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In the business, a product or service is exchanged for money between the business and the customers. The method which is used by the customer to pay for the product is called a payment method. In the regular brick-and-mortar shops, this payment method is usually cash or cards, and in some rare cases, gifts cards as well. In online businesses, the payment methods can be cards, gift cards, vouchers, direct bank transfers, or cash on delivery (Berenson et. al, 2016). The payment method can have multiple options such as the payment processors in the online method can be PayPal, Razor Pay, American Express, Visa, etc. The primary use of payment method is used to exchange value with money between the customer and the business. It is used in every industry, every business. Further, the report will discuss the technologies used in digital payment, the use of payment methods in different organizations and industries followed by a discussion of the effectiveness of payment methods as a business tool.
Fulfilling the purpose of business: every business is conducted to earn money by selling services or products to the customers that create or add value to the customer’s day-to-day life. Payment methods are the medium to receive the money either through online or offline mediums. Hence, it fulfills the purpose of conducting business (Bezovski, 2016).
Time-Saving: Earlier, people used to exchange value with the barter system where the customers with the mutual interest of exchanging goods were less likely to meet regularly. With the payment methods, the exchange is done only in an accepted form which reduces the time of finding a person with the mutual interest of selling and buying in the barter system.
Ease of doing business: there are multiple payment options available in the current market which reduces the hassle of carrying, the digital payment methods have reduced the hassle in the payment process.
It is an everyday activity to buy something that adds value to one’s life and pay for it. The payment was accepted in many ways in history and developed to the current digital methods. The evolution of payment methods is discussed in this section.
Barter: the first form of payment method was the barter system where material goods or services were exchanged between people for some other services or goods.
Coins: barter system posed various complications as it was difficult to find the person who sells goods in exchange for the goods or services that one is offering. Metals are valuable and accepted as a form of payment after the barter system in 680 to 560 BC.
Currency Notes: carrying coins for bigger transactions was difficult and later the coins were replaced with paper money and banknotes in the 7th century. At that time, the notes were given by the banks in exchange for gold.
Cheques and Bills of exchange: In the 12th century, the paper notes were replaced with cheques and bills of exchanges issued by the banks as a promise to pay the creditor from the debtor. This method is still widely used in different economies (Forziano, 2021).
Digital Payments: as the use of the Internet and worldwide banks increased, various communication channels were created to sell the goods and services such as e-commerce, websites, etc. To facilitate digital services, payment methods have evolved to digital methods such as UPI, digital wallets, etc.
The transactions that take place through the digital medium with no physical exchange of the money is called digital payment. There are several methods of digital payment such as internet banking, card payments, stored value cards, E-cash, E-cheque, E-wallets, Mobile wallets, etc. The digital payment method is explained below.
There are different nodes of online payment that are explained here, the first is payment initiation; after confirming the purchase, the customer selects a method to pay based on which the details are required such as CVV, card pin, expiration date, etc. The next stage is payment authentication, it is an important step to ensure security during the transaction, if the system detects any authenticity mismatch, the transaction is failed. This is conducted by the service provider’s data network through a secure channel to the buyer’s bank or credit card company (Alaeddin et. al, 2018). This task is secured through a payment gateway followed by a payment processer. Once, the authentication is approved by the buyer’s bank, issuing bank settles the amount to the acquiring bank.
Payment methods are used in every field and by every firm for the business such as restaurants using cards, UPI, QR scanning, contactless methods to receive the payment. In the pandemic, digital payments were the only mode of payment accepted in many stores to reduce the chances of spreading the virus. Digital payment methods are widely used by e-commerce websites to accept payments.
Digital payment methods are not bound to any specific industry and are used widely in all businesses and industries. Digital payments have been established as a convenient, secure, and transparent system of payments in every industry. In the Covid-19 pandemic, the use of digital payments modes skyrocketed as it is a safe method to reduce the contact between people which reduces the spread of the virus.
Healthcare: The digital payment methods are used in the healthcare sector as the sector has transformed digitally in recent times such as online consultation, delivery of medicines, etc. is facilitated by digital payment methods (Mekuria et. al, 2019).
Banking: earlier, banking was a tedious process as the customer had to stand in queues to get the cash, receive the statements, etc. with the digital payments the banking has become very easy, the banks use online payments to receive the EMIs, paperless loans application, e-cheque, etc.
Education: The institutes accept online payments as the trend of remote coaching has increased to reduce the traveling time of teachers as well as the students (Singh and Rana, 2017). It also benefits the students as they can get access to industry experts’ teachers without traveling to different cities and countries. The exam conducted for entrance or jobs also uses digital payments for the applications.
Real Estate: The transactions in this sector are usually large amounts which are difficult to conduct in the cash mode and hence, in the real estate businesses the technology of digital payments is widely used.
There are several apps and software used for digital payments. Software like Google Pay, Apple Pay, PayPal, etc. is used as the link between the customer and the acquiring bank. The details for authentication such as card number, UPI ID, etc. are saved in these apps and authenticated every time the user tries to initiate the payment. Banks offer their applications for direct debit between the sender’s bank and the acquiring bank. The virtual technology used in the payment methods is Wi-Fi, and ethernet connectivity (Nikulchev et. al, 2019).
