E-PAYMENTS

What is e- payment ?
E payment is a subset of an ecommerce transaction to include electronic payment for buying and selling goods or services offered through the Internet. Generally we think of electronic payments as referring to online transactions on the internet, there are actually many forms of electronic payments.

INTRODUCTION:DEFINITION
An e-payment transaction may be defined as one in which monetary value is transferred electronically or digitally. In other word any payment that is not transacted by paper based instruments is considered an e-payment transaction.

When it comes to payment options, nothing is more convenient than electronic payment. You don't have to write a check or handle any paper money; all you have to do is enter some information into your Web browser and click your mouse.

TYPES OF E-PAYMENT
Cards Internet Mobile Payments Financial Service Kiosks Television Set-Top Boxes and Satellite Receiver Biometric Payments

Components of a Digital Payment System

1. Acceptability Payment infrastructure needs to be widely accepted 2. Anonymity Identity of the customers should be protected 3. Convertibility- Digital money should be convertible to any type of fund 4. Efficiency Cost per transaction should be near zero 5. Integration- Interfaces should be created to support the existing system

6. Scalability Infrastructure should not breakdown if new customers and merchants join 7. Security Should allow financial transactions over open networks 8. Reliability- avoid single points of failure 9. Usability Payment should be as easy as in the real world.

Digital token based e payments

Benefit to buyers Convenience of global acceptance Wide range of payment options Convenient and immediate access to funds on deposit via debit cards Accessibility to immediate credit as opposed to arranging a consumer loan.

Benefit to sellers
Speed and security of the transaction processing chain- from verification & authorization to clearing and settlement Freedom for costly labour materials and accounting services Better management of cash flow inventory and financial planning>>> swift bank payment Cost and risk savings by eliminating the need to run an in-house credit facility

Cards
Credit Card Debit Card Smart Card

Credit Cards as E-payment system

Payment using credit card is one of most common mode of electronic payment. Credit card is small plastic card with a unique number attached with an account. It has also a magnetic strip embedded in it which is used to read credit card via card readers. When a customer purchases a product via credit card, credit card issuer bank pays on behalf of the customer and customer has a certain time period after which one can pay the credit card bill. It is usually a monthly payment cycle.

Players in Credit Card System

1. The card holder Customer 2. The merchant - seller of product who can accept credit card payments. 3. The card issuer bank - card holder's bank 4. The acquirer bank - the merchant's bank 5. The card brand - for example , visa or mastercard.

HOW CREDIT CARD WORKS???????

Step
Step 1 Step 2

Description
Bank issues and activates a credit card to customer on his/her request. Customer presents credit card information to merchant site or to merchant from whom he/she want to purchase a product/service. Merchant validates customer's identity by asking for approval from card brand company. Card brand company authenticates the credit card and paid the transaction by credit. Merchant keeps the sales slip.

Step 3 Step 4

Step 5

Merchant submits the sales slip to acquirer banks and gets the service chargers paid to him/her.
Acquirer bank requests the card brand company to clear the credit amount and gets the payment. Now card brand company asks to clear amount from the issuer bank and amount gets transferred to card brand company.

Step 6 Step 7

Internet
Online payments - customer transferring money or making a purchase online via the internet. Payments can be through Credit cards , Debit cards , net banking or prepaid cards . Can make an one time payment ( buying online ) or recurring payments ( automatic payment of bills such as electricity , telephone. Etc. )

Mobile Payments
mobile phone manufacturers enable the chip and software in the phone for easier electronic commerce. Consumers may send an SMS message, transmit a PIN number, use WAP to make online payments ex : airtel money .

Financial Service Kiosks

Making payments using ATM machines Ex. Utility bills Payment machines set up in offices like electricity board , water board etc . This is to enable electronic payments by individuals who may not have regular access to the internet or mobile phones

Television Set-Top Boxes and Satellite Receiver

can make purchases by viewing items on the television. Making payments for watching a particular movie or a programme . Making payments for games Ex : XBox

Biometric Payments
Still in infancy . Most biometric payments involve using fingerprints , retina scanning as the identification and access tools . could replace the plastic card and more securely identifies the person . The electronic payment is still charged to a credit card or other account, with the biometric identifier replacing the card,

PAYMENT TYPES :BASED ON SIZE OF PAYMENTS

I. Micro Payments II.Consumer Payments III.Business Payments MICRO PAYMENTS: Very low value payments Transaction values < $10 or Rs 100 Transaction Costs are nearly zero

CONSUMER PAYMENTS
Transaction values in the range $5 and $500 or Rs 100- Rs 50000 Payments are usually executed by credit cards.

