7.

ELECTRONIC PAYMENT
Learning objectives:

 In this chapter you will learn,

 how money helps to make business
which payment methods are of interest for E-Commerce
which role is played by banks and payment service providers
how cyber money is an appropriate means for running an E-Commerce
business.
How secure electronic transaction works

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 7.1 BUSINESS AND MONEY

 Money makes the world go round.

 It is the lubricant of powerful economic areas
 we also need money to make business in the Web
 Money plays a basic role in the economic cycle with the subsequently listed steps:
 Deliver a product or a service.
Get money for it.
Offer money to get a product or service.
Get the product or service.
Spend the money for the delivered product or service.
 Notes and coins are a universal medium of exchange.
 The specific physical entities (notes, coins) are independent from the actual owner.
 They are long living and divisible into very small units.
 However, the owner has the problem of fraud and the problem of loss.
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 7.1 BUSINESS AND MONEY cont’d…

 Real economic areas use money in cash and book money. Business with money in cash runs as
follows:
Customer and supplier come together physically (at the same location).
The supplier has a product or service offering; the customer has notes and coins.
Both partners exchange product or service and money synchronously.
Prerequisites are:
The customer assumes that the supplier is the legal owner of the goods.
The supplier assumes that the customer is the legal owner of the money.
The customer checks goods; the supplier checks notes and coins.
Customer and supplier do not have to know each other.

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 7.1 BUSINESS AND MONEY cont’d…

Problems are:
Notes and coins must be accepted by both partners.
Notes and coins must be authentic (no bad money).
Notes and coins can be lost or stolen or disappear.
 Today most business transactions are conducted without the use of notes and coins. We usually
do business with book money. Business with book money runs as follows:
 Customer and supplier need a banking account; this makes some kind of bank necessary
(the bookkeeper).
The account owner has to pay the bookkeeper for his services (transaction costs).
There is a higher protection against fraud and loss ? but of course no perfect security.

 Finally the following question must be answered: How can we transfer real money into the
economic area Web?

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 E-PAYMENT

 E-Payment methods have been developed especially for E-Commerce

 It supplement the traditional payment methods.
 Payment functions are adopted by specific E-Payment providers to unburden the supplier.
 E-Payment uses for the most part well known traditional payment methods and combines or
bundles them to new services.
E.g. SET(secure electronic transaction)

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 Reading assignment

1.cyber money
1.1 virtual money
1.2 Cryptocurrency
1.2.1 Bitcoin

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End of Slides…
Thank you..
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