Electronic payments are beneficial to business owners as they help them reach a wider audience as not every customer has to be physically present in the store. They improve the purchasing process since there are no lines that customers need to wait in, they are easily accessible.
Acceptance is the road to all change. Human beings have evolved into the digital world though not without hurdles. In India, it is tough to break traditional beliefs. Trust in cash payments has been one of the firmest beliefs. While digital payments entered India in the early 2000s, it has seen a sharp rise in India only after the government’s initiative of demonetization of cash in 2016. Indians have now come to full acceptance.
What are e-payments?
Electronic payment allows consumers to pay for a particular product or service through an electronic medium without the use of cash or cheque. E-payments are brought about by electronic fund transfer(EFT), which is the process of transferring money from one bank account to another without any exchange by hand. The most common forms of online payment is a debit card and a credit card. The alternative payment methods are bank transfers, electronic wallets such as Paytm and free charge, smart cards like metro or railway cards, and cryptocurrency wallets such as bitcoin.
What are the advantages of e-payments?
Electronic payments are beneficial to business owners as they help them reach a wider audience as not every customer has to be physically present in the store. They improve the purchasing process since there are no lines that customers need to wait in, they are easily accessible. They also increase payment security as there are numerous security protocols and measures to make sure online transactions are safe and secure. There are two types of electronic payments- cash payment system and credit payment system.
Cash payment system
- Direct debit- It is a financial transaction in which the account holder instructs the bank to collect a specific amount of money from his account electronically to pay for goods or services. Eg. A consumer directing their bank to pay their phone bill monthly.
- E-check- is a digital version of an old paper check. It is an electronic transfer of money from a bank account, usually a checking account, without the use of a paper check.
- E-cash — is a form of payment where a certain amount of money is stored on a client’s device and made accessible for online transactions. For eg. Transit cards and Paypal.
- A stored-value card — is a card with a certain amount of money that can be used to perform the transaction in the issuer store. Eg. A gift voucher, customer loyalty cards.
Credit payment system
- A credit card- is a form of e-payment system where a financial institution issues a card to the cardholder for making payments online or through an electronic device, without the use of cash. For eg. VISA, Mastercard is among the major cards.
- E-wallet- is an electronic wallet that stores a user’s financial data, like debit and credit card information to make an online transaction easier. For eg. Paytm, google pay, etc.
- Smart card- It is also known as a microchip card, is a plastic card with a microprocessor that can be loaded with funds to make transactions. It can be found in contactless cards.
What is a merchant account?
To sell any product or service, an E-commerce merchant account is needed. It is a special bank account where the card sales funds are held before transferring to a regular bank account. When a customer finishes their purchase, the payment is not immediately transferred to the merchant’s bank account, but they’re captured by a special bank account first. This special bank account is called a merchant account. To set one up, a merchant needs to sign a legal agreement between you and the issuing bank and also needs to prepare for the underwriting and approval process. Only a few providers offer a merchant account with a payment gateway.
What is a payment gateway?
A payment gateway is a technology that captures and transfers payment data from the customer to the acquirer and then transfers the payment acceptance or decline back to the customer. A payment gateway validates the customer’s card details securely, ensures that the required amount is available, and eventually enables merchants to get paid. It acts as an interface between a merchant’s website and its acquirer. It encrypts sensitive credit card details, ensuring that information is passed securely from the customer to the acquiring bank, via the merchant.
What is the role of a payment gateway?
The main role of an online Payment Gateway is to approve the transaction process between merchant and customer. It plays an important role in the online transaction process and authorizes transactions between merchants and customers. It helps the e-commerce platform aggravate its existence with ease of payments to offer to its customers.
“Faceless, Paperless, Cashless”…
is the aim of the Government of India as they promote the ‘Cashless India’ scheme. The Digital India program is a flagship program of the Government of India with a vision to transform India into a digitally empowered society and knowledge economy. The government is providing full support to boost electronic payments and gateways as even they know, that is where the future of finance lies.