Electronic payments: Common methods and which one to use

Money has gradually been going digital for decades, but technology and e-commerce have made digital payments the standard over the last few years.

According to the Federal Reserve Bank of Atlanta, two-thirds of financial transactions were made by card last year, with 32% by credit card and 30% by debit. Electronic payments aren’t just for online transactions, either: Consumers made only one-quarter of in-person payments in cash.

Offering electronic payment methods isn’t just convenient—it enhances the customer experience. For any business, understanding e-payments can simplify operations and drive growth.

What is an electronic payment?

Common examples of e-payments include credit cards, debit cards, digital wallets (e.g., Apple Pay, Google Pay, PayPal), online bank transfers, ACH payments, and even cryptocurrencies like Bitcoin. Simply put, e-payments enable customers to pay for goods or services through secure digital platforms, offering convenience and flexibility for businesses and consumers alike.

Some key characteristics of e-payments include their ability to eliminate the need for physical cash, allowing for seamless digital transactions through options such as credit cards and peer-to-peer apps. While they are faster and more convenient than traditional methods, they also carry risks like fraud and data breaches, which we’ll review later.

Common types of electronic payment methods

The most common types of electronic payment methods include card payments, bank transfers, digital payment options, and foreign exchange (FX) payments.

Here's a closer look at each:

• Card payments: Card payments are some of the most widely used electronic payment methods. Customers can use credit, debit, purchase cards (P-cards), or virtual cards to swipe, insert, or tap their cards at a point-of-sale terminal or enter card details online.
• Bank transfers: Bank transfers include ACH payments and wire transfers. Businesses and consumers use these payment options to move money directly between accounts.‍
• Digital payment options: Digital wallets and mobile payment apps like PayPal, Apple Pay, and Google Pay have gained traction for their ease of use. Customers can store their payment information within the platform and make purchases in person or online with just a tap or click.‍
• Foreign exchange (FX): FX payments like international wire transfers, forward contracts, and cross-currency transactions allow businesses that operate internationally to pay vendors or accept payments from customers in different countries

E-payment methods compared: Pros, cons, and average cost per transaction

Below, we’ll explain different electronic payment methods, their pros and cons, and the average cost per transaction for each.

1. Credit cards

Credit card payments are the most commonly used electronic payment type, whether online shopping or in a brick-and-mortar store. They’re fast, secure, and widely accepted.

• Pros: Widely accepted, may offer rewards, protection against fraud‍
• Cons: High transaction fees for businesses, potential for chargebacks‍
• Average cost per transaction: 1.5% to 3.5% of the total transaction

2. Debit cards

Debit cards draw funds directly from an associated bank account at the time of purchase.

• Pros: Lower fees than credit cards, immediate funds transfer‍
• Cons: Less fraud protection, potential for insufficient funds‍
• Average cost per transaction: 0.73% of the transaction value

3. Virtual cards

Virtual cards are digital representations of traditional credit or debit cards. Businesses can generate virtual cards with unique card numbers, expiration dates, and spending limits for a specific transaction so a specific payee can access a predetermined amount of funds.

• Pros: Enhanced security, prevents fraud by limiting exposure of real card details
• Cons: Limited use, typically online only, may not be accepted by all merchants
• Average cost per transaction: Generally the same as the associated physical card

4. Purchase cards (P-cards)

P-cards are a type of corporate card that businesses use for procurement and expenses.

• Pros: Streamlines purchasing, better expense tracking, reduces paperwork‍
• Cons: Higher fees, risk of misuse without proper controls‍
• Average transaction processing cost: Varies, but generally lower than credit cards

5. ACH transfer

ACH payments allow businesses to transfer funds directly from the payer’s account to another bank account via the Automated Clearing House Network. Companies and consumers often use ACH payments for bill payments, paycheck direct deposit, and recurring expenses like SaaS subscriptions. Bank transfer payments are usually cost-effective compared to other methods.

• Pros: Cost-effective, ideal for recurring payments like subscriptions or payroll
• Cons: Slower processing (1–3 business days), potential for returns if accounts have insufficient funds
• Average cost per transaction: $0.26 to $0.50 per payment

6. Digital wallets

A digital wallet is an application that stores payment information and allows users to complete transactions online or using their smartphones. Examples include Apple Pay, Google Pay, Samsung Pay, Venmo, and CashApp. These payments are quick and offer a contactless experience.

