Electronic payment systems are services or platforms that allow for the transferring of funds via digital routes — i.e., without any physical payment method involved, like checks or cash.
These systems can often be seen as a more trustworthy way to pay employees, whether they’re in the same country as the employer, or abroad. Some electronic payment systems also include additional features to automate the payment process and manage any necessary record keeping.
Examples of electronic payment systems
Some common examples of electronic payment systems may include the following:
- Bank services, like wire transfers, direct deposits, and ACH payments
- Digital payment platforms, which are used to manage electronic payment transfers and usually include a range of payment options, including bank transfers, credit cards and e-wallets.
- Payment apps, which allow for sending and receiving funds via phone. The apps are often connected to a person’s bank account or credit card. Generally, they’re used for peer-to-peer payments rather than employee compensation
How do electronic payment systems work?
How electronic payment systems work will depend on the type of system in question. In general, though, it will involve the following stages:
- Encryption and other security measures to ensure that payments are made safely once submitted
- Ensuring the payer has enough funds to make the transfer
- Approval and transaction of funds to the person’s account or e-wallet
- At times, records of transactions may also be generated
Use of electronic payment systems for a global workforce
Electronic payment systems have become a regular part of organizations’ toolbox for paying employees abroad.
However, the payment compensation can get a bit complicated and if differences in tax requirements and regulations aren’t taken into account and if relevant policies aren’t set. A few ways things companies can do to solve this includes:
- Ensuring proper training for all payroll staff
- Setting clear protocols and policies tailored for each location
- Conducting regular audits and ensuring employee payment data is up to date
- Partnering with third-party providers to ensure secure regulated transfers
- Utilizing technology to offer a centralized system that ensures both payment and payroll data is in sync