The hardware used in the digital payment methods includes chip readers to tire the information, near field communication technology for accepting the digital payments, scanners, swipe machines, monitors, mobile phones, and in many cases, a POS device which is issued by the bank to the merchants. For data storage and usage, the secure network established by the banking system is used by the payment gateways and payment processors to ensure a secure transaction. Live data processing tools are used to ensure security as the data is processed and authenticated and the bank account holder receives a notification about the transaction in real-time to avoid any fraudulent transactions (Nandlal et. al, 2021).
The technology is widely used by businesses to facilitate the transaction as it provides ease and convenience to the merchant as well as the buyer. Digital payment is also important for economic progress as it makes the transactions transparent and a seamless experience encourages buyers to spend more occasionally which is beneficial for the economy. The business transactions history is easily available which makes it easier for the customer as well as business to track their inflows and outflows of money.
Digital payment methods are a highly effective business tool as compared to the traditional cheques and cash as the e-payment systems are easy to carry, instant, and many other benefits that are discussed in this section.
Fast: The system is very fast and convenient as the customer can pay at any time, from anywhere as the e-payment systems are not dependent on location or time and the transactions can be conducted from anywhere across the globe (Anshari et. al, 2019).
Security: The entire digital payment system is secured with encryptions, tokenization, SSL, etc. numerous security features are conducted such as multiple authentications within less time. For the merchants, it is easier to accept several payments at the same time (Ardianshah et. al, 2020).
Processing time and cost are saved: The merchant’s processing cost is reduced with the digital payments which help the merchants to reduce the expenditure and time taken in the processing in the traditional methods of transaction.
Risk of theft is reduced: The digital cash can’t be stolen easily as it is secured with multiple encryptions and require expertise to hack the account. Hence, the chances of money being stolen are reduced manifolds.
Transparent: the payment transactions are transparent and easily available in the applications so that merchants can track the transactions, as well as the name of the customer, is mentioned which reduces the confusion.
Contactless: In recent times, where the world is dealing with a pandemic, digital payment methods have facilitated contactless payments and secured businesses (Gupta and Singhal, 2021).
This report summarizes what a payment method is, its importance, and its evolution throughout history. The payment method has been present in human civilization for a very long time as a means of exchange of goods and services between people. It fulfills the basic purpose of business i.e., to exchange goods and services. In addition, it emerges as a time saver and makes the business easy to conduct. Payment methods started as the rudimentary barter system which involved the direct exchange of goods, which evolved to sophisticated financial systems like coins, currency notes, cheques, etc. With the advent of the internet, payment methods found their most sophisticated method of evolution yet, digital payment (Berenson et. al, 2016). There are a plethora of businesses like healthcare, banking, education, real estate, etc. which involve the use of digital payment methods in the current times. Banks and organizations offer their means of digital payment which are usually mobile or web applications that users can easily use to complete any transaction. Some examples of such apps are Google Pay, Apple Pay, Paypal, etc. These methods are extremely fast, secure, easy to use, and reduce the risk of physical thefts. In conclusion, payment methods will always be present in the world and digital payments are the current and possibly the future evolution of a payment method.
Alaeddin, O., Rana, A., Zainudin, Z. and Kamarudin, F., 2018. From physical to digital: Investigating consumer behaviour of switching to mobile wallet. Polish Journal of Management Studies, 17(2), pp.18-30.
Anshari, M., Almunawar, M.N., Masri, M. and Hamdan, M., 2019. Digital marketplace and FinTech to support agriculture sustainability. Energy Procedia, 156, pp.234-238
Ardiansah, M., Chariri, A., Rahardja, S. and Udin, U., 2020. The effect of electronic payments security on e-commerce consumer perception: An extended model of technology acceptance. Management Science Letters, 10(7), pp.1473-148
Berenson, R.A., Upadhyay, D., Delbanco, S.F. and Murray, R., 2016. Payment methods: how they work. Washington, DC: Urban Institute.
Bezovski, Z., 2016. The future of the mobile payment as electronic payment system. European Journal of Business and Management, 8(8), pp.127-132.
Gupta, A. and Singhal, R., 2021. Impact of COVID-19 on Digital Payment Services at Towns and Villages. IJCRT2106045 International Journal of Creative Research Thoughts (IJCRT).
Mekuria, L.A., de Wit, T.F., Spieker, N., Koech, R., Nyarango, R., Ndwiga, S., Fenenga, C.J., Ogink, A., Schultsz, C. and van’t Hoog, A., 2019. Analyzing data from the digital healthcare exchange platform for surveillance of antibiotic prescriptions in primary care in urban Kenya: A mixed-methods study. Plos one, 14(9), p.e0222651.
Nandal, N., Nandal, M.N., Mankotia, K. and Jora, M.N., 2021. Investigating Digital Transactions in the Interest of a Sustainable Economy. International Journal of Modern Agriculture, 10(1), pp.1150-1162
Nikulchev, E., Ilin, D., Kolyasnikov, P., Zakharov, I. and Malykh, S., 2019. Programming technologies for the development of web-based platform for digital psychological tools. arXiv preprint arXiv:1906.05276
Singh, S. and Rana, R., 2017. Study of consumer perception of digital payment mode. Journal of internet banking and commerce, 22(3), pp.1-14.
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