In India’s journey towards E-payments, and digitization, merchants, as well as customers, are getting comfortable adopting new digital technologies.
With customers getting comfortable with online shopping, nowadays, an eCommerce site and online payment acceptance is a must to have for any business.
Customers are happy with browsing and shopping at any time from anywhere with just a few clicks and along with this rise of online shopping and eCommerce, E-payments are gaining widespread popularity.
COVID and the limitation it has imposed on people who made online payments need time. Many businesses are now offering their products and services online.
However, if you are a business and want to accept e-payments, you have to work on your electronic payment system to provide better and more secure service for your customers.
And to know the e-payment system here is everything you need to know.
What is an e-payment system?
An e-payment or Electronic Payment system allows customers to pay for services via electronic methods.
They are also known as online payment systems. Normally e-payment is done via debit, credit cards, direct bank deposits, and e-checks, other alternative e-payment methods like e-wallets, bitcoin, cryptocurrencies, and bank transfers are also gaining popularity.
Types of e-payment systems
E-payments can be done in the following ways,
Internet banking – In this case, the payment is done by digitally transferring the funds over the internet from one bank account to another.
Some popular modes of net banking are, NEFT, RTGS, and IMPS.
Card payments – Card payments are done via cards e.g. credit cards, debit cards, smart cards, stored valued cards, etc. In this mode, an electronic payment-accepting device initiates the online payment transfer via card
Credit/ Debit card – An e-payment method where the card is required for making payments through an electronic device.
Smart card – Also known as a chip card, a smart card, card with a microprocessor chip is needed to transfer payments.
Stored value card – These types of cards have some amount of money stored beforehand and are needed to make funds transfer. These are prepaid cards like gift cards, etc.
Direct debit – Direct debit transfers funds from a customer’s account with the help of a third party
E-cash – It is a form where the money is stored in the customer’s device which is used for making transfers.
E-check – This is a digital version of a paper check used to transfer funds within accounts.
Alternate payment methods – As technology is evolving, e-payment methods kept evolving with it (are still evolving..) These innovative alternate e-payment methods became widely popular very quickly thanks to their convenience.
E-wallet – Very popular among customers, an E-wallet is a form of prepaid account, where a customer’s account information like credit/ debit card information is stored allowing a quick, seamless, and smooth flow of the transaction.
Mobile wallet – An evolved form of e-wallet, mobile wallet is extensively used by lots of customers.
It is a virtual wallet, in the form of an app that sits on a mobile device. Mobile wallet stores card information on a mobile device.
The user-friendly nature of mobile wallets makes them easier to use. It offers a seamless payment experience making customers less dependent on cash.
QR payments – QR code-enabled payments have become immensely popular. QR code stands for ‘Quick Response’ code, a code that contains a pixel pattern of barcodes or squares arranged in a square grid.
Each part of the code contains information. This information can be merchant’s details, transaction details, etc. To make payments, one has to scan the QR code with a mobile device.
Contactless payments – Contactless payments are becoming popular for quite some time. These payments are done using RFID and NFC technology.
The customer needs to tap or hover the payment device or a card near the payment terminal, earning it a name, ‘tap and go.
UPI payments – NPCI (National Payment Corporation of India) has developed an instant real-time payment system to facilitate interbank transactions.
This payment system is titled UPI(Unified Payment Interface). Payments via UPI can be made via an app on a mobile device.
Biometric payments – Biometric payments are done via using/scanning various parts of the body, e.g. fingerprint scanning, eye scanning, facial recognition, etc.
These payments are replacing the need to enter the PIN for making transactions making these payments more accessible and easy to use.
Payments are done via Wearable devices – Wearable devices are rapidly becoming popular among customers.
These devices are connected to the customer’s bank account and are used to make online payments.
An example of a wearable used for making an online payment is a smartwatch.
AI-based payments – As machine learning and Artificial Intelligence is creating a revolution all around the world, AI-based solutions are becoming more popular.
Payments based on AI such as speakers, chatbots, ML tools, deep learning tools, etc are making it easier for businesses to maintain transparency.
How does the e-payment system work?
Entities involved in an online payment system
The customer / the cardholder
The issuing bank
Working of e-payments can be explained in the following three steps,
Payment initiation – Customer finalizes the product/service and chooses the payment method to initiate the transaction.
Depending on the payment method, the customer enters the required information like card number, CVV, personal details, expiration date, PIN, etc.
The chosen payment method either redirects the customer to an external payment page or a bank’s payment page to continue the payment process.
Payment authentication – The information submitted by the customer along with other details like payment information, and the customer’s account information is authenticated by the operator.
The operator can be a payment gateway or any other solution involved. If everything gets authenticated positively, the operator reports a successful transaction.