INTRODUCTION TO ELECTRONIC PAYMENT.

Commerce is the most major aspect of any civilization. Improving Commerce can bring
prosperity into all segments of society. In today's world there has been major changes to
the commerce industry. The most important of it is the introduction of computers into the
commerce industry. Computerization of commerce has taken the world by a storm. There
are significant improvements in the areas of initiating sale of products, placing orders,
making payments, and transfer of funds. This has led to a much better global economy
and better living standards for all.

Payment started with the barter system centuries ago. Goods were exchanged directly
between people in the barter system. The major drawback of barter system was that the
buyer and the seller had to mutually like the goods that they had in surplus. This led to
next generation of payment method called Commodity Money System. Here, the buyer
would buy goods from the seller in exchange of some commodity in the form of gold,
silver, corn etc. Commodity Money slowly evolved into standard of having paper notes at
the exchange parameter.

The cash payment method does not require the seller to like the commodity that he/she is
going to receive in exchange for the goods. About 80 % of all the transactions in the
world are done through cash payment. The process is simple and there is no bank
involvement. There is however an overhead of printing notes. The cash payment method
is very insecure. There is no record of the transaction maintained. There is a possibility
for generating counterfeit notes. Cash Payment is mostly used for low-value payments.
Check Payment is employed for making medium to high value payment. A record of the
transaction is maintained at the bank at the cost of the transaction fee. However, it is not a
guaranteed form of payment since the checks do no represent real time cash. There is a
possibility that the checks could be turned down by the buyer's bank due to various
reasons. As the volume of check processing started increasing, banks had to think about
ways of improving the turn-around time for payment processing.

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Electronic Commerce is defined as a monetary transaction that occurs electronically as
opposed to the physical exchange of money or checks. Tangible currency is eliminated nd
accounts are maintained electronically to reflect the effects of transaction. E-Commerce
involves trading using the latest electronic equipment and software between the sellers
and the buyers. The trade in e-commerce is conducted in a slightly different way than the
traditional trading. The earliest form of automation in the financial industry was done to
automate the functions of clearing house in bank associations. In 1968, group of
California Bankers formed Special Committee on Paperless Entries (SCOPE) which led
to the formation in 1972 of California Clearing House Association. This was the first
regional automated Clearing House. The first form of automated payments was to
disburse salaries to employees from an employer's account. Gradually, the information
revolution changed the outlook of the banking sector and computerized majority of the
functions. This led development of new forms of payment using the latest technology.

Electronic Payments can be categorized as Stored Account Payments or Stored Value

Payments. In a stored account payment, the buyer and the merchant maintain accounts
with a bank. The transactions are registered and the actual transfer of funds takes place at
a later stage through settlement. Examples of Stored Account payment System include
Credit Cards, Debit Cards and Electronic Checks. In Stored Value Payment System like
smart cards, mondex cards, digital cash, certain amount of prepaid monetary value stored
electronically on the card. Electronic Checks are also processes on the lines of traditional
check processing. Each of these cards can have different ways.

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 MEANING AND DEFINATION OF E-PAYMENTS

E-payments means to purchase something via internet or E-banking

rather than to give physical cash or cheque etc. for paying

DEFINATION

The definition of an electronic payment system is a way of paying for a goods and
services electronically, instead of using cash or a check in person or by mail. An
example of an electronic payment system is the use of a credit cards, debit cards,
electronic cash, micropayment system, and session level protocols for secure
communications

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 THE HISTORY OF E-PAYMENTS

Have you ever imagined how the world would look like if we had to pay for goods
with a grain or the animals we have just hunted. For thousand of years it was the
reality we had to cope with luckily these days are over and electronic payment
methods are now available for everybody and are an important part of our day to day
activities and life. Nowadays paying for goods and services is really convient it can be
easy as a onetime click.
It’s obvious that the development of e-payments is closely related to online
commerce and follows the improvements in that field. As you probably know and
experienced e-commerce is extremely convenient and online payments are way more
suited to customers requirements that traditional payment form like cash. There are a
variety of payment methods today, such as online banking, credit and debit card,
charge card or e-wallet, but take a step back and look at how it all began.

1.It all started with the World Wide Web

The origin of e-payment is of course related to the beginning of the internet which
revolutionized the world like nothing before. After all if there were no World
Wide Web, there wouldn’t be online stores and e-services.
The history of internet starts in 1969 with ARPANET, the military network which
was intended to be communication network in the Vietnam War era. But the main
turning point happened in 1989 when Tim Berners- lee presented the solution of
making information easier to publish and access on the internet by using the so-called
“sites” or “pages”.

2.The beginning of e-payments systems

Along with the internet development, pioneer online payment services started to
operate in the first half of the 90s.in 1994 stanford Federal Credit union was
established the first financial institution which offered online internet banking
services to all of its members. However first online payment system weren‟t adapted
to constant changing of users number and their transactions.

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In the beginning the main players on the e-payments market were Millicent (founded
in 1995) E Cash or Cyber Coin (both in 1996).The majority of the first online
services were using micropayment systems and their common attribute was the
attempt (such as e-money, digital cash or tokens).
More ever. in 1994,the Amazon is founded (one of the e-commerce pioneers) and
Pizza Hut starts accepting online food ordering .Can you believe it? The first online
delivery system was one step ahead of all Pizza Hut‟s competitors.

3.Evolution of payment possibilities

Most of the modern payment systems are easy to use with the payment process
minimized to just a few simple steps. They are website or app based which means
there is no need to install a distinct software or buy special equipments which was
the case a few years ago. Nowadays systems are available from any device connected
to the internet.
Ever year there are new solutions in e-payments world that stimulate e-
commerce growth. New players make electronic payments both easy to
implement and convenient for users who pay online.

4.Time for game changers

The online and offline payments are interpenetrating and the distinction between
these two becomes more and more blurred each year. It is related mainly to the
dynamic growth of technologically advanced mobile devices with the internet
connection, and retailers who allow you to pay in their brick-and-motar stores with
your smartphone are nothing exceptional nowadays.

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5. Social networks and new technologies

It is also of the consistent popularity of social networks and online gaming.

Facebook only (which was launched in 2004) has 1,55 billion monthly active users
and is still growing. Till today, the network extends its functionality with online
games, which allows us making in-game purchases.
Furthermore, mobile technologies are developing fast and customers no longer need
PC‟s or laptops to buy online. The future of e-payment depends on the development
of new technologies and the role of the internet in our life.
As we see the payments landscape is changing fast and its driven by new
technologies. It’s obvious that future of online payments depends on the
development of the internet infrastructure Users are more willing to pay for
intangible goods (such as online games or multimedia access) and customers will
make more payment choices

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 ELECTRONIC PAYMENT PROCESS
Introduction.

Why people came up for online business? There are many reasons why we go
for this type of business. For the seller or merchants, they can operate their business
profitably 24/7 and reach the market across the world - geographical boundary is not a
barrier anymore. It is not necessary for them to establish their shops physically in
many places around the world which means anyone even small businesses can have
their business online. While at customers‟ end, it is more convenient where one can
place his/her purchase orders in just a click of the mouse anytime of the day regardless
of where one is standing. Another reason is transactions are even faster that
transactions are done in just a few minutes. Payment transactions for these online
businesses can be done either online or offline. However, nowadays the method of
payment has become important and the possibility for online payment acceptance
provides convenience to the customers. In this paper, I will be discussing about the
online payment process.

