Online payments
• How do we purchase
on the web?
• What choices of
payment have we?
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Online payments
• Looking at ….
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Credit Card Transactions
Digital Currency
E-Wallets
Smart Cards
Micropayments
Business to Business (B2B) transactions
E-Billing
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Introduction
• Secure electronic funds transfer is crucial to ecommerce
• Examination of how individuals and organizations
conduct monetary transactions on the Internet
• Credit-card transactions, digital cash and ewallets, smart cards, micropayments and
electronic bill presentment and payment
• Electronic-payment enablers
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Credit-Card Transactions
• Popular form of payment for online
purchases
• Resistance due to security concerns
• Many cards offer capabilities for online and
offline purchases
– MasterCard
– Visa
– American Express Blue
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Anatomy of an Online CreditCard Transaction
• To accept credit-card payments, a merchant must
have a merchant account
• Traditional merchant accounts accept only POS
(point-of-sale) transactions
– Transactions that occur when you present your credit
card at a store
• Card-not-present (CNP) transaction
– Merchant does not see actual card being used in the
purchase
• Authentication
– The person is, in fact, who they say they are
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Anatomy of an Online CreditCard Transaction
• Authorization
– The money is available to complete the transaction
• Acquiring bank
– The bank with which the merchant holds an account
• Issuing bank
– The bank from which the buyer obtained the credit
card, and the credit-card association
• Verification
• Money issued to merchant after product/service is
distributed
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Anatomy of an Online CreditCard Transaction
• Step 1
– Consumer makes a purchase at an online store, credit
card information received by e-store (merchant)
• Step 2
– Credit card information is sent from the merchant to the
acquiring bank
• Step 3 and Step 4
– The credit card association and the issuing bank certify
the transaction and the verification is sent to the
acquiring bank
• Step 5
– The merchant ships the product and payment is issued
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Credit-Card Transaction Enablers
• Credit-Card Transaction Enablers
– Companies that have established business
relationships with financial institutions that will
accept online credit-card payments for
merchant clients
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iCat
Trintech
Cybercash
NextCard, Inc.
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Online Credit-Card Fraud
• Chargeback
– When a credit-card holder claims a purchase was made
by an unauthorized individual, or when a purchase was
not received
– The charges in question are not the responsibility of the
credit-card holder
– On the Internet, neither a scan of the card nor a
signature is registered and the cost is incurred by the
merchant
• Visa
– High-risk business models
– “Best Practices” policy
• Mastercard
– Uses the three digit pin code on the back of the card
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Digital Currency
• Digital cash
– Cash stored electronically, used to make online
electronic payments
– Similar to traditional bank accounts
– Used with other payment technologies (digital wallets)
– Alleviates some security fears online credit-card
transactions
– Allows those with no credit cards to shop online
– Merchants accepting digital-cash payments avoid
credit-card transaction fees
– eCash Technologies, Inc. is a secure digital-cash
provider that allows you to withdraw funds from your
traditional bank account
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Digital Currency
• Gift cash, often sold as points, can be
redeemed at leading shopping sites
– An effective way of giving those without credit
cards, the ability to make purchases on the Web
• Points-based rewards
– Points are acquired for completing specified
tasks including visiting Web sites, registering or
buying products
– Points can then be redeemed
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Digital Currency
Using eCash on the Web. (Courtesy of eCash Technologies, Inc.
and ©2000 eCash.)
