What is a Digital Payment and How it Works?
The world has changed digitally — both in business and in life. You can call a ride from the mobile app, and your transactions for all kinds of goods and services can easily be paid from your mobile.
Physical money is starting to be left behind, replaced by digital wallets. All you need is a smartphone.
Definition of Digital Payment
Digital payments, or online payments, is the process of transferring value from one payment account to another using a digital device such as a mobile phone, POS (Point of Sales), digital communication channel, such as mobile wireless data or a computer.
This system is usually integrated in a business software such as accounting software which has many of the best benefits of a company's business and financial payment system.
The definition of digital transactions in general includes payments made by digital money, bank transfers and also payment cards, such as credit cards and debit cards.
Types of Digital Payment Methods
With more than 75% of US consumers making digital transactions, the incentives for businesses that accept them are enormous.
Whether you are an eCommerce business or a retailer, smooth digital payment processing will help win consumer confidence.
Here are some types of digital payments that you need to know.
1. Digital Wallets
As the name implies, a digital wallet is a type of wallet in which you can carry cash, but in digital format.
Often customers link their bank account or banking card to a digital wallet to facilitate secure digital transactions.
Another way to use this digital payment method is by adding money to a digital wallet and using that balance to transfer money.
Nowadays, many banks have launched their digital wallet service products.
Reputable private companies have also established their presence in the digital wallet space.
2. Mobile point of sale (mPOS) systems.
The most famous mobile point of sale system in the world of digital payments.
The mPOS system works via smartphones, tablets and other wireless devices to accept payments from anywhere.
Retailers, restaurants and street service providers are the biggest beneficiaries of mPOS systems.
They allow you to move between devices and accept payments wherever you need them — whether it's bank card payments or digital wallets.
Wireless devices allow business owners more flexibility. When social distancing is enforced, those with mPOS devices can easily meet customers where they are seated, limiting contact or meeting people at the checkout.
Additionally, most mPOS software solutions come with features that allow businesses to email receipts, track sales, and even set up loyalty programs right through the system. It's a simple and convenient way to accept payments, enhance the customer shopping experience, and increase productivity.
3. Biometric Authentication
Many people already use biometric authentication technology for their buying and selling transactions every day.
It is basically a tool for verifying identity, ensuring only people with a bank account, or digital wallet, can authorize transactions through it.
Currently, most digital wallets already use biometric authentication, which requires users to scan their fingerprints before opening the wallet. (business.com)
For those who have activated facial recognition, it can also be an authenticator to enable payments.
Biometric authentication is a secure way to verify the identity of people making transactions. This makes fraud more difficult.
UK schools have already started using face recognition to accept payments in line for lunch.
4. Social media payments
Small businesses are doing big things through social media by leveraging built-in online commerce solutions, enabled by multiple social media platforms.
Instragram, Facebook, and Pinterest business accounts all offer online shopping solutions, including in-app purchases.
Any business that sells online, and promotes goods through social media, should be aware of how these platforms accept digital payments.
It is very common nowadays for brands to establish themselves on social media. Some have even started as influencers, gained massive followings, and ventured into their own product lines, all within the social media ecosystem.
The best way to accept payments on social media depends on the platform. Platforms like Instagram, Facebook and Pinterest all have their own unique social selling features, so check your account settings to learn how to get started accepting payments.
5. Peer-to-peer digital payments
PayPal, Venmo and Facebook Messenger are all examples of digital peer-to-peer payment solutions. This platform allows users to search for other users and carry out online payment transactions among themselves.
The peer-to-peer solution links payers' and payees' bank accounts to withdraw and deposit money, providing a way for users to make money transfers easily.
In many cases, mobile banking applications do not make it easy to transfer money between users, who do not share the same bank account. Peer-to-peer digital payments is the solution to this gap.
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