0. Chapter 10 Electronic Commerce Payments, Order Fulfillment, and
Other Support Services

1. Pearson Education – Prentice Hall
Learning Objectives
Understand the shifts that are occurring with regard to noncash and online payments.
Discuss the Crucial factors that determine whether a method of e-payment achieves critical mass.
Discuss the different categories and potential uses of smart cards.
Discuss various online alternatives to credit card payments and identify under what circumstances they are best used.
Describe the processes and parties involved in e-checking.
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Learning Objectives
Describe payment methods in B2B EC, including payments for global trade.
Define EC order fulfillment and describe the EC order fulfillment process.
Describe the major problems of EC order fulfillment.
Describe various solutions to EC order fulfillment problems.
Discuss support services provided by general consulting and outsourcing firms.
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3. The Payment Revolution
Crucial factors that determine whether a method of e-payment achieves critical mass:
Independence – must not need specialized SW
Interoperability and Portability – compatible with many platforms
Security
Anonymity
Divisibility – min/max ranges – credit cards will not do for too small costs
Ease of Use
Transaction Fees – merchant pays 3% + fixed fee
Regulations
International support
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4. Using Payment Cards Online
Payment cards —electronic cards that contain information that can be used for payment purposes
Credit cards—provides holder with credit to make purchases up to a limit fixed by the card issuer
Charge cards—balance on a charge card is supposed to be paid in full upon receipt of monthly statement
Debit card—cost of a purchase drawn directly from holder’s checking account (demand-deposit account)
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5. Using Payment Cards Online
PROCESSING CARDS ONLINE
authorization
Determines whether a buyer’s card is active and whether the customer has sufficient funds.
settlement
Transferring money from the buyer’s to the merchant’s account.
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6. Using Payment Cards Online
Three basic configurations for processing online payments. Merchants may:
Own the payment software
Use a point of sale system (POS) operated by an acquirer
payment service provider (PSP)
A third-party service connecting a merchant’s EC systems to the appropriate acquirers. PSPs must be registered with the various card associations they support
Use a POS operated by a payment service provider
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7. Using Payment Cards Online
Fraudulent Card Transactions
In the online world, merchants are held liable for fraudulent transactions
Merchants can incur additional fees and penalties imposed by the card associations
Costs associated with combating fraudulent transactions are also the merchant’s responsibility
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8. Using Payment Cards Online
FRAUDULENT CARD TRANSACTIONS
Key tools used in combating fraud:
Address Verification System (AVS)
Detects fraud by comparing the address entered on a Web page with the address information on file with the cardholder’s issuing bank.
card verification number (CVN)
Detects fraud by comparing the verification number printed on the signature strip on the back of the card with the information on file with the cardholder’s issuing bank.
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9. Using Payment Cards Online
Key tools used in combating fraud (cont.):
Negative lists
Fraud screens and automated decision models
Card association payer authentication services
Manual review
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Smart Cards
SMART CARD
An electronic card containing an embedded microchip that enables predefined operations or the addition, deletion, or manipulation of information on the card.
APPLICATIONS OF SMART CARDS
Retail Purchases
Transit Fares
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Smart Cards
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Smart Cards
TYPES OF SMART CARDS
contact card
A smart card containing a small gold plate on the face that when inserted in a smart card reader makes contact and passes data to and from the embedded microchip.
contactless (proximity) card
A smart card with an embedded antenna, by means of which data and applications are passed to and from a card reader unit or other device without contact between the card and the card reader.
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Smart Cards
smart card reader
Activates and reads the contents of the chip on a smart card, usually passing the information on to a host system.
smart card operating system
Special system that handles file management, security, input/output (I/O), and command execution and provides an application programming interface (API) for a smart card.
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Stored-Value Cards
stored-value card
A card that has monetary value loaded onto it and that is usually rechargeable
Anyone can obtain a stored-value card without regard to prior financial standing or having an existing bank account as collateral
The stored-value card market is growing rapidly
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E-Micropayments
e-micropayments
Small online payments, typically under $10.
