Session 15

Unit 31: E-business Operations

Learning Outcomes

4-1 Describe electronic funds transfer and electronic payment systems

Topics

Review of Last session Lecture

Electronic Payment Systems

Assignment 2

Review of Last Session

Topics Discussed

Trust and Security Evaluating Benefits

Test of Baseline Knowledge

Test of Baseline Knowledge

Name different electronic funds transfer and electronic payment systems used by real companies
How are EFT and EPS effective tools in online payments. How are these secured?

CRITERIA 4-1

Describe electronic funds transfer and electronic payment systems

Electronic Payment Systems

use of electronic funds transfer using private networks for reliability and security by banks; increased risk of payment through internet as public network; most consumer payments over internet made by credit or debit card consumer gives card number and authorises by seller to make the charge, payment is then made by issuing bank through banking system; credit cards allow consumer to defer payment but issuing bank assumes risk of fraudulent transactions; debit cards funds must be available in account before payments made; Protection against fraud other intermediaries first take payment from consumer before making payment, may cause delay between two transactions; charges for processing credit or debit cards uneconomic for small value transactions (micro payments) so cash usually used for these purposes; e-cash attempt to meet need for internet transactions, consumers deposit cash into electronic wallet from which funds are deducted; costs of processing payments, lower than paper-based and e-cash, but not free services

Electronic Fund Transfer

the electronic exchange or transfer of money from one account to another, either within a single financial institution or across multiple institutions, through computer-based systems.

Conventional Payments
The buyer withdraws a certain amount of money from his account He transfers the cash to the seller The seller deposits the cash into his account

Non-Cash (Credit Card/ Debit card)

Online Payment (Credit /Debit Card)

E-Commerce Payment

E-Payment Categorization
Pre-paid: customer pays before the transaction (e.g. she buys electronic tokens, tickets, coins, and uses them to pay for her transactions ) Pay-now: the customers account is checked and debited at the same time when the transaction takes place (ex: internet banking) Pay-later (credit-based): customer pays after the transaction (ex: credit card...)

Requirements to evaluate EPS

Technological Economic Social and Regulatory aspects.

Technological
Authentication (also referred to as Identification or Validity) Privacy (also referred to as Confidentiality) Data integrity (also referred to as Accuracy) Non-repudiation Durability Authorization type Process speed Flexibility

Economic
Cost
Buyer cost Merchant cost

Liquidity (also referred to as Convertibility or Multi currency) Atomic Exchange User Reach (also referred to as Applicability or Acceptability) Value Mobility Financial Risk Trust

Social
Anonymity/ Traceability Convenience (also referred to as Easy-touse) Mobility Interoperability

Regulatory
Regulations of the countries in which it plans to operate. Government regulations with respect to on-line business transactions.
digital signatures, digital fund transfers, electronic commerce contracts, customs and taxation, and international agreements

Summary

EPS Important Criteria for Buyers

Applicability Buyer cost Convenience Convertibility Privacy Security Trust

EPS Important Criteria for Merchants

Applicability Financial risk Merchant cost Convertibility Security Trust Non-reputation

EPS Important Criteria for Networks

Applicability Cost Security Regulatory Aspects Trust Convenient.

Matrix of Objectives, Resources & Criteria

Matrix of Objectives, Resources & Criteria

Matrix of Objectives, Resources & Criteria

Matrix of Objectives, Resources & Criteria

EFT using private networks

Company/ companies that provide payment systems in the Internet Usually performed by Banks and Credit Card Companies Some private networks for EFT provide Electronic Wallet and Electronic Money Equivalents

Risks of Payment through Internet

from the customer's perspective: stolen payment credentials and passwords dishonest merchants or financial service providers disputes over quality of services or goods from merchant's perspective: forged or copied payment instruments insufficient funds in customers account, especially with off-line payment systems dishonest or slow financial service providers from the financial service provider's perspective: stolen customer or service credentials forged or copied payment instruments customers not paying (applies only to credit models) the risk may be shifted in one direction or the other by using a credit or debit model and by special agreements.

Protection against Fraud

protect payment credentials with token or smart cards

use on-line authorization to detect double spending, check for sufficient funds and abnormal spending patterns

Processing of online Payment

Average Approval Rating This criterion, usually evaluated by percentage of approved applicants, refers to its approval rate, the processing speed and the fee to apply Cost per Month A low monthly cost helps keep overhead costs down. A competitive credit card processing company will require a low monthly fee with clear communication about ongoing fees and costs.

Start-Up Cost Credit card processing companies shouldn't charge you too much to set up a merchant account and a payment gateway.

Processing of online Payment

Account Setup Time A competent credit card processing service will expedite your application and get you in business as quickly as possible. Customer Service Accessible customer service answers inquiries 24 hours a day, seven days a week. The service should offer many avenues of contact including telephone, email or instant messaging. Internet Based Features Most companies offer more than one type of virtual terminal as well as an online merchant account and payment gateway. POS/ Swipers Features A variety of Point of Sale options and swipers (card readers) should be available through the service..

END OF SESSION