Electronic payments allow consumers to make payments online for goods and services without physically transferring cash or checks. Common electronic payment methods include payment cards, electronic cash stored on cards or digital wallets, and stored-value cards. When making an electronic payment, the customer enters their payment details on the merchant's site or is redirected to their bank. If validated, the payment is processed and the merchant's account is credited, completing the transaction. Popular electronic payment systems like credit cards, debit cards, and electronic wallets provide convenience but also have security and portability tradeoffs.

1. Electronic Payments

2. What is an electronic payment?
One of the significant functions of electronic
commerce sites is the handling of payments
over the Internet since e-commerce involves the
exchange of some form of money for goods or
services.

3. • An electronic payment is defined as paying for
goods or services on the internet using
electronic devices such as computers,
smartphones or tablets.
• Electronic payment is a method in which a
person can make online payments for
purchasing goods and services without physical
transfer of cash and cheques, irrespective of
time and location through the internet directly
to manage the e-business environment.

4. • E-payments come with various methods
whereas the most popular forms of payment on
the Internet are payment cards, electronic cash,
mobile wallets, and stored-value cards.
Processing of an electronic payment:
• Electronic payments also known as e-payments
are made instantly being convenient and saves
lots of time where every aspect of our lives
happens at a fast pace. The basics underlying in
processing of an electronic payment are as
follows.

5. • Customer act The processing of an electronic
payment begins when a customer visits the
merchant’s site, adds the items to the shopping
cart and click buy now.
• The payment form is displayed in which certain
information such as card number, expiration
date, CVV code, address are to be filled.
• Depending on the payment method, the
customer is either redirected to bank’s website
or a payment app else continues the payment
on the website.

6. • Authentication of the payment
• The payment gateway ensures whether the payment
information is valid and if everything is fine then the
process continues.
• The payment gateway reports back the successful
transaction and the customer receives a payment
confirmation.
• Merchant’s account credited
• An electronic payment provider receives the payment
from a customer’s bank and transfers it to the
merchant’s account thus ending the payment process.
• In general, electronic payments are a fast, cheap and
secure means of payment with lots of benefits for both
merchants and consumers.
• Moreover, electronic payments are highly effective for
international transactions and there is no need to
worry about currency conversion.

7. Types of electronic payment
Electronic Fund Transfer (EFT)
• Electronic funds transfer is one of the oldest
electronic payment systems and is the
groundwork of the cash-less culture where paper
bills, checks etc., are eliminated.
• EFT is used for transfer money from one bank
account to another directly without the
involvement of paper money exchanged by
hands.
• EFT is one of the convenient payment methods to
conduct business online.

8. Advantages and disadvantages of using EFT
• Increased efficiency
• Safe and secure
• Low administrative cost
• Transaction amount limited

9. Payment cards
In business, the term payment card is commonly
used as a general term to describe all types of
plastic cards that the businesses and consumers
use to make purchases. The core categories of
payment cards are credit cards, debit cards and
charge cards.

10. • Credit card
• Credit cards are by far the most prevalent method that consumers use to pay for
online purchases since the recent surveys have found that more than 90 percent
of worldwide consumer Internet purchases are paid for with credit cards.
• Credit cards are the plastic cards that facilitates customers to carry transactions
through electronic data processing system and is issued by an agency such as
Master or Visa with a pre-determined spending limit to the holder of the card.
• The spending limit is based on the user’s credit history such that a user can pay
off the entire credit card balance or pay a minimum amount each billing period.
• Credit cards are extensively accepted by merchants around the world because it
provide assurances for both the consumer and the merchant. There are two
types of credit cards in use today.
• Credit cards issued by credit card companies.
• Credit cards issued by credit card companies such as Master Card, Visa are issued
based on the customer's income level, credit history and total wealth which the
customer use to buy goods and services. The limitations of credit cards is that it
is not used for small payments and also, due to security issues, these cards have
a limit and cannot be used for excessively large transactions.
• Credit cards issued by department stores.
• Businesses extremely benefit from these cards and are cheaper to operate. They
are widely issued to and used by a broad range of customers since businesses
offer incentives to allure customers to open an account.

11. Debit card
• A debit card resembles a credit card, but it works quite
differently. Debit cards are issued by a bank or a financial
institution in which the card holder has an account and the
card enables consumers to access the account for a variety
of transactions.
• The amount of the sale is removed from the cardholder’s
bank account and transferred to the seller’s bank account
immediately for a transaction in an on-line debit card.
• The difference between credit cards and debit cards is that
in order to pay with a debit card one need to know the
personal identification number (PIN) and a hardware device
is mandatory to read the information that is stored in the
magnetic strip on the back.
• Many ATM cards have the features of a debit card and
obtaining it is much easier than obtaining a credit card.

12. • The benefit for the customer is the easiness of
use and convenience as well as the cards keep
the customer under his or her budget because
they do not allow the customer to go beyond his
or her resources.
• The merchant is not charged any fees as well as
payment processing is fast when a customer uses
debit card to pay for purchase hence they prefer
debit card for payment by their customers.

13. Electronic cash or E-cash
• Electronic cash or e-cash is a general term that
describes any value storage and exchange system
created by a private entity other than government that
doesn’t use paper documents or physical cash and
that can aid as an ancillary for government issued
physical currency.
• E-cash can be defined in simple words as the money
available in an electronic account to carry out
electronic business transaction on the internet.
• Electronic cash can be readily exchanged for physical
cash on demand but on the other hand because
electronic cash is issued by private entities, there is a
need for common standards among all electronic cash
issuers so that one issuer’s electronic cash can be
accepted by another issuer.

