Electronic Payment System111

Electronic Payment System

Presented by: Richa Somvanshi (85) Sachin Goel (68) Sahar Airom (118)

Electronic Payment System 

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Financial system creating the means for transferring money between suppliers and users of funds, usually by exchanging debits or credits among financial institutions. Also known as a payment mechanism. A secure electronic financial transaction has to meet the following four requirements: ensure that communications are private; verify that the communications have not been changed in transmission; ensure that the client and server are who each claims to be; and ensure that the data to be transferred was, in fact, generated by the signed author.

Digital Wallets 

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Similar to physical wallets which stores credit card, electronic cash, owner identification and address. Authenticates the consumer through the use of digital certificates or other encryption methods, stores and transfers value, and secures the payment process from the consumer to the merchant.  Makes shopping easier and more efficient  Eliminates need to repeatedly enter identifying information into forms to purchase  Works in many different stores to speed checkout  Amazon.com one of the first online merchants to eliminate repeat form-filling for purchases

Types of E-payments      

Digital-cash Online stored value system Accumulating balance payments Online credit payment systems EFT (electronic fund transfer) E-check

E-cash Concept

Digital cash(e-cash) Digital forms of value storage and value exchange that have limited convertibility into other forms of value and require intermediaries to convert. Example: First virtual and Millicent

E-cash Concept Merchant

5 4 Bank

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1. Consumer buys e-cash from Bank 2. Bank sends e-cash bits to consumer (after charging that amount plus fee) 3. Consumer sends e-cash to merchant 4. Merchant checks with Bank that e-cash is valid (check for forgery or fraud) 5. Bank verifies that e-cash is valid 6. Parties complete transaction: e.g., merchant present e-cash to issuing back for deposit once goods or services are delivered Consumer still has (invalid) e-cash

Consumer

Advantages and Disadvantages of Electronic Cash 

Advantages   

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More efficient. Lower transaction costs Anybody can use it, unlike credit cards, and does not require special authorization

Disadvantages   

Tax trail non-existent, like regular cash Money laundering Susceptible to forgery

Online stored value systems

Online stored value systems Online stored value payment systems permit consumers to make instant, online payments to merchants and other individuals based on value stored in an online account. Example- Ecount.com

How Ecount.com Works: A Stored Value System

Smart Cards

Smart Cards     

Plastic card containing an embedded microchip Available for over 10 years So far not successful in U.S., but popular in Europe, Australia, and Japan Unsuccessful in U.S. partly because few card readers available Smart cards gradually reappearing in U.S.; success depends on:  Critical mass of smart cards that support applications  Compatibility between smart cards, card-reader devices, and applications

Smart Cards examples:

Advantages and Disadvantages of Smart Cards  Advantages: 1. 2.

3. 4. 5.

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Atomic, debt-free transactions Feasible for very small transactions (information commerce) (Potentially) anonymous Security of physical storage (Potentially) currency-neutral

Disadvantages: 1. Low maximum transaction limit (not suitable for B2B or most B2C) 2. High Infrastructure costs (not suitable for C2C)

Digital Accumulating Balance Payment Systems

Allow users to make micro payments and purchases on the Web, accumulating a debit balance for which they are billed at the end of the month. Like a utility or a phone bill consumers are expected to pay entire balance at the end of the month. Example : qPass

Credit Cards

Credit Cards 

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Credit card provides a card holder credit to make purchase up to amount fixed by a card issuer. In B2C business, it continues to be the most used form of payment system given its high convenience. Entities that involve in the credit card payment system include - Card holder - Merchant (seller) - consumer bank - Merchant Bank (merchant’s financial institution - Third party processor

Credit Cards 

Credit card    

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Used for the majority of Internet purchases Has a preset spending limit Currently most convenient method Most expensive e-payment mechanism  MasterCard: $0.29 + 2% of transaction value Disadvantages  Does not work for small amount (too expensive)  Does not work for large amount (too expensive)

Processing a Payment Card Order

Electronic Fund Transfer (EFT)

Electronic Fund Transfer (EFT) 

EFT refers to the paperless act of transmitting money through a computer network

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It is mostly used for Business to business (B2B) commerce where companies doing business together tend to use electronic data interchange (EDI) system to send each other bills and notices of payment

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The payments are made using electronic fund transfer between banks

Electronic Check (E-Check, Digital Check)

Electronic Check (E-Check, Digital Check) 

A new electronic version of paper check. E-check is an instruction to a financial institution to pay a given amount of money to the payee.

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It is a specially formatted email message sent over the Internet. It contains as the same information as on paper based check.

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Check service providers - PayByCheck (http://www.paybycheck.com) - CyberSource (http://cybersource.com)

How Digital Checking Works:

Statement

Quiz Time

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Name two types of e-payments?

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Give two examples of smart cards?

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Give 1 example of digital-cash?

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Give 1 example of Digital Accumulating

Balance Payment Systems?

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What is the full form of ECML ?

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What is the full form of EBPP ?

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What is the full form of OTP?

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What is the full form of OBI?

Round-2

Round-3

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Who founded Digi-cash?

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How much a fee is being prescribed by RBI for EFT (electronic Fund Transfer) ?

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Who developed Millicent E-cash?

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Name two types of smart cards?

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Does Payee is required to sign on E-check or not?

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Does double spending is ethical or not ?

Thank You & Enjoy the chocolates