Ecommerce in its core is about allowing people and businesses to purchase goods and services over the Internet. For online merchants and businesses it is of great importance to be able to instantly convert these online shoppers into buyers, or – from an economical point of view – to convert online purchases into payments.
What is an online payment?
When talking about 'online payments' and about the way consumers can pay online, it is necessary to have a mutual understanding of the definition of online payments. So what is considered as an online payment?
Do 'online payments' only refer to the situation whereby both the purchase and payment are conducted over the Internet and performed in direct sequence? Or does it also cover those situations where the buyer completes the purchase online but chooses to pay offline, e.g. in store or upon delivery? Or, as another example, when he chooses to pay through an online home banking application after receipt of the goods purchased online?
A strict interpretation would entail that many payments – which originated as an online purchase – are left out of scope, because the actual payment is conducted in another environment (offline) or at another moment in time. Despite the fact that these payments could represent substantial turnover for online businesses.
Please take into consideration that not every consumer prefers to pay online and in real-time, or even has the option to do so. 20 percent of all people worldwide is still 'unbanked' and does not have access to banking products (home banking) or debit or credit cards.
Therefore, it seems more accurate and comprehensive to take a broad perspective. Our definition of online payments is therefore:
An online payment – in the context of Internet commerce – is a financial transaction between a buyer and a seller resulting from an Internet purchase where the buyer has selected its payment method online
Online Payments in the broadest sense
Following the above reasoning, the term 'online payments' refers to the situation whereby (all of the following are applicable):
- goods and services are purchased over the Internet (whether through a browser or in-app)
- the purchase is confirmed online
- the buyer selects the way he or she wants to pay on the website of the seller
- the purchase is followed by an actual payment – whether in direct sequence after the purchase or at a later stage
- the payment – either conducted online or offline – is followed by settlement of funds (money) from the buyer's account to the seller's account.