What is Online Payment?

Online payment is when the customer or buyer makes his payment

transactions for the goods or services purchased with the use of the Internet – to be
online. “This type of payment lowers the costs for businesses as the more payments
made electronically (online or offline) the less they spend for paper and postage. Also,
it helps on improving customer retention as he is more likely to return to the same e-
commerce site where his or her information has already been entered and stored.” [1].
With online payment, it is not necessary for the payer to be in a long queue as
payment is made in just a click of a mouse. Additionally for example, almost all the
banks have an online bill payment service where it is offered free of charge and is
available all days of the week or 24/7

Nevertheless, the issue on security is a crucial element to the implementation

as well as acceptance of payment both for sellers or merchants (fraud) and buyers or
customers (privacy or identity theft).

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Online payment method

2.1. Credit Cards. This has been the dominant form of online payments when
purchasing online. However, many people still resist the appeal and simplicity of
credit-card transactions due to security concerns. Until now there are a high risk
for stolen cards, identity theft thus customers fear credit-card fraud by merchants
and other parties [2]. Yet, there are some credit card issuers who have features that
provide online fraud protection.

2.2. Virtual Credit Cards. This virtual credit card is an innovation in online credit
cards. Credit card issuer provides a special number that can be used in place of
the regular credit card number to make online purchases. This allows the user to
use a credit card online without disclosing the actual number. Additionally, the
user gives a transaction number instead of the credit card number – example is
Private Payment by American Express. [3]

2.3. Debit Cards. With the debit card, the money for a purchased item comes directly
out of the holder’s checking account. The actual transfer of funds from the
holder’s account to the merchant’s takes place within 1 or 2 days [3].

2.4. Smart Cards. This card looks like any plastic payment card but it has a microchip
embedded on its face. This can hold more information than ordinary credit cards
with magnetic strips. Rather than holding only card’s information, it can also hold
information for such as health care, transportation, identification and banking, and
others. This enables information for different purposes to be stored in one
location. The smart card can be used to make purchases over the Internet with the
use of a card reader to read the card details necessary for payment and secure
sending of data over the Internet [3].

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2.5. e-Checks. An e-Check is an electronic version or representation of a paper check.
It contains the same information as a paper check and based on the same legal
framework. It works the same as the paper check however they are faster, cheaper and
more secure [2]. To pay by e-check, an account number is keyed in and together with
the bank's routing number. The vendor authorizes payment through the customer's
bank, which then either initiates an electronic funds transfer (EFT) or prints a check
and mails it to the vendor [1].

2.6.Digital Cash. Digital cash is an example of a digital currency, where it allows

people who do not have credit card to shop online. It is similar to a traditional bank
account: consumers deposit money into their digital cash accounts to be used in the
purchase online. This is often used with other technology such as digital wallets [2].

2.7.e-Wallets. An e-wallet is a software component that a user downloads to their

desktop and in which the user stores credit card numbers and other personal
information. When a user shops at a merchant who accepts e-wallet, the user clicks the
e-wallet and the forms are automatically filled in with all the necessary information in
just one click. Credit card companies such as Visa and MasterCard also offer this e-
wallet [3].

2.8.e-Billing. E-Billing is also called electronic bill presentment and payment (EBPP).
This enables the presentment, payment and posting of bills via the Internet.
Presentment means taking the information that is typically printed on a bill and
hosting it on a bill-presentment web server. Once the bill is available, the customer
can view it with the browser, review and then pay online. When the payment is
received, it is posted into the biller’s account receivable system and the payment is
transferred from the customer’s account. It is said that online payments are expected
to grow to more than 15% of 19 billion bills by 2011. [3]

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2.9.Peer-to-Peer Payments. P2P payments are one of the fastest-growing online
payment schemes as they enable the transfer of funds between two individuals. PayPal
is one of the first companies to offer this service. A user will open an account with the
username, password and also an e-mail address as well as the payment card or bank
account number. Then the user adds funds to their account and once account has been
funded, the money can be sent to the recipient who also has an account at PayPal, for
instance. The e-mail that is sent to the recipient contains a link back to the service‟s
(PayPal) website and can transfer the money from the PayPal account to their credit
card or bank account

Online payment process

3.1 Online Credit Card Payment Process [4]

In the processing of a credit card payment, there are several entities that play
important roles to make the online payment possible. For the payment to be
successful, merchants must connect to a network of banks (both acquiring and issuing
banks), processors, and other financial institutions so that the information provided by
the customer can be routed securely.

1. Cardholder – the individual or the entity or simply the customer that uses
his credit card to pay the purchases made online.

2. Issuing Bank – the financial institution that issues a credit card to the
cardholder. The issuing bank establishes and verifies the cardholders‟ credit line to
see if he has available credit to purchase a product/service and it provides the
cardholder with the monthly billing statements, etc.

3. Credit Card Issuer/Association – a financial institution that provides credit

cards and other products for banks who privately brand the products such as Visa
International or MasterCard International. Also they often set up programs for
merchants to accept the cards. Also they are involved in operating and managing the
authorization and settlement systems worldwide.

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4. Merchant – the entity or an individual that is selling products/goods or services.
Goods can be either hard goods (tangibles) such as apparel, computer hardware any
kinds of goods that is possible to sell over the Internet or soft goods (intangibles) such
as service contracts or pay-per-view content.

5. Acquiring Bank – an entity that is often referred to as the merchant bank or

acquirer. It is the financial institution that enables merchants to accept credit card
payments. The acquiring bank often works with the third-party processor to accept or
decline the cardholder’s credit card purchase or request, deposits funds into the
merchant’s bank account, provides the merchant with the periodic deposit statements,
etc.

6. Payment Application – the application that is used by the merchant to request credit
card authorization and settlement of funds between the merchant and the acquiring
bank. This application can either be self-managed application or can be an outsourced
service.

7. Third-party Processor – also known as payment processing networks, frontend

processors, or just processors, the organization that works with an acquiring bank
(merchant bank) to process credit card transactions via the card issuers/associations.
The third-party processor communicates to the card associations/issuers to obtain
authorizations and execute fund transfers. In some cases, the acquiring bank and the
third-party processor may be the same entity.

8. Independent sales organization (ISO) – an independent agent that solicits

prospective merchants for merchant banks, ISOs are also referred to as merchant
account providers. ISOs assist merchants in setting up merchant accounts and ensure
that the accounts connect to the third-party processors. ISOs may either assume partial
or shared financial liability for merchant activity.

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 When using the credit card for online payment, merchant’s account must be in
place with the acquiring bank or with the third party service. As soon as the customer
makes a purchase online and pays using his credit card, he is required to submit his
credit card information which is then sent securely over the Internet to the merchant’s.
Below is an illustration (see Figure.1) on how is the process going on when a
transaction of purchasing and payment (thru credit card) is made online as well as the
step-by-step process explanation of the figure. Nevertheless, please take note that this
is a simple and generic online transaction processing, authorization and settlement
where potential steps can be added into it [4]:

1. Card issued: The customer has a credit card with him issued by the issuing bank with
the credit limit and an available balance.

2. Buy button: The customer visits a web site or the online shop using standard web
browser and start shopping and add the product(s) into his shopping cart. Upon
checkout, he is required to submit his credit card information, expiration date, billing
address. After which, he also selects the method of shipping for example and then
click on the submit button to initiate the transaction. The information is then
transmitted to the merchant‟s online shop where the outsourced payment service is
setup. The outsourced payment service receives the encrypted information from the
online shop, perform a fraud check, and then initiate the process of communicating the
billing information and purchase amount to the third-party processor.

