eCommerce Payment Systems
An e-commerce payment system facilitates the acceptance of electronic payment for online transactions. Also known as Electronic Data Interchange (EDI),
e-commerce payment systems have become increasingly popular due to the widespread use of the internet-based shopping and banking. In the early years
of B2C transactions, many consumers were apprehensive of using their credit and debit cards over the internet because of the perceived increased risk
of fraud. Recent research shows that 30% of people in the United Kingdom still do not shop online because they do not trust online payment systems.
However, 54% do believe that it is safe to shop online which is an increase from 26% in 2006.
There are numerous different payments systems available for online merchants. These include the traditional credit, debit and charge card but also
new technologies such as digital-wallets, e-cash, mobile payment and e-checks. Another form of payment system is allowing a 3rd party to complete
the online transaction for you. These companies are called Payment Service Providers (PSP), a good example is
Paypal or WorldPay. (Note Paypal
also offers its own payment system)
Credit Cards and Smart Cards:
Over the years, credit cards have become one of the most common forms of payment for e-commerce transactions. In North America almost 90% of
online B2C transactions were made with this payment type. Turban et al. goes on to explain that it would be difficult for an online retailer
to operate without supporting credit and debit cards due to its widespread use. Increased security measures such as the use of the card
verification number (CVN) which detects fraud by comparing the verification number on the printed on the signature strip on the back of the
card with the information on file with the cardholder's issuing bank. Also online merchants have to comply with stringent rules
stipulated by the credit and debit card issuers (Visa and Mastercard). This means that merchants must have seurity protocol and
procedures in place to ensure transactions are more secure. This can also include having a certificate from an authorised certification
authority (CA) who provides PKI infrastructure for securing credit and debit card transactions.
Despite this widespread use in North America, there are still a number of countries such as China, India and Pakistan that have some problems
to overcome in regard to credit card security. In the meantime, the use of smartcards has become extremely popular. A Smartcard is similar to
a credit card; however it contains an embedded 8-bit microprocessor and uses electronic cash which transfers from the consumers’ card to the
sellers’ device. A popular smartcard initiative is the VISA Smartcard. Using the VISA Smartcard you can transfer electronic cash to your card
from your bank account, and you can then use your card at various retailers and on the internet.
Financial Cyber-mediaries:
These are companies that enable financial transactions to transpire over the internet, such as
Paypal.
Many of the mediaries permit consumers to establish an account quickly, and to transfer funds into their on-line accounts from a traditional
bank account (typically via ACH transactions), and vice versa, after verification of the consumer's identity and authority to access such bank
accounts. Also, the larger mediaries further allow transactions to and from credit card accounts, although such credit card transactions are
usually assessed a fee (either to the recipient or the sender) to recoup the transaction fees charged to the mediary.
The speed and simplicity with which cyber-mediary accounts can be established and used have contributed to their widespread use, although
the risk of abuse, theft and other problems—with disgruntled users frequently accusing the mediaries themselves of wrongful behaviour—is
associated with them.
Electronic Bill Presentment and Payment:
Electronic bill presentment and payment (EBPP) is a fairly new technique that allows consumers to view and pay bills electronically.
There are a significant number of bills that consumers pay on a regular basis, which include: power bills, water, oil, internet, phone
service, mortgages, car payments etc. EBPP systems send bills from service providers to individual consumers via the internet.
The systems also enable payments to be made by consumers, given that the amount that appears on the e-bill is correct. Banks in Canada
have been offering these on-line payment services for some time now, and are growing in popularity. Other service providers such as
Rogers Communications and Aliant accept major credit cards within the bill payment sections of their websites. This service is in
addition to the original EBPP method of a direct withdrawal from a bank account through a bank such as Scotiabank.
The biggest difference between EBPP systems and the traditional method of bill payment, is that of technology. Rather than receiving
a bill through the mail, writing out and sending a check, consumers receive their bills in an email, or are prompted to visit a
website to view and pay their bills.
Three broad models of EBPP have emerged. These are:
- 1.Consolidation, where numerous bills for any one recipient are made available at one Web site, most commonly the recipient's bank. In some
countries, such as Australia, New Zealand and Canada, the postal service also operates a consolidation service. The actual task of
consolidation is sometimes performed by a third party, and fed to the Web sites where consumers receive the bills. The principal
attraction of consolidation is that consumers can receive and pay numerous bills at the one location, thus minimising the number of
login IDs and passwords they must remember and maintain.
- 2.Biller Direct, where the bills produced by an organisation are made available through that organisation's Web site. This model
works well if the recipient has reasons to visit the biller's Web site other than to receive their bills. In the freight industry,
for example, customers will visit a carrier's Web site to track items in transit, so it is reasonably convenient to receive and pay
freight bills at the same site.
- 3.Direct email delivery, where the bills are emailed to the customer's In Box. This model most closely imitates the analog postal
service. It is convenient, because almost everyone has email and the customer has to do nothing except use email in order to receive
a bill. Email delivery is proving especially popular in the B2B market in many countries.
Major providers of outsourced bill production services have developed facilities to process bills through consolidation, biller
direct and email delivery services, thus enabling major billers to have all their bills, paper and electronic, processed through
the one service. Niche service providers in many countries provide one or two of these models, but generally do not integrate with
paper bill production.
See Also:
References
- Third of internet users too scared to use credit card to shop online. (2009). Retrieved: May 12, 2009 from The Telegraph http://www.telegraph.co.uk/scienceandtechnology/technology/technologynews/5305146/Third-of-internet-users-too-scared-to-use-credit-card-to-shop-online.html
- Turban, E. King, D. McKay, J. Marshall, P. Lee, J & Vielhand, D. (2008). Electronic Commerce 2008: A Managerial Perspective. London: Pearson Education Ltd. p.550
- Turban, E. King, D. McKay, J. Marshall, P. Lee, J & Vielhand, D. (2008). Electronic Commerce 2008: A Managerial Perspective. London: Pearson Education Ltd. p.554
- Mastercard. 2009. Retrieved: May 12, 2009, from http://www.mastercard.com/us/merchant/pdf/SPME-Entire_Manual_public.pdf
- Wikipedia.org
