Almost every trade and economic transaction can now be facilitated online. And if your business is not yet tapping this opportunity, you’ll be left out of the competition. But even if actual e-commerce transactions can be carried online, the main concern is on the movement of money. For retail consumers who have their debit and prepaid cards, online payment solutions are really simple. But what about business-to-business transactions which involve larger amounts of money? And things get a little more complicated when payments are to be made across the border.
The traditional business solution is to remit money with the help of your bank or a local remittance company. When dealing with huge amounts of payments, the bank is your best option. But there are disadvantages of doing so. Bank transfer fees are quite high which is oftentimes set as a certain percentage of the money being transferred. For small businesses trying to survive by relying on low markups or even for large companies with multiple transactions at a time, the fees could be unbearable. And if it’s an international wire transfer, your business partner will end up waiting several days or even weeks for your payment to arrive.
The Peer-to-Peer Payment Solution
An innovation that has evolved in the recent years is the use of online peer-to-peer payment systems. These are online services that allow individuals and companies to transfer funds or make payments from their bank account to another person’s account using simple internet tools. Perhaps, the most popular and widely used form of peer-to-peer payment system is the digital wallet.
What is a Digital Wallet and How the Use of it Benefits Businesses and Economies?
A digital wallet is an internet-based application or system that allows a user to store personal, financial, and passwords or security data to allow instant payment or transfer of funds when the user needs to pay another individual or merchant. Most of the time, your digital wallet or your account with the service provider is linked to your credit and debit card or to your bank account. It’s really a simplified payment gateway. Some of the biggest and most popular websites offering such service even have the capacity to let users maintain, deposit, or load money to their accounts similar to the concept of an online bank.
The major benefit of using a digital wallet is obviously convenience. Instead of personally going to the bank to send payments using wire transfer, individuals and businesses can do it inside their homes or offices. And as mentioned above, funds can be transferred real time.
Digital wallets and online payment gateways allow both small and medium businesses to thrive and compete. Using these payment systems is a far way cheaper alternative than the traditional ones. Even for international transactions or cross border payments, fees are usually the same and you often have the option to use either your local currency or the internationally accepted ones like dollars, pounds or Euros. Additionally, small businesses that rely on walk-in customers who pay cash can now extend their market and tap online consumers or business partners.
The next advantage is access. Because digital wallets are internet-based, a business can transact almost everywhere and anywhere as long as it’s within internet’s reach. Some of the biggest online payment systems have access to the more or less 200 countries worldwide.
Finally, these modern day payment solutions have their benefits to economies particularly the developing ones. When the number of businesses grows as a result of the access to easier and cheaper online payment systems, economies will also prosper. And from an economist’s point-of-view, when money is circulated quickly and efficiently, it also translates to a multiplier effect on growth.