Electronic Payments (E-Payments) Definition, Types and Process

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Ask any consumer about the holidays and chances are they buy more gifts online every year. Black Friday is slowly being replaced by Cyber Monday as brands compete for a piece of the e-commerce pie. That’s because online shopping is a trend that continues to grow year after year. It’s estimated there will be close to 2.05 billion global digital buyers in 2020.

Online shopping is growing at exponential rates. Think about it. How many companies now offer free shipping? Competition is fierce and the ones coming out on top are the buyers. That means the faster the sale, the more money to be made. This is where electronic payment systems come in. 

What are Electronic Payments (E-Payments)?

The popularity of electronic payments has skyrocketed in the past decade due to the spread of internet-based banking and online shopping. Electronic payment systems and payment processing devices are on the rise as people seek to transact in this manner everywhere. As these payment processes improve and provide more secure online payment transactions, businesses will be using checks and cash much less.

You will see electronic payments abbreviated in many ways like “epayment” or “e-payment” but it’s all the same. People use electronic payments because they want to make it easier to transfer money and buy things online. 

You also don’t have to input credit card details into a ton of sites. There’s no need to pull out your Visa or Mastercard to buy. E-paying is usually as simple as clicking a button (think PayPal). This is especially the case for sites that make mobile payments easy. No one is typing their credit card data into a phone.

Electronic payment solutions usually provide the majority of services for free. You can be charged transaction fees for selling and other actions like invoicing, large payments, and international transfers. Most e-payment services make their money by charging the merchant. 

How Do Electronic Payments Work?

Electronic payments function in a few different ways and there are many platforms to choose from. When you open an account, money can be paid into it using a bank card or bank account. When you shop online, money is deducted from the balance. If you’re selling things, it will be transferred like an ACH payment. This is real webmoney that can be pocketed in your bank account at any time. It typically takes 1-2 business days depending on the epayments system you are using. 

If you are uncomfortable keeping money online, as long as a credit card or bank account is linked to your e-payment platform, you can still transact. When something is purchased, the system will go straight to your financial data in the offline account and pull the money from there. All you need to buy or sell is the account details of the e-payments service.

The Pros and Cons of Electronic Payments

What are the advantages of getting suppliers to adopt e-payments? Is this a system that could work for your business? How much time and money can be saved?

There are pros and cons to any financial system. Here are a few for epayments:


  • Streamlines online buying. Just click a button and enter a password.
  • Secure payments. No need to give out card details.
  • Usually free and highly cost-effective (especially for international payments).
  • Transactions can be made in seconds, anytime, from anywhere (you just need to be connected).
  • Expense control. You have a transaction history of all online purchases.
  • Anti-fraud tools and safer payments.


  • E-payment companies are not protected by many government organizations, like the Financial Services Compensation Scheme. The United States Federal Reserve also has stipulations.
  • If an e-payment company goes out of business, you could lose money if stored under an account number in their system.
  • Even when using a credit card, you will not get additional protection under section 75 of the Consumer Credit Act.
  • E-commerce fraud is growing at a rate of 30% per year. There is always the risk of sensitive data breaches.
  • Lack of privacy. Your personal data (like address and phone number), as well as your banking info, is all stored online.
  • If the internet fails, your e-payments will not go through. You must be connected to use the service.

Despite there being some disadvantages to an epayments e-wallet and other forms of electronic transactions, the global online shopping market size is predicted to hit 4 trillion in 2020. There is no denying how essential this form of finance is.

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Types of Electronic Payments

There are many ways to send a payment electronically. In addition to debit and credit cards, you can use:

  • Electronic wallets (e-wallets) – A prepaid account that stores user data for online transactions.
  • Bank transfers – ACH transfers
  • Smart cards – A plastic card with a microprocessor that can be loaded with funds for online transactions. An epayments prepaid Mastercard or Visa is usually what is offered. PayPal has a card that can also be used at any ATM for cash withdrawals.
  • Bitcoin or Litecoin wallet – These are both forms of cryptocurrency.

Electronic Cash Payment System

  • Direct debit — The bank collects a specific amount of money to pay for goods or services electronically.
  • E-cash – This is an electronic payment system where money is stored on your device and made accessible for online transactions (think Apple Pay and Google Pay). It’s also called “contactless payment.” Rather than swiping a card, you are tapping a smart device at the point of sale.
  • E-check — A digital version of a paper check. It’s an electronic transfer of money from a bank account, without the use of the paper.
  • Stored-value card — Giftcards from a specific brand that can be used online to make purchases in their store.

Securing funds electronically is one of the top global payment methods we have. In 2023, eCommerce retail purchases are expected to rise from 14.1% to 22%. The need is only increasing and having an e-payment system married to your online commerce is a must. The more ways you offer people to pay, the better the buying experience. And when people are happy, they always come back.

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