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Infrastructure Issues and Risks in EPS

Infrastructure is necessary for the successful implementation of electronic payments. Proper Infrastructure for electronic payments is a challenge.

  1. For electronic payments to be successful, there is the need to have reliable and cost effective infrastructure that can be accessed by majority of the population.
  2. Electronic payments communication infrastructure includes computer network. such as the internet and mobile network used for mobile phone.
  3. In addition, banking activities and operations need to be automated. A network that links banks and other financial institutions for clearing and payment confirmation is a pre-requisite for electronic payment systems. mobile network and Internet are readily available in the developed world and users usually do not have problems with communication infrastructure.
  4. In developing countries, many of the rural areas are unbanked and lack access to critical infrastructure that drives electronic payments.
  5. Some of the debit cards technologies like Automated Teller Machines (ATMs) are still seen by many as unreliable for financial transactions as stories told by people suggested that they could lose their money through fraudulent deductions, debits and other lapses for which the technology had been associated with by many over the last few years.
  6. Telecommunication and electricity are not available throughout the country, which negatively affect the development of e-payments. The development of information and communication technology is a major challenge for e-payments development. Since ICT is in its infant stages in Nepal, the country faces difficulty promoting e-payment development.

RISKS IN ELECTRONIC PAYMENT SYSTEMS

Electronic payments allow you to transfer cash from your own bank account to the bank account of the recipient almost instantaneously. This payment system relies heavily on the internet and is quite popular due to the convenience it affords the user. It would be hard to overstate the advantages of electronic payment systems, but what about the risks? Certainly they exist, both for financial institutions and consumers.

(i) The Risk of Fraud

Electronic payment systems are not immune to the risk of fraud. The system uses a particularly vulnerable protocol to establish the identity of the person authorizing a payment. Passwords and security questions aren’t foolproof in determining the identity of a person. So long as the password and the answers to the security questions are correct, the system doesn’t care who’s on the other side. If someone gains access to your password or the answers to your security question, they will have gained access to your money and can steal it from you.

(ii) The Risk of Tax Evasion

The law requires that businesses declare their financial transactions and provide paper records of them so that tax compliance can be verified. The problem with electronic systems is that they don’t fit very cleanly into this paradigm and so they can make the process of tax collection very frustrating for the Internal Revenue Service. It is at the business’s discretion to disclose payments received or made via electronic payment systems in a fiscal period, and the IRS has no way of knowing if it’s telling the truth or not. That makes it pretty easy to evade taxation.

(iii) The Risk of Payment Conflicts

One of the idiosyncrasies of electronic payment systems is that the payments aren’t handled by humans but by an automated electronic system. The system is prone to errors, particularly when it has to handle large amounts of payments on a frequent basis with many recipients involved. It’s important to constantly check your pay slip after every pay period ends in order to ensure everything makes sense. Failure to do this may result in payment conflicts caused by technical glitches and anomalies.

(iv) The Risk of Impulse Buying

Impulse buying is already a risk that you face when you use non-electronic payment systems. It is magnified, however, when you’re able to buy things online at the click of a mouse. Impulse buying can become habitual and makes sticking to a budget almost impossible.

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