Pros and Cons of an Electronic Payment System

During this highly technological age, cash is trying hard to compete with electronic money, since nowadays a lot of people choose to use their virtual wallets. Here, you will read about the pros and cons of using an electronic payment system.

It is plain to see that electronic payment systems have more advantages than traditional banking services. Let’s see:

  • Saves on time

Money transfer from one virtual account to another may only take a few minutes, whereas a wire or postal transfer may take a number of days. Besides, you have to spend some time to go to the bank or post office and wait in line.

  • Controls expenses

Even if a person is willing to control his disbursements, it can take a lot of patience to jot down all the expenses, and this takes up a huge part of the total amount. On the other hand, the virtual account comprises the history of all the transactions, including the store name and amount spent. Best of all, you can check it whenever and wherever you like. In this case, an electronic payment system works to your advantage.

  • Reduced loss and theft risks

You will not make the mistake of losing or leaving your virtual wallet behind, and it can never be taken by robbers.

  • User- friendly

All services aim to reach out to a greater number of audiences and so, their interface should be easy for users to understand. Moreover, users can always ask help from the support team since they work 24/7. You can receive an answer by means of the forums as well.

  • Convenient to use

As long as you have access to the Internet, you can carry out transfers anytime, anywhere.

After discussing the advantages that come with using an electronic payment system, it is essential to talk about its disadvantages as well:

  • Restrictions

In every payment system, there is a limit with regard to the number of transactions you can do per day and the maximum amount you can withdraw.

  • Risk of Getting Hacked

Risks can be reduced when you follow the security regulations. This is comparable to the risk of being robbed. The situation can get worse when the processing company’s system breaks down, since this may lead to the leaking of confidential information on the online cards, as well as its owners. Though some electronic payment systems do not launch plastic cards, they can however be involved in Identity theft scandals.

  • The problem of money transfer from one payment system to another

Most of the time, electronic payment systems do not cooperate with one another. If that is the case, you can use e-currency exchange services. However, it can consume a lot of time when you do not have a service you can trust for this purpose.

  • Lack of Anonymity

Since the database of the payment system stores all your transactions – like the name of recipient, amount and time – the intelligence agency can access all your information. Decide on whether that is good or bad.

  • The Need for Internet Access

When you have no Internet connection, you cannot transact on your online account.

Making the Switch From Paper Cheques to Electronic Payment

Paper cheques’ days are numbered!

As anyone doing business in Europe will know, cheques are no longer used as a method of payment in most European countries. Rather, it is standard practice for companies to publish their bank details on invoices, so that payment can be made directly to their bank account.

Within North America, cheque usage is on the decline. We believe that the tipping point is fast approaching where cheques will become the exception, rather than the rule, in business-to-business (B2B) payments. A significant number of corporations are planning to migrate the majority of their B2B payments to electronic payments.

There are numerous advantages to using electronic payment methods such as electronic funds transfer (EFT) to pay your suppliers and employees:

  1. Security and internal control is significantly strengthened, reducing chance of fraud and theft. EFT payment approvals utilize strong on-line banking security, instead of much weaker paper-based signature approvals
  2. Paper cheque stock no longer needs to be stored and secured
  3. Clerical work and errors are reduced through automated efficiency
  4. Ability to manage and forecast cash flow is improved. Payments can be set up with various due dates, and post-dated for up to 35 days
  5. Stale-dated cheques are no longer a possibility
  6. Bank reconciliations are simplified, as there will be no outstanding cheques to account for
  7. Cheque printing, mailing and handling costs are eliminated
  8. Payment approval process is streamlined. Payments are ready for approval immediately upon entry into the EFT system. Payments can be approved from anywhere, at anytime, by authorized signing authorities
  9. EFT is environmentally friendly. Paper & ink used in producing cheques and envelopes is eliminated, as is the carbon footprint resulting from the physical distribution of cheques.

There are also a number of benefits to vendors and employees of implementing EFT payables. These include:

  1. Assurance of prompt payment directly to vendor’s bank account
  2. Vendors have improved ability to manage and forecast their company’s cash flow
  3. Time and cost of handling and depositing cheques is eliminated
  4. Risk of lost, stolen or damaged cheques is eliminated

The process to convert to EFT payables is relatively straightforward. Begin by gathering written authorizations from your suppliers to pay them electronically. This information can be collected on a single page form and includes your supplier’s banking information, along with their agreement that payments will be made to the specified bank account. The supplier also agrees to notify you if they wish to change the account to which payment is to be made. These forms should be kept on file in the event of any dispute concerning where funds have been deposited.

Each bank has their own web portal and systems to enable their customers to process EFT transactions via the internet. Security tokens or USB keys, along with a user ID and password, are given to each person requiring access.

Multiple signing authorities can be easily accommodated, as each signing authority is given their own security token and access credentials. Before a payment transaction can be released for payment, all necessary approval authorities must first have signed on and approved the transaction. This is one reason why EFT is considered to be a far more secure method of payment than paper cheques.

Does your organization still pay its suppliers using paper cheques? If so, you may wish to consider joining the growing number of organizations that have converted their payment method from cheques to electronic payment, in the process realizing significant benefits.

Should We Be Concerned When Using Electronic Payment Systems?

The world now operates largely through the World Wide Web. New internet based companies are springing up all the time to offer consumers products for less and without the hassle of having to pop down to the shops to pick the item up.

All of these websites need to have some form of electronic payment system to allow the customers to securely pay their money to the company in question and possibly the biggest single issue with shopping on the internet is the threat of your bank details being hacked by some online virus or tracker.

Obviously there will always be people that will attempt to hack peoples bank details, just like there will always be people who attempt to rob banks or perform muggings. But thankfully there are a number of individuals that have the task of constantly coming up with new ways to make the electronic payment systems more secure.

There have been several variations of the online electronic payment system, but the standard version that most people use today is PayPal. This service works as a go between for the client and the company selling products. The money is transferred securely to PayPal who then hold the money before passing it on to the company. Because of this there is no exchanging of bank details between the two individuals. All the bank details are stored on PayPal’s secure servers.

Other variations of the electronic payment system involve using a series of security number and passwords. For instance VISA’s latest version of their online electronic payment system includes using the three digit security code from the back of the card and also uses a specified password that the owner sets to verify that the card hasn’t been stolen.

Obviously you will never really eliminate all card crime, because as quickly as these companies can manufacturer new methods of keeping us all safe, someone is coming up with a way to crack the code and give the advantage back to the thieves.

If you really want to make sure that you stay safe when ordering your products online, then there are a number of rules that you should follow. Firstly, online shop on sites that you know are genuine and you trust, secondly ensure that you machine is updated with the latest security patches from your software manufacturer, and thirdly ensure when purchasing that the web address starts with https. As long as you follow these steps you should have a happy and safe online purchasing experience.