Abstract

The human never stop to build up new things. Day by day humans are adding new
technology and improvement in the world. While electronic commerce (e-commerce)
continues to have a deeply impact on the global business environment, technologies
and applications have begun to focus more on more. Now a day’s customers and
businesses are using the internet to conduct business and to run it which gives an
incredible growth for e-commerce. Ecommerce engages different kinds of phases like
www, digital rights management, security, privacy issues and electronic payment
systems. Now days in market areas there are different types of electronic payment
systems available.

In this Ecommerce issue paper, we will discuss the different types of payment
system which are currently being used in the market-place and further going to
discuss in favor of and defraud of each type of payment system. At finally, it is
fast and steady progress technologically electronic payment systems in the recent
years, as most focused on integration between the various components needed in the
complete purchasing process to produce end-to-end solutions rather than in the
actual payment systems.

Introduction
The technology of the Internet and the development of electronic commerce have
grown up in a running business environment where payment transactions are able to
take place without face-to-face communication. When the internet came in 1958 the
ecommerce was not found till early 1990s but in past 14 years the technologies are
developing new technique rather then before. The success of electronic payment is
the one of the reasons behind the unbelievable growth of e-commerce.
The technologies are developing ecommerce business but in the market very hard to
define e-commerce. What is e-commerce? The E – Commerce can be defined as a
combination of several cores like communication, interface, business process,
online media, as a structure of a market. Business are marketing and selling their
products to the customers on the internet and customer willing to buy their
products by visiting the medium of website of the organizations. It involves
digitally enabled commercial transactions within organizations. The Digitally
enabled transactions consist of all transactions directed by digital real time
technology such as Desktops, Laptops and handheld devices like PDA, Cell Phones,
iphone.

When it comes to payment options, nothing is more convenient than electronic

payment. But still this mode of payment is not as popular as typical transactions.
There are different kinds of electronic payments systems like Credit cards, Digital
cash, EFTPOS, Digital accumulating balance payment systems, Digital credit
accounts, Online stored value systems. We will discuss how each of them does work
and their benefits and boundaries.

How Electronic Transaction Works ?

The concept of digital wallet is relevant to many of the new digital payment
systems. It tries to follow the functionality of traditional wallet. Most important
functions includes authentication consumer through use of digital certificates or
other encryption methods and store and transfer value trough secure payment process
from consumer to merchant. Digital wallet is mostly use in M-commerce. There are
two types of digital wallet: client side and server side.
Every electronic payment system depends on some type of encryption and utilization
of digital certificates. With an encryption algorithm, the original text is changed
into cipher text, which is decrypted by the receiver and transformed into clear-
text. The encryption algorithm utilizes a key, a binary number often ranging in
length from 40 to 128 bits. After being encrypted, the information is considered to
be coded and therefore ”locked.” The recipient uses another key to ”unlock” the
coded information, restoring it to its original binary form (Eletronic payment
system, 2010).
Digital Cash is one of the best forms of payment systems. In Digital cash, Customer
establishes an account at bank and download digital wallet with private and public
keys. Then bank sends e-cash through encrypted and authenticated messages coins as
customer requested. While purchasing online customer gives e-cash to merchants.
Merchant transfers e-cash to bank and bank credits merchant’s account.

Credit cards are main form of online payment, accounting for around 80% of online
payments in 2004-2005. This transaction is similar with the same way that in-store
payment purchases. Customer makes purchase via World Wide Web. They get connected
securely to merchant server via SSL (by Netscape) and asked to provide credit card
details. While merchant contacts to clearing house on secure line, clearing house
verifies account, expiry date and balance with issuing bank. At the end, bank
transfers funds to merchant’s bank account and sends customer a monthly billing
statement. Credit cards have limitation like safety, asking price and social equity
with compatibility. So many people do not have access to credit cards and so many
people even cannot afford cards still yet (Laudon & Traver, 2007).
There is also digital credit card payment system sometimes also known as e-Charge.
In this system, customer sign for e-charge account. After approving application, e-
charge download digital wallet to customer’s account. Consumer uses this wallet
during transaction. E-charge verifies account and balance. It also focus specially
on making use of credit cards safer and more convenient for online merchants and
consumers Online Stored Value Systems, customer establishes an account at E-count
by credit or debit card. E-count verifies account and balance with consumer’s bank.
It extends the functionality of existing credit cards for use as online shopping
payment tools. While making purchase, customer either chooses a credit card option
or sends cash to individuals via e-mail. At the end E-count transfer money to
merchant or individuals.

