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1 Online payments How do we purchase on the web? What choices of payment have we?

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Presentation on theme: "1 Online payments How do we purchase on the web? What choices of payment have we?"— Presentation transcript:

1 1 Online payments How do we purchase on the web? What choices of payment have we?

2 2 Online payments Looking at …. –Credit Card Transactions –Digital Currency –E-Wallets –Smart Cards –Micropayments –Business to Business (B2B) transactions –E-Billing

3 3 Introduction Secure electronic funds transfer is crucial to e- commerce Examination of how individuals and organizations conduct monetary transactions on the Internet Credit-card transactions, digital cash and e- wallets, smart cards, micropayments and electronic bill presentment and payment Electronic-payment enablers

4 4 Credit-Card Transactions Popular form of payment for online purchases Resistance due to security concerns Many cards offer capabilities for online and offline purchases –MasterCard –Visa –American Express Blue

5 5 Anatomy of an Online Credit- Card Transaction To accept credit-card payments, a merchant must have a merchant account Traditional merchant accounts accept only POS (point-of-sale) transactions –Transactions that occur when you present your credit card at a store Card-not-present (CNP) transaction –Merchant does not see actual card being used in the purchase Authentication –The person is, in fact, who they say they are

6 6 Anatomy of an Online Credit- Card Transaction Authorization –The money is available to complete the transaction Acquiring bank –The bank with which the merchant holds an account Issuing bank –The bank from which the buyer obtained the credit card, and the credit-card association Verification Money issued to merchant after product/service is distributed

7 7 Anatomy of an Online Credit- Card Transaction Step 1 –Consumer makes a purchase at an online store, credit card information received by e-store (merchant) Step 2 –Credit card information is sent from the merchant to the acquiring bank Step 3 and Step 4 –The credit card association and the issuing bank certify the transaction and the verification is sent to the acquiring bank Step 5 –The merchant ships the product and payment is issued

8 8 Credit-Card Transaction Enablers –Companies that have established business relationships with financial institutions that will accept online credit-card payments for merchant clients iCat Trintech Cybercash NextCard, Inc.

9 9 Online Credit-Card Fraud Chargeback –When a credit-card holder claims a purchase was made by an unauthorized individual, or when a purchase was not received –The charges in question are not the responsibility of the credit-card holder –On the Internet, neither a scan of the card nor a signature is registered and the cost is incurred by the merchant Visa –High-risk business models –Best Practices policy Mastercard –Uses the three digit pin code on the back of the card

10 10 Digital Currency Digital cash –Cash stored electronically, used to make online electronic payments –Similar to traditional bank accounts –Used with other payment technologies (digital wallets) –Alleviates some security fears online credit-card transactions –Allows those with no credit cards to shop online –Merchants accepting digital-cash payments avoid credit-card transaction fees –eCash Technologies, Inc. is a secure digital-cash provider that allows you to withdraw funds from your traditional bank account

11 11 Digital Currency Gift cash, often sold as points, can be redeemed at leading shopping sites –An effective way of giving those without credit cards, the ability to make purchases on the Web Points-based rewards –Points are acquired for completing specified tasks including visiting Web sites, registering or buying products –Points can then be redeemed

12 12 Digital Currency Using eCash on the Web. (Courtesy of eCash Technologies, Inc. and ©2000 eCash.)

13 13 E-Wallets E-wallets –Keep track of your billing and shipping information so that it can be entered with one click at participating sites –Store e-checks, e-cash and credit-card information Credit-card companies offer a variety of e-wallets –Visa e-wallets –MBNA e-wallet allows one-click shopping at member sites – offers a personalized desktop toolbar that includes an e-wallet A group of e-wallet vendors have standardized technology with Electronic Commerce Modeling Language (ECML)

14 14 Smart Cards Smart card –Card with computer chip embedded on its face, holds more information than ordinary credit card with magnetic strip –Contact smart cards To read information on smart cards and update information, contact smart cards need to be placed in a smart card reader –Contactless smart cards Have both a coiled antenna and a computer chip inside, enabling the cards to transmit information –Can require the user to have a password, giving the smart card a security advantage over credit cards Information can be designated as "read only" or as "no access" Possibility of personal identity theft

