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 Describe the features of traditional payment

systems
 Describe the type and methods of electronic
payment system
 Describe the benefits of electronic payment
system
 Understand the limitations of online credit
card payment system
 How electronic payment is done

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 efore 90·s normal cheque is used
 After 90·s computerizes cheque is used
 In 1997 ATM machine is used in mumbai

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 ›lectronic payment system refers to
In which payment is done with the help
Of electronic money.
 ›lectronic payment have been developed
For provide internet transactions.

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 ›lectronic money also known as › money,
›lectronic cash, electronic currency, digital
Cash
 These all are exchanged only electronically
With the use of server provided by merchant.
 ›xamples:
1. ›lectronic Fund Transfer
2. Direct Deposit

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 Debit Cards
 Credit Cards
 ›lectronic Cash
 Micro Payment System

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 Debit card is that which is issued by bank
To customer for deposit money in bank.
 It is just like prepaid payment.
 It can be used any time at ATM machines.

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 Credit card is that which is issued by bank
to those customer who have goodwill and
have a touch with bank from long time.
 It is issued to good rated customer.
 Its limits depend on goodwill of customer.

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 ›lectronic cash is just like real money but
there is transfer of money with help internet
 Its has a identify numbers, which is used
for payment
 ›xamples:
1. Smart cards


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 Micro payment is related to very small
of money.
 In this system, small payment is collected
With help of online deposit, credit card and
After that it is deposit into a merchant a/c.


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Checking Transfer
Credit Card
Stored Value
Accumulating alance


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 Funds transferred directly via a signed draft or check
from a consumer·s checking account to a merchant
or other individual
 Most common form of payment in terms of amount
spend
 Can be used for both small and large transactions
 Its require third party intervention (banks)
 Introduce security risks for merchants (forgeries,
stopped payments), so authentication typically
required


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 —epresents an account that extends credit to
consumers, permitting consumers to purchase items
while deferring payment, and allows consumers to
make payments to multiple vendors at one time
 Credit card associations ² Nonprofit associations
(Visa, MasterCard) that set standards for issuing
banks
 Issuing banks ² Issue cards and process transactions
 Processing centers (clearinghouses) ² Handle
verification of accounts and balances


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 Accounts created by depositing funds into an
account and from which funds are paid out or
withdrawn as needed
 ›xamples: Debit cards, gift certificates, prepaid
cards, smart cards
 Debit cards: Immediately debit a checking or
other demand deposit account


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 Accounts that accumulate expenditures and to
which consumers make period payments
 ›xamples: utility, phone, American ›xpress
accounts


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 Credit cards are dominant form of online payment,
accounting for around 80% of online payments in
2002
 New forms of electronic payment include:
Î Digital cash
Î Online stored value systems
Î Digital accumulating balance payment systems
Î Digital credit accounts
Î Digital checking


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 Processed in much the same way that in store
purchases are
 Major difference is that online merchants do not
see or take impression of card, and no signature
is available (CNP transactions)
 Participants include consumer, merchant,
clearinghouse, merchant bank (acquiring bank)
and consumer·s card issuing bank


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 Security ² neither merchant nor consumer can be
fully Secured
 Cost ² for merchants, around 3.5% of purchase
price plus transaction fee of 20 30 cents per
transaction
 Social equity ² many people do not have access
to credit cards (young adults, plus almost 100
million other adult Americans who cannot afford
cards or are considered poor risk)


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 Digital ´have notsµ include:
Households with incomes below —s35,000
Those without college educations
People living in rural areas
African Americans and Hispanics
Seniors over 65
Disabled
 Most recent Department of Commerce study most of
above groups gaining access to computers and Internet
due to falling computer prices and free or low cost ISPs
 ut without credit cards, still hard for people to shop
online


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 cardholder and merchant identity through
use of digital certificates
 An open standard developed by MasterCard
and Visa
 Transaction process similar to standard
online credit card transaction, with more
identity verification


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 Permit consumers to make instant, online
payments to merchants and other individuals
based on value stored in an online account
 —ely on value stored in a consumer·s bank,
checking or credit card account


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 ›xtend the functionality of existing credit
cards for use as online shopping payment
tools
 Focus specifically on making use of credit
cards safer and more convenient for online
merchants and consumers
 ›xample: eCharge


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 Mobile
payment (m payments) systems not
very well established yet in U.S, but with
growth in Wi Fi and 3G cellular phone
systems, this is beginning to change


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  32
AJAY GUPTA
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