14. • Unfortunately this need has not yet been met since
each issuer has their own standards hence electronic
cash is not universally accepted.
• E-cash card has two types namely a stand-alone card
containing e-cash and a combination card that
incorporates both e-cash and debit
• Process involved in E-cash payment
• The process involved in e-cash payment are
• The user first must possess a cash software program
and a bank account.
• The software allows the user to download “electronic
coins” to his or her desktop.
• From the bank account, the user can withdraw or
deposit e-cash with the help of computer.
• The beneficiaries of the e-cash send the money to
their bank account similar to the physical cash deposit.

15. Advantages and disadvantages of using
e-cash
• Electronic cash involves lower transaction cost and it does not need
any special authorization like credit cards.
• Electronic cash is secure, convenient and adds control to everyday
customer cash transactions as it operates on a smart card, which
includes an embedded microprocessor chip which stores cash value
and the security features that make
• electronic transactions secure as well as keeps track of the e-cash
transactions..
• Most of the world’s population does not have credit cards due to
minimum income requirements or past debt problems or simply
because they are too young and for all of these people, electronic
cash provides the solution to pay for online purchases.

16. Electronic wallets or E-wallets
• As consumers are becoming more enthusiastic about online
shopping, they have begun to tire of repeatedly entering detailed
shipping and payment information each time they make online
purchases therefore to address these concerns, many electronic
commerce sites include a feature that allows a customer to store
their name, address, and credit card information on the site.
• However, consumers must enter their information at each site
with whom they want to do business which is overcome by the
significant feature of entering the information only once that can
be used in all ecommerce sites using the E-wallet.
• Electronic wallet is like physical wallet which can hold credit
cards, e-cash, owner’s identification, address and provides that
information at an electronic commerce site’s checkout counter as
well as has the memory for storing the balance of an account in a
financial institution.

17. • Electronic wallets make online shopping a convenient one
for frequent online shoppers because they store personal
and financial information such as credit cards, passwords,
PINs, and much more along with the ability to keep track
of billing and shipping information so that it can be
entered with one click at participating merchants' sites.
• E-wallets can act as payment cards when they are used to
store credit card information or as e-money when they
store electronic currency.
• A well-known example of an e-wallet on the market is
Microsoft Wallet and Yahoo Wallet .
• The elimination of re-entering personal information on
the forms, results in higher speed and efficiency for online
shoppers.

18. Classification of E-Wallet
• Server side electronic wallet – stores
customer’s information on a remote server
which may belong to a merchant or wallet
publisher.
• Client side electronic wallet - stores
customer’s information on user’s system.
• Many of the e-wallet are client side wallet that
require users to download the wallet
software.

19. Advantages and disadvantages of using
E-wallet
Server side e-wallet:
• In server-side wallets the e-wallet software remain on
a server and thus require no download time or
installation on a user’s computer.
• Server side wallets can be accessed from any computer
since it is portable.
• Although server-side electronic wallets employ strong
security measures that minimize the possibility of
unauthorized disclosure, security breach could reveal
• millions of user’s personal information including credit
card numbers to unauthorized parties.

20. Client side e-wallet
• Client-side electronic wallet stores consumer’s
information on his or her own computer therefore less
possibility of security breach.
• Client-side wallets need to download e-wallet software
onto every computer used to make purchases which is
a major drawback of client-side wallets.
• Client-side wallets are not portable therefore e-wallet
is not available when a purchase is made from a
computer other than the computer on which the wallet
resides.

21. • For a wallet to be useful at many online sites,
the electronic wallet manufacturer and
merchants from many sites must coordinate
their efforts so that a wallet can recognize
what consumer information goes into each
field of a given merchant’s forms.

22. Stored Value Cards
• Nowadays, most people carry a number of plastic cards
such as credit cards, debit cards, charge cards, driving
license, health insurance card, identification card etc.
• A key to reduce all those cards into a single plastic card
is called a stored-value card which is an elaborate
smart card with a microchip or a plastic card with a
magnetic strip that records the currency balance.
• The stored value card with a microchip stores more
information than a stored value card with a magnetic
strip.

23. Smart cards
• Smart cards are stored value cards with a microchip which allows
electronic money to be stored in a secure medium with a built-in
microprocessor and memory.
• A smart card can simultaneously be an ID, a credit card, a cash card or a
repository of personal information such as telephone numbers or medical
history as well as enable the bearer the ability to access information and
physical places without any need for online connections.
• Along with storing and periodically recharging the information, the money
on the card
• is saved in an encrypted form and is protected by a PIN to secure the
smart card.
• In order to pay via smart card the card must be introduced into a
hardware terminal that requires a special key from the issuing bank to
start a money transfer in either direction.
• Smart cards have been extensively used in the telecommunications
industry for years to hold information on health care, transportation,
identification, retail and banking etc. in a single location.

24. Advantages and disadvantages of using
stored value cards
Few advantages and disadvantages of stored value
cards are listed below
• Store large amount of information with reduced
space.
• Store many types of information
• Portability
• Highly secure
• Lack of universal standards for their design and
utilization.