The following is an article reprinted with permission from the Summer 2010 edition of Viewpoint (WWR’s Governmental Collections newsletter):
By: Jill A. Keck, Associate
Over the past decade, the Internet has evolved from a specific resource for IT pros and computer geeks to a daily destination for people all over the world. Technology has inarguably made our lives easier. Recent years have seen an explosive growth in the online retail arena. Many people are just as willing to order a movie from Netflix as they are to stop by their local Blockbuster or Hollywood Video. One of the biggest technological innovations is in the area of banking, finance and commerce – the Electronic Payments. Electronic Payments or e-payments refer to the technological breakthrough that enables us to perform financial transactions electronically.
E-payments have several advantages, which were never available through the traditional modes of payment. Some of the most important are:
- Good transaction efficiency
- Low financial risk
Perhaps the greatest advantage of e-payments is the convenience. Individuals can pay their bills and make purchases at unconventional locations 24 hours a day, 7 days a week, 365 days a year. There is no waiting for a merchant or business to open. Vacationers and others away from home need not worry that they forgot to drop off the payment for the utilities or mail the check for their credit card bill. They can simply pull up their account online and pay their bills on the road.
This leads to the second best benefit of e-payments- they save time. Once the initial set-up of the payment system for each account is completed, an individual can pay his bills in a flash. In a research study Marketwatch.com found that the average American, who writes checks and mails them for payment, spends over 24 hours during the course of a year paying bills*. E-payments have reduced the amount of time spent on bill management or payment by about 60%. This has given busy individuals more time to spend doing those things they enjoy.
The cost of e-payments is yet another benefit. For the majority of merchants, vendors, and businesses, there is no fee or charge to pay online. For others, the fee is nominal. Compared to the cost of postage, check writing fees and trips to the post office, individuals paying their bills online can save hundreds of dollars per year. In this day and age, reducing expenses is quite important for many individuals.
Finally, despite the belief of many to the contrary, e-payments are secure. They may even be more secure than the old fashion way of mailing in a check. According to most sources, most instances of identity theft occur by stealing mail out of a person’s mailbox or from discarded trash, not over the Internet. Encryption technology allows an individual’s personal financial data to be scrambled before it is sent electronically. It also lowers the risk of human error by reducing the number of people touching the payment once it leaves the payer.
On the flip side, with so many benefits to using e-payments, it’s important to remember that there are negative aspects too. Some of the biggest downsides of e-payments are the lack of authentication, repudiation of charges and credit card fraud. There is no way to authenticate or verify that the individual entering the information online is who they say they are. There is no request for picture identification or even a signature. Therefore, an unauthorized user may carry out transactions in your name before you have time to alert authorities the information has been taken. Because no identifying information is provided at the time of the online payment, an individual may have an extremely hard time disputing a charge later. Further, given the benefits of convenience and speed that come along with e-payments, this creates the perfect opportunity for fraudulent credit card transactions.
One of the other disadvantages of e-payments is that most sites require you to open an online account with them. You need to register with the institution in order to be authorized to perform money transactions with them. While the overall payment process is efficient, the initial registration to a given site can be time-consuming. It also involves a username and a password, which implies the need of password protection, to maintain an e-payment account at each organization. If a person has more than one or two accounts, e-payments can become extremely cumbersome.
This article is not meant to discourage you from making electronic payments, but rather to make you aware of the positive aspects and potential disadvantages of electronic payment systems. Anyone considering using an electronic payment system for paying monthly bills should carefully consider how that organization’s electronic payment system works. Ask what lead time the system will require from them in order to make sure their payments are being made timely. And, most importantly, find out what safeguards are in place to prevent unauthorized individuals from obtaining or using their information and resolving payment conflicts. Users should learn what protections are in place with respect to fees and penalties applied to improperly processed payments. Every need or obligation is different, and for some, the electronic payment services may be of great help.
Jill A. Keck is an Associate in Consumer Collections; Consumer Collections and Subrogation Groups and is based in the Cincinnati office. She can be reached at (513) 723-2205 or firstname.lastname@example.org.