xE-commerce payment options by wuyunyi


Payment Options
Traditional Payment Methods
Payment: The transfer of money from one individual or
  legal entity to another
 Cash

 Personal Cheques

 Money orders (Bank note)

 Credit cards

 Debit cards
Requirements of E Payment Methods

 Enable an honest customer to convince a seller
  to accept payment
 Prevent a dishonest customer from making
  unauthorized or fraudulent payments
 Ensure the privacy of honest participants

 Scalable to very large numbers of customers

 Integrate with existing and evolving systems
Pros and Cons of E-Payment
   Pros:
     Potentialfor great flexibility
     Low transaction costs
     Rapid and diverse purchase power

   Cons:
     Perfectcopying of transactions is possible
     Vulnerability to world-wide attack
     Lack of anonymity, potential for privacy intrusion
E-Payment Methods
   Credit and Debit card
   Smart card
   Digital Currency/Electronic Cash
   E-Wallets
   Peer-to-Peer Methods
   Micro-payments
   B2B
   Credit card
       Used for the majority of Internet purchases
       Has a preset spending limit
       Currently most convenient method
       Most expensive e-payment mechanism
         MasterCard: $0.29 + 2% of transaction value

       Disadvantages
         Does not work for small amount (too expensive)
         Does not work for large amount (too expensive)

   Charge card
       No spending limit
       Entire amount charged due at end of billing period
Credit Card Process
   Merchants must set up merchant accounts to accept
    payment cards
   Law prohibits charging payment card until merchandise
    is shipped
   Payment card transaction requires:
     Merchant to authenticate payment card
     Merchant must check with card issuer to ensure funds are
      available and to put hold on funds needed to make current
     Settlement occurs in a few days when funds travel through
      banking system into merchant’s account
Using a Credit Card on the Web

                          SOURCE: PAYMENT
                          PROCESSING INC.
Credit Card Fraud
   Fraud is a major problem for E-commerce
   The merchant has no legal proof of purchase unless
    the buyer uses authentication certificate
   Companys such as Visa, nochargeback.com and
    CyberCash (now VeriSign) are working to limit fraud:
     Visa has established high risk business models and best
      practices info for merchants
     Nochargeback.com has lists of fraudlent cards, e-mail
      addresses and postal addresses
Smart Cards
 Cards with computer chips embedded on their
  faces – very common in Europe
 Used for health care, transportation, ID, retail,
  pay phones, loyalty programs, banking
 Smart card readers interface with card and
  request user PIN for access
 Bank machines can load cards with cash and
  then merchants can download cash from card
 Returns anonymity of purchase to customer
Smart Cards
   Ticketless travel
   Authentication, ID
   Medical records
   Ecash
   Store loyalty programs
   Personal profiles
   Government
       Licenses
   Mall parking
Pros and Cons of Smart Cards
   Advantages:
    1.   Atomic, debt-free transactions
    2.   Feasible for very small transactions (information commerce)
    3.   (Potentially) anonymous
    4.   Security of physical storage
    5.   (Potentially) currency-neutral
   Disadvantages:
    1.   Low maximum transaction limit (not suitable for B2B or most B2C)
    2.   High Infrastructure costs (not suitable for C2C)
    3.   Single physical point of failure (the card)
    4.   Not (yet) widely used
Digital Currency/E-Cash
 Digital cash accounts like traditional bank
 Buyers deposit cash in the account and spend it
  at E-commerce sites (acct # is passed using
  secure proprietary protocol)
 E-commerce merchants can feel sure of
 Customers do not need a credit card and
  spending is limited to account balance
E-Cash Structure
                     1. Consumer buys e-cash from Bank
                     2. Bank sends e-cash bits to consumer (after
                        charging that amount plus fee)
                     3. Consumer sends e-cash to merchant
                     4. Merchant checks with Bank that e-cash
 Bank            3      is valid (check for forgery or fraud)
                     5. Bank verifies that e-cash is valid
                     6. Parties complete transaction: e.g., merchant
             2          present e-cash to issuing back for deposit
    1                   once goods or services are delivered

                     Consumer still has (invalid) e-cash
Pros and Cons of E-cash
   Advantages
     More  efficient, eventually meaning lower prices
     Lower transaction costs

     Anybody can use it, unlike credit cards, and does not
      require special authorization
   Disadvantages
     Tax trail non-existent, like regular cash
     Money laundering

     Susceptible to forgery
   Established by financial institutions in partnership with
    member E-Commerce sites
   Allows customer to submit billing and shipping info with
    one click at member sites
   Also can store e-Cheques, e-Cash and credit card
   Makes shopping easier and more efficient
       Eliminates need to repeatedly enter identifying information into
        forms to purchase
       Works in many different stores to speed checkout

   Amazon.com one of the first online merchants to
    eliminate repeat form-filling for purchases
Examples of E-Wallets
   Agile Wallet
       Developed by CyberCash
       Allows customers to enter credit card and identifying information once, stored on
        a central server
       Information pops up in supported merchants’ payment pages, allowing one-click
       Does not support smart cards or CyberCash, but company expects to soon
   eWallet
       Developed by Launchpad Technologies
       Free wallet software that stores credit card and personal information on users’
        computer, not on a central server; info is dragged into payment form from
       Information is encrypted and password protected
       Works with Netscape and Internet Explorer
Person-to-Person Method
   Digital cash via email (eCash.com)
   PayPal.com – digital payment system
     Acts as a trusted third party (e.g. auction purchase)
     To send money:
           Sender sets up an account and requests to send payment
           Sender places payment into the receivers account by credit-card
           Reciever is notified of payment via email
           Receiver can transfer funds to bank account or request a cheque
     There is also a request payment method
     FOR FREE .. ? What is the their business model ?
   Long distance phone call charge is an example of a
   Digital Equipment Corporatiion (DEC) researchers
    originally envisioned MPs:
     Payment per newspaper article ($0.005)
     Payment by stock quote ($0.001)

     Payment per click (Qpass, Inc)
The Fall of Micro-Payments
   Overly complicated for customer and business –
    technology & accounting
   Income is very dependent on customer use
    (difficulties in cashflow management)
   Customer anxiety – could act as a deterent
   Difficulties in standardization – lost of different
    approaches, variant media
B2B (Business to Business)
   B2B transactions are the fastest area of $ growth on
    the web
   B2B transactions are substantially larger than B2C
   Paymantech is major provider:
     24/7 availability, all manner of EFT supported
     many management tools and reporting methods

   Ecredit.com offers real-time automated credit
    approval and financing
   TradeCard offers comprehensive B2B E-commerce
    facilities on an international scale

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