BUSINESS PAYMENTS
Very High value Payments Transaction values above $500 or Rs 50000 Usually done through direct debit or invoices

ELECTRONC FUNDS TRANSFER (EFT)

Electronic funds transfer is one of the oldest electronic payment systems. EFT is the groundwork of the cash-less and check-less culture where and paper bills checks, envelopes, stamps are eliminated. EFT is used for transferring money from one bank account directly to another without any paper money changing hands. The most popular application of EFT is that instead of getting a paycheck and putting it into a bank account, the money is deposited to an account electronically.

ADVANTAGES OF EFT
EFT is considered to be a safe, reliable, and convenient way to conduct business. The advantages of EFT contain the following : Simplified accounting Improved efficiency Reduced administrative costs Improved security

SMART CARDS
They are made of a plastic with an embedded microprocessor chip and has a stored value. The Chip holds important financial and personal information. The microprocessor chip is loaded with the relevant information and periodically recharged. In addition these systems have been developed to store cash onto the chip. The money on the card is saved in an encrypted form and is protected by a password to ensure the security of the smart card solution

APPLICATION OF SMART CARDS

Smart cards have been extensively used in the telecommunications industry. Smart-card technology can be used to hold information on health care, transportation, identification, retail, loyalty programs and banking etc.. Smart cards enable information for different purposes to be stored in one location. The microprocessor chip can process different types of information, and therefore, various industries can use them in ways to suit them

TYPES OF SMART CARDS

I. CONTACT CARDS II.CONTACT-LESS CARDS CONTACT CARDS :
This type of smart card must be inserted into a special card reader to be read and updated. A contact smart card contains a microprocessor chip that makes contact with electrical connectors to transfer the data.

CONTACT LESS CARDS :

A contact-less smart card also contains a microprocessor chip and an antenna It allows data to be transmitted to a special card reader without any physical contact. This type of smart card is useful for people who are moving in vehicles or on foot. They are used extensively in European countries for collecting payment for highway tolls, train fares, parking, bus fares, and admission fees to movies, theaters, plays, and so forth.

ADVANTAGES OF SMART CARDS

Can Store many types of information Are not easily duplicated Do not occupy much space Portable Low cost to issuers and users Includes high security

E-CASH: Introduction
E-cash enables transactions between customers without the need for banks or other third parties. E-cash is transferred directly and immediately to the participating merchants and vending machines. Electronic cash is a secure and convenient alternative to bills and coins. E-cash usually operates on a smart card, which includes an embedded microprocessor chip. The microprocessor chip stores cash value and the security features that make electronic transactions secure.

HOW E CASH WORKS????

Pre Requisites: The customer receives specific software to install on his or her computer. The software allows the customer to download electronic coins to his or her desktop

STEP 1: A customer or merchant signs up with one of the participating banks or financial coins is charged against the customer's bank account or against a credit card. STEP 2 : When buying goods or services from a web site that accepts e-cash, the customer simply clicks the Pay with e-cash button. STEP 3 : The merchant's software generates a payment request, describing the item(s)purchased, price, and the time and date. STEP 4: The customer can then accept or reject this request. When the customer accepts the payment request, the software residing on the customer's desktop subtracts the payment amount from the balance. STEP 5: It creates a payment that is sent to the bank or the financial institution of the merchant, and then is deposited to the merchant's account.
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E Payment network

E-PAYMENT BENEFITS
Potential for great flexibility . Low transaction costs . Multiple Choices and flexibility . Speed and Convenience. Saves time and effort . Worldwide acceptance

INCREASE IN PROFITABILITY DUE TO E-PAYMENT: THE REASONS

Convenience Immediacy Improved cash flow Growth Competitive advantage

E-PAYMENT: CONCERNS
Concerns over privacy
The possibility of identity theft Dislike for making electronic payments; preference of familiarity of writing cheques and cash transactions

1.HACKING. 2.LEAKAGE OF CONFIDENTIAL INFO. 3.IDENTITY THEFT. 4.USAGE OF STOLEN CREDIT/SMART CARDS. 5.VULNERABILITY OF WORLD WIDE ATTACK.

Areas of concern in india

E literacy among the population. Penetration of internet . Lack of confidence in online transactions due to security issues .