Risks in Electronic Payment Systems

by David Karanja; Updated September 26, 2017
Electronic payment systems save time.

Electronic payment is a popular method of making payments globally. It involves sending money from bank to bank instantly -- regardless of the distance involved. Such payment systems use Internet technology, where information is relayed through networked computers from one bank to another. Electronic payment systems are popular because of their convenience. However, they also may pose serious risks to consumers and financial institutions.

Tax Evasion

Businesses are required by law to provide records of their financial transactions to the government so that their tax compliance can be verified. Electronic payment however can frustrate the efforts of tax collection. Unless a business discloses the various electronic payments it has made or received over the tax period, the government may not know the truth, which could cause tax evasion.


Electronic payment systems are prone to fraud. The payment is done usually after keying in a password and sometimes answering security questions. There is no way of verifying the true identity of the maker of the transaction. As long as the password and security questions are correct, the system assumes you are the right person. If this information falls into the possession of fraudsters, then they can defraud you of your money.

Impulse Buying

Electronic payment systems encourage impulse buying, especially online. You are likely to make a decision to purchase an item you find on sale online, even though you had not planned to buy it, just because it will cost you just a click to buy it through your credit card. Impulse buying leads to disorganized budgets and is one of the disadvantages of electronic payment systems.

Payment Conflict

Payment conflicts often arise because the payments are not done manually but by an automated system that can cause errors. This is especially common when payment is done on a regular basis to many recipients. If you do not check your pay slip at the end of every pay period, for instance, then you might end up with a conflict due to these technical glitches, or anomalies.

About the Author

Based in Nairobi, Kenya, David Karanja has been writing since 1995. He is the author of novels and his articles have appeared in “Global Journalist” magazine, “Nieman Reports” journal and “Christianity Today” magazine. He holds a Bachelor of Arts in anthropology from the University of Nairobi.

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