ELECTRONIC PAYMENT SYSTEMS

Ashish Singh(70)
Kriti Mathur(76)
Gunjan Jain(79)
Surabhi Makhija(80)

Electronic Payment is a financial exchange that takes
place online between buyers and sellers. The content of
this exchange is usually some form of digital financial
instrument (such as encrypted credit card numbers,
electronic cheques or digital cash) that is backed by a
bank or an intermediary, or by a legal tender.

Electronic payment system is a system which helps the
customer or user to make online payment for their
shopping.




Speed

Convenience

Efficiency

Increased Customer Base

Potential for great flexibility

Low Transaction cost


Complexity of billing systems and processes used by
competing banks and financial institutions

Bothersome registration and maintenance of an account
per organization

Identity Theft

Exposed to hackers

Disputes over adopting uniform security and
implementation standards

Cash Credit Card
Stored Value
A legal tender defined by a national authority to
represent value.
FEATURES:

Instantly Convertible into other forms of value

Require no intermediation

Private Organization sometimes create a form of private cash called
SCRIP
ADVANTAGES:
Portable
Requires no
Authentication
Provides Instant
purchasing Power
Use of Cash is free
Anonymous
Difficult to Trace
Is Private
DISADVANTAGES:
Limited to smaller
transactions
Easily Stolen
Does not Provide any
Float
Purchases are final
Purchases are irreversible


Credit Card represents an account that extends credit to
consumers, permits consumers to purchase items while deferring
payment, and allows consumers to make payments to multiple
vendors at one time.
FEATURES:
Reduce risk of theft
Increase consumer convenience
Offer considerable float
Have less finality than other payment systems
Limit risk for consumers while raising it for merchants and
bankers
9

Accounts created by depositing funds into an account and from
which funds are paid out or withdrawn as needed are stored
value payment systems.

Examples include Debit Cards, Gift certificates, Prepaid cards
and smart card.

Debit Cards look like credit cards, but rather than providing
access to a line of credit, they instead immediately debit a
checking or other demand deposit account.

Peer-to-peer (P2P) payment systems such as PayPal are
variation on the stored value concept.
New financial needs cannot effectively fulfilled by traditional
payment system.
Example: auctions

New types of online information requires micropayments.

E-commerce helps in creating enhancements to existing
systems.
Example: In US, dominance of online credit card payments is
being challenged by number of new forms of electronic
payments.

These new forms of payments include digital cash, digital
checking, digital credit accounts.
Digital Wallet Digital Cash
Online Stored
Value System
Digital Credit Card
Payment System
Digital Checking
Payment System
Digital Cash are systems that generate a private form of
currency that can be spent at e-commerce sites

Examples: First Virtual, Millicent, PayPal, MoneyZap

To send money:
1. Sender sets up an account and requests to send
payment.
2. Sender places payment into the receivers account by
credit-card
3. Receiver is notified of payment via email
4. Receiver can transfer funds to bank account or
request a cheque.

Founded in 2000 and purchased by eBay in 2002
Provides payment processing services to businesses and to
individuals
Peer-to-peer (P2P) payment system
Pay anyone, anywhere via email
Based on automated clearinghouse

ACCOUNT
HOLDER A
ACCOUNT
HOLDER AS
BANK
ACCOUNT
HOLDER X
PAYPAL

ACCOUNT A
. . .
ACCOUNT X
ACCOUNT
HOLDER XS
BANK
ACH
PROCESSOR
ACCOUNT
HOLDER AS
CREDIT CARD
INTERNET
EMAIL
PAYPALS
BANK
1. A PAYS X VIA
PAYPAL (A HAS
ENOUGH IN PAYPAL
ACCOUNT)
6. PAYPAL NOTIFIES
X OF PAYMENT. X
CHOOSES PAYMENT
METHOD
2. OR: PAYPAL
CHARGES XS
CREDIT CARD
3. OR: PAYPAL
INITIATES ACH
DEBIT
4. FUNDS ARE
DEPOSITED IN
PAYPALS BANK
7. OR: PAYPAL
INITIATES
ACH CREDIT
5. PAYPAL CREDITS
XS PAYPAL ACCOUNT
8. OR: PAYPAL MAILS CHECK TO X
The Digital wallet is a payment scheme that operates
like a carrier of e-cash and other information. Also can
store e-Cheques, e-Cash and credit card information.
FUNCTIONS:
Authenticate through use
of digital certificates and
other encryption methods.

