What Is Online Payment System?

What Is Online Payment System?

The system of payment on E-commerce platforms is known as Online Payment System. Generally it requires a dependable and secure internet payment mechanism in order to make it effective and reliable.

Classification Of Online Payment Mechanism

The online payment mechanism is broadly devided into 2 types such as:

  • Payment Instruction
  • Digital Money

Payment Instruction

The verbal or written order to initiate a payment transaction by the user to financial intermediation is known as payment instruction.

It enabled financial intermediaries to transfer the money on behalf of its user through electronic fund transfer through debit or credit transaction.

Digital Money

The payment mechanism that empowers consumers to take electronic money to bank accounts is called Digital Money.

Once consumers take the position of electronic cash they are able to transfer another party through Paytm, Phone Pe, Google Pay and other payment gateways.

Generally it requires a digital signature which generates a micro chief in order to ensure transfer of digital money.

Function or Uses Of Online System

The function of online payment system is broadly divided into 2 type:

A.Consumer Oriented Activity

B.Business Activity

Consumer Oriented Activity

The important function of an online payment system is its activity is to carry on consumer oriented activity on the internet. It mainly focuses on consumer oriented activity like:

Purchase of goods & services

The online payment system is commonly used to purchase goods and services. It enables consumers to purchase various commodities online, offline and make payment through debit or credit card.

Payment of utility bills

The online payment system is very much useful for payment of utility skills. It enables people to collect dues and payment of dues instead of cash payment.

Business Activity

The online payment system is not only useful for consumers but also very much essential for business houses. It enables business to carry on economically within a few moments it includes.

Invoice payment

The online payment system enables a business unit to make payment on invoice received from Client or business unit. It ensures easy settlement of claims of suppliers.

Cash Management

The management of cash is considered as vital correspondence life for online payment mechanisms. It is very helpful to manage the cash effectively. It also enables the final manager to avoid a large amount of cash in the hand.

Supply Chain Management

The online payment system enables companies to fast settlement of supply chain disputes. It also ensures timely delivery of consumer payment from them with concrete proof.


The act of finding, occurring, buying goods and services for external sources through tendering is called procurement. The online payment system is considered as the best way of procurement as it avoids thoughts & collisions.

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