Security & Flexibility in the Economy – the Rise of Digital Payment Systems

There has been a revolution going on! If you’re not sure what that quite means, well – I’m referring to the internet. By now the internet has completely revolutionised almost every aspect of what we do. Whether it’s the increase in communication, the sharing of information or indeed the way we pay for things.

With increasing access to the internet, there have been a slew of digital payments that have risen up in recent years. Some of which compete with their analogue alternatives, and others which have enabled increasingly secure and flexible payments that help stimulate the electronic economy.

Online payment systems are an integral part of some of the major players on the web, including eBay and Facebook. Now, even Amazon is trying to get into online payment systems with its own proprietary way to pay with Amazon.

So where did this seemingly unstoppable rise come from? How far does it currently reach? And what does this mean for the future of our economy?

It can be quite an ordeal to make the jump in your mind when trying to think about electronic money. It’s hard to imagine the value when it’s a series of 1’s and 0’s in data form.

Actually, electronic money is something of a misnomer – it’s really referring to the way that money is exchanged, via an electronic apparatus. There are many e-money operations that perform a variety of functions. Some of these functions include;

• Transferring Money – One of the most important aspects of almost every e-money system is the ability to make a money transfer online in a fast and secure way. This is possible through use of computer networks with secure encryption. This may be used to transfer money between online accounts or to other people.

• Secure Shopping – Many online payments systems are designed to make the process of shopping online more secure. With electronic money accounts, separate from a normal bank account, there is an extra level of security against online fraud – which is a big problem for traditional credit or debit cards. Several well-known centralised systems are intended for this function.

• Anonymity – The expectation of privacy when payments are made cannot be guaranteed with traditional banking, as a result several anonymous payment services have been created to do this – which makes anonymous internet banking possible through use of cryptography.

Generally speaking, all forms of electronic money and their related providers serve one or more of these functions. Electronic money is chiefly about the transfer of money by electronic means, as opposed to the creation of an alternative currency – and it forms an important part of the overall digital economy.

There are many aspects to a digital economy. One that is particularly important in stimulating online business and the digital economy is the rise of eCommerce systems that do not allow people to make payments, but rather enable businesses to take payments from others.

There are many complications when it comes to developing innovative eCommerce platforms. There is a great deal of diverse functionality needed for example, as customers may wish to pay with a variety of types of payment systems. These may include digital payment systems like PayPal but may also include traditional payment options such as credit and debit cards.

eCommerce is also an important aspect of a growing trend, mobile eCommerce. With the proliferation of the internet, in addition to the development and expansion of many smartphone devices with extensive capabilities it is possible for people to access the internet and shop online using mobile devices.

Mobile shopping is widely considered to be what much of the future of eCommerce will be. Mary Meeker of Kleiner Perkins Caufield Byers said that mobile will “overtake fixed internet access by 2014”. This is an important indicator of where the future of online payment systems lies – as device use will dictate where payments will take place.

When trying to understand the rise of online payment systems and speculating where it will end up, we must first look at the technologies available to us.

In the early days of electronic money, the only access to the platform of the internet was from a computer. A desktop computer eventually broadened out to a laptop, and from there mobile devices became capable of internet functionality.

Contactless payments, an electronic method of payment that allows vendors to take payments by waving an electronic card with an amount of money stored on it in front of a sensor, is a curious beast.

This is because, although it is an aspect of electronic money, it is used outside of the digital world in shops, restaurants or any other location that a vendor might choose to take such payments. So, it is an interesting evolution as it is bringing online payments to a point where they are coming back offline – albeit still depending on online payment systems to function.

It’s fair to speculate that there may very well be a future soon to be a present in which every form of payment is reliant on online payment systems. We can see this already with the decrease in the use of cheques and other analogue forms of payment – even the use of cash is dwindling.

So, let’s wait and see – but it’s clear to see that online payment systems have risen to a dominant position in the way we view and use money in the global economy.

Thanks for reading. Please check out the rest of my work on Instructables, I’d particularly recommend “Important Things To Consider When Building An Intranet”.

Add me to your circles on Google+ for all the latest.