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Chapter 6 Electronic Payment Systems (E-Payment (Who will involve?…
Chapter 6 Electronic Payment Systems
4 ways to purchase items
(traditional and electronic)
Cash, checks, credit cards, debit cards
E-Payment
What?
Payment made online or electronically rather than paper
Who will involve?
Customer/payer/buyer
Merchant/payee/seller
Issuer - bank
Regulator - automated clearing house (ACH)
(electronic funds-transfer system)
Factors to determine e-payment methods
refer slide 10
Types of payment methods
Electronic payment cards
Electronic cash
Micropayments and small payment
Pay Pal
E-wallet
Stored value card
Smart card
E- check
B2B electronic payments
Electronic-Cards
- electronic card that contain information that can be used for payment purpose
3 format of E-Cards
Charge cards
carries no spending limit and the entire amount charged to the card is due at the end of the billing period.
Debit cards
Removes the amount of the sales from the cardholder’s bank account and transfer it to the seller’s bank account.
Credit cards
has a spending limit based on the user’s credit history
3 steps
once the merchant receives consumer’s payment card information
1) Merchant authenticates payment card to ensure validity- the card is valid and not stolen
2) Merchant checks with payment card issuer to ensure credit or funds are available and puts a hold on credit line or funds needed to cover the charge.
3) Settlement occurs (usually few days after purchase) which means that funds travel between banks and are placed into the merchant’s account.
Advantages? refer to slide 17
disadvantages? refer to slide 18
Electronic-Cash
(e-cash, digital cash) - describes any value storage and exchange system created by a private entity that does not use paper documents or coins and that can serve as a substitute for government-issued physical currency.
Problems?
No standard among all electronic cash issuers
Not universally accepted
Factors prefer electronic cash
Potentially significant electronic cash market
Advantages & disadvantages? refer to slide 22
Micropayments or e-micropayments
- Small online payment or Internet payment typically under $10.
How it works?- offered through mobile telephone
Buyers make purchases using their mobile phones
Charges appear on monthly mobile phone bill
not been implemented well on the web yet
Pay Pal
- PayPal is the electronic cash payment system that provides payment processing services to business and to individuals.
E-Wallets
- A software that a user downloads to their desktop to store credit card numbers and other personal information.
2 categories
Server-side electronic wallet
Client-side electronic wallet
Stored value card
- A card that has monetary value loaded onto it and that is usually rechargeable.
eg. prepaid phone, Touch n Go, LRT ticket, bus cards, hotel passkey, MyCard
Smart Card
- an electronic card containing an embedded microchip that enables predefined operations or the addition, deletion, or manipulation of information on the card.
2 types of smart cards
Contact card
Contactless (proximity)card
B2B electronic payments
- use for financial supply chain management is to optimize: Accounts payable (A/P), Accounts receivable (A/R), Cash management, Working capital, Transaction costs, Financial risks, Financial administration
EIPP(Enterprise invoice presentment and payment)
is the process by which companies present invoices and make payments to one another through the Internet.
Purpose of EIPP - to improve cash flow, better customer service for billing and improve data that can lower invoice processing costs.
Financial technology (Fintech)
refers to technology and innovation that aims to compete with traditional financial methods (banking and credit card) in the delivery of financial services.
Blockchain
transaction processing system that operates on a
distributed and shared database
(called peer-to-peer or P2P computer network) rather than a single organization’s database.
Cryptocurrency -
Cryptography is a
method of protecting information and communications through the use of codes
so that only those for whom the information is intended can read and process it.
Problem?
- many risks involved in a distributed transaction database that shares transaction information among thousands of firms.
Solution?
system is equipped with encryption and authentication of the participants, which ensures that only legitimate actors can enter information, and only validated transactions are accepted. Once recorded, the transaction cannot be changed.
How it works?
refer slide 44
Issue?
Some governments and financial regulatory bodies perceive Bitcoin/Blockchain to be a potential threat to the sovereignty of their central banking system. Some countries like China and South Korea, have banned virtual currency exchanges.
