Consumers want convenience; it’s one of the reasons that online shopping continues to grow in popularity across Australia. In 2017, more than 79 per cent of us said we preferred online shopping, which is no surprise given that 87 per cent of Australians access the internet daily and spend an average of 10 hours on an internet-connected device.
E-commerce is a huge opportunity for businesses to expand their brand presence and increase their revenue substantially. However, in order to online payments properly, you need to invest in an electronic payment system. Whether you’re just starting a business or are a key player in your industry, here’s everything you need to know about electronic payment systems.
Frequently Asked Questions
What is an electronic payment?
How do electronic payment systems work?
What are electronic payment methods?
Are electronic payments secure?
What are the benefits of electronic payment systems?
What is an electronic payment?
Electronic payments allow customers to pay for products or services electronically. Electronic payments are what allow you to purchase clothes via your favourite online store or pay your bills online. So if you’re planning to create an online store, you need to have an electronic payment system and learn exactly how it works.
Even if you’re not planning to invest in e-commerce, it’s important to understand how electronic payments work (as a customer) and the role they play in the evolution of the payment processing ecosystem.
How do electronic payment systems work?
Understanding how an electronic payment works can get technical since there are a lot of moving parts. Here’s a breakdown of the main participants required for an electronic payment transaction:
- The cardholder is identified as the consumer who purchases a product or service online.
- The seller is the person or business that sells the product or service to the cardholder.
- The issuer is the financial institution that provides the cardholder with the payment card. This is usually the cardholder’s bank.
- The acquirer, or seller account provider, is the financial institution that establishes an account with the seller. The acquirer authorises the legitimacy of the cardholder account.
- The payments processor handles the official transaction between the cardholder and seller.
- The payment gateway processes seller payment messages and uses security protocols and encryptions to ensure transaction safety.
Electronic payment transactions are divided into two types: one-time vendor payments and recurring customer vendor payments.
- One-time vendor payments are commonly used on e-commerce websites. A cardholder types in the card or banking information on a checkout page and simply clicks to purchase.
- Recurring customer vendor payments are used when the cardholder is paying for a product or service regularly. Customers enter their information once and then opt in for a recurring payment option with a set date for the payment to go through. This is often used by car insurance agencies, phone companies, loan management companies, and other types of businesses.
Electronic payment methods
All transactions require a method of payment. With traditional payment processing systems, a customer can use cash, checks, EMV contactless and chip cards, eftpos payments or mobile payment options.
Electronic payment methods differ slightly. E-payments are orchestrated by an electronic funds transfer (EFT), which is the process of transferring money from one bank account to another without any exchange by hand. Online payment methods that use EFT include, for example, are debit or credit cards. Businesses must have e-commerce software to accept payments online. A customer enters the debit or credit card information in a virtual terminal or online invoice when a product or service is purchased.
Are electronic payments secure?
Credit card security is a top priority for any business, especially if you have an online store or use the internet to complete transactions in any way. But don’t worry, there are a number of security standards and protocols in place to ensure the security of financial transactions online.
Here’s how you can abide by industry standards and keep sensitive data secure.
Ensure your electronic payment system is PCI compliant
When you are assessing different options for an electronic payment system, make sure you select one that is PCI compliant. The Payment Card Industry Data Security Standard (PCI DSS) sets a list of requirements for payment systems to securely accept, store, and process payments.
Create an e-commerce site that uses SSL encryption technology
Secure socket layer (SSL) technology is a security model that meets the following security provisions: encryption, authentication, non-reputability, and integrity. It ensures that all electronic payment transactions made on your e-commerce site are safe and secure.
Why does it benefit your business?
Now you understand how electronic payment systems work. How do they work for your business?
- Reach a new audience.
E-commerce opens up your target market substantially. Because you don’t have geographic or time limits, customers can access your website and purchase products from anywhere and at any time.
- Improve purchasing efficiency.
Customers don’t have to wait in line to buy products or services when using an electronic payment system. This kind of purchasing efficiency can actually encourage consumers to buy from your business more often.
- Increase payment security.
There are a plethora of security measures and protocols in place to ensure your online transactions are safe and secure.
