What Is an Electronic Payment System?  

An electronic payment system is a technology that allows for money transfer between parties. If used for e-commerce, there are three parties connected by the electronic payment system – the customer who pays for the goods or services, the merchant who receives payments in exchange for the goods, and the bank who processes the transaction between the customer and the merchant.

Surprisingly, the first electronic payment system was used in 1959 by American Express. Now, the evolution of instant and smart payment continues. What’s more, the recent pandemic has largely contributed to the new types of electronic payments development, attracting a lot of new users to the existing systems, especially mobile-based ones, thereby eliminating the need to use cash.

What Are Its Types and Advantages?

Below are the main types of electronic payment systems.

• Automated clearinghouse. Within this type of electronic payment system, a customer pays for the goods or most often, services in advance, by reserving a certain sum on his bank card. After the deal is finalized, the money will be transferred from the payer’s account and delivered to the recipient. 
• Wire transfers. These are the money transfers, as a rule, between companies, where an intermediary – a processing company that gets a fee from each transaction is always present.
• Item processing. In this case, a financial institution converts data about the payments in a unified format. Then, the data is transferred to the special environment to be processed automatically for the deal finalization. 
• Remote deposit capture. This is a solution for paper check processing. The paper checks are digitally scanned and the money is sent to the customer bank account automatically.
• Automated Teller Machines. These are the machines that help customers to make standard operations without turning to the cash desk – for example, making money transfers in an international currency, pay utility bills or replenish their personal accounts.
• Card Services (ATM, credit, debit, prepaid). Everything is quite clear with this type of electronic payment system. In this case, the customer uses any type of bank card to pay for the goods online or in-store with the help of the POS terminal.
• Mobile payments. To make a mobile payment, the customer uses a specific mobile wallet, for example, Yandex Money.

Also, there is one more classification for the electronic payment system in e-commerce. According to the research, “There are four types of electronic payment systems: namely, the online credit card payment system, the electronic-cash payment system, the electronic-check payment system, and the smart-card-based electronic-cash payment system.”

What Are The Advantages of Using an Electronic Payment System for Your eCommerce Store? 

• Fast. E-payments are fast, or better to say, they are almost instant. Thus, neither your customer nor you should be waiting and be nervous until the money will be withdrawn and delivered by several intermediaries. 
• Secure. There is no way to fake digital money. Surely, there are a lot of ways of a scam; however, online payments are quite secure if each transaction is protected with the help of special technologies. 
• Transparent. It is very easy to follow the trace of each transaction while cash is very difficult or even almost impossible to track and control. 
• Safe. In light of the recent pandemic, e-payments are also safe. Digital money, unlike cash, can’t transfer any kind of viruses. What’s more, digital payments helped the physical businesses survive during the times they were forced to stay online.

What Are the Features of an Electronic Payment System?

According to the research, “The basic characteristics of an e-payment system are applicability, ease of use, security, reliability, trust, scalability, convertibility, interoperability, efficiency, anonymity, traceability, and authorization type. The features of the ideal electronic payment service are compliant, reversals, freely accessible (nondiscriminatory), immediate, final, transaction amount neutral, transparent, and anonymity. ”.

Surely, each of the features above corresponds to the real features that are embedded in the electronic payment systems. For example, security infrastructure can be represented by such features as two-factor authentication, biometric authentication, and AI-powered anti-fraud solutions integrations.

What Is the Best Electronic Payment System in Ecommerce?

We have already listed the types of electronic payment systems, so you have a lot of alternatives to choose from for your e-commerce store. According to the best user experience practices in e-commerce for 2020-2021, an online store should have:

• An ability to safely pay with credit or debit card plus the opportunity to store/not to store the financial data for future transactions.
• An ability to alternatively pay with the help of a mobile wallet. Surely, it should be a wallet that supports the most popular currencies and is easy to use.
• The payment system integration. As one more opportunity to make a choice, modern users also want to be able to pay with PayPal, Stripe, or Braintree (depending on their preferences and location). 
• An opportunity to pay with cryptocurrency, however, before implementing this feature in your store, you should first find out what are the legal requirements for cryptos usage in your country, and secondly, make sure your customers really need this opportunity. 

So, in order to offer the best eCommerce experience, your site should have the above electronic payment integrations. However, when making the choice. make sure to analyze once more:

• the preferences of your customers.
• the cost and the complexity to integrate a certain system into your website.
• the cost to use a certain system (some of them may reach $2500 per month)
• security and anti-fraud features. 

