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8/6/2019 Lecture 8 - Chap 6 Commerce)
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Muhammad Saad Sarwar
6 E-commerce PaymentSystems
8/6/2019 Lecture 8 - Chap 6 Commerce)
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8/6/2019 Lecture 8 - Chap 6 Commerce)
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Types of Payment SystemsSlide 5-3
Cash
CheckingTransfer
Credit
Card
Stored Value
Accumulating Balance
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CashSlide 5-4
Legal tender
Mostcommon form of paymentinterms ofnumber of transactions
Instantlyconvertibleinto other forms of valuewithoutintermediation
Portable, requiresno authentication
Free (no transaction fee), anonymous, low
cognitive demands Limitations:easilystolen, limited to smaller
transaction, doesnotprovide any float
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8/6/2019 Lecture 8 - Chap 6 Commerce)
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CreditCardSlide 5-6
Represents accountthatextendscredittoconsumers; allowsconsumersto makepaymentstomultiplevendors at onetime
Creditcard associations:Nonprofit associations(Visa, MasterCard)thatsetstandards for issuing
banks
Issuing banks:Issuecards and processtransactions
Processingcenters (clearinghouses): Handleverification of accounts and balances
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Stored ValueSlide 5-7
Accountscreated by depositing fundsinto an
account and from which funds arepaid out or
withdrawn asneeded xamples: Debitcards,giftcertificates,prepaid
cards,smartcards
Peer-to-peer paymentsystemssuch as PayPal a
variation
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Accumulating BalanceSlide 5-8
Accountsthat accumulateexpenditures and to
which consumers makeperiod payments
xamples: Utility,phone,American Express accounts
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Dimensions of Payment SystemsSlide 5-9
Table 5.6, Page 305
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E-commerce Payment SystemsSlide 5-
10
Creditcards are dominant form of onlinepayment, accounting for around 70% of onlinepaymentsin 2007
Other e-commercepaymentsystems:
Digital cash
Onlinestored valuesystems
Digital accumulating balancepaymentsystems
Digital credit accounts
Digital checking
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How an
Online
CreditTra
nsacti
on
Works
Slide 5-
11
Figure 5.18, Page 308
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Limitations of OnlineCreditCard Payment
SystemsSlide 5-
12
Security:neither merchantnor consumer can be
fully authenticated
Cost: for merchants, around 3.5% of purchase
priceplustransaction fee of 20 30 centsper
transaction
Social equity: manypeople do not have accesstocreditcards
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Digital WalletsSlide 5-
13
Seeksto emulatethe functionality of traditionalwallet
Mostimportant functions:
Authentic
ate
cons
umerthrou
gh u
seof d
igital
certificates or other encryption methods
Store and transfer value
Securepaymentprocess from consumer to merchant
Earlyeffortsto popularize have failed Newesteffort: GoogleCheckout
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Digital CashSlide 5-
14
One of the first forms of alternativepayment
systems
Not reallycash: rather, form of valuestorageand valueexchangethat has limited
convertibilityinto other forms of value, and
requiresintermediariesto convert
Mostearlyexamples have disappeared;conceptssurvive aspart of P2P paymentsystems
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Online Stored Value SystemsSlide 5-
15
Permitconsumersto makeinstant, onlinepaymentsto merchants and other individuals based onvaluestored in an online account
Rely onvaluestored in a consumers bank,checking,or creditcard account
PayPal mostsuccessful system
Smartcards another example
Contact and contactless
Mondex, Octopus
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Digital Accumulating Balance Payment SystemsSlide 5-
16
Allows usersto make micropayments and
purchases onthe Web, accumulating a debit
balance for which they are billed attheend of
the month
Examples: Valistas PaymentsPlus,Clickshare
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Digital Checking Payment SystemsSlide 5-
17
Extends functionality of existingchecking accounts
for use as onlineshoppingpaymenttool
Example: PayByCheck
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Wireless Payment SystemsSlide 5-
18
Use of mobile handsets aspayment devices well-
established in Europe, Japan, South Korea
Notvery well established yetin U.S, but with growth
in Wi-Fi and 3G cellular phonesystems,thisis
beginningto change
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Electronic Billing Presentment and Payment
(EBPP)Slide 5-
19
Onlinepaymentsystems for monthly bills
EBPP expected to grow rapidly,to anestimated40% of all households by 2007
Main business modelsin EBPP marketinclude:
Biller-direct
Consolidator
Above aresupported by EBPP infrastructureproviders
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Case:Checkfree:OnTop ofElectronic Billing
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Critical Thinking Questions
21
Question 1
What businesschallenges doesCheckfree face asit attemptstomaintainits dominanceinthe EBPPmarket? Who areits maincompetitors?
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Critical Thinking Questions
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Question 2
Whatnew technologiesareposing a threattoCheckfrees leadership?
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Critical Thinking Questions
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Question 3
Whatsocial factorscanyouidentifythat mighteither inhibitor encourage use of Checkfreesservices?
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Critical Thinking Questions
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Question 4
How mightthecontinuedevolution of broadband internetconnectionsspur thegrowth ofonline bill payment?
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Topics of Interest/ReadingAssignments from the Web
25
Topics
8/6/2019 Lecture 8 - Chap 6 Commerce)
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Topics of Interest/ReadingAssignments from the Web
26
Has EconomyHurt GoogleSearch Ads?
Semi-
connected
Action urged tokeepnetneutral
Paypal toblock 'unsafebrowsers'
Nano switchhints at futurechips
Pakistan:Where BillionsVanish