Danielle works in digital marketing and advertising. She holds a bachelor's degree in English and an MBA.
Electronic payment systems are a common way for businesses and consumers to exchange goods and services. In this lesson, we'll study the concept of an electronic payment system and identify the types of electronic payment methods used in the business field.
Electronic Payment Systems
During the checkout process, you bring out your credit card and swipe it or enter your number, the money is transferred, and you are on your way. People make payments, online and in-person, every day without thinking twice about the electronic payment systems that run everything. An electronic payment system is a way of making transactions or paying for goods and services electronically without using cash or checks. In order to accept funding and meet customer needs, companies are accepting payments in many more forms than cash or checks.
Electronic Payment Systems Types
There are several ways of transferring money from a bank or credit account to another user. Before learning about electronic payment systems, it's important to note electronic payment systems rely on a number of transfer options. The most common are electronic funds transfer and a credit payment system. An electronic funds transfer is an electronic system used to transfer funds from one bank to another without the use of cash. A credit payment system is the same idea except the transfer is backed by a credit card previously issued by a financial institution.
1. Card Terminal
As a card holder and regular shopper, you deal with card terminals during checkout processes at the grocery store, the gas station, and most other stores. A credit card terminal and reader accepts both credit and debit card transactions and allows merchants to accept credit cards at the point of sale. They used to plug in to phone lines but now there are many wireless options available.
A single card terminal is easy to use, simple to integrate, and doesn't require high levels of employee training for operation. The largest con of a card terminal is the fact that it is not connected with other systems the business may use.
2. Integrated System
When is the last time you conducted a transaction with a nationwide retailer? Larger companies make use of integrated systems. Whether you've heard the term integrated system or point of sale system (or POS system), this is a retail system which connects a register, drawer, receipt printer, barcode scanner, customer display, credit card reader, and in some cases, a computer system integration. Companies are turning to POS systems because of capabilities such as managing customer information and sales reporting.
The benefits of an integrated system include: integration of logistics, sales trends, inventory counts, customer information, and more. A POS allows for integration of gift cards and customer loyalty programs. Larger companies run better and with less report management if there is a good POS in place. The biggest downsides to an integrated system are the high cost to purchase and the need to train your staff.
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With the prevalence of options like Square, mobile payments are more popular than ever before. You might have seen it at your last flea market visit, a recent farmers market trip, or even with a home seller. A mobile payment system is a credit or debit card swipe system that connects to a smart phone but operates under all established financial regulations. All information is stored or synced with an internal program. This is extremely convenient, but it can also produce a potential security issue.
4. Online Payments
If you've purchased anything online, then you've used online payments which give you the option of taking payments online through a secure website. There are entire businesses built on the online payments format, just think of Amazon! One of the major advantages of online payments is the potential to accept payments on a site, but online transactions tend to include a higher service fee from merchant accounts.
An electronic payment system is a way of making transactions or paying for goods and services electronically without using cash or checks. These transactions are made through an electronic funds transfer, where an electronic system is used to transfer funds from one bank to another without the use of cash.
There are several types of electronic payment systems available:
A credit card terminal accepts both credit and debit card transactions and allows merchants to accept credit cards at the point of sale. These replace the need for cash and checks and are easy to use and simple to integrate, but they aren't connected to other systems used by the business.
A point of sale system (POS) is a retail system which connects a register, drawer, receipt printer, barcode scanner, customer display, credit card reader, and in some cases, a computer system integration. These provide things like integration of logistics but also have a high purchase cost and need for training.
A mobile payment system is a credit or debit card swipe system that connects to a smart phone but operates under all established financial regulations. This is really convenient but also causes potential security issues.
An online payment gives you the option of taking payments online through a secure website. This is great for accepting payments on a site, but there is usually a higher service fee.
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