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3. Authorization request: The outsourced payment service encrypts the purchase
information or data and transmits it to the third-party processor, who will forward the
information or data further to the card association or card issuer for authorization and
verification.

4. Merchant notification: The third-party processor receives the authorization

message and other pertinent information from the card association or issuer and
initiates the process of communicating the authorization message to the merchant. The
third-party processor encrypts the authorization message and transmits the encrypted
information to the merchant’s secure commerce server.

5. Authorization response: The issuing financial institution verifies the credit card
information and determines whether the customer has sufficient credit available to pay
for the purchase. An authorization number is generated and the available credit is
reduced by the authorized amount. If it so happen that the credit card information is
not correct or if there is not enough available credit, then a message declining the
transaction is generated.

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 During this short span of time, the issuing bank also performs other operations such
as address verification service (AVS), where the billing information entered online is
compared to the entry in the issuing banks database – this is the authentication part.
After which, an authorization message is returned to the card association and
forwarded to the third-party processor.

6. Shopper notification: The merchant’s server receives the information and is

programmed to send immediately the purchase approval or decline message to the
cardholder/customer. Normally when the credit card was declined, some pertinent
information like a suggestion to check for the accuracy of the information provided or
to use a different credit card is sent. As soon as the customer receives this information
for example approved transaction he at the same time receives a confirmation number.

It takes only a few seconds end-to-end from the moment that the customer hit the buy
button until he receives the authorization message back. The authorization process
usually takes a few seconds, depending on the merchant’s payment application and
procedures as well as Internet traffic and other factors.

7. Fulfillment: The merchant begins the process of fulfilling the customer’s order
with the appropriate product/service.

8. Settlement request: The merchant compiles a batch of orders that have been
fulfilled and begins the process of transmitting batch to the third-party processor for
the settlement. The merchant first transmit the batch to his payment service that
encrypts the purchase information and transmits the encrypted information to the
third-party processor. The third-party processor receives this information and sends
the settlement instructions to the appropriated financial institution to transfer the ticket
amount from the cardholder’s account to the merchant’s account.

9. Settlement: For each credit card transaction in the batch, the appropriated financial
institution is debited and the cardholder’s credit card statement is updated.
The acquiring bank receives the funds and makes a deposit into the merchant’s bank

account

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 10. Settlement response: The merchant receives the notification that the funds have
been deposited into his bank account. On a periodic basis, the merchant receives reports
that he can use to reconcile with his batch settlement requests with his deposit activity.

11. Funds available: The interval between the merchant’s issuance of a settlement
request, funds transfer and funds availability can take up to several days, depending on
the issuing bank, the acquiring bank and the third-party processor. The settlement cycle
time is actually affected by the acquiring bank’s holding period on deposits, as well as
other procedures and policies established by the acquiring banks and third-party
processors.

Some of the Online Credit Card Transaction Enablers

In this section, I will be presenting some of the online payment enablers that are
commonly used by merchants to enable the acceptance of payments online particularly
for the online credit card transactions. There are a lot more of them but I will only
discuss a few of them. These companies established business relationships with the
financial institutions to accept online credit card payment for their merchant clients.

1.PayPal. “Arising from the popularity of eBay online auctions, PayPal

(www.paypal.com) has quickly become dominant in online transaction processing”
according to Pan-Western E-Business Team [9]. Many people still think of PayPal
primarily as the service to use to pay for items they buy on eBay. PayPal originally
started as a peer-to-peer money transfer system for eBay auctions, but has also expanded
as a third payment processor for any website. Two of their main gateway products that
they offer are Pay flow Pro and Pay flow Link.

1. Google Checkout ™. Google has an online payment processing service particularly

for credit card transactions. The difference between PayPal is that the scope of Google
Checkout™ is focused on enabling one-time payments to be made from a purchaser to
a merchant.

2. Authorize.Net. Like any other payment gateways Authorize.Net handles online

payment transactions for credit card and electronic payment processing between the
merchants and financial processing networks.

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Security in online payment

Security is vital when doing business be it online or offline. If I compare the

traditional transaction using a credit card, what the merchant need is the signature of
the cardholder and sometimes the photo on the credit card is also use to verify the
identity of the customer. In the virtual world, information needed are the credit card
number, the verification code and the billing address to verify the identity of the
cardholder and fraudulent transactions are always around.
Common challenges that the merchants have to face are Internet fraud,
product returns, non-delivery claims, disputes that leads to chargebacks and etc. As
regard to the customers are stolen cards, theft identity and so on. Most people think
that the customers are most in danger of being defrauded, however the truth is that
merchants are more often the targets of fraud and they are at the same time held liable
for these fraudulent transactions [4]. Therefore, a well devised security system can
address these security issues that are very crucial to the online payment acceptance.
VISA for example, has developed a list of “best practices” to be used by the
merchants when conducting credit-card transactions. This list includes implementing a
firewall, using encryption, anti-virus software and the incorporation of intercompany
security practices and the protocols are also mandatory.

1 Standard Security Protocol.

SSL and SET technologies are used for data security where data are encrypted
and digitally signed before transmission over the Internet. Secure Socket Layer
(SSL) and Secure Electronic Transaction™ (SET™) are the standard security
protocols that protect the integrity of these online transactions. SSL was developed by
Netscape Communications, a non-proprietary protocol used to secure communication
in the Internet and the Web. This SSL is built into many web browsers including
Netscape Communicator, Microsoft Internet Explorer and numerous other software
products. SSL uses public-key technology and digital certificates to authenticate the
server in a transaction and to protect the private information and transmit the date over
the Internet with integrity. However, in the case of online credit card transactions for
example, there are more to make than just encrypting the credit card information upon
transmission to the merchant – such as checking the validity of the card, the

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 authorization of the card, etc. SET™ is a cryptographic protocol which was
developed by Visa International and MasterCard International was designed
specifically to protect and handle the complete online transactions both for the
customers and the merchants. SET uses the digital certificates to authenticate each
party in a transaction. Additionally, it requires special SET software to process
transactions. With this protocol, the merchant never sees the customer‟s information
like the credit card information as it is not stored on his server which reduces the risk
of fraud. Moreover, you will know that you are transacting safely or when the website
is running on a secure server when you see the lock icon found in the status bar of
your browser and also in the URL in the address bar has the prefix „https‟ instead of
„http‟,

Fraud Rate

In the graph below it shows how the online payment fraud is still a significant
problem for many e-businesses. According to Cyber Source Annual Online Fraud
Report – 2008 Edition, “Over the past few years the percent of online revenues lost to
payment fraud has been slowly declining from 1.8% in 2004 to 1.4% this year.
However, total losses from online payment fraud in the U.S. and Canada have steadily
increased during this time as e-Commerce has continued to grow 20% or more each
year
(U.S. Census Bureau Retail E-Commerce Sales reports, Shop.org & Forrester
Research). In 2007, we estimate that $3.6 billion in online revenues will be lost
to online fraud — up from $3.1 billion in 2006.” .

