Advantages & Disadvantages of E-Payment

by Alison Green; Updated September 26, 2017

Electronic payment enables individuals, businesses, governments and nonprofit organizations to make cashless payments for goods and services through cards, mobile phones or the Internet. It presents a number of advantages, including cost and time savings, increased sales and reduced transaction costs. But it is vulnerable to Internet fraud and could potentially increase business expenses.

E-Payment Advantages

  • Increased Speed and Convenience: E-payment is very convenient compared to traditional payment methods such as cash or check. Since you can pay for goods or services online at any time of day or night, from any part of the world, you don't have to spend time queuing in banks or merchant offices waiting for your turn to transact. Nor do you have to wait for a check to clear the bank so you can access the funds. E-payment also eliminates the security risks that come with handling cash money. 
  • Increased Sales: As Internet banking and shopping become widespread, the number of people making cash payments is decreasing. In a 2014 survey, Bankrate established that more than 75 percent of those surveyed carry less than $50 a day, meaning electronic alternatives are increasingly becoming the preferred payment option. As such, e-payment enables businesses to make sales to the customers who choose to pay electronically and gain a competitive advantage over those that only accept traditional methods.
  • Reduced Transaction Costs: While there are no additional charges for making a cash payment, trips to the store typically cost money, and checks also need postage.  On the other hand, there are usually no fees -- or very small ones -- to swipe your card or pay online. In the long run, e-payment could save both individuals and businesses hundreds to thousands of dollars in transaction fees.

E-payment Disadvantages

  • Security Concerns: Although stringent measures such as symmetric encryption are in place to make e-payment safe and secure, it is still vulnerable to hacking. Fraudsters, for instance, use phishing attacks to trick unsuspecting users into providing the log-in details of their e-wallets, which they capture and use to access the victims' personal and financial information.  Speaking to Information Security Media Group's BankInfoSecurity.com, Scott Dueweke, a payment systems consultant, notes that inadequate authentication also ails e-payment systems. Without superior identity verification measures like biometrics and facial recognition, anyone can use your cards and e-wallets and get away without being caught.
  • Disputed Transactions: If someone uses your electronic money without your authorization, you would identify the unfamiliar charge and file a claim with your bank, online payment processor or credit card company. Without sufficient information about the person who performed the transaction, though, it can be difficult to win the claim and receive a refund.
  • Increased Business Costs: E-payment systems come with an increased need to protect sensitive financial information stored in a business's computer systems from unauthorized access. Enterprises with in-house e-payment systems must incur additional costs in procuring, installing and maintaining sophisticated payment-security technologies.

About the Author

Based in New York City, Alison Green has been writing professionally on career topics for more than a decade. Her work has appeared in “U.S. News Weekly” magazine, “The Career” magazine and “Human Resources Journal.” Green holds a master's degree in finance from New York University.