Electronic Payments

Introduction 
Handling

payments over the internet is an important function of e-Commerce sites. e E-Payments can be convenient for customers & can save companies money.  The most popular electronic transfers are automated payments of loans, insurance payments, & mortgage payments made from consumers accounts.

Contd 
Credit

cards are by far the most popular method that consumers use to pay for online purchases.  E-Payment systems are becoming central to e-commerce as companies look for eways to serve customers faster & at lower cost.

Contd 
E-payment

systems are proliferating in banking, retail, healthcare, online markets, and even in Government.  Organizations are motivated by the need to deliver products & services more costcosteffectively & to provide a higher quality of service to customers.

Credit or Postpaid  . Cash or Real time 2.Digital Token-based E-payment System TokenEElectronic Tokens are designed as electronic analogs of various forms of payment backed by a bank over networks.  Electronic tokens are of 3 types: 1. Debit or Prepaid 3.

(e- .  An example of online currency exchange is electronic cash (e-cash).Contd  Cash or Real time: Transactions are settled with the exchange of electronic currency.

 Examples of prepaid mechanisms are Smart Cards & electronic purses that store electronic money.  Debit .Contd or Prepaid: Users pay in advance for the privilege of getting information.

.  Examples of postpaid mechanisms are credit cards & electronic checks.Contd  Credit or Postpaid: The server authenticates the customers & verifies with the bank that funds are adequate before purchase.

anonymity & authentication.Dimensions of Payment instruments The four dimensions that bring different viewpoints to the payment instruments of e-Commerce are: e(i) The nature of transaction for which the instrument is designed. (iv) The question of risk. (ii) The means of settlement used (iii) Approach to security. .

Security .Retrievability and .Electronic Cash (e-cash) (e Electronic cash (e-cash) combines (ecomputerized convenience with security & privacy that improve on paper cash.Interoperability .  Properties of e-cash: e.Monetary value .

Contd Monetary Value E-Cash must have monetary value. . it must be backed by either cash (currency). a bank authorized credit or a bank certified cashier s check.

. deposits in banking accounts.that is interoperableexchangeable as payment for other eecash. goods or services.Contd Interoperability e-Cash must be interoperable.

.Contd Retrievability e-Cash must be storable & retrievable. Remote storage & retrieval would allow users to exchange e-cash from home or eoffice or while travelling.

This includes preventing or detecting duplication and double-spending. double- . .Contd Security .e-cash should not be easy to copy or tamper with while being exchanged.

Establishment of an account ii. Maintaining enough money in the account to back the purchase.Purchasing e-Cash from Currency servers eThe purchase of e-Cash from an online ecurrency server (or bank) involves two steps: i. .

Digital currency usage The e-cash software on the customer s PC estores digital money. the software collects the necessary amount from the stored tokens.  Whenever the customer wants to make the payment. once the tokens are purchased.  .

two types of transactions are possible: a. Trilateral . Bilateral b.Contd Under the payment mode.

. whereby the merchant checks the veracity of the note s digital signature by using the bank s public key. the merchant stores the digital currency on his machine & deposits it later in the bank to redeem the face value of the note. If satisfied with the payment.Contd Transactions involving cash are bilateral or twotwo-party (buyer & seller) transactions.

whereby the notes are sent to the merchant. seller & thirdbank) transactions.Contd  Transactions involving financial instruments other than cash are usually trilateral or third-party (buyer. . who immediately sends them directly to the digital bank.

 In this case. The account of the merchant is credited. . every note can be used only once.Contd  The bank verifies the validity of these notes & that they have not been spent before.

Smart Cards Smart Cards are debit and credit cards enhanced with microprocessors capable of holding more information than the traditional magnetic stripe. .

Contd  The chip. estimated to be 80 times more than a magnetic stripe. . can store significantly greater amounts of data. at its current state of development.

Electronic purses .Contd Smart Cards are basically of two types: 1. Relationship-based smart cards Relationship2.

user A relationship-based smart card is an relationshipenhancement of existing card services & addition of new services that a financial institution delivers to its customers via a chipchip-based device. convenient & reliable.RelationshipRelationship-based Smart cards  Traditional cards are fast evolving into smart cards as consumers demand payment & financial services products that are user-friendly. .

value-added valuemarketing programs.Contd  New services may include access to multiple financial accounts. or other information which cardholders may want to store on their card. .

personal shopping preferences & actual purchase records. .  This information will enable merchants to accurately track consumer behavior & develop promotional programs designed to increase shopper loyalty.Contd  Enhanced credit cards store cardholder information including name. birth date.

such as debit.Contd  Relationship-based Relationship- products offer access to multiple accounts. e A variety of functions such as cash access. . balance inquiry. or funds transfer for selected accounts are also offered. credit. bill payments. investments or stored value for e-cash.

Contd  Banks are also attempting to customize services on smart cards. & airlines to offer frequent shopping. . offering a menu of services similar to those that come up through ATMs.  Banks may link up with healthcare providers. telephone companies. retailers. flyer programs & other services.

to paying subway fares.  Electronic purses are wallet-sized smart walletcards embedded with programmable microchips that store sums of money for people to use instead of cash for everything from buying food. & even Government institutions are racing to introduce electronic purses .Electronic purses  Many banks. credit card companies. . to making photocopies.

. it can be used to pay for any product in a vending machine equipped with a card reader.Contd Electronic purse works in the following manner: Step 1: After the purse is loaded with money at an ATM.

Step 3: In one second.Contd Step 2: The vending machine need only verify that the card is authentic & there is enough money available for the product purchased. eThe remaining balance on the card is displayed by the vending machine or can be checked at an ATM. the value of the purchase is deducted from the balance on the card & added to an e-cash box in the vending machine. .

. Step 5: This allows customers to pay for rides & calls with a prepaid card that remembers each transaction.Contd Step 4: Electronic purses would virtually eliminate fumbling for change or small bills in a busy store or rush hour toll booth & waiting for a credit card purchase to be approved.

Contd  When the balance on an electronic purse is depleted. by telephone & transferred to a bank account.  As for the vendor. the receipts can be collected periodically in person or. more likely. . the purse can be recharged with more money.

Online Banking  Online banking is the practice of making bank transactions or paying bills via Internet. .  Only internet browser is required for online services and no additional software to get its access.

Contd  Online banking allows customers to conduct financial transactions on a secure website.  The convenience factor of the customer is high through online banking as the customer does not have to wait for the bank statement to arrive in the mail.  One can check the balance at any time by just logging into their account. .

. account information. and other banking services through a PC over Internet.  Home banking services have grown enormously as home computers become more affordable and easier to use.Home Banking  Facility to securely access funds.

Contd  Home banking is the self-service banking selffor consumers and small business owners enabling users to perform many routine functions at home through an internet connection. .

 The customer has to logout immediately once the transaction is completed. .  The bank s website is to be verified by an internet security company.Online banking process  Verify that the website login details are secure.  The login and password information of the customer are to be protected.

the account information is available round the clock. No need to have too many cashiers or clerks.  It is cost-effective. pay bills and check balances any time.  For customers. . regardless of their location. Thousands of costcustomers can be dealt with at once.Advantages  Online banking is convenient. It allows you to perform transactions.

Transactions are typically performed and executed at a faster pace than an ATM.Contd  The customer is not required to visit any bank branch for any bank related information.  It is fast and efficient. .

 There s always a possibility of a cracker gaining access to your account. it is not possible to access the account. . you can t use it.Disadvantages  If the bank s server is down.  Many banks don t show how to use online banking services very well.  Without an Internet connection.

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