Credit Card Payment Gateways - Making Life Easier

Attributing to services such as credit and debit card payment gateway offered by service providers to online trading sites, paying through credit card and debit card is a growing fad today. Approximately every person who starts a new bank account today opts for a credit or debit card due to its simple and less time-consuming user process. Paying through credit and debit card is a facile process as compared to paying through a cheque or any other form of payment with the exception of cash payments. Though traders who are more on a face-to-face basis with their patrons find it more appropriate to accept cash payments, merchants who are based online find card payments more feasible.

Card payments are a quicker and economical process as compared to options like Cash On Delivery for traders who are based online. Hence dealers who trade through the medium of online trading platforms opt for payment service providers who offer services such as payment through credit or debit card. Credit and Debit card payments are advantageous for both the dealer and their patron. If this form of payment is inexpensive and faster in comparison to cash payment for the traders, it is also beneficial for their clients as this process is less prolonged and effortless. In addition the shopper does not have to dread stacking up liquid cash for fear that they need to pay a hefty amount for the merchandise they purchase.

Furthermore payment made in the form of credit and debit cards is much safer for both the merchant and their customer as it curtails the probability of fraudulent dealings. It is a time-saver, as neither the trader nor the shopper has to go through the ordeal of standing in a large queue waiting to withdraw or deposit the amount. Payments are completed in a jiffy in a matter of few seconds and it takes less than two days to complete the entire procedure which is also inclusive of debiting the amount in the trader’s account. Hence attributing to its alacrity and enhanced usability, online trading platforms prefer debit and credit card payment gateways than other methods of payment. 

THE DAWN OF ELECTRONIC MONEY

Payment methods are broadly classified into two types. Exchanging and Provisioning. In provisioning a third party must be involved from one party's account to another party. This is where Electronic Payments, more commonly known as Plastic Money comes into play.

Credit card, debit card, instant money transfers, and recurring cash or ACH (Automated Clearing House) disbursements are all electronic payments methods. Electronic payments technologies are magnetic stripe card, smartcard, contactless card and mobile handset. Mobile handset based payments are called mobile payments.

Electronic payment systems are software systems that enable online credit/debit/cash/smart card processing. Via an electronic payment system, users can browse an online catalog and purchase items online through automated online transactions. Launching an e-commerce website ultimately improves the way of doing business, increases level of sales, expands business to local and foreign markets and improves relationships with existing customers.

Advantages:

• Speed and Convenience: Consumers can find what they want to buy and purchase it quickly.
• Flexible Payment Arrangements- Electronic payments are also flexible. Many payment schedules allow for later billing or payment installments using a third-party vendor. Business websites typically give several options for customers to buy using a credit card, debit card or even a direct transfer from a bank account. This also allows several types of transactions that are only available online, such as peer-to-peer electronic transfers.

Disadvantages:

•  Security- The flexibility that e-payments enjoy can also create security hazards. Malware and other hacking attempts can track keystrokes in order to copy account passwords and access payment information. Online databases can be hacked and important information can be stolen. Money can be stolen from online accounts.
• Payment System Collision- Since online payment systems are new and global in their perspective, problems can occur when it comes to applying them to all e-commerce businesses. Some types of payment that customers are used to depending on may not be available in other countries, even when purchasing online from those countries is an option.

PAYMENTS SYSTEMS THROUGH THE AGES III

Fiat Money:

In earlier times, currencies were based on physical commodities such as gold or silver, but fiat money is based solely on faith. As per modern definition, most of the world's paper money is fiat money. Because fiat money is not linked to physical reserves, it risks becoming worthless due to hyperinflation. If people lose faith in a nation's paper currency, the money will no longer hold any value.

Fiat money originated in 11th century China and its use became widespread during the Yuan and Ming dynasties.

Advantages:

• Convenience- Paper money comes in many denominations, which allows you to carry large amounts of legal tender without having to move large, bulky forms of money. It takes up little space and is widely recognized as a note of value that can be traded for any goods or services.
• Economical- Not only is paper money small and transportable, but it also is much cheaper to produce than the value it may represent.
• Can Be Created At Will- Unlike any other store of wealth, paper money can be printed at will of the Government Body. If there is a need, such as in times of a national emergency or monetary deflation, the bureau can print and release as many bills as needed to resupply the population with paper money.

