ETIT Q.2) What are the different electronic payment systems (meaning and uses)?

Q.2) What are the different electronic payment systems (meaning and uses)?

• electronic payments:-
Electronic payment methods are the payments made electronically rather than by paper (cash, checks, vouchers, etc)
– 95% of all e-commerce will be B2B transactions by 2004, with only 5% for B2C (Research by Gartner Group)
• Allows global reach, high speed, low transaction cost and high automatability

Types of Electronic payments (B2B):-

• Electronic checks
• Purchasing cards
• Electronic letters of credit
• Electronic Funds Transfer
– Transfer of funds
• Ex) ATM, Internet banking

• Electronic Benefits Transfer
– Transfer of benefits
• Ex) Debit card for food stamps

Types of Electronic Payments (B2C):-

• Electronic Payment Cards
– (credit, debit, charge)
• Smart Cards
– (phone cards, bank cards)
• P2P payments
– (paypal)

• Other payment methods

Credit Card:-
– Most popular online payment
– Convenient for both merchant and customer
– Quicker payments 24/7
– Safest recommended method

• Liability is limited by federal law to $50 for unauthorized charge on credit card
How credit card works?

1. The consumer enters credit card information into a form on the merchant’s website
2. Real time - Server sends the transaction to the payment processing center for authorization, customer is notified for approval or disapproval. Non real time – Merchant checks authorization manually like they do at brick and mortar.
3. Payment Processing center process the credit card information to merchant bank or 3rd party processor
4. Funds are transferred from card holder’s bank to merchant bank

Smart Card:-
• A type of computer embedded chip card that stores and transacts encrypted data between users.
• Smart card are used in healthcare, banking, entertainment and transportation industries.
• Offers enhanced security, convenience and economic benefits
• Rechargeable stored value card
– Examples
• Mondex in UK
• VisaCash in US

• Smart Card for E-Commerce:-
– Advantages
• Carry personal Accounts
• Credit and buying preferences
• Manage and control expenditures with automatic limits and reporting

– Disadvantages

• Costs 2 to 7 times more than magnetic stripe cards
• Need a smart card reader

P2P:-

• Person to person payments are newest and fastest growing e-payment schemes.
• Able to transmit funds to anyone with an email address
– ex) Paypal
• Free to send money to anyone
• Over 50 million account holders in 45 countries
• State of the art security technology
• Buyer protection up to $1,000 with no extra charge

Micropayments:-

• Allows very small charges for goods and services
• Very small payments usually below $10
– Ex) Digital music
• Credit cards or EFT are too expensive
– Credit card charges 25 cents to 35 cents and 2 to 3 percent of purchase price
• Difficult to allocate payment
– Hard to split between issuing bank, paying bank, card processor, and etc)
• New business model made possible by innovation of IT