The new frontier in finance is electronic payments to better serve our increasingly virtual and mobile lifestyle.
Behind these seemingly new forms of money is the old system of banks processing these transactions, the exception being new, virtual currencies.
Electronic payments are still either debit or credit: coming out of an existing account that you have funded, or a form of borrowing, respectively.
Electronic payments have long been around in forms such as international wire transfers or direct debits, when a customer instructs their bank to take money from their account and deposit it in someone else’s. The new twist is for the Internet and smartphones.
Mobile payments/wallets allow you to pay with a wave of your phone because it stores the necessary account details from your existing debit and credit cards (Ed. Note: link to that section). The U.S. is behind the rest of the world in adopting this technology.
New Types of Electronic Payments:
1. Better ways to pay online
e.g. PayPal; Google Checkout (now part of Google Wallet); electronic checks; Bill Me Later
2. Tap-and-pay by smartphone
3. Virtual Currencies—mere fads?
The Ven, Bitcoin; Facebook Credits (phased out in 2012)
Why You Would Use Them:
- A trusted third party to facilitate payments
e.g. PayPal when you don’t want to send money to a stranger on eBay or an individual not set up to accept credit-card payments.
e.g. Bill Me Later for someone who doesn’t have a credit-card to pay online
- Convenience/to save time
e.g. Payment can be as quick as a tap/wave of your phone; you’re saved from retyping all your payment details, etc., when shopping online with Google Wallet.
Why You Would Not:
- Security concerns have been raised about linking to all of your bankcard accounts in one virtual wallet on your phone.