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Fraud Protection

As mentioned earlier, merchants are held liable for fraudulent transactions that
lead to chargebacks. Some companies have a feature where transactions are monitored
by how many times the credit card for example is being used within a day, where if
the transaction is suspected, the merchant can reject the request. The credit card
issuers had also established a solution to make the online payment transaction more
secure. These are “Verified by Visa®” program of Visa Inc. and “Secure Code®”
program by Master card which are used during the authentication process that protects
both the cardholders as well as the merchants‟ liability against fraudulent credit card
transactions.

In MasterCard Secure Code, every time the cardholder pays online through the
merchant’s website, he will automatically be prompted to enter the unique and private
code called the Secure Code that was issued and registered with his issuing bank as
part of the authentication process of the transaction made before confirming that the
purchase transaction is completed.

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In Verified by Visa, it uses the same system in authenticating the cardholder’s
transaction. The cardholder activates his visa card online directly with Visa Inc. or
with his issuing bank’s website. During activation process, the cardholder has to
create a unique password which shall be used together with the credit card number
when making a purchase online. Another way also is the use of the “3-Digit Security
Code” by Visa Inc. as below:

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 Furthermore, there had been suggestions on how online merchants can
prevent fraud in general (see points below) [9] or avoid chargeback problem such as
subscribing to services like ChargebackPrevention.com and the like [8].

Understand what existing technical measures are already in place to reduce fraud by
your payment gateway.

Retain and require documentation for every stage of the sale Respond to your
customers in a timely fashion.

Require human intervention for suspicious orders, such as international orders,

mailing addresses with PO boxes, and orders over a certain amount of money

Consider using a shipper that can provide you with a signature for proof of delivery

Find out if your payment processor provides some sort of seller fraud protection, and
follow their guidelines

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 TYPES OF E-PAYMENTS

1) Credit cards:-

A Credit card is a piece of plastic, 3-1/8inches by 2-1/8 inches in size, that carries
information that allow you to make purchase now pay for them later. Credit cards
from visa maser card or any other network allow you to pay for purchase or services
by borrowing from the credit card company. To purchase goods from merchant who
accept credit card such as merchant has credit card reader to purchase the payment
transaction to withdraw cash from ATM. You then repay by making monthly payment
toward the amount borrowed, that is you don’t have to repay the whole borrowed
amount in fill at one go.

2) Debit Card:-

Debit card is a prepaid card and also known as ATM card. An individual has to
open an account with the issuing bank which gives debit card with a personal id
number, when he makes a purchase he enter his pin number on shop pin pad. When
the card is slurped through the electronic terminal it dial the acquire a banking system
either master card or visa card that validate the pin and finds out from the issuing bank
whether to accept or decline the transaction the customer can never overspend because
the system reject any transaction which exceeds the balance in his account the bank
never face a default because the amount spent is debited immediately from the
customer account With almost every bank account you are issued a debit card.

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 3) Smart card:-

Smart card was first introduce in Europe most of these method are known as stored
value card .A smart card is about the size of a credit card, made of a plastic with an
embedded microprocessor chip that holds important financial and personal
information. The microprocessor chip is loaded with the relevant information and
periodically recharged. In addition to these pieces of information, systems have been
developed to store cash onto the chip. The money on the card is saved in an encrypted
form and is protected by a password to ensure the security of the smart card solution.
In order to pay via smart credit is necessary to introduce the card into a hardware
terminal. The device requires a special key from the issuing bank to start a money
transfer in either direction.

4) Digital Wallet (Electronic wallet):-

Electronic wallets being very useful for frequent online shoppers are commercially
available for pocket, palm-sized, handheld, and desktop PCs. They offer a secure,
convenient, and portable tool for online shopping. They store personal and financial
information such as credit cards, passwords, PINs, and much more. To facilitate the
credit-card order process, many companies are introducing electronic wallet services.
E-wallets allow you to keep track of your billing and shipping information so that it
can be entered with one click at participating merchants' sites. E-wallets can also store
e checks, e-cash and your credit-card information for multiple cards.

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5) Electronic Cheque:-

Electronic cheque is messages that contain all the information that is found on an
ordinary Cheque but it uses digital signature for signing and endorsing and has digital
.
certificate to authenticate bank account There are many websites that accept
Electronic
Cheques an electronic payment process that resembles the function of paper cheques
but offers great security and more feature. Electronic checks are typically used in
orders processed online and are governed by the same laws that apply to paper checks.
Electronic checks offer protective measures Such as aunthentification and digital

6) Electronic cash:

Similar to regular cash, e-cash enables transactions between customers without the
need for banks or other third parties. When used, e-cash is transferred directly and
immediately to the participating merchants and vending machines. Electronic cashes a
secure and convenient alternative to bills and coins. E-cash usually operates on a
smartcard, which includes an embedded microprocessor chip. The microprocessor
chip stores cash value and the security features that make electronic transactions
secure. when e cash created by one bank is accepted by other reconciliation must
occur without any problem cash must be storable and receivable. Most E-cash is
transferred directly from the customer's desktop to the merchant's site. Therefore, e-
cash transactions usually require no remote authorization or personal identification

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 ELECTRONIC PAYMENT SYSTEM IN BANKS

1. Introduction

The driving force in the development of national payment systems of any

country is usually the central bank of that country. The Reserve Bank of India as the
central bank of India has been playing this developmental role and has taken several
sufficient steps for Safe, Efficient, Accessible, Secure, Sound, and Authorized
payment systems in the country.

The Board for Regulation and Supervision of Payment and Settlement Systems
(BPSS), a sub-committee of the Central Board of the Reserve Bank of India is the
highest policy making body on payment systems in the country. The BPSS is
empowered for authorizing, prescribing policies and setting standards for regulating
and supervising all the payment and settlement systems in the country. In India, the
payment and settlement systems are regulated by the Payment and Settlement Systems
Act, 2007 (PSS Act) which was legislated in December 2007. The initiatives taken by
RBI in the mid-eighties and early-nineties focused on technology-based solutions for
the improvement of the payment and settlement system infrastructure, coupled with
the introduction of new payment products by taking advantage of the technological
advancements in banks. The continued increase in the volume of cheques added
pressure on the existing set-up, thus necessitating a cost-effective alternative system.

At present, there are 27 Public Sector Banks in India including SBI and its 5
associates and 19 nationalized banks .Moreover, there are two banks, which have been
categorized by RBI as “Other Public Sector Banks” IDBI and Bhartiya Mahila Bank.
As on September 2015 there are 46 foreign banks from 26 countries operating as
branches in India and 39 banks from 21 countries operating as representative offices in
India.

Page 24
 The RBI plays a pivotal role in the development of India’s payment and
settlement systems for both large-value and retail payments. The central bank played a
pioneering role in automating the paper-based clearing system in the 1980s. It
introduced an electronic funds transfer system and electronic clearing services (ECS
Credit and Debit) in the 1990s. The special electronic fund transfer (SEFT) system
was introduced in April 2003 (subsequently discontinued in March 2006, after the
implementation of the National Electronic Fund Transfer (NEFT) system in
November 2005) and the real-time gross settlement (RTGS) system in March 2004.
The RBI operates the RTGS, which has replaced the paper-based inter-bank clearing
system and settles a sizeable volume of large-value and time-critical customer
transactions. RBI also manages the clearinghouses (for paper-based and electronic
clearing) in 17 large cities while operating the clearinghouses at four major

Locations. It is the settlement banker in these cities. The RBI introduced the
NEFT system in November 2005. Together with ECS, this forms the electronic retail
payment infrastructure.

