As long as humanity has existed, people have been trading. First, through barter or exchange, then with the advent of currency, and now via electronic payment processors that have transformed financial transactions.

When you use your credit or debit card at a physical or online merchant, a processor goes to work. And according to this Card Rates research, JPMorgan Chase & Co., a top processor, handles more than $1 trillion in annual processing volume.

Ever since the advent of credit card terminals, our ability to make secure payments has been growing rapidly. From mobile payments to digital wallets today, these processors have greatly simplified and expedited the process.

We'll delve into electronic payment processors in this article — how they came about and their effects on consumer behavior and business operations in recent years. Keep reading to find out.

What Are Electronic Payment Processors

Electronic payment service providers, commonly referred to as electronic payment processors or PSPs, are corporations that mediate online transactions between purchasers and vendors. They are essentially intermediaries who securely relay the buyer's payment specifics from their bank or financial institution to the seller.

The smooth flow of money across internet platforms, mobile apps, and physical point-of-sale terminals would be impossible without these processors. They authorize payments, check account balances for accuracy, and transfer funds between accounts.

PayPal is a prevalent example of an electronic payment processor. By linking their PayPal account to their bank accounts, credit cards, or mobile wallets, users can process payments.

When making online purchases, buyers also may opt to pay via PayPal. To guarantee a smooth and secure transaction, the payment provider safely moves money from the buyer's chosen means of payment to the seller's account.

Put it simply, electronic payment processors enable individuals and businesses to transmit and accept funds electronically—whether for bill payments, online purchases, or peer-to-peer transfers.

How Electronic Payment Processors Emerged

The rise of e-commerce and digital technology gave birth to electronic payment processors. The first big step forward in this area was IBM's introduction of magnetic stripe technology for credit cards in 1973, a groundbreaking advance that made secure electronic payments possible.

Some might date the arrival of electronic payment processors to the late 1990s. In 1997, David Chaum created the first digital payment system called Ecash. However, it faced technical and regulatory obstacles and failed to develop widely.

Online payments took a turn in 1998 when PayPal started offering an alternative to checks and money orders. Users could send money using email addresses and quickly set up an account by linking it to their bank account or credit card.

The aughts saw the launch of Amazon Payments and Google Checkout – now part of the latter's broader Google Wallet project – as online shopping began to take off. The idea was to make digital payments even more convenient for customers than they already were.

Back in 2011, Square disrupted the payment process by creating a service that let entrepreneurs take credit card payments on their smartphones by using a card reader, too. The main advantage of this innovation was that sellers could now accept payments wherever they were without any trouble.

Currently, it is possible to find more ways to pay digitally than ever before because of cryptocurrencies like Bitcoin or Ethereum. Unlike older forms of money, these digital ones, mostly called blockchains, are found in decentralized systems and aren't controlled by any organization.

The Impact of Electronic Payment Processors

You can't deny that the manner in which payments are made today has been totally transformed by electronic payment processors, and their effect cannot be overstated. The reasons why EPPs are so widely used are because they are very secure, they process transactions quickly, and they can be used by anyone.

Let's think about what it's like when you want to send money to family or friends or even pay for something online using a platform like PayPal. You don't need actual cash. 

The algorithm is simple: all you have to do is type in their email address, and whether they're across the table or across the world. What is more, it goes through right away without any worries about security.

Electronic payment processors have also completely changed how online businesses work. With just one simple integration, companies can now accept money not just from people (or companies) in their town but from other countries, too. This means better experiences for customers as well because transfers never take ages like they did before.

Still, it's important to know that, like any technology, electronic payment processors may create some serious risks if used not properly. For example, if a business does not pay much attention to its financial security, there is a potential danger of data violations or unauthorized entry.

Other issues may include system failures or bugs that can cause different transaction delays or even disrupt all commerce operations. So, having a contingency plan is a must to avoid any adverse effects.

Still, the overall impact of electronic payment processors on people and businesses is enormous and positive. They have significantly facilitated the way people pay for goods and services and reduced all the barriers to international payments.

Conclusion

People's financial habits have been completely changed by the way electronic payments are processed nowadays. It's amazing to consider that transactions have become easier, more protected, and faster all because of services like PayPal and the more current attraction to digital forms of cash like Bitcoin.

Still, there are dangers to be aware of — like technology not working the way it should or someone hacking into a system. But the positive effects on how individuals live and work are definite. So, we can expect e-payment systems to keep developing and having an effect on our financial behavior for a while.