What is an E-Payment System?
An integral part of e-commerce.
Can either be a:
Simple electronic version of existing payment systems such as
cheques and credit cards
Or, based on the digital currency technology
Traditional Payment Systems
A conventional process of payment and settlement involves a
buyer-to-seller transfer of cash or payment information (i.e.,
cheque and credit cards).
The actual settlement of payment takes place in the financial
Problems with Traditional Systems
Lack of Convenience
Lack of Security
Lack of Coverage
Lack of Eligibility
Lack of support for micro-transactions
Modern E-Payment Systems
The traditional system does not depend on a central processing
An electronic fund transfer is a financial application of EDI
(Electronic Data Interchange), which sends credit card numbers
or electronic cheques via secured private networks between
banks and major corporations.
Types of E-Payment Systems
An online shopping payment tool
This payment system has been widely accepted by consumers and
merchants throughout the world
This form of payment system has several advantages:
Good transaction efficiency
Low financial risk
“Smart cards‟ are receiving renewed attention as a mode of online
Plastic cards with the memory chips
In some cases, with microprocessors embedded in them so as to
serve as storage devices for much greater information than credit
cards with inbuilt transaction processing capability.
This card also contains some kinds of an encrypted key that is
compared to a secret key contained on the user’s processor.
Applications of Smart Card
Store loyalty programs
Smart Card: Pros & Cons
Feasible for very small transactions (information commerce)
Security of physical storage
Atomic, debt-free transactions
Low maximum transaction limit (not suitable for B2B or most B2C)
High Infrastructure costs (not suitable for C2C)
Not (yet) widely used
A small plastic card, resembling a credit card in appearance.
Used to make cash withdrawals from a bank account, or to pay for
goods and services.
A 'prepaid' Debit Card is not linked to a bank account, but is
'loaded' with funds by over-the-counter payment or electronic
transfer before use, and can be 'recharged' when necessary.
Debit Card Process
Card owners are usually issued with a Personal Identification
Number used to verify their identity and authority to use the card.
This PIN (generally a four digit number) should be kept secret, and
typed into a terminal or ATM or entered on to an Internet form to
verify your identity when using the card.
Some Debit Card purchases can be confirmed with a signature.
Both methods provide good security, though it is important for card
owners to keep their card somewhere safe and inaccessible to
others, and to report any loss at once.
Debit Card : Pros & Cons
Accepted by merchants because of its easiness, safety and quick money
One time fee with no extra interests or surcharges like late fee, APR, etc.
A debit card can be used at anywhere, anytime for any buying.
You can use your debit card to obtain cash from an ATM without paying any
Anyone who has bank account can obtain a debit card.
Non-sufficient funds or over-limit fee.
Some countries does not offer much security on a debit card than credit card
Easier for hackers than a credit card.
Addresses the electronic needs of millions of
businesses, which today exchange traditional paper
cheques with the other vendors, consumers and
Works in much the same way as conventional paper
An account holder will issue an electronic
document that contains the name of the
financial institution, the payer’s account number,
the name of payee and amount of cheque.
Most of the information is in uncoded form.
E-Check: Pros and Cons
Does not require consumers to reveal account information to
other individuals when setting an auction
Does not require consumers to continually send sensitive financial
It is less expensive than credit cards
It is much faster than paper based traditional cheque.
Relatively high fixed costs
Limited use only in virtual world and the fact that they can protect
the users‟ anonymity.
Newest and fastest-growing payment schemes. E
Enable the transfer of funds between two individuals
One of the first companies to offer this service was PayPal
PayPal claimed, in late 2001, to have 8 million customer accounts,
handling 25 percent of all eBay transactions and funneling $5 billion
in payments through its servers annually.
Benefits of E-Payment Systems
Electronic payment is very convenient for the consumer.
Completing a transaction is as simple as clicking your mouse: All you
have to do is confirm your purchase and you're done.
Electronic payment lowers costs for businesses.
The more payments they can process electronically, the less they
spend on paper and postage.
Offering electronic payment can also help businesses improve
A customer is more likely to return to the same e-commerce site
where his or her information has already been entered and stored.
Most of the online banking require you to open an online account
For secure online transactions, the site that hosts your account
should follow strict security policies.
Electronic payments are resistant to forgery, the keys are vulnerable
This was not to discourage you from taking to electronic
payments. It was rather to make you aware of the disadvantages
of electronic payment systems. While we are moving towards a
paperless environment, we are inviting issues related to
E-Payments in Pakistan
At present several utility service providers along with
many banks have started using electronic payment
system in Pakistan.
The banking industry in Pakistan is mostly privatized
and banks like HBL, HMB, Standard Chartered and
MCB etc are using ATMs and POS for payment of
utility bills electronically.
E-Payments in Pakistan
Another huge sector which is under development
and growing massively the concept of branchless
banking, such as Telenor EasyPaisa, MobiCash or
UBL Omni, which involves banking payment
transfers through banks and depositors backed up
by a cellular network.
The utility service providers have also taken several
steps so that they can work along with the banks to
provide the service of electronic payment (KESC,
SSGC, WAPDA, PTCL etc)
Technology has inarguably made our lives easier.
It has cut across distance, space and even time.
One of the technological innovations in banking, finance and
commerce is the Electronic Payments.
Electronic Payments (e-payments) refers to the technological
breakthrough that enables us to perform financial transactions
electronically, thus avoiding long lines and other hassles.