• Pros: Contactless, secure, and fast; popular with mobile users
• Cons: Not accepted everywhere
• Average cost per transaction: Zero for transfers that take a few days. 1% fee ($0.25 minimum and $10 maximum) for instant transactions.

7. Cryptocurrencies

These aren’t as common as other methods, but some businesses accept cryptocurrencies like Bitcoin, Litecoin, or Ethereum for purchases. They offer security and potential savings on transaction fees, but their value can be volatile.

• Pros: Lower fees, secure, appealing to tech-savvy customers
• Cons: Highly volatile, not widely accepted, complex to manage for some businesses
• Average cost per transaction: $0.50 to $2.50 per transaction

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8. Online payment gateways

Many e-commerce businesses rely on online payment gateways like PayPal, Stripe, and Square. These payment solutions facilitate transactions by securely transmitting data between customers, merchants, and financial institutions. Online payment gateways can support several e-payment methods, including credit cards.

• Pros: Simple integration for online sales, secure transactions
• Cons: Transaction fees, risks of chargebacks, dependent on internet access
• Average cost per transaction: 2.9% of the transaction amount plus $0.30

9. Wire transfer

Wire transfers send funds electronically from one bank to another. Individuals and businesses often use them for large or international transactions.

• Pros: Wire transfers are fast and reliable for large amounts, useful for international payments
• Cons: High fees, irreversible once sent, requires detailed recipient account information
• Average cost per transaction: $15 to $30

Risks and benefits of e-payments for businesses

Electronic payment systems offer several advantages over cash and paper checks, but it’s essential to consider both the risks and benefits they present to your business.

Benefits of electronic payments

• Speed and convenience: Depending on the method, electronic payments can be virtually instantaneous. Speedy payments can help you maintain a healthy cash flow.
• Security: Electronic payments leverage encryption, tokenization, and fraud detection tools, making them more secure than handling cash or checks. Many payment providers also offer additional fraud protection for businesses.
• Wider customer reach: Accepting multiple forms of electronic payments helps you attract customers who prefer digital payment methods, potentially expanding your customer base globally
• Better recordkeeping: Electronic payments automatically generate transaction records. This automated recordkeeping simplifies your accounting and reduces the risk of human errors making their way into your books.
• Improved customer experience: E-payment options like mobile payments and digital wallets make customer transactions seamless, increasing satisfaction and loyalty
• Potentially higher revenue: Businesses that accept electronic payments typically need to cover some processing fees. Still, offering convenient payment options can help boost sales because customers may be willing to spend more with your business when they can use their preferred payment method.

Are electronic payments safe?

Electronic payments are generally secure. Depending on the type of transaction, payment platforms and financial institutions may use encryption, tokenization, or other fraud prevention and detection methods to keep payment data secure. However, businesses should still invest in strong cybersecurity protocols to protect against data breaches and unauthorized access.

Electronic payment risks

With that, here are some typical risks that come with electronic payments:

• Cybersecurity threats: While generally secure, e-payment platforms aren’t immune to cyberattacks. Businesses that accept digital payment options must invest in security measures to prevent breaches and protect sensitive data, including customer credit card details.
• Transaction fees: Payment processors typically charge fees for each transaction. E-payment processing fees can really add up, particularly for small businesses.
• Technical issues: System outages, software bugs, and connectivity issues can disrupt electronic payments, causing delays or lost sales if you don’t have backup payment processing options in place
• Chargebacks: Some electronic payment methods, especially credit cards, may lead to payment disputes or chargebacks, where customers reverse payments. Chargebacks can result in lost revenue and increased administrative overhead.

How Automation enhances e-payments

Streamlining e-payments with financial management or accounts payable automation software transforms how businesses handle transactions. These tools automate recurring payments, flag errors, and provide real-time visibility into cash flow.

By integrating payment workflows with AP software, businesses can centralize processes, reduce manual effort, and ensure timely, accurate transactions. This not only saves time but also enhances financial oversight, allowing businesses to operate more efficiently.

Vendor e-payments are easier on Ramp

Ramp’s accounts payable automation software helps your business streamline vendor payments by offering multiple ways to pay from a single platform. Make payments via card, check, same-day ACH, or international wire—whatever your vendors prefer.

Ramp also integrates with accounting systems like QuickBooks and NetSuite to ensure seamless data flow and more accurate recordkeeping. With features that identify duplicate invoices and match invoices to POs, you can minimize the risk of fraud and payment errors.

Interested in trying Ramp for yourself? Check out our fully functional demo environment to get a feel for how Ramp can modernize your finance operations.