Chapter 5 Outline 5.1 Introduction 5.2 Credit-Card Transactions 5.3 E-Wallets 5.4 Alternate Consumer Payment Options 5.5 Digital Currency 5.6 Peer-To-Peer Payments 5.7 Smart Cards 5.8 Micropayments 5.9 Business-to-Business (B2B) Transactions 5.10 E-Billing 5.11 Online Banking

Online Monetary Transactions Risanuri Hidayat, Ir., M.Sc.

5.1 Introduction The electronic transfer of funds is key to conducting e-business successfully Discussion includes: How individuals and organizations perform monetary transactions on the Internet How individuals and organizations perform monetary transactions on the Internet Payments by credit card, cash, and check; payments to businesses; peer-to-peer payments; banking and bill paying Payments by credit card, cash, and check; payments to businesses; peer-to-peer payments; banking and bill paying Companies who are developing online payment technology Companies who are developing online payment technology Products, software, and services that these companies produce Products, software, and services that these companies produce

5.2 Credit-Card Transactions Customers fear credit-card fraud Credit cards have been developed to accommodate online and offline payments Credit cards have been developed to accommodate online and offline payments The Prodigy Internet Mastercard guarantees online fraud protection To accept credit-card payments, a merchant must have a merchant account with a bank Specialized Internet merchant accounts have been established to handle online credit-card transactions Specialized Internet merchant accounts have been established to handle online credit-card transactions Transactions are processed by banks or third-party services Traditional merchant accounts accept only POS (point-of-sale) transactions Those that occur when you present your credit card at a store Those that occur when you present your credit card at a store

5.2 Credit-Card Transactions Companies enable merchants to accept credit-card payments online. These companies have established business relationships with financial institutions that will accept online credit-card payments for merchant clients. These companies have established business relationships with financial institutions that will accept online credit-card payments for merchant clients. CyberCash and iCat CyberCash and iCat CyberCashiCat CyberCashiCat Trintech Trintech Trintech

5.2 CyberCash Feature Enables businesses to receive payments through Internet CashRegister CashRegister Makes it possible for merchants to receive credit-card numbers, offer the numbers to the appropriate financial institution for validation and accept credit-card payments in a secure environment over the Web Establishes direct connection between its servers and the Web sites of its e-business customers Customer enters credit-card and shipping information Information sent to CyberCash for validation, once validation is received, purchase can be completed and funds are transferred electronically from customer accounts to merchant’s account

5.2 CyberCash Feature CyberCash Instabuy allows customers to store their purchasing information in an Instabuy e-wallet An e-wallet electronically stores purchasing information An e-wallet electronically stores purchasing information Using redundant servers, or identical servers for back up if one server fails, CyberCash is able to minimize downtime CashRegister keeps track of transactions All financial information transmitted via the Internet is encrypted and digitally signed CyberCash offers fraud detection to protect merchants

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

5.4 Alternate Consumer Payment Options Checks or money orders through the mail Cash on delivery (COD) Debit cards offer an alternative for card-holders to access their accounts offer an alternative for card-holders to access their accounts funds are instantly deducted from checking account funds are instantly deducted from checking account Can withdraw cash from Automatic Teller Machines (ATMs) Can withdraw cash from Automatic Teller Machines (ATMs) Checking-account numbers Companies such as AmeriNet allow merchants to accept checking-account numbers as a valid form of payment Companies such as AmeriNet allow merchants to accept checking-account numbers as a valid form of paymentAmeriNet AmeriNet provides authorization, account settlement, distribution and shipping (fulfillment) and customer service inquiries

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

5.5 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 An effective way of giving those without credit cards, the ability to make purchases on the Web Flooz Flooz Flooz Points-based rewards Points are acquired for completing specified tasks including visiting Web sites, registering or buying products Points are acquired for completing specified tasks including visiting Web sites, registering or buying products Points can then be redeemed Points can then be redeemed Beenz Beenz Beenz

5.6 Peer-To-Peer Payments Peer-to-peer transactions Allow online monetary transfers between consumers Allow online monetary transfers between consumers eCash allows the transfer of digital cash via between two people who have accounts at eCash- enabled banks eCash allows the transfer of digital cash via between two people who have accounts at eCash- enabled banks eCash PayPal offers X payments PayPal offers X payments PayPal Allows user to send money to anyone with an address Can be used to enable credit-card payment for auction items in real time (the transaction begins processing immediately after it is initiated), reducing the risk of fraud or overdrawn accounts BillPoint BillPoint BillPoint Allows buyers to submit electronic payments to sellers’ checking accounts Tradesafe.com ( larger transactions, B2B) Tradesafe.com ( larger transactions, B2B) Tradesafe.com

5.7 Smart Cards Smart card Card with computer chip embedded on its face, holds more information than ordinary credit card with magnetic strip Card with computer chip embedded on its face, holds more information than ordinary credit card with magnetic strip Contact smart cards 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 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 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

