ONLINE PAYMENT MECHANISMS

HOW TO DEFINE ONLINE PAYMENTS?

A online payment or digital payment, sometimes called an electronic payment, is the transfer
of value from one payment account to another using a digital device such as a mobile phone,
POS (Point of Sales) or computer, a digital channel communications such as mobile wireless
data or SWIFT (Society for the Worldwide Interbank Financial Telecommunication). This
definition includes payments made with bank transfers, mobile money, and payment cards
including credit, debit and prepaid cards.
There is no single, universally accepted definition of online payments because online
payments can be partially digital, primarily digital, or fully digital. For example, a partially
digital payment is one in which both payer and payee use cash via third party agents, with
providers making digital bank transfers in the backend. A primarily digital payment might be
one in which the payer initiates the payment digitally to an agent who receives it digitally but
the payee receives the payment in cash from that agent.
So, the definition must be fit-for-purpose. One definition emphasizes the payer-payee
interface as the defining element. Another defines digital payments based on the payment
instrument, or some other variable. These definitional choices become particularly relevant
when the objective is to estimate the number or share of digital payments in a specific use -
case, organization, company, country, or region. The definition of digital payments determines
how they are measured.
 BENEFITS OF ONLINE PAYMENTS
Regardless of the definition, some things we know for sure: Online payments offer significant benefits to
individuals, companies, governments, or international development organizations. The benefits of going digital
include:
Cost savings through greater efficiency and speed. Women’s economic participation by giving women
For example, a recent report by the Better Than Cash more control over their financial lives and providing
Alliance and the Inter-American Development Bank
shows that the Government of Peru could save US$96 them greater economic opportunities. A G20 GPFI
million by shifting all government payments to more report highlights how digital payments contribute to
efficient digital options currently available in the women’s economic participation.
market.
Transparency and security by enhancing traceability Inclusive growth Cumulatively, the benefits outlined
and accountability, reducing corruption and theft as a above help unlock economic opportunity for the
result. For example, a recent report analyzes risks financially excluded, and enable a more efficient flow
incurred by individual purchasing clerks in cocoa value
chains (including assault), due to the prevalence of of resources in the economy. There is robust academic
cash. As of March 2019, the Government of India has evidence about the impact of the widespread adoption
saved almost $14 billion in social protection payments of digital payments on poverty reduction (see Jack and
through electronic Debit Benefits Transfers.
Suri, 2016) and on SDG progress.
Financial inclusion by increasing access to a range
of financial services, including savings accounts,
credit and insurance products. The Committee on
Payments and Market Infrastructure and the World
Bank published the flagship report ‘Payment Aspects
of Financial Inclusion (PAFI)’, outlining how digital
payments help advance financial inclusion.
 ONLINE PAYMENT SYSTEMS DEFINITIONS
• ACH payments are electronic credit and debit transfers, allowing customers to make payments
from their bank accounts for utilities, mortgage loans, and other types of bills. ACH stands for
Automated Clearing House and most payment processors offer ACH payment options to their
customers, especially for monthly- and subscription-based transactions. Most payment solutions
use ACH to send money (minus fees) to their customers.
• A merchant account is a bank account that allows a customer to receive payments through
credit or debit cards. Merchant providers are required to obey regulations established by card
associations. Many processors (such as the ones listed below) act as both the merchant account
and the payment gateway.
• A payment gateway allows merchants to securely pass credit card information between the
customer and the merchant and also between the merchant and the payment processor. The
payment gateway is the middleman between the merchant and their sponsoring bank.
• A payment processor is a company that a merchant uses to handle credit card transactions.
Payment processors implement anti-fraud measures to ensure that both the front-facing customer
and the merchant are protected.
• PCI compliance is when a merchant or payment gateway sets their payment environment up in a
way that meets the Payment Card Industry Data Security Standard (PCI DSS). The PCI DSS
standard was created by the Payment Card Industry Security Standards Council to increase
security of cardholder data and to reduce fraud.
DIGITAL INNOVATIONS
The pace of digital innovation in payments is driving a reduction in costs projected double compound annual
growth rate. It is resulting in new business models and a more competitive environment as new players emerge.
These are some of the innovations:
• Contactless payments – a secure payment • QR codes - a two-dimensional Quick
method using a debit, credit or smartcard enabled Response bar code or square-shaped code
by Radiofrequency Identification (RFID) or near- that contains data. It has become popular as it
field communication (NFC). This digital payment is a quick and easy way to exchange
method is growing in popularity due to its speed information and has the potential of
and seamless experience. substantially reducing payment acceptance
• Open Application Programming Interfaces costs. All that is needed for the payment to
(API) - a publicly available API that provides take place is a digital device with a camera
developers with programmatic access to a linked to an account.
proprietary software application or web service.
Open APIs allow new providers to build services • Biometric Payments – Biometric digital
on top of existing infrastructure. The relevance of payments use Biometric ID as a means of
these approaches is that it lowers barriers to entry verification and authorization of payments.
for new financial technology players, encouraging Biometric ID is any means by which a person
innovation and enabling the rise of seamless can be uniquely identified by evaluating one or
digital payment services for the end-user. more distinguishing biological traits. Unique
• Distributed ledger technology (DLT) - A identifiers include fingerprints, hand geometry,
database that is consensually shared and earlobe geometry, retina and iris patterns,
synchronized across multiple sites, institutions or voice waves, DNA, and signatures.
geographies. This database architecture solves • Central Bank Digital Currencies (CBDC) -
the problem of trust among multiple stakeholders
and the so-called “double spend”, which refers to Globally, emerging market economies are
the dilemma of ensuring a digital asset is not moving from conceptual research to intensive
spent twice. Since all members of the network practical development. Central banks
hold a copy of the ledger at all times, DLT allows representing a fifth of the world’s population
for decentralized digital payment systems that do say they are likely to issue the first CBDCs in
not rely on a single central authority, such as a the next few years.
bank or a public institution.
10 OF THE BEST ONLINE PAYMENT PLATFORMS

