What is an e-payment system?

It is now common for people to do more and more of their shopping online – that means making electronic payments. Most people reach for their credit or debit card when making payments online. However, this is not without risk. What if the retailer suffers a breach and your payment card details are exposed? This sort of information is regularly traded, and you may have to go through the hassle of cancelling your card and getting a new one issued.

So, is there a better way of making payments online that doesn’t put your card details at risk? The answer could lie in an e-payment system that puts another layer between your card and the retailer. Several companies now offer e-payments, the best known being PayPal, Google Pay and Apple Pay, but how do they work?

What is an e-payment account?

Using an e-payment account allows you to send and receive money online without exposing your bank or payment card details. When you make a purchase online, instead of entering your card details you sign in to your e-payment account instead. You can also use the account to transfer money to individuals who are signed up to the same service.

Of course, your e-payment account needs to be backed by some actual money. There are two main methods of achieving this. The first is a pre-paid account; this works somewhat like a pay-as-you-go phone, where you credit a fixed amount to your account, you can then spend up to that limit.

Another more common way is to link your e-payment account to a payment card or a bank account. When you make a purchase, the e-payment company then debits your card or bank account. In most cases, you can set up multiple payment options so that, for example, if there are insufficient funds in your bank to cover the payment, your credit card will be debited instead. You can also specify more than one bank account or card, so there’s a great deal of flexibility in payment options.

Does it cost anything?

The use of e-payments is usually free when you are a buyer and setting up an account is free too. The service providers make their money by charging a fee to retailers who use their service. You may, however, be charged a conversion fee if you make foreign currency payments and you will usually incur a cost if you are selling on sites such as eBay or your own website.

Is it safe?

The reason most people opt to use e-payment systems is so that they don’t have to enter their card details directly. Accounts are protected should the retailer be breached. However, you are placing a degree of trust in the payment provider.

It’s always a good idea to protect your e-payments account insofar as you can. Enable two-factor authentication (2FA), for example, so that you can’t easily sign in with a password. If you need to receive a text or check an authenticator app to make a payment, this acts as an additional layer of protection.

There are some other security points to consider too. The Financial Services Compensation Scheme does not cover E-payment providers (FSCS). If your payment provider goes out of business, you may not get back any money that was sitting in your account.

Whereas, if you pay directly with a credit card, you are protected under section 75 of the Consumer Credit Act which means if there’s a problem with the retailer, you may be entitled to a refund from the card provider. This doesn’t apply if you’ve made a payment via a service such as PayPal, even if the money has been charged to your credit card.

Should I use e-payments?

Generally speaking, there is no reason not to take advantage of the benefits that e-payments offer. Your card or bank details are protected, and there are usually no additional charges. Most online retailers widely accept E-payments, and with services such as Google Pay and Apple Pay, you can often use them in the real world too with an app on your phone.

Buyers should take steps to ensure their account is protected. Don’t share your password and make sure you enable 2FA where it’s available. In the event of a problem with a transaction, the retailer should be your first point of contact, but in certain situations, you may be able to get help from the e-payment provider.

If you are worried about using your payment card directly online, then e-payments offer a useful and straightforward alternative to give you additional peace of mind.

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