How Electronic Payment Works (2024)

FAQs

How does electronic payment work? ›

Electronic payment systems work by facilitating the exchange of funds between parties electronically. When a payment is initiated, the system securely processes the transaction details via a payment gateway that verifies the payer's identity and validates the transaction.

Electronic bill payment and presentment (EBPP) is a process that companies use to collect payments electronically through systems like the Internet, direct-dial access, and Automated Teller Machines (ATMs). It has become a core component of online banking at many financial institutions today.

Electronic money (e-money) is a digital store of a medium of exchange on a computerized device. E-money can be used for payment transactions, with or without bank accounts. The great advantage of course is a cashless payment system that makes money transfers of any size quick and easy.

The consumer starts payment transactions using UPI, mobile wallets or a similar option of his choice. The payment details are transmitted securely into the payment network. The payment network checks for the balance, thereafter, funds are moved from the consumer's bank account to the payee's bank account.

Are digital payments more secure than offline payments? Digital payments are typically more secure than offline payments for a variety of practical reasons. First, paying for items using physical cash or cards requires that customers carry those items around with them, possibly exposing themselves to robbery.

The customer provides their payment details—like card number or bank account information—at the business's POS, card reader, or ecommerce checkout. The payment information is securely transmitted to a payment gateway, which encrypts the data and forwards it to the payment processor.

The sender initiates the transfer over the internet or at a payment terminal. The transfer request is sent to the sender's bank and then back to the receiver's bank. EFTs are commonly used by businesses to pay employees, by utility companies to collect payment for services, and by retailers to pay suppliers.

Digital currency may be recorded on a distributed database on the internet, a centralized electronic computer database owned by a company or bank, within digital files or even on a stored-value card.

The disadvantages of online payments include fraud risks, difficulty in tracing, technical issues, reliance on the internet, loss of smart cards, identity theft, and more.

What is the difference between electronic payments and digital payments? ›

Electronic payments transfer financial values by means of online transactions on the Internet. They are understood to be any type of payment that is not made in cash. Digital payments are a type of electronic payment in which the transaction occurs online. However, they do not use any type of physical element.

Digital account opening is the method of opening a bank account or financial product completely online, eliminating the need for physical paperwork or in-person visits. It allows customers to easily initiate and complete the account opening process remotely, typically through a website or mobile app.

E-payments are convenient, fast, and secure, but they also come with various risks, such as fraud, cyberattacks, compliance issues, and operational failures. To protect your business and your customers, you need to design and implement an effective e-payment risk management framework.

Login into bank website using the net banking user id and password. Select the payment details and make the payment. On successful transaction e-challan will be generated.