You have lots of options when it comes to online payment methods. Here are nine of the top
platforms for online payments:
• Authorize.Net
• PayPal
• Google Pay
• Amazon Pay
• Dwolla
• Stripe
• Braintree
• WePay
• Verifone (Previously 2Checkout)
• Apple Pay
 1. Authorize.net 2. PayPal
With a user base of more than 445,000 PayPal is the world’s most widely used payment
merchants, Authorize.net is one of the Internet’s acquirer, processing over 19 billion payments in 2021.
most widely used payment gateways. This More than 30 million merchants and 400 million active
payment solution from Visa has been around customers use PayPal.
since 1996 and now handles more than a billion
Payments are made using a user’s existing account or
transactions per year.
with a credit card. Money can be sent directly to an
Many widely used e-commerce platforms, such email address, thus prompting the users to sign up for
as Magento, Volusion, and X-Cart, integrate a new PayPal account.
easily with Authorize.net.
In addition to taking payments, PayPal also allows its
users to send money through the service, which is a
feature that only a few online payment solutions
provide.
 3. Google Pay 4. Amazon Pay

Google Pay is Google’s answer to PayPal. Google Amazon Pay allows shoppers to easily make
Pay allows users to pay for goods and services purchases using the payment methods saved in
through an account connected to their Google their Amazon account online and by voice using
profile. Amazon Alexa. Merchants can add an Amazon
Pay button to their checkout processes.
A major benefit that Google Pay has over the
competition is that millions of Internet users use
Google for other services, making a purchase
through Google Pay a simpler process.
 5. Dwolla 6. Stripe

Dwolla is another payment platform option that Stripe provides an excellent payment solution for
emphasizes simplicity and security. It offers web developers who would like to integrate a
numerous features such as digital wallets, the payment system into their projects using Stripe’s
ability to send up to 5000 payments at once, real- robust API. By bypassing the traditional signup
time payments to banks participating in the RTP® process, Stripe acts as a merchant account for its
Network, and same-day ACH payments. providers, handling all PCI compliance and
merchant approvals.
 7. Braintree 8. WePay

Braintree is an online payment gateway and WePay is an online payment solutions

merchant account solution known for working with company that provides payments infrastructure
popular tech startups such as Airbnb and StubHub. for independent software vendors and software
platforms.
PayPal acquired the company in 2013, and Braintree
is now part of the PayPal ecosystem. Braintree, This infrastructure enables small businesses to
however, is geared toward companies with high sales accept payments through the software
volumes that need customization capabilities. platforms. JPMorgan Chase acquired WePay in
With Braintree, customers can also use a range of 2017, which enabled functionality such as
online payment methods, including PayPal, Venmo, same-day deposits to Chase bank accounts.
debit and credit cards, Google Pay, and more.
 9. Verifone (previously 2Checkout) 10. APPLE Pay

