Online Payments: Meaning, Types and Benefits

The concept of online payments didn’t just start today. It can be traced to the early days of the internet, although it can be said that its adoption is now totally widespread. According to History, the rise of the Internet was between the 1990s-2000s which further paved the way for the rise of mobile payments, digital wallets, and payment gateways that simplified the process of accepting online payments for businesses. 

Simply put, online payments refer to the digital transfer of money through the internet. They are transactions that occur electronically, typically over the Internet. Instead of exchanging physical money, these payments involve the transfer of funds from one account to another using digital means. 

In this article, we’ll discuss online payments, their meaning, types, and benefits they offer. Basically, all you need to know about online payments.  

Types of Online Payments

In the introduction, we have defined the meaning of online payments, so let’s discuss the types. Online payments have evolved significantly, with various methods to suit different needs. Here are some of the most common types:

Credit Card 

A credit card is a plastic card issued by a financial institution that allows you to borrow money to make purchases. It essentially means taking a loan from the bank. To make a transaction, customers provide their credit card details, the payment is processed through a gateway and the funds are transferred from the customer’s credit card to the merchant’s account. 

Debit Card

Similar to credit cards, debit cards are also accepted as an online payment method. Instead of lending money from a credit card issuer, the amount will automatically be deducted from the cardholders' bank accounts. The most widely used method involves the use of plastic cards with magnetic stripes or embedded chips.

Debit cards come in different types like verve, visa, and Mastercard.  Visa cards are the most acceptable cards worldwide for all online and digital payments. Debit cards provide an easy way for people who are seeking to make online payments.

Bank Transfers

This type of online payment involves electronic transfers between banks. This means transferring funds directly from the customer’s bank account to the receiver’s account. They are the same as debit card transactions, just that a debit card is not required in this instance. 

Bank transfers provide a faster and safer form of payment than other modes of transactions, such as paying or withdrawing money from a bank account. In such cases, customers provide their bank account information to initiate the transaction. Bank transfers can be processed through online banking platforms and payment gateways.

Digital Wallets

Digital wallets are virtual accounts that allow users to store their payment information securely on a mobile app and make online payments without having to enter their card details every time. Users can link their credit cards, debit cards, or bank accounts to those wallets and proceed with secure payments online.

A great advantage of the digital wallet as a type of online payment is the reduced risk of fraud that it has. They provide an added layer of security and this is because the customer’s details are not shared with the receiver/merchant. 

Mobile Payments

This online payment method allows customers to make online payments directly through mobile devices. Mobile payments usually utilize NFCs ( Near Field Communication), QR (Quick Response) codes, or mobile banking apps to ensure a smooth and secure payment.

This payment method provides ease of use and convenience. Customers can simply tap their device or scan a QR code to complete a payment, removing the need to carry physical cards or cash. Mobile payments also often come with additional security features such as biometric authentication or tokenization, making them more secure than traditional payment methods.

Cryptocurrency

Cryptocurrency payments involve using digital currencies such as Bitcoin,  or stablecoins such as USDT, or USDC to complete online transactions. Bitcoin is decentralized and operates on blockchain technology, which ensures secure and transparent transactions. When making a digital currency payment, you need to provide your digital wallet address and the amount you wish to send, then the payment is processed through the blockchain network. 

They are quick and do not need intermediaries like banks before payments are processed. 

Gift/Prepaid Cards

Another important method of online payment is the gift/prepaid card. Although similar to the debit card in usage, but is not linked to a bank account. For these cards, customers load funds onto the card in advance and can use it for online payments. When making a prepaid card payment, customers enter the card details just like with credit or debit cards. The payment is then processed through a secure payment gateway and the funds are deducted from the prepaid card balance.

A greater advantage they have is the anonymity they provide as they are not linked to any bank accounts. 

Benefits of Online Payments

Now, let’s explore some benefits of online payments to individuals and businesses. 

Convenience

The most important benefit that online payments give to consumers and businesses is convenience. Businesses can now receive payments at any time of the day, especially whenever customers want to make a purchase. This brings about customer satisfaction, ease, and convenience to the customers. 

So, payments can be made anywhere and at any time of the day without the need for any human interaction. 

Speed of Transactions

Transactions made with the method of online payments move with the speed of light. They are quick and efficient as all they require is a few clicks. They don’t require physical visits to the banks or any financial institutions. 

Wider Audience

Imagine how cool it is that customers residing outside a business location and even far beyond that can order any item and the payment is received by the merchant. Cool right? That’s one of the greatest benefits of online payments. It can capture a wider audience thereby overcoming the barriers of currency exchange rates. 

Choice of Payment Methods

Another benefit of online payments is the customer’s ability to choose which of the payment methods to use. As explained above, there are different types of payment methods and this is to the customer's advantage. A customer choosing its preferred payment method and finding it seamlessly might lead to customer retention.

Enhanced Security

Online payments are considered safe! Even though many businesses worry about security, online payments are protected by special rules called PCI standards. These rules make sure that your payment information is kept secret.

When you buy something online and enter your credit card number, the website changes it to a code. This code is sent safely to the company that handles credit cards (like Visa or Mastercard). They check with your bank to see if you have enough money to pay.

So, you don't need to worry about your money being stolen when you shop online. Your payment information is safe. 

Getting Started With Bitnob

The perfect mobile App that has payment methods that are beneficial for both businesses and individuals is the Bitnob App. On the bitnob App, you can transfer money to other African countries, make payments with USDT, Pay with Bitcoin, and many more. 

It gives you the convenience, ease of use, security, choice of payment methods, and other benefits you can imagine. 

Ready to experience the ease and security of the Bitnob App? Download the Bitnob app and activate your account to get started.