Five basic micropayment models that do not depend solely or directly on credit or debit cards:
Aggregation
Direct payment
Stored value
Subscriptions
Á la carte
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E-Checking
e-check
A legally valid electronic version or representation of a paper check.
Automated Clearing House (ACH) Network
A nationwide batch-oriented electronic funds transfer system that provides for the interbank clearing of electronic payments for participating financial institutions.
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E-Checking
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18. Order Fulfillment and Logistics—An Overview
All the activities needed to provide customers with their ordered goods and services, including related customer services.
back-office operations
The activities that support fulfillment of orders, such as packing, delivery, accounting, inventory management and shipping
front-office operations
The business processes, such as sales and advertising, that are visible to customers.
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19. Order Fulfillment and Logistics—An Overview
The operations involved in the efficient and effective flow and storage of goods, services, and related information from point of origin to point of consumption.
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20. Order Fulfillment and Logistics—An Overview
THE EC ORDER FULFILLMENT PROCESS
Step 1: Making sure the customer will pay
Step 2: Checking for in-stock availability
Step 3: Arranging shipments
Step 4: Insurance
Step 5: Replenishment
Step 6: In-house production
Step 7:Use contractors
Step 8: Contacts with customers
Step 9: Returns
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21. Order Fulfillment and Logistics—An Overview
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22. Order Fulfillment and Logistics—An Overview
reverse logistics
The movement of returns from customers to vendors.
Traditional versus EC Logistics
e-logistics
The logistics of EC systems, typically involving small parcels sent to many customers’ homes (in B2C).
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Traditional versus EC Logistics
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24. Order Fulfillment and the Supply Chain
Order fulfillment and order taking are integral parts of the supply chain.
Flows of orders, payments, and materials and parts need to be coordinated among
Company’s internal participants
External partners
The principles of supply chain management must be considered in planning and managing the order fulfillment process
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25. Problems in Order Fulfillment and the Supply Chain
Typical Supply Chain Problems
Demand forecasting is difficult
Many of the problems along the EC supply chain stem from the need to coordinate several activities, internal units, and business partners in the face of uncertainties, caused by demand forecast.
third-party logistics suppliers (3PL)
External, rather than in-house, providers of logistics services.
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26. Other EC Support Services
CONSULTING SERVICES
EC OUTSOURCING SERVICES
Major reasons why many companies outsource:
A desire to concentrate on the core business
The need to have services up and running rapidly
Lack of expertise for many of the required support services
The inability to have the economy of scale enjoyed by outsourcers
Inability to keep up with rapidly fluctuating demands if an in-house option is used
The number of required services, which usually are simply too many for one company to handle
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27. Solutions to Order Fulfillment Problems
Improvements in the Order-Taking Process
Warehouse management system (WMS)
A software system that helps in managing warehouses.
Automated Warehouses
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28. Solutions to Order Fulfillment Problems
Other inventory management improvements
Reducing inventory and decreasing the incidence of out-of-stocks
Maintaining an inventory of repair items
Picking items out of inventory in the warehouse
Communicating
Managing product inventory
Receiving items at the warehouse automating the warehouse
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29. Solutions to Order Fulfillment Problems
Partnering Efforts and Outsourcing Logistics
Comprehensive Logistics Services
Outsourcing logistics
Speeding Deliveries - same day, even same hour
Handling Returns (Reverse Logistics)
Return the item to the place of purchase
Separate the logistics of returns from the logistics of delivery
Completely outsource returns
Allow the customer to physically drop the returned item at a collection station
Auction the returned items
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30. Other EC Support Services
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Solutions to Order Fulfillment Problems
Order Fulfillment in B2B
Using BPM to improve order fulfillment
Using e-marketplaces and exchanges to ease order fulfillment
Order fulfillment in services
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