Verifone is a payment solutions company that Apple Pay is a mobile payment service by Apple Inc.
began with point-of-sale hardware and now also that allows users to make payments in person, in iOS
focuses on software applications. apps, and on the web. It is supported on these Apple
devices: iPhone, Apple Watch, iPad, and Mac.
The company acquired 2Checkout in 2020, which
enabled it to expand further into It digitizes and can replace a credit or debit card chip
ecommerce. 2Checkout, which is now part of and PIN transaction at a contactless-capable point-of-
Verifone, offers various digital commerce sale terminal. It does not require Apple Pay-specific
solutions, including payments, billing, and contactless payment terminals; it can work with any
subscription management. merchant that accepts contactless payments.[1] It
adds two-factor authentication via Touch ID, Face ID,
PIN, or passcode.
THE FUTURE OF MONEY IS DIGITAL: PAYMENTS
TRENDS FOR 2022

Andrew Torre, Visa’s regional president for Central & Eastern Europe, Middle East and Africa
looks ahead at his payment predictions for 2022, while outlining why the future of money is
digital.
Over the past 12 months digital transformation has continued to accelerate across all sectors,
and commerce has been no exception. Even as society begins to normalize, with restrictions
lifting and offices reopening, habits adopted during the pandemic are sustained.
Online and offline, spending has been transformed. Businesses that were brick -and-mortar-
only adapted as online shopping became the only viable option in lockdown. In physical
stores, the value recognized in touchless payments boosted the continued growth of
contactless payments. Digital progress typically expected over a number of years was
squeezed into just a few months.
While uncertainty and unpredictability are now expected, one thing that is clear is that that the
future of money is digital. The pandemic accelerated change, but we have seen a permanent
behavior shift to digital that is set to last far beyond. This is being supported by several
innovative emerging trends that are set to unlock the power of digital money, and further
reshape our payments world, and commerce more broadly.
Here are some of the most interesting areas to watch in the payments space over 2022.
• Embedded Finance: Open innovation has made once • Buy Now Pay Later: Following another year of rising
complex and expensive banking infrastructure much eCommerce adoption, consumer interest in instalment-
more accessible, allowing any company to become a based solutions has rapidly increased. Like credit cards,
fintech, and create new financial products often with a Buy Now Pay Later (BNPL) offers unsecured credit to
better customer experience and at a lower cost. With consumers, but they differ in terms of accessibility as well
evolving regulations, more and more merchants are as the placement of the service itself, at the checkout
(either online or in physical stores). To be successful,
exploring how financial services can complement their fintech BNPL providers must carefully balance their cost of
revenues, while a raft of new banking-as-a-service funds with their ability to assess credit risk, manage bad
providers are helping create new use cases and debt and cope with increasing regulation, while FIs need to
revenue streams. focus on partners and solutions that can allow them to
enable these purchases.
• Green payments: With last year’s COP26 meeting
drawing vital attention to the climate emergency, • Crypto goes mainstream: Another fast-growing 2021
consumer awareness and appetite for sustainable trend that will become even more prominent this year is
products has never been higher. Research shows 62% the integration of crypto into mainstream financial
of consumers would stay with their bank if sustainable services. We increasingly see regulators outline the
benefits were available, yet only a quarter of mechanisms that they are going to use to oversee crypto-
consumers have sustainability features today. New related activities. Visa is playing a leading role in enabling
solutions, such as Visa Eco Benefits, can help this entry of crypto into mainstream financial services by
integrate features into card payments, helping users to working with our financial institutions to allow their clients
to buy and hold crypto through digital custodians and
understand the impact of their spending on the enabling more than 60 partners to issue cards to their
environment, with transactions offering donations crypto customers to buy various goods and services.
towards eco-friendly and carbon offset partners.
• Open banking: While data is a key ingredient in a truly
• The Metaverse: The Metaverse is creating a new personalized offering of financial services, it is paramount
shared space between different digital worlds, that consumers can share sensitive information with third
blending virtual and augmented reality. Whether it is parties in a more secure manner. Through APIs,
Nike selling virtual sneakers, Ariana Grande’s concert consumers can share information with trusted third parties,
in Fortnite or a replica of Florence’s Gucci Garden in who in turn create innovative financial solutions. This
Roblox, we are seeing a ‘third space’ of virtual enhances the scope for entirely new products and services
economies allowing sales of virtual goods. While the – and revenue streams – for acquirers and fintechs, such
Metaverse presents enormous opportunities and as Solaris Bank, which handles the core infrastructure of
creates an entirely new sales platform, defining how to banking services while allowing its clients to take care of
effectively serve new and emerging forms of front-end distribution
commerce presents a big question for financial
institutions and merchants alike.
 HOW THE E-PAYMENT SYSTEM CAN HELP
BUSINESSES TO EARN MORE
• Revenue Opportunities
This is probably the biggest point of them all — E-Payment Systems are providing customers with a variety of
options to pay, which opens up more opportunities to collect revenue. The easier and more diverse purchasing
