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The Future Of Online Banking Is Digital: Why Merchants Choose Online Payment Systems

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Most financial transactions are made online these days. Online payments are quick and flexible enough to keep up with the hectic pace of the post-modern business, and all you need to have is a smartphone, access to the Internet, an account, and a reliable online payment system. In this article, we shall briefly explain what an online payment system is, and how it works. We shall then describe various online payment methods available and consider their advantages in order to understand why merchants choose to use them.

Qualifying the question

One side remark is in order before we begin with the main topic of the article. If your business is located entirely on the Internet, it’s not a question of online payment system’s advantages to you. As all your financial transactions are completed online, you don’t really have a choice since there’s simply no other way to do it. In that case, an online payment processing provider is a must for you.

What is an online payment system, and how it works

In simple terms, an online payment system is an electronic channel for financial transactions, as opposed to payments by checks and cash. It requires the presence of three participants, namely the payer, the payee, and the channel, the latter being a software interface and an information channel between the first two.

When you swipe your credit card in a shop, you open a payment channel whereby your payment information is transmitted to a special service that processes the transaction, decides whether it should be authorised, and either completes or declines it. Precisely the same thing happens in the case of online payment, except that you fill in your banking details instead of swiping your card.

In other words, the stress in our definition falls on the word channel since somebody has to do it for the transaction to take place at all. A merchant service provider is a company that offers such a payment gateway, among other services. It channels the data, processes the transaction, and ensures communication between the payer, the payee, and the bank. Typically, such operators are responsible for the security of all sensitive personal and financial data, which is why the information is processed in an encrypted form.

The types of online payment systems

There Are several common payment systems, and none of them is better than another. Ideally, you combine two or more of them in order to suit your individual mercantile purposes.

 Credit cards

These are plastic cards issued by the banks to provide you with electronic access to your accounts so that you may manage your financial transactions without visiting the banks. We may think of a credit card as a bank’s payment gateway.


Originally, they were intended to be electronic credit cards for you to manage your bank account without the plastic card. That is, all your data is stored in an online application, not on a chip, as is the case with a credit card.

Later, e-wallets separated from the banks, offered to store money in them directly and, effectively, became alternative, virtual banks. Still, later, they went even further by offering to make savings independent from the actual cash. Money could be stored in some digital symbols instead.

Bank transfers

You may also use banking services to send money from one account to another electronically. Again, no need for plastic cards or bank tellers, the entire transaction may be completed on your smartphone from any location any time.

 Prepaid cards

Basically, this is a card funded for a transaction beforehand. You may call it a single-use credit card. The most typical examples are shop vouchers and gift certificates. 

Smart cards

This is a sort of combination of credit and a prepaid card: it contains a chip that allows you to deposit money and use it for transactions repeatedly. Effectively, it’s a portable bank account or a reloadable voucher card.

The advantages of online payment systems

There are numerous reasons merchants favour these systems, so we’ll only look at the most important ones here.

Expanded market

One obvious advantage is, your services and products become available and accessible on a much larger scale. In fact, your business becomes global, and you may begin to trade worldwide. And to shop too.


Both merchants and customers prefer online payments because it’s a lot easier to do since money can be transferred from any location at any time. And it’s a lot less hassle too as you don’t have to go anywhere and carry banknotes with you.


Needless to say, it takes a lot less time too, which is extremely important in our day of speed, as the entire transaction takes just a couple of minutes, and the money is delivered instantaneously.

Cost reduction

Another important advantage for the postmodern world of high expenses lies in the lower costs of an online enterprise both for the merchant and the customer. The merchant doesn’t have to pay a lease for a brick-and-mortar venue, employ large numbers of personnel and invest in physical exhibitions, which at the same time allows him or her to reduce prices. The customer doesn’t have to take time off in order to visit the venue and may enjoy lower prices too.

The security issue

No discussion of online payment systems would be complete without raising the issue of potential security risks involved. Not only is there no physical contact between the parties, and they may indeed be located world apart literally, but the electronic space itself is highly vulnerable to all kinds of scams and fraud. And the responsibility of maintaining security at a satisfactory level rests almost entirely with payment gateway operators. This is why it’s extremely important to make sure that only a reliable and reputable merchant service provider manages your online payment processing.


According to Carlos Gonzalez, modern technological advances have made it possible for us to trade and shop worldwide from the comfort of our home, which is why virtually all brick-and-mortar business have relocated to the Internet by now. New, virtual banks and even virtual currencies rule the market these days. Powerful electronic mechanisms have completely transformed the structure as well as dynamics of  modern trade, making it more convenient, faster, cheaper, and global. It is now in the hands of merchant service providers to make sure that the online trading system remains safe enough for traders and customers not to turn away from it.