Electronic payment is the term used for any kind of payment processed without using cash or paper checks. Forms of electronic payment include use of ACH or Automated Clearing House, e-checks, direct debit, debit cards, and credit cards.

Types of Electronic Payment Transactions

One time electronic payment transactions are common to e-commerce sites like eBay. All you have to do is type in your credit card information when you click on the shopping cart icon. The site then checks the information you have provided and sends you an email regarding your transaction after the account was verified. Some sites accept e-checks. In this electronic payment method, you have to input your bank routing number in conjunction with the account number to send payments.

Recurring payments, on the other hand, are those payments made for long-term or recurring financial responsibilities such insurance payments, loans, phone bills, electric bills, etc. Some services that require memberships like gyms require this mode of payment from their clients.

Benefits of Using Electronic Payment

  • Convenience: The most apparent benefit of this mode of payment is the convenience it can offer us. With electronic payments, all you have to do is input your account and shipping information and the transaction can proceed. Payment of bills can also be done easily without the usual long lines and hassles.
  • Lower Costs: Due to automation of functions such as credit card processing and payment, electronic payments have lowered the cost of doing business. There’s less postage fees, paper consumed, and personnel as well as resources needed the costs are smaller.

Electronic Payment Security

Questions have been raised regarding the security of electronic payments and most of these stem from the fear of having confidential and private information compromised. Identity theft is a valid concern, and this has cast some doubts on the security of electronic payments.

However, there are some basic security measures that can be taken to greatly minimize the risks involved. Some of these include the installation and constant updating of anti-virus and anti-spyware programs. Installation of firewalls, awareness of new threats online, and knowledge about how best to deal with these threats would also help.

Making sure that the online transaction is being done over a secure server can also greatly minimize the risk of compromising your credit card and financial information. This can be done by looking for the lock or key icon in your browser and for “https” instead of “http” in the address bar.

Regardless of the security risks, online or electronic payments are here to stay. Just in the year 2004 alone, more than twelve billion dollars changed hands through Automated Clearing House payments representing a twenty percent increase from the previous year. Moreover, more and more banks and financial institutions are providing this method of payment to their customers. A 2005 survey done on this subject showed that more than 94% of large banking companies and more than 65% of community banks have started offering these services to their clients.