Summing up, the best electronic payment system in eCommerce is the one that suits your business most in terms of cost-efficiency, security, ease of integration, and the readiness of the customers to use it.

Conclusion

Thus, using an electronic payment system is an integral part of modern eCommerce and an essential part of the positive user experience. Looking for the best solution for your business, keep in mind that each type of electronic system we have reviewed is highly specific, so there is no sense in embedding all of them for the sake of experience. It would be much better to research your users’ expectations, and then, either proceed with an existing ePayment system or create a customized one from scratch.

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The post 7 Main Types of Electronic Payment System Explained appeared first on Tricky Enough.

Consider Your Credit Card Expenses as Loans

For most entrepreneurs, using a credit card is an extremely attractive way of financing the business since only the minimum amount due has to be paid each month, which is generally far less than the monthly payment on loans. The zero percent APR introductory offers that are quite common to new subscribers also ease the repayment burden and tempt card users to let the outstanding dues mount. Treating the credit card as free money is possibly the worst mistake that e-commerce entrepreneurs could make because within no time, they will discover that the repayment amount has ballooned, especially when interest has been applied together with late payment fees.

Make the Best Use of Balance Transfer Offers

If you have let your credit card balances mount up and are finding the repayments every month very difficult to make, balance transfer offers can make your life far easier. Very often, card issuers offer balance transfer facilities at zero percent for as long as 12-18 month during which no interest will be charged on balances that have been transferred from other cards. Sometimes to sweeten the deal further, they do not even charge any fees. If you have a large amount outstanding on other cards, using a balance transfer offer on a new card can reduce your interest expense substantially and free your cash flow to boost your e-commerce business. If you are out of options and the interest burden is killing you, you can consider talking to private lenders like national debt relief for a debt consolidation loan.

Pick a Card without Annual Fees or Make Sure That You Can Afford the Fees

As you might guess, the advantages and features offered by the cards that charge fees are quite different from the free cards. When you are choosing a credit card, you should first find out what features and facilities you require and then see if there are any features that the premium cards are offering that may make the annual fees worth the while. Choosing a free card means a lot of saving every year compared to cards that charge very steep fees. On the other hand, many of the premium cards give you a wide range of facilities and freebies that owners of businesses can use to save a lot of money depending on the use. In case, you choose a premium card that charges fees, do make sure that you can afford to make the yearly subscription payment.

Have a Transparent Credit Card Usage Policy for Employees

Even though in its early stages, an e-commerce business may not have too many employees, it is still a wise decision to have a credit card usage policy in place in case the business credit card is going to be used by any employee or business partner. Even if you do not wish to get a card usage policy drafted by a lawyer, you should at least have a written document. It should specify the allocation of the business budget for paying off the card bill every month, the liability of all users to pay for card expenses made for the business, non-allowance of any personal expenses charged on the card and the course of action if the business cannot afford to make the payment. A policy may seem redundant when the business is small but it helps to avoid messy disputes later on.

Have Different Credit Cards for Different Expenses

While the best card for a startup is obviously one that offers a very long zero percent APR on both purchases and balance transfers, you may not always be eligible to get one. When you have no choice but to use normal credit cards to fund your e-commerce venture, you should study the features and take full advantage of them. For example, a card that offers higher cash backs may be ideal for buying supplies, while a card that offers better travel reward points is better used for booking travel expenses. Fuel and fleet cards are better suited to meet expenses on fuel and car rentals. It is a good policy to have a selection of credit cards with different reward features and leverage their advantages as best possible.

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Maximize Your Credit Limit

It is quite common to find that your e-commerce business has an insatiable hunger for funds, especially if it is growing very fast. If your credit cards do not have large limits, you may find the growth of your business difficult to manage. The best way of getting access to more funds apart from getting new credit cards is to build up a very good track record of repayments on time. You will find that your card issuer automatically increases your card limit and if that does not happen even after six months or so, you can give them a call and make a request for a limit increase. If the card issuer is happy with you, it will only be glad to accommodate you. Not only does a higher limit give you more flexibility but also it ensures that the utilization ratio goes down and boosts your credit score.

Conclusion

When you are chasing funds, it can be very difficult to make a choice regarding which cards to use. While personal business cards may offer a longer zero percent APR period, a business card will typically offer a larger credit limit. By using a business card, you can protect your personal credit score and keep your personal expenses separate from your business expenses. Credit cards represent a very convenient way of funding your e-commerce business but you need to take care to use them responsibly.

The post How to Use Credit Cards Effectively to Fund Your E-Commerce Startup appeared first on Tricky Enough.