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E-Wallets
• E-wallets
– Keep track of your billing and shipping information so
that it can be entered with one click at participating
sites
– Store e-checks, e-cash and credit-card information
• Credit-card companies offer a variety of e-wallets
– Visa e-wallets
– MBNA e-wallet allows one-click shopping at member
sites
– Entrypoint.com offers a personalized desktop
toolbar that includes an e-wallet
• A group of e-wallet vendors have standardized
technology with Electronic Commerce Modeling
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Language (ECML)
Smart Cards
• Smart card
– Card with computer chip embedded on its face, holds
more information than ordinary credit card with
magnetic strip
– Contact smart cards
• To read information on smart cards and update information,
contact smart cards need to be placed in a smart card reader
– Contactless smart cards
• Have both a coiled antenna and a computer chip inside,
enabling the cards to transmit information
– Can require the user to have a password, giving the
smart card a security advantage over credit cards
• Information can be designated as "read only" or as "no access"
• Possibility of personal identity theft
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Micropayments
• Merchants pay fee for each credit-card transaction
• Micropayments
– Payments that generally do not exceed $10, allows
companies offering nominally priced products to profit
• To offer micropayments, some companies form
strategic partnerships with utility companies
– eCharge uses ANI (Automatic Number Identification) to
verify the identity of the customer and the purchases
they make
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Millicent Feature
• Millicent is a micropayment technology provider
• Companies using Millicent payment technology
allow customers to make micropayments using
credit or debit cards, prepaid purchasing cards or
by adding purchases to a monthly Internet Service
Provider bill or phone bill
• Millicent handles all payment processing needed
for the operation of an e-business, customer
support and distribution services
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Business-to-Business (B2B)
Transactions
• Business-to-business (B2B) transactions
– Fastest growing sector of e-commerce payments
– Payments are often larger than B2C transactions and
involve complex business accounting systems
• PaymentechTM
– Payment solution provider for Internet point-of-sale
transactions
– Electronic merchants choose from transactionprocessing options including debit cards, credit cards,
checks and EBT authorization and settlement
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Business-to-Business (B2B)
Transactions
• eCredit provides real-time, credit-transaction
capabilities of B2B size
• Clareon facilitates B2B transactions by providing
digital payment and settlement services
– Payment is digitally signed, secured and authenticated
via digital payment authentication (DPA)
– Compatible with all enterprise resource planning (ERP)
systems and can adapt electronic records for
companies, banks and each member of a given
transaction
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Business-to-Business (B2B)
Transactions
• Electronic consolidation and reconciliation of the
business transaction process
– Companies can keep track of a transaction from orderto-cash settlement while reducing administrative costs,
errors, waste and complexity in the supply chain
• Order-fulfillment providers
– Companies attempting to bring supply chain expertise
and logistical services to Internet businesses
• Internet-based electronic B2B transactions will
augment, but not replace, traditional Electronic
Data Interchange (EDI) systems
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B2B Transactions
PAYTRUST SmartBalance™ screen shot. (Courtesy of Paytrust, Inc.)
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TradeCard Feature
• Provides a global B2B e-commerce infrastructure
– Cross-border data management and payment
• Buyer creates pre-formatted electronic purchase
order and presents document to seller
• Purchase order data stored electronically in
TradeCard database, and electronic invoices and
packing slips are produced from data
• Uses a patented "data compliance engine" to check
documents against original purchase order
– If discrepancies are found, concerned parties are
notified immediately and can negotiate to resolve the
conflict
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TradeCard Feature
• TradeCard awaits delivery confirmation from a
third-party logistics services provider (3PL)
– Industry terminology for a shipping company
• When confirmation is received and compliance
met, TradeCard completes the financial transaction
by sending request for payment to the buyer’s
financial institution
• TradeCard enables large-scale and large-dollar
commerce without credit-card payment through
direct interaction with existing financial
institutions
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4.10 TradeCard Feature
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E-Billing
• Electronic Bill Presentment and Payment (EBPP)
– Offers ability to present a company’s bill on multiple
platforms online and actual payment processes
– Payments are generally electronic transfers from
consumer checking accounts, conducted through the
ACH (Automated Clearing House)
• Current method for processing electronic monetary transfers
– Paytrust
• Users send bills directly to Paytrust which scans them and
places them online
• E-mails customers about newly arrived bills and payment-due
dates
• Makes automatic payments on any bill up to a threshold
amount
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E-Billing
• Services to enable EBPP on a company’s site
– Derivion
• Provides billers with electronic capabilities in conjunction with
Paytrust’s service
• Offers billing companies the technology and expertise needed
to transfer from paper to electronic billing through iNetBillerSM
– Encirq
• Partners with banks that issue credit cards, presenting the
consumer with an illuminated statement (interactive statement,
placing special offers from retail merchants to correspond with
the itemized charges on a credit-card statement)
• Builds highly specific consumer profiles each time charges is
received
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CheckFree Feature
• CheckFree is a consolidation service
– Can service any biller and present consumers with all
their bills in one interactive online environment
• If the company or person you wish to pay does not
offer electronic billing, you can still set up
payment to them from any bank account using the
pay everyone service
• For billers, the e-billing option adds convenience
and lower costs
• All payments and outstanding bills can be tracked
online and consumers have interactive access to
their entire payment histories
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Summary
• We have looked at:
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Credit Card Transactions
Digital Currency
E-Wallets
Smart Cards
Micropayments
Business to Business (B2B) transactions
E-Billing
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