15 15 Micropayments Merchants pay fee for each credit-card transaction Micropayments –Payments that generally do not exceed $10, allows companies offering nominally priced products to profit To offer micropayments, some companies form strategic partnerships with utility companies –eCharge uses ANI (Automatic Number Identification) to verify the identity of the customer and the purchases they make

16 16 Millicent Feature Millicent is a micropayment technology provider Companies using Millicent payment technology allow customers to make micropayments using credit or debit cards, prepaid purchasing cards or by adding purchases to a monthly Internet Service Provider bill or phone bill Millicent handles all payment processing needed for the operation of an e-business, customer support and distribution services

17 17 Business-to-Business (B2B) Transactions Business-to-business (B2B) transactions –Fastest growing sector of e-commerce payments –Payments are often larger than B2C transactions and involve complex business accounting systems Paymentech TM –Payment solution provider for Internet point-of-sale transactions –Electronic merchants choose from transaction- processing options including debit cards, credit cards, checks and EBT authorization and settlement

18 18 Business-to-Business (B2B) Transactions eCredit provides real-time, credit-transaction capabilities of B2B size Clareon facilitates B2B transactions by providing digital payment and settlement services –Payment is digitally signed, secured and authenticated via digital payment authentication (DPA) –Compatible with all enterprise resource planning (ERP) systems and can adapt electronic records for companies, banks and each member of a given transaction

19 19 Business-to-Business (B2B) Transactions Electronic consolidation and reconciliation of the business transaction process –Companies can keep track of a transaction from order- to-cash settlement while reducing administrative costs, errors, waste and complexity in the supply chain Order-fulfillment providers –Companies attempting to bring supply chain expertise and logistical services to Internet businesses Internet-based electronic B2B transactions will augment, but not replace, traditional Electronic Data Interchange (EDI) systems

20 20 B2B Transactions PAYTRUST SmartBalance screen shot. (Courtesy of Paytrust, Inc.)

21 21 TradeCard Feature Provides a global B2B e-commerce infrastructure –Cross-border data management and payment Buyer creates pre-formatted electronic purchase order and presents document to seller Purchase order data stored electronically in TradeCard database, and electronic invoices and packing slips are produced from data Uses a patented "data compliance engine" to check documents against original purchase order –If discrepancies are found, concerned parties are notified immediately and can negotiate to resolve the conflict

22 22 TradeCard Feature TradeCard awaits delivery confirmation from a third-party logistics services provider (3PL) –Industry terminology for a shipping company When confirmation is received and compliance met, TradeCard completes the financial transaction by sending request for payment to the buyers financial institution TradeCard enables large-scale and large-dollar commerce without credit-card payment through direct interaction with existing financial institutions

23 23 4.10 TradeCard Feature

24 24 E-Billing Electronic Bill Presentment and Payment (EBPP) –Offers ability to present a companys bill on multiple platforms online and actual payment processes –Payments are generally electronic transfers from consumer checking accounts, conducted through the ACH (Automated Clearing House) Current method for processing electronic monetary transfers –Paytrust Users send bills directly to Paytrust which scans them and places them online E-mails customers about newly arrived bills and payment-due dates Makes automatic payments on any bill up to a threshold amount

25 25 E-Billing Services to enable EBPP on a companys site –Derivion Provides billers with electronic capabilities in conjunction with Paytrusts service Offers billing companies the technology and expertise needed to transfer from paper to electronic billing through iNetBiller SM –Encirq Partners with banks that issue credit cards, presenting the consumer with an illuminated statement (interactive statement, placing special offers from retail merchants to correspond with the itemized charges on a credit-card statement) Builds highly specific consumer profiles each time charges is received

26 26 CheckFree Feature CheckFree is a consolidation service –Can service any biller and present consumers with all their bills in one interactive online environment If the company or person you wish to pay does not offer electronic billing, you can still set up payment to them from any bank account using the pay everyone service For billers, the e-billing option adds convenience and lower costs All payments and outstanding bills can be tracked online and consumers have interactive access to their entire payment histories

27 27 Summary We have looked at: –Credit Card Transactions –Digital Currency –E-Wallets –Smart Cards –Micropayments –Business to Business (B2B) transactions –E-Billing

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