Store and transfer value

Secure the payment
process
ADVANTAGES:
Convenience

Lower transaction cost

Hasten the order process

Reduced risk of fraud

Server-side electronic wallet
Stores a customers information on a remote server
belonging to a particular merchant or wallet publisher
More successful
No need to install a special software
Can be dynamically updated
Lower transaction cost
Lower customer acquisition & retention cost
E.g. Microsofts Passport

Client-side electronic wallet
Stores a consumers information on his or her own
computer
Low adoption rate
E.g. Gator.com, MasterCard Wallet etc.

18
Server side electronic wallet offered by Yahoo!

Yahoo! Wallet is a service of Yahoo! that securely stores your credit
card, billing, and shipping information so you don't ever have to
type it in again.

It makes shopping online safer, easier, and faster

Yahoo Wallet now offers the ability to store multiple credit cards.

Yahoo won't display your full credit card number after you first
enter it. When you use or edit your Yahoo Wallet, you only see the
last four digits of the card number so you can identify the card.

Online stored value systems permit consumers to
make instant online payments to merchants and
other individuals based on value stored in an online
account.


Some of them require the user to download a digital wallet.
Some require users to simply sign up and transfer money.
Rely on the value stored in the consumers bank, checking
or credit card account
For example: E-count offers a prepaid debit account.
A stored value system based on
credit card sized plastic cards that
have embedded chips that store
personal information.

Smart Cards can hold 100 times more
data than credit cards.
Smart card readers interface with card
and request user PIN for access
Bank machines can load cards with
cash and then merchants can download
cash from card
GemPlus, MasterCard are leading
supplier of SCs

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.


Contacts (8)
Epoxy
Microprocessor
Contacts
Card
(Upside-down)
Digital Checking Payment system seek to extend the
functionality of existing checking accounts for use as
online shopping payment tools.

These are extensions to the existing checking and banking
infrastructure.

One of the simplest digital checking systems is Achex.
Design primarily as a P2P small payment mechanism.
Users open an account at Achex site
Users submit their traditional checking account number.
Once the account is verified, Achex subscribers can pay
other individuals.


Reduces the merchants administrative costs.

Improves the efficiency of the deposit process for
merchants and financial institutions.

Speedier during the checkout process for consumers.

Provides consumers with more information about their
purchases on their account statements.

Reduces the float period and the number of checks that
bounce because of insufficient funds (NSFs).


focused on specifically making the use of credit cards safer and
more convenient for both users and merchants.
Digital credit card payment system seek to address several
limitations for merchants as well as consumers such as:


Digital credit card payment systems seek to extend the
functionality of existing credit cards for use as online
shopping payment tools.
FOR MERCHANTS:
Lack of authorization
Repudiation of charges
Credit card fraud
Credit card fraud

FOR CONSUMERS:
Having to reveal credit card
information at multiple sites
Repeatedly having to
communicate sensitive
information over the internet.


Electronic Billing
Presentment and
Payment
Much more complex than B2C payments
Must link into Enterprise Resource Planning (ERP) and
Electronic Data Interchange (EDI) systems.
Electronics Fund Transfer (EFT) is used due to growing
number of transactions.
Types of B2B payment systems:

Electronic bill presentment and payment (EBPP)


Internet, electronic bill presentment and payment (EBPP) is a process that
enables bills to be created, delivered, and paid over the Internet.

Types of E-Billing:

A.) Online banking
Created by large utilities that send millions of bills each month. Makes
it easier to pay their utilities. e.g. Digicash, Billserv.com etc.

B.)Bill consolidator
Aggregates all bills for consumers & permit one-stop bill payment e.g.
Paytrust, Checkfree etc.

C.) Portals
Same as consolidators but offers a variety of other financial
management services e.g. AOL, Yahoo, PayMyBIlls.com etc.

The reduction in expenses related to billing and processing
payments

Advertising: electronic inserts can be customized to the
individual customer

Reduces the customers expenses by eliminating the cost
of checks, postage, and envelopes

Simplifies and centralizes payment processing and
facilitates better record keeping

Customers can review and pay bills at virtually any time





DATA PARSING
BILL FORMATTING
BILLER HOSTING
PERSONAL FINANCE SYSTEM,
AGGREGATOR,
BANK
PAYMENT AND REMITTANCE
PROCESSING
DATA FLOW
MONEY FLOW
BILL
INFO
PAYMENT
ORDERS
Serves as an international marketplace intermediary in
the payment process by paying foreign sellers
immediately and allowing domestic buyers a variable
time period for repayment.
Handles credit risk for sellers by paying them
immediately.
Transactions are entirely digital and secured with digital
certificates.