options that are available, the more likely it is the revenue flow will increase.
• Automated Processes
When electronic payment processing is performed automatically, there is no room for human error. It saves a lot
of time and effort for the business and allows one to organize recurring payments as subscription programs.
• Greater Flexibility
It can easily offer special promotions and discounts or make a quick price change in accordance with the latest
marketing insights in order to make as many deals as it can.
• Improved Security
At first glance, using an electronic payment system in E-commerce seems like a weak point in terms of security,
but it will also get access to the latest technology to protect the transactions as much as possible. Also, E -
commerce fraud detection and prevention standards are very high in these systems. With the right approach,
these security technologies could serve as a cost-saver by detecting fraudulent transactions.
• Engaging a New Audience
It can make businesses available to a new audience by accepting payments from all over the world or by
including certain E-Commerce payment methods that are popular in the target regions.
 6 WAYS IN WHICH E-PAYMENT SYSTEMS
IMPROVE THE CUSTOMER EXPERIENCE
• Simplified Process
Solutions like Amazon 1-Click Ordering, where all the customer needs to do is push one button to buy or use Apple Pay (where a
smartphone needs to be placed against the sensor) create a whole new level of convenience. If your business supports these ty pes of
solutions, you will make it much easier for your customers to buy your products or services.
• Eliminating Repetitiveness
If your system still requires customers to enter their personal information each time that they make a purchase, you can opti mize this
process. For example, by introducing an option that allows clients to save payment information and not have to re -enter it for the next
order. You can also introduce the auto-pay approach the way Spotify and Amazon Prime have done, to ask your customers for the
required information just once— when they get registered.
• Instant Notifications
Using an electronic payment system in E-commerce allows customers to get instant notifications on whether a transaction has been
completed and when they receive the products.
• Minimizing Human Contact
When you set up your electronic payment system to provide a customer with all the essential functions like balance, credit in formation, or
transaction history without the need to contact your team members, it creates an additional layer of convenience. If the cust omer needs
to contact your business, you can launch a chatbot (a great example of using Machine Learning in Finance and E -Commerce) which is
available 24/7 to show your clients how much you value their time.
• Providing Various Options
This is not only a revenue driver, but also a way to improve the customer experience. Let your clients choose between credit cards, bank
transactions, or maybe even cryptocurrencies and they will pay you with loyalty and respect!
• Security
Having these multiple options, however, creates a problem — your business is now vulnerable to hackers. But if you use a third-party
service to verify PCI compliance and make sure you are doing everything to protect customer information, you can build a repu tation as a
secure business. This will help build a strong brand image in the long run and make it easy for your clients to recommend you r business
to others because they will feel safe making purchases.
 HOW MILLENNIALS ARE DRIVING NEXT GEN
COMMERCE
Since the launch of the first iPhone more than 10 years ago, the payments industry has benefited as
much as any as connected devices have become the central way we interact with the world. Mobile
devices have proven to be the driving force to normalize new enabling technologies such as biometrics,
making consumers more comfortable to pay using biometrics than passwords.
And millennials are driving many of these exciting changes.
We recently shared insights from our annual Digital Payments study, which surveyed over 42,000 people
across 22 markets in Europe, to examine consumers’ changing attitudes towards payments and how they
manage their money more broadly. The study showed that millennials – young adults aged 18-34 – are
driving mobile commerce behaviors, whether that’s shopping, sending money to friends or family, or
doing everyday activities such as paying bills.
Mobile banking has become particularly popular millennials with 69% of UK millennials regularly checking
their balance or managing their money on their phones and tablets. They are also embracing other
payment forms and behaviors such as peer-to-peer payments through apps (something that social media
companies are beginning to introduce globally), contactless payments with Apple Pay and Android Pay
and mobile shopping on-the go.
The ability to shop anywhere, at any time has resulted in e-commerce outstripping face-to-face spending
in the UK in recent years. We’ve seen this through Visa’s monthly Consumer Spending Index, which has
demonstrated a steady growth in household expenditure through the e-commerce channel. Since
January, online spending has shown year-on-year growth in every month of this year except April.
For online retailers, removing points of friction in the shopping experience has been key. In the
early days, when consumers first started to move from the desktop to smaller smartphone
touchscreens, website navigation and the perils of the ‘fat finger syndrome’ led to many
frustrations. This has been addressed by the mobile-optimized sites and apps offered by most
major retailers now. One click payment services, coupled with browsers which remember
pertinent details, negate the need to re-enter billing and delivery information. Two in five (42%) of
the population have now paid for goods and services online via their mobile device – rising to
65% of 18-34 year olds. Millennials also lead the way in making face-to-face payments on mobile
devices through the likes of Apple and Android Pay – half have now used these services at some
point, compared to 29% of the general population.