The National Electronic Clearing Services (NECS) system, which aims to

centralize the Electronic Clearing Service (ECS) operation and bring uniformity and
efficiency to the system, was implemented in September 2008. At present, the NECS
settles only credit transfers.

1.1. RBI vision 2012-2015

To proactively encourage electronic payment systems for ushering in a less-cash
society in India and to ensure payment and settlement systems in the country are safe,
efficient, interoperable, authorized, accessible, inclusive and compliant with
international standards. The Vision Statement indicates RBI‟s renewed commitment
towards providing a safe, efficient, accessible, inclusive, interoperable and authorized
payment and settlement systems for the country. Payment systems will be driven by
customer demands of convenience ease of use and access that will impel the
necessary convergence in innovative e-payment products and capabilities

.
Page 25
Integration of various systems through unified solution architecture and current
technology would lead to adoption and usage of resilient payment systems. Regulation
will channelize innovation and competition to meet these demands consistent with
international standards and best practices. The overall regulatory policy stance is
oriented towards promoting a less cash/less paper society, the “green” initiative, and
hence the increased emphasis on the use of electronic payment products and services
that can be accessed anywhere and anytime by all at affordable prices. Embracing new
technology and innovation to unveil a bouquet of simple, low cost, easy to use modern
payment products and services would be the corner stone of this endeavor. The
Reserve Bank recognizes that building dexterity of payment systems through
standardization and a broad consultative process is a continuing agend

1.2 Electronic Clearing System

ECS is an electronic mode of payment / receipt for transactions that are

repetitive and periodic in nature. ECS is used by institutions for making bulk payment
of amounts towards distribution of dividend, interest, salary, pension, etc., or for bulk
collection of amounts towards telephone / electricity / water dues, cess

tax collections, loan installment repayments, periodic investments in mutual funds,

insurance premium etc. Essentially, ECS facilitates bulk transfer of monies from one
bank account to many bank accounts or vice versa. ECS includes transactions
processed under National Automated Clearing House (NACH) operated by National
Payments Corporation of India (NPCI).
Primarily, there are two variants of ECS - ECS Credit and ECS Debit.

ECS Credit is used by an institution for affording credit to a large number of

beneficiaries (for instance, employees, investors etc.) having accounts with bank
branches at various locations within the jurisdiction of an ECS Centre by raising a
single debit to the bank account of the user institution. ECS Credit enables payment of
amounts towards distribution of dividend, interest, salary, pension, etc., of the user
institution.

Page 26
 ECS Debit is used by an institution for raising debits to a large number of
accounts (for instance, consumers of utility services, borrowers, investors in mutual
funds etc.) maintained with bank branches at various locations within the jurisdiction
of a ECS Centre for single credit to the bank account of the user institution. ECS Debit
is useful for payment of telephone / electricity / water bills, cess / tax collections, loan
installment repayments, periodic investments in mutual funds, insurance premium etc.,
that are periodic or repetitive in nature and payable to the user institution by large
number of customers etc.

Table no: 1-Electronic clearing system

ECS Dr ECS Cr

Volume Value Volume Value

Years (Mn) (Bn) (Mn) (Bn)

2010-11 156.7 700 117.3 1800

2011-12 164.7 800 121.5 1800

2012-13 176.5 1083.1 122.2 1771.3

2013-14 192.9 1268.3 152.5 2492.2

2014-15 226 1739.8 115.3 2019.1

Source: RBI annual report

Electronic payment system

Page 27
1.3National Electronic Funds Transfer System (NEFT)

National Electronic Funds Transfer (NEFT) is one of the most prominent electronic
funds transfer systems of India. Started in Nov.-2005,NEFT is a facility provided to
bank customers to enable them to transfer funds easily and securely on a one-to-one
basis. It is done via electronic messages. This is not on real-time basis like
RTGS(Real Time Gross Settlement). This is a "net" transfer facility, which is
executed, in hourly batches resulting in a time lag. NEFT facilities are available in
30,000 bank branches all over the country and work on a batch mode.
NEFT has gained popularity due to it saving on time and the ease with which the
transactions can be concluded. This reflects from the fact that 42% of all electronic
transactions in the 2008 financial year were NEFT transactions.

Table:2- National Electronic Fund Transfer System(NEFT)

Years Volume (Mn) Value (Bn)

2010-11 132.3 4000

2011-12 226.2 17900

2012-13 394.1 29022.4

2013-14 661 43785.5

2014-15 927.6 59803.8

Page 28
 Source: RBI annual report

1.4 Card based clearing (CBC)

As mentioned above India is one of the fastest growing countries in the plastic
money segment. Already there are 130 million cards in circulation, which is likely to
increase at a very fast pace due to rampant consumerism. India‟s card market has been
recording a growth rate of 30% in the last 5 years. Card payments form an integral
part of e-payments in India because customers make many payments on their card-
paying their bills, transferring funds and shopping.

Ever since Debit cards entered India, in 1998 they have been growing in
number and today they consist of nearly 3/4th of the total number of cards in
circulation.

Credit cards have shown a relatively slower growth even though they entered
the market one decade before debit cards. Only in the last 5 years has there been an
impressive growth in the number of credit cards- by 74.3% between 2004 and 2008. It
is expected to grow at a rate of about 60% considering levels of employment and
disposable income. Majority of credit card purchases come from expenses on jewelry,
dining and shopping.

Page 29
Another recent innovation in the field of plastic money is co branded credit cards,
which combine many services into one card-where banks and other retail stores,
airlines, telecom companies enter into business partnerships. This increases the utility
of these cards and hence they are used not only in ATM‟s but also at Point of
sale(POS) terminals and while making payments on the net.

Table: 3-Card based clearing (CBC)

CREDIT DEBIT
CARDS CARDS

Years Volume (Mn) Value (Bn) Volume (Mn) Value (Bn)

2010-11 265.1 800 237.1 400

2011-12 320 1000 327.5 500

2012-13 396.6 1229.5 469.1 743.4

2013-14 509.1 1539.9 619.1 954.5

2014-15 615.1 1899.2 808.1 1213.4

Source: RBI annual report

Page 30
 1.5 Real-time gross settlement (RTGS)

Real-time gross settlement systems (RTGS) are specialist funds transfer systems
where transfer of money or securities takes place from one bank to another on a "real
time" and on "gross" basis. Settlement in "real time" means payment transaction is not
subjected to any waiting period.

The transactions are settled as soon as they are processed. "Gross settlement"
means the transaction is settled on one to one basis without bundling or netting with
any other transaction. Once processed, payments are final and irrevocable.

RTGS systems are typically used for high-value transactions that require
immediate clearing. In some countries the RTGS systems may be the only way to get
same day cleared funds and so may be used when payments need to be settled
urgently. However, most regular payments would not use a RTGS system, but instead
would use a national payment system or network that allows participants to batch and
net payments.
Table: 4- Real-time gross settlement (RTGS)

Years Volume (Mn) Value (Bn)

2010-11 49.3 394500

2011-12 55 484900

2012-13 68.5 676841

2013-14 81.1 734252.4

2014-15 92.8 754032.4

Source: RBI annual report

Page 31
Page 32
 ADVANTAGES OF E-PAYMENTS

In the age of High Technology cash strives to endure the competition

with electronic money because more and more people prefer to have
virtual wallets. We already provided you with the information on
particular payment systems in this article we will describe the general
advantages of electronic payment system and its disadvantages.

