What Are Electronic Payments? Everything Your Business Needs to Know

June 11, 2024

Electronic payments, or epayments, are a convenient alternative to cash and checks. They’re the main way that most customers like to pay. 

And that means businesses that don’t accept electronic payment services risk losing customers who don’t carry cash. Whether you have a brick-and-mortar store, operate online, or both, setting up epayments is critical to success. 

Before looking deeper into the how and why of epayments, let’s examine the fundamentals.

What Are Electronic Payments?

Epayments refer to any non-cash payments. They let people pay for goods and services with credit and debit cards, bank account transfers, or digital wallets like PayPal and Apple Pay. Funds move safely from a customer’s account to your business account.

Epayments include in-person and online transactions. In a store, customers typically tap their card on a point-of-sale (POS) device to facilitate the money transfer. But online, the process looks a little different. People can input their credit card information or use a digital wallet, depending on where they’re shopping and what they prefer. 

How Do Electronic Payments Work?

Epayments move money from one account to another. Here’s a step-by-step guide to how this journey works for online purchases:

1. A Customer Enters Payment Information

A customer goes to the checkout section of your website. Here, they enter their payment information. This could be their card number or their account information for an external service like PayPal. It depends on how you set up your system and what payment methods you allow.

2. The Request Enters Payment Gateway

Next, the data goes to a payment gateway. The gateway acts as a middleman between the customer’s account and yours. 

3. The System Validates the Information

The payment gateway checks the customer’s details. It makes sure there is enough money in the account and that the transaction is valid. If it finds something’s wrong, it pauses the transfer and lets either you or the customer know. It depends on what the problem is. 

4. The Transaction Is Processed

If everything’s clear, the gateway sends the payment details to the customer’s bank or digital wallet. The bank then moves the money through your website into a merchant account. The funds are held there while the payment processes before eventually moving to your business account. This happens quickly, often in just a few seconds. 

When you set up an effective epayment system, the whole process is hands-off. You don’t have to deal with processors unless something goes wrong. For example, your system might flag an order for fraud. In that case, it’s up to you to reach out to the customer and navigate the situation.

The Epayment Method: Pros and Cons

Epayments are popular because they make buying and selling easier. But, like any business process, they have pros and cons. 


1. Allows Secure Payments

Most epayment providers are safe. They use strong security to protect customers’ money and personal details. This makes it hard for thieves to steal their information.

2. Saves Money

Many epayment services have low transaction fees. This helps both customers and businesses save money. And since there are so many options out there, you can compare services and choose one that’s the most cost-effective for you.

3. Tracks Expenses

Your business can record epayments in a single platform. That means you have real-time financial data. You can analyze everything from what products customers like to how much they spend in one go. This leads to more informed decisions. 

4. Facilitates Transactions Quickly

Transactions are linked to global networks. They can move through the system in seconds, anytime, from anywhere. This speed is great for both buyers and sellers because neither has to wait more than a few seconds for confirmation.


1. Vulnerable to Fraud

Even with strong security, there’s still a chance of cybercrime. Hackers can try to steal your customers’ or business’s information through vulnerabilities in payment processing systems or data storage. This can lead to fraud or data breaches. 

Cybercriminals can also pose as customers and make payments that look real, but don’t go through later. You might send a product or provide a service before realizing what happened. Your business loses time and money, and it’s hard to get those resources back.

2. Requires Internet Connection 

Customers need the internet to make epayments. If their connection fails, the payment won’t go through.

Types of Epayments Explained

Everyone’s familiar with card payments and bank transfers. But there’s more to epayments than just those options. Modern examples include ewallets like PayPal and even crypto wallets for digital currencies. It’s a good idea to offer a few options so customers can pay how they prefer.

Here’s a guide to different epayments:

  • Bank Transfers. Bank account transfers move money directly from one bank account to another. They include ACH transfers and wire transfers. They’re not as common for ecommerce because they take a long time. Their most common use is large or sensitive payments, like buying a house or sending money across borders.
  • Card Payments. Card payments include credit and debit cards. But credit payments are more common for online transactions. Popular providers include Visa, Mastercard, and Discover. Card payments are quick and easy, but you may have to pay processing or transaction fees.
  • Electronic Wallets. Electronic wallets, like PayPal, Apple Pay, and Google Wallet, store payment information on a smartphone or tablet. Users can scan a QR code or tap their device to make payments. Ewallets are convenient and secure, but not everyone uses them.
  • Electronic Checks. An echeck is an electronic version of a paper check. It moves money directly from a customer’s bank account to the business’ account. Echecks are often used for recurring payments, like rent or utilities, rather than purchases. They also take a few days to process.
  • Crypto Wallets. Crypto wallets store digital currencies like Bitcoin and Ethereum. They let people send and receive cryptocurrency. They offer secure and private transactions, but their value can change quickly, since cryptocurrencies are volatile. Crypto also has different regulations by state, so check the laws in your area.

How To Receive Electronic Payments Step-By-Step

The first step is to sign up for a business bank account if you haven’t already. Check with your bank to make sure it’s a formal merchant account, which lets you accept payments from customers. Ask about transaction fees for different types of epayments, like ACH transfers or digital wallets. Compliance standards may differ depending on your bank and business.

Next, choose a payment service that connects to your website. It should have a payment gateway and a payment processor. Many website hosts, like Shopify and Squarespace, can set this up for you. For example, Shopify has its own payment gateway built in. 

If you send customers invoices instead of facilitating payments through a website, you can include a payment portal on every invoice with Invoice Simple. This lets customers easily pay from the invoice you send them. 

Implementing Electronic Payment Processing Software

Epayments help you work faster than traditional payment methods. They help you enhance efficiency, streamline operations, and improve customer satisfaction. And with Invoice Simple, accepting payments is even easier. 

Invoice Simple offers easy, accessible, and safe payments with its online invoice payment processing service. Let your clients pay with flexible options that work for them and work for you. Plus, track outstanding invoices, due dates, and balances at a glance.

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