5.8 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 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 enables companies to offer this option to customers eCharge enables companies to offer this option to customers eCharge eCharge uses ANI (Automatic Number Identification) to verify the identity of the customer and the purchases they make Outsource payment-management systems (Qpass) Qpass

5.8 Millicent Feature MillicentMillicent is a micropayment technology provider Millicent 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 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

5.9 Business-to-Business (B2B) Transactions Business-to-business (B2B) transactions Fastest growing sector of e-commerce payments Fastest growing sector of e-commerce payments Payments are often larger than B2C transactions and involve complex business accounting systems Payments are often larger than B2C transactions and involve complex business accounting systems Paymentech TM Paymentech TM Payment solution provider for Internet point-of- sale transactions Payment solution provider for Internet point-of- sale transactions Brick-and-mortar and electronic merchants choose from transaction-processing options including debit cards, credit cards, checks and EBT authorization and settlement Brick-and-mortar and electronic merchants choose from transaction-processing options including debit cards, credit cards, checks and EBT authorization and settlement EBT (Electronic Benefits Transfer) is defined by the USDA as the electronic transfer of government funds to retailers for the benefit of the needy

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

5.9 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 Companies can keep track of a transaction from order-to-cash settlement while reducing administrative costs, errors, waste and complexity in the supply chain eTime Capital eTime Capital Order-fulfillment providers Companies attempting to bring supply chain expertise and logistical services to Internet businesses 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

5.9 TradeCard Feature Provides a global B2B e-commerce infrastructure Cross-border data management and payment 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 If discrepancies are found, concerned parties are notified immediately and can negotiate to resolve the conflict

5.9 TradeCard Feature TradeCardTradeCard awaits delivery confirmation from a third-party logistics services provider (3PL) TradeCard Industry terminology for a shipping company 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 buyer’s financial institution TradeCard enables large-scale and large-dollar commerce without credit-card payment through direct interaction with existing financial institutions

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

5.10 E-Billing Services to enable EBPP on a company’s site Derivion Derivion Derivion Provides billers with electronic capabilities in conjunction with Paytrust’s service Offers billing companies the technology and expertise needed to transfer from paper to electronic billing through iNetBiller SM Encirq Encirq 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) 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

5.10 CheckFree Feature CheckFreeCheckFree is a consolidation service that can service any biller and present consumers with all their bills in one interactive online environment CheckFree 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

5.11 Online Banking Internet-only banks Offer convenience and lower rates to their customers Offer convenience and lower rates to their customers Establishing a physical presence Establishing a physical presence The hybrid bank model Going online has become important for the survival and growth of small local banks Going online has become important for the survival and growth of small local banks Smaller banks will usually partner with third- party service providers to make the transition to the Internet Smaller banks will usually partner with third- party service providers to make the transition to the Internet Glass-Steagle Act Prohibited financial institutions from engaging in multiple financial operations Prohibited financial institutions from engaging in multiple financial operations Was repealed so now banks, brokerages and insurance companies are permitted to offer a wide range of financial services Was repealed so now banks, brokerages and insurance companies are permitted to offer a wide range of financial services

5.11 Online Banking Claritybank.com Internet-only bank that specializes in loans to new-economy firms Internet-only bank that specializes in loans to new-economy firms Offers a customized portal service and a B2B center Offers a customized portal service and a B2B center OneCore.com Targets small businesses Targets small businesses Offers packages to businesses at different stages of growth Offers packages to businesses at different stages of growth Offers financial-overview services Offers financial-overview services Payroll and 401K services, enabling of credit- card processing for would-be merchants and payables streamlining services Payroll and 401K services, enabling of credit- card processing for would-be merchants and payables streamlining services An "electronic financial officer" is available who will answer business financial questions via An "electronic financial officer" is available who will answer business financial questions via

5.11 Wells Fargo Feature Wells FargoWells Fargo provides of online banking services Wells Fargo Services are broken into three main sectors; personal finance, small business and commercial banking Services are broken into three main sectors; personal finance, small business and commercial banking Offers customers personal banking, free bill-paying and checking-account comparisons Planning to use its portal site as a financial aggregator allowing people to view information from all of their financial accounts in one place on the Internet allowing people to view information from all of their financial accounts in one place on the Internet Establishing specialized resource centers for students, retirees and those purchase cars or homes

5.11 NetBank Feature NetbankNetbank is the largest bank operating solely on the Internet Netbank Customers benefits Can open checking, savings and credit accounts Can open checking, savings and credit accounts Can plan for retirement using IRAs and other investment accounts, conduct online trading, and obtain mortgage, car and business loans over the Web Can plan for retirement using IRAs and other investment accounts, conduct online trading, and obtain mortgage, car and business loans over the Web Receive a line of credit, free online bill payment and presentment, ATM card and Visa credit card Receive a line of credit, free online bill payment and presentment, ATM card and Visa credit card