It is clear electronic payment systems have a range of pros in

comparison to traditional banking services:

1.Time savings. Money transfer between virtual accounts usually takes a

few minutes while a write transfer or a postal one may take several days
Also you will not waste your time waiting in lines at a bank or post office.

2.Expenses control. Even if someone is eager to bring his disbursements

under control it is necessary to be patient enough to write down all the
petty expenses which often takes a large part of the total amount of
disbursements. The virtual accounts contains the history of all
transactions indicating the store and the amount you spent.And you can
check it anytime you want.This advantage of electronic payment system
is pretty important in this case.

3.Reduced risk of loss and theft. You can not forget your virtual
wallet somewhere and it can not be taken away by robbers. Although in
cyberspace there are many scammers

Page 33
4. Low commissions. If you pay for internet service provider or an mobile
account replenishment through the UPT (unattended payment terminal)
you will encounter high fees .As for the electronic payment system a fee
of this kind of operations consists of 1% of the total amount and this is a
considerable advantage.

5.User friendly .Usually every service is designed to reach the widest

possible audience so it has the intuitively understandable user interface.in
addition there is always the opportunity to submit to question to a support
team which often works 24/7.Anyway you can always get an answer
using the forums on the subject.

6. Convenience. All the transfers can be performed at anytime, anywhere

.It’s enough to have an access to the Internet.

Page 34
 DISADVANTAGE OF E-PAYMENTS

1.Restrictions. Each payment system has its limits regarding the

maximum amount in the account the number of transactions per day
and the amount of output

2.The risks of being hacked. If you follow the security rules the threat is
minimal It can be compared to the risk of something like a robbery. The
worse situation when the system of processing company has been broken
because it leads to the leak of personal data on cards and its owners, Even
if the electronic payment system does not launch plastic cards ,It can be
involved in scandals regarding the identity theft.

3.The problem of transferring money between different payment

systems .Usually the majority of electronic payment systems do not
cooperate with each other .In this case you have to use the services of e-
currency exchange and it can be time consuming if you still do not have
a trusted service for this purpose. Our article on how to choose the best
e-currency exchanger greatly facilitates the search process.

4.The lack of anonymity. The information about all the transactions

including the amount time and recipient are stored in the database of the
payment system. And it means the intelligence agency has an access to
this information. You should decide whether it‟s bad or good.

5.The necessity of internet access. If internet connection falls you

cannot get to your online account

Page 35
An Analysis and Comparison of Different Types of
Electronic Payment Systems

1.INTRODUCTION
Worldwide proliferation of the internet led to the birth of electronic commerce a
business environment that allows the transfer of electronic payments as well as
transactional information via the Internet. Electronic commerce flourishes based upon
the openness, speed, anonymity, digitization, and global accessibility characteristics
of the Internet. It facilitates real time, on line business activities such as advertising,
querying, sourcing, negotiating, auctioning, ordering, or paying for merchandise.

The main concern with electronic payment is the level of security in each step of the
transaction because money and merchandise are transferred without direct contact
between parties involved in the transaction .If even the slightest possibility exists
that electronic payment system may be insecure, consumers, merchants, and bankers
confidence in this system might erode and, consequently, destroy the foundation of
electronic commerce.

There are four categories of electronic payment systems online credit cards, on line
electronic cash. Each system has its advantages and disadvantages for merchants and
consumers. This paper will explore the requirements of merchants and consumers
the appropriate business environment for each of them to function and the potential
for future expandability.
This research was based on extensive literature reviews and experts opinions.
Information from market surveys, technical journals, company reports,
product catalogs , research reports, newspaper, and magazines were analysed.

Page 36
2.ASSESSMENT CRITERIA FOR ELECTRONIC PAYMENTS SYSTEMS

An electronic payment system may be assessed from four dimensions the

technological aspects the economic aspect the social aspect and the regulatory
aspect in the following;-
A. Technological aspect.
The technological aspect of an electronic payment system includes the system
expandability, its efficiency and security in handling each transaction its
complexity for consumers to adapt to the system. Above all security is an utmost
technical concern .
Business and financial activities require secure deposit and withdrawal of money to
and from bank accounts secure data, application programs , and database, secure
transaction and payments, secure communication networks and computers system and
secure facility maintenance and network management. Among these the security in
business transactions and payments is of utmost concern for companies and
customers. They must satisfy the following requirements.

a)Authenticity- The purpose is to verify the claimed identities of all parties invoved
in the transaction in order to prevent from malicious misrepresentation, sabotaging
information, making unauthorized transfer or false transactions.

b)Privacy- The purpose is to protect the anonymity of the purchaser in a transaction

and to prevent unauthorized personnel or even merchants employees from
accessing information with respect to the transactions.

c)Integrity-The purpose is to prevent tampering with any data in the transaction

process, sending more or less than the actual information involved in a transaction,
as well as to avoid transmission errors,

d)Non-repudiation- The purpose is to prevent consumers and or merchants from

denying the commitments they made in a transaction, or from altering the
information in the transaction, the quantity of purchase, and the agreements, etc, must
be recorded and verified.
Page 37
B. Economic aspects.
Any electronic payment system must make economical sense with respect to
designing it, building it, running it, maintaining it, and upgrading it. Besides, its
acceptance and widespread use by the consumers is the critical factor affecting
its economical feasibility. The economic needs are summarized in the following:

a) Cost of Transactions: This refers to the costs incurred by the seller and buyer in a
transaction. The costs include both direct costs and indirect costs. The fixed cost in
a transaction is the most critical consideration of a micro payment system.

b). Atomic Exchange: This means that an electronic payment system must involve
consumers paying money or something equivalent in value in a transaction.

c.) User Reach: This refers to the range of users to whom an electronic payment
system is accessible. This attribute characterizes whether a system is accessible in
all countries of the world, or the population of all ages.

d.) Value Mobility: An electronic payment system’s token of purchasing power

may be circulated only within the community authorized by the issuing company.
On the other hand, the token may be valued by a large number of parties at different
places, may be passed along as a gift, or exchanged for currency in equal value.

e). Financial Risk: Consumers are concerned about the level of security involved in
online transactions. The potential damages or financial losses that consumers and/or
merchants may incur are another important economic characteristics of an
electronic payment system.

Page 38
 C. Social Aspect

In addition to satisfying the needs associated with the technical and economic
aspects, an electronic payment system still needs to address social needs before it can
win consumers‟ trust and acceptance. The social needs include:
a) Anonymity: To protect the privacy of consumers and to prevent companies
or financial institutions from tracing users‟ purchasing preferences or
behaviours.

b) User friendliness: An electronic payment system should be simple and easy to

use. The degree of user friendliness is a factor when consumers choose which
payment system to use, especially for micro payments.

c) Mobility: Users do not always use a PC to access the Internet and to make online
purchases. Besides, it is not uncommon that family members may share the same PC
at home. Therefore, it is inconvenient if a payment system is tied up with the
hardware of a PC. Electronic payment systems should provide mobility, i.e. can be
used anywhere
.

