Electronic payments, or e-payments, make it possible to move money at the speed of a click. Many people can pay instantly—across borders and devices—as easily as they order a ride or stream a song. A record 92% of people in the US used digital payments in 2024, according to a survey by global management consulting firm McKinsey & Co.

E-payments offer a fast, encrypted exchange of value that runs 24/7. This eliminates the multiday transfer delays of traditional methods and manual tasks such as card counts and check deposits. When the systems work well, they fade into the background and become the backbone of modern business.

Below, we’ll explore what e-payment means, including the types, their pros and cons, and how your business can accept them.

What’s in this article?

• What is electronic payment?
  
• How does the electronic payment process work?
  
• What are the main types of electronic payments?
  
• How do electronic payments benefit businesses?
  
• What are the challenges of electronic payments?
  
• How secure are electronic payments?
  
• How can your business start accepting electronic payments?
  
• How Stripe Payments can help
  

What is electronic payment?

An electronic payment is any transaction in which money is transferred digitally between accounts. When someone pays online with a card, taps their phone at a store, or sends a bank transfer through an app, they’re making an electronic payment. It moves money with digital efficiency, creating a faster, safer, and more trackable payment method.

How does the electronic payment process work?

Every time someone pays online or in person, a chain of systems will move the money. Here’s how the e-payment process works:

• The customer initiates the payment: They enter card details online, tap their phone at checkout, or approve a transfer in their banking app. Then the payment data, which should be encrypted for security, is sent.

• The gateway and processor transmit it: The payment gateway passes those details to a processor, which routes the request through card networks or banking channels to the customer’s financial institution.

• The issuing bank authorizes the transaction: The issuing bank verifies the account has funds or credit, screens for potential fraud, and returns an approval or decline in real time.

• The business receives confirmation: An approved amount appears instantly in the business’s system, which signals the sale is authorized.

• Settlement moves the funds: The customer’s bank releases the money to the business’s acquiring bank, typically within 1–3 business days, depending on the payment type.

What are the main types of electronic payments?

An e-payment can come in different forms, each built on a different system, but they’re all designed to securely and quickly move money. These are the main types:

• Credit and debit card payments: Customers pay by drawing funds via a card network, on credit or from a bank account. These transactions are processed electronically through processors and card networks, and they usually settle within three days.

• Bank transfers: Direct debit payments are often used for actions such as payroll deposits and recurring bills. They’re processed in daily batches and take a couple of business days to clear. Wire transfers move money from bank to bank, usually within 24 hours, and they’re often used for high-value or international transactions.

• Digital wallets and mobile payments: Customers pay through apps on their phones or devices with stored card or bank information. Near-field communication (NFC), a proximity radio technology used in contactless payments, and tokenization help secure these transactions by ensuring the card number isn’t exposed.

• Cryptocurrency payments: Digital currencies such as Bitcoin and Ether, the native cryptocurrency of Ethereum, can be used for payments in some places, though they’re still niche because of their volatility and changing regulations. Stablecoins such as USDC are designed for stability and enable quick, borderless transfers.

How do electronic payments benefit businesses?

Electronic payments speed up transactions, reduce manual work, and make it easier to serve customers. Here are some benefits of adopting them:

• Faster payments and improved cash flow: Electronic payments settle within days, so funds land in your account faster.

• Straightforward operations: Your payment dashboard or accounting system records digital transactions automatically, cutting hours of manual reconciliation.

• Built-in recordkeeping: Every transaction creates a digital footprint, making audits, reporting, and financial tracking far simpler than with cash or paper records.

• Broader customer reach: About 9 in 10 US and European customers made digital payments in 2024, the McKinsey survey found. With that level of adoption, you can meet customers’ expectations by accepting cards, digital wallets, or online transfers. Doing so lets you reach a much wider customer base.

• Improved customer experience: The easier it is to pay, the more likely customers are to make the purchase. Digital checkouts can minimize friction and cart abandonment.

What are the challenges of electronic payments?

E-payments can help businesses move money faster and with more flexibility, but they present challenges. Here’s what to watch for when you accept electronic payments:

• Security and fraud risks: Cyberattacks and phishing scams pose substantial threats. A single weak point (e.g., an outdated system, careless customer data management) can lead to costly breaches or chargebacks. Strong security practices and reputable providers help lower risk exposure.

• Technical downtime: Every digital system depends on internet connectivity and functioning networks. A server outage or local connection issue can temporarily halt transactions, which is why redundancy and backup options matter.

• Processing fees: Card networks and payment platforms charge fees for each transaction, sometimes a few percent of its value. Those costs can accumulate, but they typically pay for themselves in efficiency and reach.

• Difficulties with compliance: Regulations regarding data and payments, including the Payment Card Industry Data Security Standard (PCI DSS) and General Data Protection Regulation (GDPR), keep developing. Compliance requires vigilance, but it protects you and your customers.

• Customer adoption: Not everyone embraces digital payments. Some customers might prefer cash and others are cautious about online transactions, so it can be smart to provide multiple options.

How secure are electronic payments?

The best providers of electronic payments apply multiple layers of protection to make digital payments safer than cash or checks. Here’s how e-payments make fraud more difficult and detection faster:

• Encryption: In a secure transaction, payment details such as card numbers and account credentials are encrypted from the start. The data becomes unreadable without the proper key, keeping sensitive information safe in transit.

• Tokenization: Instead of storing real card numbers, payment systems replace them with random tokens. Even if someone gained access to the data, the tokens would be useless without the secure vault, which links them to real accounts.

• Fraud detection: Modern systems monitor transactions in real time and flag anything unusual (e.g., a sudden location change, a high-value purchase from a new device). Machine learning models improve this protection as they process more data.

• Compliance and standards: Reputable providers follow security standards such as the PCI DSS and use ongoing monitoring to stay ahead of emerging threats.

How can your business start accepting electronic payments?

Setting up your business to accept electronic payments is relatively easy. Modern payment providers such as Stripe handle much of the burden in the background. It’s still important to understand your needs and choose the right setup for your business.

Here are the steps to begin accepting electronic payments:

• Identify the payment methods you need: First, determine how your customers prefer to pay (credit or debit cards, direct debit transfers, digital wallets, or a combination of these). The right mix depends on whether you sell online, in person, or through invoices.

• Select a reputable payment partner: Look for transparent fees, PCI compliance, and strong fraud prevention measures. Some platforms bundle the gateway, processor, and merchant account into one service.

• Integrate payments into your systems: Add secure checkout to your website, or connect a physical point-of-sale terminal. Many providers offer simple application programming interfaces (APIs), plug-ins, or prebuilt checkout pages so you can launch quickly.

• Stay compliant: Use the platform’s built-in tools for encryption, tokenization, and authentication, and follow its guidance on data handling.

Once your business is live, monitor performance and customer experience. An efficient payment process should make it easier to buy from your business.

How Stripe Payments can help

Stripe Payments provides a unified, global payment solution that helps any business—from scaling startups to global enterprises—accept payments online, in person, and around the world.

Stripe Payments can help you:

• Optimize your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment user interfaces (UIs), access to 125+ payment methods, and Link, a wallet built by Stripe.

• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multicurrency management with cross-border payment options, available in 195 countries across 135+ currencies.

• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalize interactions, reward loyalty, and grow revenue.

• Improve payment performance: Increase revenue with a range of customizable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorization rates.

• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% uptime and industry-leading reliability.

Learn more about how Stripe Payments can power your online and in-person payments, or get started today.