What are Electronic Payments?
Electronic payments, or e-payments, are a way of making transactions or paying bills online or through an electronic medium, without the use of physical checks or cash. The most popular methods of electronic payments include credit cards, debit cards, virtual cards, and ACH (direct deposit, direct debit, and electronic checks). For example, when a vendor performs a service for your business and sends the invoice electronically, the process of paying the vendor via credit card, debit card, etc. is considered an electronic payment. With most electronic payment methods, the hard costs and fees associated with traditional B2B payment gateway website payment like checks are no more — including paper, postage, and manual labour expenses.
Electronic payments also provide businesses with several benefits over traditional methods of payment:
Speed – Electronic payments can be completed within seconds while checks can take up to three days to clear depending on your bank’s policies.
Flexibility – You can make multiple payments at once using one account number instead of having to fill out multiple checks for each recipient.
Convenience – Most people have access to their checking accounts 24 hours a day so you don’t have to worry about being away from home when it’s time to pay bills.
The Benefits of E-Payments
Electronic payments are rapidly becoming a preferred method for paying vendors, especially for quickly making large-dollar and recurring payments. However, many businesses still rely on paper checks as their primary form of payment.
Electronic payments and e-payments systems are highly beneficial to both businesses and their suppliers. In the context of accounts payable, e-payments are a win-win in that they reduce costs, improve relationships, increase visibility and provide enhanced security when compared to traditional checks. Here’s how:
Lowered Processing Costs: The more payments a business can process electronically, the less they spend on paper and postage, along with the time required to print, sign, stuff and mail checks. In fact, shifting to a holistic e-payments strategy can reduce payment processing costs up to 80 percent.
Strengthened Supplier Relationships: Businesses can improve vendor relations by facilitating quicker, more secure payments that include rich remittance data for easier reconciliation.
Increased Payment Security: Electronic payments are inherently more secure than paper checks
Types of Electronic Payments
A payment system is an integrated set of components that allow consumers to make purchases online. In addition to providing a secure payment gateway, these systems are also responsible for processing payments, recording transactions, and sending receipts back to customers.
A good e commerce payment system should make it easy for customers to make purchases online through a variety of means. These include card payments, bank transfers, virtual cards, and cross-border/FX payments.
Card Payments: Credit and debit card payments are the most common type of electronic payments. Despite their decreasing popularity among younger generations, credit card payments continue to be the most utilized electronic payment form due to their rewards and rebates offerings.
Bank Transfer Payments: A bank transfer is when funds are moved from one bank to another and can be done in a few different ways. Most bank transfers are conducted via direct deposit, where payments are deposited electronically into the recipient’s bank account. However, in the U.S., bank transfers are conducted with ACH transfer payments.
Virtual Card Payments: A virtual card is a randomly-generated 16-digit number that can only be used.