D. Regulatory Aspects

In addition to the technical, economic, and social needs, a payment system must
abide by all government regulations with respect to on-line business transactions.
Some of the concerns associated with such regulations include: digital signatures,
digital fund transfers, electronic commerce contracts, technical standards, customs
and taxation, and international agreements, etc. Because each district or nation has its
own set of policies, an electronic payment system must conform to the respective
regulations of the countries in which it plans to operate

Page 39
 3. ELECTRONIC PAYMENT SYSTEM OVERVIEW

In the growing B2C electronic commerce market, electronic payment systems must
be secure, popular, and work well with existing business practices. This paper aims to
assess the characteristics of different kinds of electronic payment systems, and to
analyze the business environments that each electronic payment system is appropriate
to operate in. The following electronic payment systems have either started
commercial operation or have received support from W3C or other conglomerates,
including: VCC, SSL, cybercast, SET, E-cash, Mondex , Visa Cash, FSTC, Millicent,
MPTP, and IBM small payments etc16,11,13,17,191. The Secure Electronic
Transaction (SET) is a protocol co¬ developed by MasterCard and Visa for secure
bankcard transactions18,14,181. The Secure Socket Layer (SSL) is a session layer
protocol proposed by Netscape for secure information exchanges between a client
and a server13-41. Other payment systems such as Net Bill [7,15,16] and Millicent
12,5,101 are more appropriate for micro-payments, i.e., payments of trivial amounts
for which the use of credit cards is uneconomical.
A. General Comparison of Electronic Payment System Types Electronic payment
systems can be divided into four general types: online credit card payment systems,
online electronic-cash systems, electronic-check systems, and smartcard-based
electronic-cash systems1‟1. Note that the micropayment system is characterized by
the amount of the payment and not by the type of transaction.
It’s worth noting that E-cash and Mondex / Visa Cash systems are very different in
function. For example, E-cash use blind signatures and relies on online checking of
database to ensure that the amount of the transaction is deducted immediately after it
is used. On the other hand, Mondex and Visa Cash store the amount of the transaction
in the buyer’s and the seller’s smart cards. The funds will be transferred offline from
the buyer’s bank account into the seller’s bank account. Not only does it not use the
blind signature technology, it doesn't have to maintain a real-time database.
Therefore, the Mondex and Visa Cash systems are classified in the smart-card based
electronic-cash system instead of the online credit card system or the online
electronic-cash system. The characteristics of online credit card payment systems,
electronic-cash systems, electronic check systems, and smart-card based electronic-
cash systems are compared in Table .

Page 40
 Comparisons of E-Payment System:-

Comparisons of Credit Card, E-Cash ,E-Cheque, Smart card and Debit Card given below

feature Credit Card E-Cash E-Cheque Smart card Debit card

Prepai
Actual Paid later Prepaid Paid later d Prepaid
payment
time
Onlin Offlin Offline Offline
Online and e E transfers transfer
transfe
offline transactions Online Rs
transaction
Transaction S

accou accou make account

Bank Credit card No nt makes nt s the makes the
account makes payme
account the involvement the payment nt payment
payme
involvement nt

legitimat Anyon with Anyon wit Anyone with a

Users Any e Anyone E ae h a bank
credit card bank or credit
users bank account card or credit card

accou
nt account

Page 41
Party to Distributing Bank Store Store Store Store

Which

payment is

made out

Small Transaction costs Transaction Transaction costs Transaction costs

payments are high. Not costs are low, Allows are low. Allows are low. Allows

suitable for small suitable for stores stores to stores to accumulate

payments small To accumulate accumulate debts debts until it reaches

payments debts until it until it reaches a a limit before paying

reache
S a limit limit before paying for it. Therefore, it

before paying for it. Therefore, it is suitable for small

for it. Suitable is suitable for small payments

for small payments

payments

deducted
Transaction Can be signed and Face value is Can be signed Can be Can be deducted

information issued freely in often set, and and issued freely in freely in compliance

face value compliance with cannot be freely in compliance with with the limit

the limit changed compliance the limit

with the limit

Limit on Depends on the Depends on No limit Depends on how Depends on how

transfer limit of the credit how much is much money is much money is

save save
card prepaid d d

Mobility Yes No No Yes Yes

Page 42
 Digital payment requirement:-
For any digital payment system to succeed. The criteria given in table ought to
be satisfied.

Criteria Need for the criteria

Acceptability Payment infrastructure need to be widely accepted

Anonymity Identify of the customer should be

protected.

Convertibility Digital money should be convertibility it

any type of fund

Efficiency Cost per transaction should be near to zero.

Integration Integration should be crated support

existing system.

Security Should flow financial transaction over open

network.

Reliability Should avoid single point of failure.

Usability Payment should be easy as in the real word.

Page 43
 Component of effective electronic payment system:-

1. Consumer and browser:-

A consumer interact with the online commerce system through a web

browser typically a consumer first accessing a shopping mall and then uses
the hyperlink from the mall to access the merchant home page.

2. Shopping mall:-

A shopping mall is where most consumer first visit for a shipping free
there will be several shopping malls and it may pay to enlist with one or
more well known mall.

3. Merchant systems:-

It consists of the home page and related software to manage the

business.

4. Banking network:-

it consist of several components there is bank that processes the online

financial transaction for the given merchant the bank maintain the account
for the merchant authorize and processes the payment the merchant bank
also maintain a link with the consumer bank for verifying the trans actions

Page 44
 Conclusion

Technology has arguably made our lives easier. One of the technological
innovations in banking, finance and commerce is the Electronic Payments.
Electronic Payments (e-payments) refers to the technological breakthrough
that enables us to perform financial transactions electronically, thus
avoiding long lines and other hassles. Electronic Payments provides
greater freedom to individuals in paying their taxes, licenses, fees, fines
and purchases at unconventional locations and at whichever time of the
day, 365 days of the year. After analysis and comparison of various modes
of electronic payment systems, it is revealed that it is quite difficult, if not
impossible, to suggest that which payment system is best. Some systems
are quite similar, and differ only in some minor details. Thus there are
number of factors which affect the usage of e-commerce payment systems.
Among all these user base is most important. Added to this, success of e-
commerce payment systems also depends on consumer preferences, ease
of use, cost, industry agreement ,authorization, security, authentication,
non-refutability, accessibility and reliability and anonymity and public
policy. The Reliable and Cashless payment system offers immunity against
theft of paper and e-money, and adopting e-payment solutions or systems
for different reasons. In addition to cost reduction, reference was made to a
number of other benefits, including improved customer service, improved
working capital, increased operational efficiencies and cycle times,
processing efficiencies and enhanced compliance to organizational policies
and procedures .This opportunities e-payment operation increases different
levels of risks for marketing. More than ten Years of Internet marketing
research have yielded a set of important findings. Based on our review of
these findings, it is clear that the Internet is playing a more and more
important role in the field of e-payment

Page 45
Peoples are becoming aware of the need to measure the collaborative
effects of e-payment The study reveals that the peoples were not aware
and educated. They have not any knowledge of e-payment. The study is
based on survey .The respondent have to answer the questions on their
own. Some people satisfy with our views. But some peoples are not
satisfies with us. This study states that Online e-payment provides greater
reach to customers. Feedback can be obtained easily as internet is virtual
in nature. Customer loyalty can be gain. Personal attention can be given by
bank to customer also quality service can be served.

We came to know various strengths of e-payment System such as quality

customer service, greater reach, time saving customer loyalty, easy access
to information, 24 hours access, reduce paper work ,no need to carry cash
easy online applications etc.

