Anthony J. Pennings, PhD


Assessing Digital Payment Systems

Posted on | August 29, 2017 | Comments Off on Assessing Digital Payment Systems

In digitally-mediated environments, new forms of currency and payment systems continue to gain public acceptance. Changes in technology, contactless options, and the ease of electronic payments make cash less desirable. While credit cards remain the most popular form of payment with some 70% of the market, other systems are emerging. PayPal, for example, is used for some 15% of online payments.

The major types of payment systems for B2C transactions:
* Payment Cards – Credit, Charge, Debit
* e-Micropayments – less than $5
* Digital Wallets – AliPay, Apple Pay, Samsung Pay
* e-Checking – Representation of a check sent online
* Digital eCash
* Stored Value (Smart Cards, PayPal, Gift Cards, Debit
* Net Bank – Digital payments directly from your bank
* Cryptocurrencies – Peer-to-peer blockchain enabled digital coins (Bitcoin, Ethereumm, Dash)

What factors determine the success of a digital payment system? Here is a list of some important criteria to consider when it comes to assessing the viability of a currency/payment system.

* Acceptability – Will merchants accept it?
* Anonymity – Identities and transactions remain private
* Independence – Doesn’t require extra hardware or software
* Interoperability – Works with existing systems
* Security – Reduced risks to payer and payee
* Durability – Not subject to physical damage
* Divisibility – Can be used for large as well as small purchases
* Ease of use – Is it easier to use than a credit card?
* Portability – Easy to carry around
* Uniformity – Bills, coins, and other unites are the same size and shape and value
* Limited supply – Currencies lose value if too abundant [1]

What about payment systems for large transactions between businesses or governments? The major types of payments systems for B2B, B2G or G2G transactions are:

* Electronic Funds TransferACH, SWIFT, CHIPS
* Enterprise Invoice Presentment and Payment (EIPP)
* Wire Transfers – FEDWIRE

The Federal Reserve’s FEDWIRE transfers trillions of US dollars every day and is a major system for facilitating transactions between banks and other financial institutions.


[1] Types of payment systems and and criteria drawn from “Functions of Money – The Economic Lowdown Podcast Series, Episode 9.” Functions of Money, Economic Lowdown Podcasts | Education Resources | St. Louis Fed. N.p., n.d. Web. 15 July 2017.



AnthonybwAnthony J. Pennings, PhD is Professor and Associate Chair of the Department of Technology and Society, State University of New York, Korea. Before joining SUNY, he taught at Hannam University in South Korea and from 2002-2012 was on the faculty of New York University. Previously, he taught at St. Edwards University in Austin, Texas, Marist College in New York, and Victoria University in New Zealand. He has also spent time as a Fellow at the East-West Center in Honolulu, Hawaii.


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