And it doesn’t stop with traditional shopping – young adults are also the leading demographic
when it comes to sending money to friends and family. Over a third (34%) of us have now done so
– rising to 59% of millennials in the UK. Payment platforms like Visa Direct are now enabling
customers to make direct payment in real time to companies of all sizes, offering direct access to
funds. Mobile platforms also enable people to make direct payments for simple tasks such as
transferring money to a friend to cover holiday costs or a share of a restaurant bill.
CUSTOMER CONVENIENCE AND EASE
UNDERPINNED BY SECURE TECHNOLOGIES
Even before the digital era, payment innovation has been about striking the right balance between customer
convenience and security. This is what drove the uptake of debit and credit cards, followed by the introduction of
chip and PIN. Convenience will only go so far; without the security underpinning it, consumers will never trust
and adopt new technologies. Mobile phone manufacturers have recognised this, and the integration of fingerprint
scanning technology in smartphones – and, recently, facial recognition – has been embraced as the ideal
combination of security and convenience. Across all age groups, 86% feel biometrics in general are a secure
form of authentication compared with 71% who trust more traditional methods such as passwords, and
signatures. Fingerprint scanning is the most trusted biometric payment method – 76% of millennials agree it is
secure, while over eight in 10 (81%) of over 65s feel the same way. The adoption and acceptance of frictionless,
simple and secure payment innovations transcend the ages. Our research has shown that older generations are
just as likely – if not more – to embrace new payment technologies.

Easy access to fingerprint scanning and facial recognition isn’t the only leap in security either. The emergence of
tokenization, which creates unique numbers for each transaction, has helped to enable NFC mobile payments
such as Android Pay and Apple Pay. With an estimated 8.4 billion connected devices in use in 2017, according to
Gartner, this opens up a wealth of possibilities to integrate payment in technologies in objects which would
previously have been considered unsecure. Nearly three in five (57%) Brits have concerns over security and
fraud when making payments on mobile devices, but encryption technologies would make the majority of this
group (54%) feel more secure.
WHAT’S IN STORE FOR THE FUTURE?
Looking ahead to the future, the speed of development and market penetration offered by
mobile technology is likely to grow. For one, the internet of things is looking likely to realize its
potential. That number of connected devices is expected to increase by over 100% in the next
three years to over 20 billion. Soon enough, it is possible that we will be able to order and pay
for food directly from our cars as we drive home.
Millennials will continue to drive mobile money management and payments. More than nine in
ten (91%) predict that they will be using their mobile devices for financial purposes in three
years’ time, far above the national average of 72%. Where it’s difficult to see where this might
end up is in the balance between online spending and face-to-face in the retail sector. We’re
certainly likely to see biometric technology begin to make its way into bricks and mortar retail
spaces facilitated by mobile technology.
What remains key is consumer choice. Smartphones have democratized how companies
innovate and placed the consumer back at the heart of the development process. People want
a frictionless experience, taking the path of least resistance, just as long as they can remain
secure. Our research shows that we need to consider the customer based on their individual
needs, rather than deciding which technology is best for them. There are those for whom
biometrics or mobile payments do not work, and they can’t be left behind as we look to
develop the industry. It is up to payments companies to recognize the multitude of options for
consumers to make payments across a number of platforms, and take the lead on working
with partners to help provide this.
CONCLUSION

Technology has arguably made our lives easier and online payment is one of the
technologicalinnovations in banking and finance. (Mathiraj & Saroja Devi, 2018) While
analyzing andcomparing various modes of online payment systems we conclude that they are
quite similar butdiffer from each other with some very small details. Online payment refers
to financial transactionselectronically and they provide huge freedom to individuals. There are
a lot of advantages of online payment systems such as time saving, avoiding long
lines, they are available whichever time ofthe day, easy access to information 24 hours,
quality customer service, online application andreduce pepper work