Page 46
 FUTURE SCOPE

Throughout our experience researching online payment systems we have

learned about many recent trends and new technologies involving these systems,
such as using PayPal, or using Safety Pay’s Online Cash Payment Platform. You
ask yourself, what are some future trends of online payment systems? We have
researched and discovered that credit and debit cards will become obsolete,
because we see the increasing development of mobile technology and the internet
industry. We see the development of new online mobile payment technologies,
which will help make your mobile device extremely flexible, because you will be
able to store credit and debit card information on your SIM card.

How will a consumer be able to use this technology to purchase from a certain
website? When you reach the payment page on the website, your mobile device
recognizes it and suggests a type a payment. After you pick your payment choice,
authorization of the transaction is done by fingerprint recognition software on
your mobile device, and a few security questions, which will help prevent
someone from stealing your banking or personal information if your device was
lost or stolen. Why would using your mobile device make transaction easier? By
having your credit or debit card information already stored on your Smartphone, it
will save many steps in the purchasing process on any website you choose to
purchase from.

Page 47
Also, at the same time everyone is very comfortable with their mobile device,
and by having the choice to purchase a product from your smart phone, helps the
company finish the sale. Most customers want to go with the transaction process
that has the least amount of steps, and by having your banking information
programmed into your SIM card and it only taking a press on the “Buy Now”
button, this takes away many of the steps that customers have to go through now
to purchase something online. Future direction of research could be to formulate a
system with similar features that supports person to person settlement as well.

Page 48
 ABSTRACT

E-commerce provides the capability of buying and selling products,

information and services on the Internet and other online environments. In an
e-commerce environment, payments take the form of money exchange in an
electronic form, and are therefore called Electronic Payment. E-Payment
system is secure there should be no threat to the user credit card number, smart
card or other personal detail, payment can be carried out without involvement
of third party, It makes E payment at any time through the internet directly to
the transfer settlement and form E-business environment. Studied have been
carried out on E-Payment system .E-Payment system an integral part of
electronic commerce. An efficient payments system reduces the cost of
exchanging goods and services, and is indispensable to the functioning of the
interbank, money, and capital markets.

Questions are related to E-Payment system in which given options are Agree,
Disagree, Strongly disagree, Strongly agree, Neutral. After analysis and
comparison of various modes of electronic payment systems, it is revealed that it
is quite difficult, if not impossible, to suggest that which payment system is best.
Some systems are quite similar, and differ only in some minor details. Thus there
are number of factors which affect the usage of e-commerce payment systems.
Among all these user base is most important success of e-commerce payment
systems also depends on consumer preferences, ease of use, cost, industry
agreement, authorization, security, authentication, non-refutability, accessibility
and reliability and anonymity and public policy Keywords-Credit card, Debit card,
Digital Wallet, E-cheque, Smart Card

Page 49
 RESEARCH METHODOLGY

This studied have been carried out on E-Payment system. Data used in this
study collected basically from the secondary sources .Primary data also
collected through personal interview method conducting the person who is
supposed to have knowledge about the topic. Secondary data have been
collected from various sources including websites, newspaper, various published
and unpublished article about pre-primary education etc.

*Survey instrument

Questionnaire sent to the person concerned with request to answer the questions
and return the questionnaire. The questionnaire is sent to respondent who
expected to read and understand the question and write down the reply in the
space meant for the purpose in questionnaire itself. A questionnaire consist of a
number of questions printed or typed in a definite order on a form or set of forms.
The respondent have to answered the questions on their own. Objective type
questions have been designed in survey. Some responses have been collected
from people. Like students, professional and others. The results of survey are
shown in the graphs. The questionnaire designed on E-payment system. Five
points like Agree, Disagree, Strongly disagree, Strongly agree, Neutral, A survey
Questionnaire is enclosed in table.

*Data Analysis

The data collected were analysed for the entire sample.

*Result

This is descriptive research which has studied the present conditions. The
relevant data was collected based on e-payment system and which e-payment
type is most suitable.
 EXECUTIVE SUMMARY

The Electronic Payments systems Observatory-Newsletter (EPSO-N) is one of the tools

within the EPSO project used to structure the EPSO Forum discussions. ITAS of the
Karlsruhe Research Centre has been awarded the task of elaborating and editing the
newsletter. This collection of the first 8 issues of EPSO-N comprising a total of 64
articles on e-payment system related themes is presented in a single volume which will
allow readers to browse through and may serve as a reference manual.

The Observatory Newsletter (EPSO-N) is the first EPSO deliverable to be produced

the first issue appeared in July 2000 and since then a total of 8 issues has been
produced. It has been very well received by its public despite the ever growing
number of e-commerce related newsletters in circulation. It started with a subscriber
base of over 200 people before the Forum was operational, and is now regularly
distributed to all EPSO-F subscribers (more than 500). It is also available on the
EPSO website for downloading some 200 additional readers per month prefer to use
this method of accessing the newsletter

Designed to structure and stimulate the EPSO-F electronic discussion EPSO-N

presents high quality timely and relevant articles supported by an international
network of highly skilled correspondents. The ITAS staff responsible for editing
EPSO-N currently consisting of Michael Rader, Ulrich Riehm and Arnd Weber,
manage the 23-strong correspondent team, who discuss, author, and review articles
.Experts from outside this group have also submitted articles that have been edited
and published in EPSO-N. Moreover, EPSO-F participants are invited to comment
on issues presented in the articles and pose further related questions in the forum
discussion, to which corresponding authors usually respond.

Short analytical articles addressing a rich variety of themes and providing insight
into various e-payment topics are included in EPSO-N. In addition, each EPSO-N
issue contains a special focus section consisting of three to five in-depth articles.
Each issues special topic is selected according to the need to follow wider
developments in the e-payments field, covering persistent knowledge gaps as well as
the broader requirements of the EPSO team in authoring background papers.
The choice of topics tries to balance the diverse needs of the subscribers, some of
whom are more interested in technological development and innovation in the
field, while others are more concerned with policy implications. The eight special
topics addressed so as far focus on:

*Mobile payments systems.

*Electronic purses and e-money schemes.
*Interchange fees.
*New Internet payment systems.2
*European regulations of Electronic Money Institutions,
and *Security aspects of electronic payments systems.
 ACKNOWLEDGEMENT

It gives me an immense pleasure to present this project of the

“STUDY OF E-PAYMENTS”

I am highly obliged to knowledge and thanks our principal madam

Dr.Mrs. S. V. SANT for giving me an opportunity to conduct a detail
study and analysis of topic relevant to my project.

I would like to thank my project guide and BMS Coordinate Mrs.

PRACHI KADAM and other facilities for helping me at every stage of
this project, for inspiring me at every stage of this project and giving me
access to such valuable information, without which my project would
be incomplete.

I would like to thank our library staff for providing appropriate books on
right time. Last but not least all my friends, family members who
support me while preparing my project.

These people have immensely helped me in getting the correct and up

to date information required for making of this project.

These project report is the combination of the efforts of all the above
mentioned people and myself. I have carried out sincere efforts on my
part to make this project.

THANK YOU……
 OBJECTIVES OF STUDY

1. To study about E-payments systems.

2. To understand why E-payments are useful.

3. To understand different types of E-payments technology.

SCOPE OF STUDY

1.To identify the area of quality customer service with personal attention.

2. To establish strong relationship between bank and customer.

3. It identify how online payment system work.

4. E- payments is all about online transaction.

IMAGES OF AN ELECTRONIC PAYMENTS

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