2 Problems with Traditional payment system Lack of ConvenienceTraditional payment methods generally require that the consumer leave the online platform and use the telephone or send a check in order to make paymentLack of CoverageFaster transactions not possible because of the limitation of banks availabilityLack of EligibilityNot all potential buyers may have a bank accountLack of SecurityExchange of confidential data on paper is not secure
3 Electronic Payment System EPS- A way of paying for a goods or services electronically, instead of using cash or a check, in person or by mail.Features:Protecting costumers from merchant’s fraud by keeping credit card numbers unknown to merchantsAllowing people even without cards to engage in online transactionsProtecting confidentiality of customers
4 Some basic types of EPS Electronic Tokens Electronic Digital Cash Electronic Cheques
5 1. Electronic TokensDigital analog of various forms of payment backed by a bank or financial institutionReal Time Tokens (Pre Paid Tokens): These are exchanged between buyer and seller, their users pre-pay for token that serve as currency. E.g. Debit CardsPost Paid Tokens: These are used with fund transfer instructions between buyer and seller. E.g. Credit card data
6 Debit CardsPlastic payment card that provides the cardholder electronic access to their bank accounts.Depending on the store or merchant, the customer may swipe or insert their card into the terminal, or they may hand it to the merchant who will do so.The transaction is authorized and processed and the customer verifies the transaction either by entering a PIN or, occasionally, by signing a sales receipt.
7 Advantages of debit card No need of direct cash transactionQuick and less complicated than using other methods like chequeEven can be used for withdrawals of cashHolders can have a record of the transactions in his banks statement
8 Credit Cards Payment card issued to users as a system of payment. Allows the cardholder to pay for goods and services based on holder’s promise to pay for them.
10 2. Electronic or Digital Cash Refers to several systems which enable a buyer to pay electronically by transmitting a unique number (digital certificate)The purchase of digital cash from an online currency server (or bank) involves two steps:The establishment of an account andThe maintenance of sufficient money in the account to back any purchasesAlso known as electronic moneyE.g. eCash
11 3. Electronic ChequeResembles the function of paper cheques but offers greater security and more featuresOffers protective measures such as authentication and digital signatures and encryption to safeguard transactions
12 Benefits of electronic cheques Works same as traditional cheques thus simplifying customer educationMostly eliminates the need to take cheques to the bank and speeds up depositsFirms can use electronic cheques to complete payments over networks in a more cost- effective manner than present alternatives
14 Electronic Checks in Action Users must register with a third party account server which acts as a billing service. (Registration procedure can vary depending on the particular account server and may require a credit or bank account to back the cheques.)Once registered, a consumer can then contact a seller of goods and servicesThen using different medium the buyer sends the cheque to the seller for a certain amount of moneyWhen deposited, the cheque authorizes the transfer of account balances from the account against which the cheque was drawn to the account to which the cheque was deposited
15 Advantages of EPS Convenience to user Completion of a transaction without hassleDecreasing technology costReduction in the cost of internet usageReduced operational and processing costReduction in paper and postageCustomer more likely to return to same e-commerce site where his/her information is storedIncreased ComplianceEasier to track and monitor dataEnhanced securityEPS offers better security and safeguarding of cardholder data
16 Problems in Implementing EPS Preventing double spendingMaking sure that neither the customer nor the merchant can make an unauthorized transactionPreserving customer’s confidentiality without allowing customer’s fraud
17 Payment GatewayAn e-commerce service that authorizes payment for e-businesses and online retailersProtect credit card details by encrypting sensitive information, such as credit card numbersEnsure that information is passed securely between the customer and the merchant and also between merchant and the payment processorTypes: Hosted and Shared
18 Hosted Payment Gateway That direct your user away from your ecommerce website.While making payments, the customer is redirected to the real gateway page by clicking the gateway link.This leaves your website for some time before returning back.The benefit of these gateways is that you do not need a Merchant ID since no confidential details are needed from your website. Examples here include PayPal, WorldPay and Nochex.
19 Shared Payment Gateway While making the payments, a customer is directed to the payment page and not out of your website.Here, a Post form is used once one clicks on a payment link/button.The payment page is maintained securely by the payment gateway.After all details about credit card and other required fields are complete, the user fully gets back to the main website.The main benefit is that one does not get away from your website thus fast and easy to use. Example of a gateway is eWay.
21 Benefits of payment gateway SecurityCustomer data always behind firewallsEncryptionUsage of SSL encryption to prevent message tampering while information is being transmittedBack-up redundancyGateways have back up system in place to ensure smooth processing during emergencyUp to date technology
22 Internet/Online banking Electronic payment system that enables customers of a financial institution to conduct financial transactions on website operated by the institutionBank customers can transact banking tasks through online banking, including -Funds transfers between the customer's linked accountsPaying third parties, including bill payments Investment purchase or saleLoan applications and transactions, such as repayments of enrollmentsCredit card applications
23 Types of Internet Banking InformationalBasic level of internet bankingProvide information of bank’s products and servicesCommunicativeAllows some interaction between banks system and the customerMaybe limited to account inquiry, loan applicationsStatic file uploads (name, address etc)TransactionalAllows customers to execute transactionsCan include accessing accounts, paying bills etc.