Download - Digital Payment Systems
Digital Digital Payment SystemsPayment Systems
Learning ObjectivesLearning Objectives
Most common payment systems
General types of payment systems
Need for e-commerce payment systems
Digital wallets
Types of e-commerce payment systems
Credit cards
Digital cash
Online stored value system
Digital accumulating balance payment system
Electronic billing presentment and payment systems
Most Common Payment Systems, Based on Number or TransactionsMost Common Payment Systems, Based on Number or Transactions
Most Common Payment Systems, Based on Dollar AmountMost Common Payment Systems, Based on Dollar Amount
General Types of Payment SystemsGeneral Types of Payment Systems
Cash Checking Transfer
Funds transferred directly via a signed draft or check from a consumer’s checking account to a merchant or other individual
Credit card Processing centers or clearing houses handle verification of
accounts and balances Stored value payments systems
accounts created by depositing funds into an account and from which funds are paid out or withdrawn as needed
Accumulating balance payment systems accounts that accumulate expenditures and to which consumers
make periodic payments
e-Commerce Payment Systemse-Commerce Payment Systems
Credit card
Digital cash
generate a private form of currency that can be spent at e-
commerce sites
Online store value systems
rely on prepayments, debit cards, or checking accounts to
create value in an account that can be used for e-commerce
shopping
Digital accumulating balance payment systems
accumulate small charges and bill the consumer periodically.
These systems are especially suited for processing
micropayments for digital accounts
How an Online Credit Card Transaction WorksHow an Online Credit Card Transaction Works
Limitations of Online Credit Card Payment SystemsLimitations of Online Credit Card Payment Systems
Security Neither the merchant not the consumer can be fully
authenticated
Merchant Risk Consumers can repudiate charges
Cost Roughly 3.5% of purchase plus transaction fee
Social Equity Young adults do not have credit cards
Almost 100 million adult Americans cannot afford cards or are
considered poor risks
B2C Digital Payment Systems
Digital Wallets
Digital Cash Online Stored Value Systems
Smart Card Stored Value Systems
Digital Accumulating Balance Payment Systems
Digital Credit Card Payment Systems
Digital Checking Payment Systems
Digital Wallets
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
Fill out order forms
Promised Functionality of Digital WalletsPromised Functionality of Digital Wallets
Types of Digital WalletsTypes of Digital Wallets
Types of Digital WalletsTypes of Digital Wallets
Client-based digital wallets software applications that consumers install on their computer, and that
offer consumer convenience by automatically filling out forms at online
stores
Server-based digital wallets software-based authentication and payment services and products sold
to financial institutions that market the systems to merchants either
directly or as a part of their financial service package
eeWalletWallet
Developed by Launchpad Technologies
Free wallet software that stores credit card and personal
information on users’ computer, not on a central server;
information is dragged into payment form from eWallet
Information is encrypted and password protected
Works with Netscape and Internet Explorer
MicrosoftMicrosoft Wallets Wallets
Comes pre-installed in Internet Explorer 4.0, but not in
Netscape
All information is encrypted and password protected
Microsoft Wallet Merchant directory shows merchants
setup to accept Microsoft Wallet
Microsoft WalletMicrosoft Wallet
How Microsoft’s Passport Wallet WorksHow Microsoft’s Passport Wallet Works
W3C Proposed Standard for Electronic WalletsW3C Proposed Standard for Electronic Wallets
World Wide Web Consortium (W3C) is attempting
to create an extensible and interoperable method
of embedding micropayment information on a
web page
Extensible systems allow improvement of the
system without eliminating previous work
W3C Proposed Standard for Electronic WalletsW3C Proposed Standard for Electronic Wallets
Merchants to accept several payment options to insure
the widest possible Internet audience
Merchants must embed in their Web page payment
information specific to each payment system
This redundancy spurred W3C to develop common
standards for Web page markup for all payment
systems
Must move quickly to prevent current methods from
becoming entrenched
Digital CashDigital Cash
Also called e-cash
Digital forms of value storage or value exchange that have
limited convertibility into other forms of value and require
intermediaries to convert
Examples of Digital CashExamples of Digital Cash
Digicash: How First Generation Digital Cash WorkedDigicash: How First Generation Digital Cash Worked
Online stored value systemsOnline stored value systems
permit consumers to make instant, online payments to
merchants and other individuals based on value stored in an
online account
Smart cards as store value systems are based on credit-card-
sized plastic cards that have embedded chips that store
personal information
Online Stored Value SystemsOnline Stored Value Systems
How Ecount.com Works: A Stored Value SystemHow Ecount.com Works: A Stored Value System
Digital Accumulating Balance Payment SystemsDigital Accumulating Balance Payment Systems
Allow users to make micropayments and purchases on the
Web, accumulating a debit balance for which they are billed
at the end of the month
Digital Accumulating Balance Payment SystemsDigital Accumulating Balance Payment Systems
Digital Credit Card Payment SystemsDigital Credit Card Payment Systems
Seek to extend the functionality of existing credit
cards for use as online shopping payment tools
How a Digital Credit Card Payment System WorksHow a Digital Credit Card Payment System Works
Digital Checking Payment SystemsDigital Checking Payment Systems
Seek to extend the functionality of existing checking
accounts for use as online shopping payment tools
How Digital Checking Works: EcheckHow Digital Checking Works: Echeck
Smart CardsSmart Cards
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.; their success depends on:
Critical mass of smart cards that support applications Compatibility between smart cards, card-reader devices, and
applications
Mondex Smart CardMondex Smart Card
Holds and dispenses electronic cash
Developed by MasterCard International
Requires specific card reader for the merchants
and/or customers to use card over Internet
Supports micro-payments as small as 3 cents and
works both online and off-line at stores or over the
telephone
Mondex Smart CardMondex Smart Card
Disadvantages
Card carries real cash in electronic form,
creating the possibility of theft
No deferred payment as with credit cards.
Cash is dispensed immediately
Mondex Smart Card ProcessingMondex Smart Card Processing
B2B Payment SystemsB2B Payment Systems
More complex than B2C systems
Must link into exist ERP and EDI systems
Two main types Systems that replace traditional banks
Existing banking systems extending to the B2B marketplace
Key Features of B2B Payment SystemsKey Features of B2B Payment Systems
Electronic Billing Presentation and PaymentElectronic Billing Presentation and Payment
New forms of online payment systems for monthly bills
Allow consumers to view bills electronically and pay
them through electronic funds transfers from bank or
credit card accounts
Electronic Billing Presentation and PaymentElectronic Billing Presentation and Payment Growth of EBPP MarketGrowth of EBPP Market
Electronic Billing Presentation and PaymentElectronic Billing Presentation and Payment Types of EBPP SystemsTypes of EBPP Systems