In digital Checking also known as e-Check customer acquires electronic checkbook

from authorized bank and use it for online purchase. During purchase, merchant
authenticates consumer’s ID and issuing bank. Merchant deposits those e-checks to
its bank. In next step Federal Reserve Bank come into roll, it certifies public
keys to both consumer’s and merchant’s bank. At the end of this process, consumer’s
bank transfer money to merchant’s bank. This system extends the functionality of
existing checking accounts for use as online shopping payment tools.

When the terms come for security, The SET (Secure Electronic Transaction) Protocol
will help to enhance the features. SET is an open protocol which has the potential
to come out as a leading force in the securing of e transactions. It is critical to
the success of e-commerce over the Internet and without privacy, consumer
protection cannot be guaranteed, and without authentication, neither merchant nor
consumer can be certain that valid transactions will happen. SET is the art of
encoding and decoding messages over the internet. Even in the time of Julius
Caesar, encoding and decoding was used to protect the confidentiality of messages.
Secure electronic transactions will be an important part of e-commerce in future.
Without such security, the interests of the merchant, the costumer, and the
economic institution cannot be served. Privacy is also as important as achieving a
trust. The ideal of the SET protocol is significant for the success of e-commerce.
Nevertheless, it remains to be seen whether the protocol will be widely used in
area of e-commerce.
Transactional Model
Electronic payment systems are fall into three different types of model: cash based
on, Post-paid and Pre-paid mechanism they use.

Cash based model: This model allows transfer of cash between users and merchants.
In this model, there are no central transaction processing fees or no additional
costs. Mondex is the best example for this model.
Post-paid model: This model gives the customer all the benefits a bank transaction
like differed payment and insurance provided by the card issuer with some of extra
charges.

Pre-paid model: This model allows transfer between customers as well as merchants,
of pre-paid tokens. It arise central transactional processing cost while consumers
may also have a risk of not receiving goods.

Limitations of Electronic Payment System

Although electronic payment system has numbers of benefits than traditional payment
system, it also has limitations. Lack of co-operation, security, trust, complexity,
lack of mutuality of benefits, inadequate marketing initiatives these are some of
the main drawbacks of electronic payment system. After having secure lines and
encrypted tools, online systems face hacking and vulnerable attacks. Not only that,
consumers also faced privacy related issues by cookies. Consumers’ identity exposes
by cookies as their interests. This is jackpot for marketing companies. Also there
are dilemmas of taxation and import/ export duties created by electronic payment
system.

Conclusion
Most of payment systems described above offer a secure means directly related to
transfer credit/debit details for settlement in the existing financial systems.
This also suffers from transaction processing costs, ensuring that low value
transactions cannot be cost-effective. Well known institutions are able to aid in
EPS (electronic payment system) adoption through the provision of a large installed
base of customers. This study has also found that these institutions play other
crucial roles in EPS adoption. Large partners are able to provide EPS with
association with trusted brand names and marketing boom. These result in the system
gaining credibility and public awareness. Once this has been achieved the system is
assessed by users on factors such as simplicity, security and mutuality of
stakeholder benefits.An electronic cash scheme, such as visa, Mondex and PayPal
offers the user the ability to pay retailers and other consumers on the Internet as
well as in the high street, over the phone and in the home. The payment requires no
other participants than the payer and payee, so by having no transaction processing
fees and allowing low value transactions to be cost-effective. This uses inherent
security mechanisms to ensure the safety of transactions independent of the
transmission protocol being used.

E-commerce on the Internet needs payment mechanisms that can serve for as much
diversity as commerce in the real world. Large value transactions will require
secure ways to use existing bank card mechanisms. At the end, finally, in light of
the success of the iTunes music store and the emergence of micropayments via mobile
phones, the issue of micropayments needs to be revisited.

Submitted by :
khushi 19bcom20
Gunjan 19bcom15
Atul 19bcom07
Tushar 19bcom47
Amisha 19bcom04