Disadvantages:

• Inflation- Conversely, printing too much paper money as required to sustain moderate growth can lead to high rates of inflation. As the number of legal notes increases, the value of those notes decreases because more dollars are chasing relatively fewer goods and services, which causes prices to rise.
• Confidence- If public confidence fades because of high national debt or political turmoil it can ensue chaos where goods and services will be traded only in kind, meaning paper money can become practically useless.
• Fragility- Paper money is susceptible to accidental tearing, shredding, burning and being run through the laundry. 

PAYMENTS SYSTEMS THROUGH THE AGES II

Commodity Money:

Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects that have value and can be used as money. Since payment by commodity generally provides a useful good, commodity money is similar to barter, but is distinguishable from it in having a single recognized unit of exchange.

Examples of commodities that have been used as mediums of exchange include gold, silver, copper, peppercorns, large stones (such as Rai stones), decorated belts, shells, alcohol, cigarettes, cannabis, candy, barley, etc. These items were sometimes used in a metric of perceived value in conjunction to one another, in various commodity valuation or price system economies.

Commodities often come into being in situations where other forms of money are not available or not trusted. Various commodities that were used in pre-Revolutionary America include wampum, maize, iron nails, beaver pelts, and tobacco.

Advantages:

• Commodity Money serves an additional purpose. For example, gold can be turned into jewelry, while cigarettes can be smoked. This gives the holder added options; he can either use or spend the money.
• It may be possible to acquire money that wasn't previously in circulation. For example, if gold is used as commodity money and somebody discovers more of this metal, he or she may be able to get more value from its role as money than from its role as a base for jewelry.

Disadvantages:

• Risk of Volatility- While commodity money typically has less volatility during turbulent economic developments; commodity money can still lose value. For example, both gold and oil are valuable commodities. However, the prices of both gold and oil undergo increases and decreases over time. Thus, the risk of volatility still exists with commodity money.
• Lack of Divisibility- Commodity money is typically not as divisible as traditional paper money. For example, you can divide dollars into quarters, nickels, dimes and pennies. However, you may have a difficult time dividing a bar of gold into small denominations needed to make everyday purchases.
• Bandwagon Ups and Downs- Commodities also suffer from the bandwagon effect. The bandwagon effect is that the price of commodities may rise and fall with the whims of the general population.
• Value- Another problem with commodity money is assessing the value of items purchased with the commodity money. Measuring the exact amounts of value of commodity money is not easy, and therefore, it is difficult to manage your wealth using commodity money.

PAYMENTS SYSTEMS THROUGH THE AGES - I

Though electronic payment is a recent form of payment, imbursement in all is not a novel concept, it existed ever since the existence of mankind where man exchanged goods to acquire goods of his choice. This article will decipher the modes of payment that existed since ages.

Barter System:

'I'll give you 5 stone axes. You hunt for me a mammoth.'

The above line is a clear demonstration of bartering- A direct trade of goods and services. Bartering as a system clearly defines that Exchange is the only vital necessity in a transaction.

The simplest and oldest form of payment is barter, the exchange of one good or service for another. In the modern world, common means of payment by an individual include money, cheque, debit, credit, or bank transfer, and in trade such payments are frequently preceded by an invoice or result in a receipt. However, there are no arbitrary limits on the form a payment can take and thus in complex transactions between businesses, payments may take the form of stock or other more complicated arrangements.

In law, the payer is the party making a payment while the payee is the party receiving the payment.

As times progressed, slowly, a type of prehistoric currency involving easily traded goods like animal skins, salt and weapons developed over the centuries. These traded goods served as the medium of exchange even though the unit values were still negotiable. This system of barter and trade is spread across the world, and it still survives today on some parts of the globe.

Advantages:

• It is a simple system free from the complex problems of the modern monetary system.
• The problems of international trade, like foreign exchange crisis and adverse balance of payments, do not exist in the barter system.
• Personal and natural resources are perfectly utilized to meet the requirements of the society without involving any wastage.

Disadvantages:

• Absence of common measure value
• Money plays an important role in a monetary economy thus being helpful in measuring their values against each other. This role might be absent in a barter economy.
• Invisibility of certain goods
• A barter transaction cannot occur if an individual wants to buy a certain amount of goods but only has single invisible unit of another good which is worth more than what the individual wants to obtain.
• Lack of standards for deferred payments.