Digital Cash/Plastic Money and Electronic Payment System

Presented byPresented by– 

Md. Shihab Uddin Khan

BS (Hons), Applied Physics and Electronics, MS (Computer Science), DU

Associate Professor, Bangladesh Institute of Bank Management

(BIBM)Phone: 01556354558,

E-mail: msukhan2000@yahoo.com, msukhan2000@gmail.com

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What is Payment Systems?

Payment Systems : a payment system consists of a set of instruments,

banking procedures and, typically, interbank funds transfer systems that ensure the circulation of money.

Payment systems responsible for smooth transfer of money. Financial institutions accept, collect, and process a variety of payment instruments, and participate in clearing and settlement processes.

In some cases financial institutions perform all of these tasks, but increasingly, independent third parties play an important role in payment systems operation.

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Definition of EPS:

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Electronic Payment is a financial exchange that takes place online between buyers and sellers. The content of this exchange is usually some form of digital financial instrument (such as encrypted credit card numbers, electronic cheques or digital cash) that is backed by a bank or an intermediary, or by a legal tender.

The various factors that have lead the financial institutions to make use of electronic payments are:

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Decreasing technology cost:The technology used in the networks is decreasing day by day, which is evident from the fact that computers are now dirt-cheap and Internet is becoming free almost everywhere in the world.

Reduced operational and processing cost:Due to reduced technology cost the processing cost of various commerce activities becomes very less. A very simple reason to prove this is the fact that in electronic transactions we save both paper and time.

Increasing online commerce:The above two factors have lead many institutions to go online and many others are following them.

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Affecting the consumers:

 Credit cards, Debit Cards, ATMs (Automated Teller Machines), Stored value cards, E-Banking. Enabling online commerce:

 Digital Cash, E-Cash, Smart cards (or Electronic Purse) and encrypted Credit cards.

Affecting Companies: The payment mechanisms that a bank provides to a company have changed drastically. The Company can now directly deposit money into its employee’s bank account. These transfers are done through Automated Transfer Houses.

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Problems with the traditional payment systems:There are also many problems with the traditional payment systems that are leading to its fade out. Some of them are enumerated below: Lack of Convenience:  Traditional payment systems require the consumer to either send paper cheques by snail-mail or require him/her to physically come over and sign papers before performing a transaction. This may lead to annoying circumstances sometimes. Lack of Security:  This is because the consumer has to send all confidential data on a paper, which is not encrypted, that too by post where it may be read by anyone. 

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 Lack of Coverage:  When we talk in terms of current businesses, they span many countries or states. These business houses need faster transactions everywhere. This is not possible without the bank having branch near all of the companies offices. This statement is self-explanatory. Lack of Eligibility:  Not all potential buyers may have a bank account. Lack of support for micro-transactions: Many transactions done on the Internet are of very low cost though they involve data flow between two entities in two countries. The same if done on paper may not be feasible at all.

 

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Types of Payment Systems:

Manual / Paper base PS: Cash Cheque/Checking Transfer

Electronic Payment System: E-cash/Digital cash Credit Card Stored Value (Pre-paid card) Debit Card Accumulating Balance Payment

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Another Classification of Payment Systems

High Value Payment Systems (>=5 Lac Taka) Real Time Gross Settlement (RTGS) Systems

Regular Value/Retail Payment Systems Cheque Clearing System Electronic Funds transfer ATM/POS Transaction Internet Payments Mobile payments

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Digital Cash Digital cash is (also known as e-currency, e-money, electronic cash, electronic currency, digital money, digital currency, cyber currency) refers to money or script which is only exchanged electronically.

Typically, this involves the use of computer networks, the internet and digital stored value systems.

EFT, direct deposit, digital gold currency and virtual currency are all examples of electronic money.

It is a collective term for financial cryptography and technologies enabling it.

Digital Cash A system that allows a person to pay for goods or services by transmitting a number from one computer to another.

Like the serial numbers on real dollar bills, the digital cash numbers are unique.

Each one is issued by a bank and represents a specified sum of real money.

One of the key features of digital cash is that, like real cash, it is anonymous and reusable.

Digital cash certificate can be reused.

Digital Cash

Most digital cash systems start with a participating bank that issues cash numbers or other unique identifiers that carry a given value, such as five dollars. To obtain such a certificate, you must have an account at the bank; when you purchase digital cash certificates, the money is withdrawn from your account.

For large purchases, the vendor can check the validity of a cash number by contacting the issuing bank.

Digital Cash

Digicash: How First Generation Digital Cash Worked

What is Plastic Money ?

Plastic money are the alternative to the cash Plastic money are the alternative to the cash

or the standard ‘Money'. or the standard ‘Money'.

Plastic money consists of plastic cards on

which information about one's bank account is

encoded, allowing you to make transactions

instead of using cash or cheque.

Plastic money is the generic term for all types Plastic money is the generic term for all types

of bank cards - credit cards, debit cards, smart of bank cards - credit cards, debit cards, smart

cards, etccards, etc

Today it is already impossible to imagine modern bank operations, commercial transactions and other payments without using the plastic cards. Plastic money due to reliability, universality and convenience, which won the deserved recognition all over the world, have received a wide circulation.

Approximately 90% of adults hold one or more cards in UK and USA.

Visa cards holders' number makes more than 300 million. Also, about 300 million clients are totaled by other largest payment system presented as MasterCard and Euro Card alliance.

Benefits of Plastic Money From Customer’s point of view: Carrying less cash is safer for

the customers. In case of Debit Card, a PIN

Number ensures secure access to their checking accounts.

The customers won't be limited to cash on hand with the use of the Plastic cards. And they won't need to remember to carry cheques / cash.

Lesser the checkout lines & faster money transaction with their Plastic cards. There is less change to be made and no cheques to write and approve.

From Merchant’s point of view: Increased Sales Customer Satisfaction Speed of Checkout Improved Efficiency Safety Currency Conversion (Using

Int. Credit Card) Reduced processing &

collection cost

Benefits of Issuer / Acquirer• Interest Income (60%)

• Annual Card Fee (14%)

• Late Payment Charges (1%)

• Foreign Exchange Income (1%)

• Cash Withdrawal Fee (2%)

• Interchange Fee/Income (17%)

[Paid by Acquirer/Merchant’s bank to Issuer/Card holder’s bank]

• Others Income (Merchant’s service charge paid to Acquirer etc.)- (5%)

** An issuer (Bank) of debit cards get the benefits of significant

increases in money deposit (Increase number of depositors).

** In POS terminal services, merchant pays 1.5% to 3% charges per transaction (payment for each shopping/purchase) to the card issuer.

What are the disadvantages of having a credit/debit card?

The disadvantages with the Credit Cards are that if it is stolen it can be used to buys goods to which the holder may be held liable if the theft is not reported. You will have to pay interest and a late fee if you are late on your monthly payment and you will also have to pay an annual fee and a fee if you go over your credit limit.

For the Debit Card you need discipline to avoid spending money on items you would have though twice about if you had actual cash in your pocket. Also if you use the card at machines other than the ones belonging to your financial institution, you will be charged a higher fee.

Types of Plastic Money:

According to PaymentService /Amount Limit-

Credit Card Debit Card Pre-paid Card ATM Card Charge Card

According to Paymentsystem or Card Association-

VISA MasterCard American Express (AMEX) EuroCard Diners Club (DC) Novus Mondex Smart Card JCB (Dominate in Japan)

Types of Plastic Money:

Other Types:

Proprietary Card Branded Card [VISA, NOVUS etc.]

Card Types based on Technology:

Magnetic Strip Card Chip / Microprocessor

Card / Smart CardOther Card Types

Business Card Corporate Card Fuel or Fleet Cards Gift Card Purchasing Card Store Card Power Card

TYPES OF PLASTIC MONEY

According to ATM Card Services in Bangladesh -

Q-Cash (12 member banks: EBL, NBL, SJIBL etc.) IT Consultants Ltd operates Q-Cash ATM services.

E-Cash (8 member banks:. Agrani, Bank Asia, Dhaka Bank, IBBL, SIBL, SEBL, State Bank of India and AB Bank)- E-Cash is owned by United Group and maintained by Electronic Transactions Network Ltd (ETN).

Ready Cash (Micro-processor chip Debit Card): American International Investment (AII) /American International (BD) Ltd is the service provider of this card services. Member banks are Basic bank, Janata, Agrani, Dhaka Bank, MBL etc.

Card Services in Bangladesh

Both Magnetic card and Chip base card are used in Bangladesh.

VISA Credit Card Types used in POS & ATM -- Normal Classic (Use local currency, BDT & Lower limit)

- Normal Gold (Use local currency, BDT & Higher limit)

- Dual Currency Classic (Use BDT & US Dollar, Lower Limit)

- Dual Currency Gold (Use BDT & US Dollar, Higher Limit)

Different Plastic Cards services of a bank

VISA Prepaid (Prepaid Card – Local) VISA Prepaid (Prepaid Card – International) VISA Prepaid (Prepaid Card – Dual) Souvenir Card (Gift Card – Local) VISA Debit Card (Classic, Silver and Gold) Debit Card with Credit Facility VISA Credit Card – (Classic, Silver, Gold) VISA Credit Card – (Local, International) VISA Credit Card – Local Currency VISA Credit Card – Dual Currency

Cont..

Credit card service type-

- Online (Currently Used)- Offline (Currently not used)

Credit facility in Debit cards of DBBL-

- Gold (Credit limit is Tk. 20 lacs)- Silver (Credit limit is Tk. 50 thousands)- Classic (No credit limit)

NBL Power Card is the first debit card for which you don't have to maintain any account with our any branch.

Benefits  It is a Pre-paid Card.  Annual / Renewal Free Tk. 200/- only.  May be issued and refilled from RFCD/FC Account.  Accepted at all VISA POS merchants.  Cash withdrawl at all ATM booths bearing VISA and Q-cash

logo(Except HSBC in Bangladesh).  Drawing of Cash : (i) from NBL ATMs - Free of charges (ii)

From ATMs under Q-cash network- Tk.10.00 per transaction (iii) From other ATM - Tk. 100.00 per transaction.

 Cash Withdrawl Fee(aboard)-2.00% on the cash drawn amount or US$2.00, whichever is higher.

 Only 1% loading fee against both International and Local Power Card at the time of Refilling.

 Yearly Tk.100 for enrollment of SMS service.

EBL LifeStyle Card (Pre-paid Card)

Under "EBL Campus" it's another brilliant offering- a solid,internationally branded prepaid card that suits the lifestyle of students.The best way to not only make a fashion statement, but also to controlyour spending all in style. Reload and use only when you need to.

Features: A global branded VISA prepaid card Reloadable Round the clock access to large ATM network (over 85 Q-cash & VISA

ATMs within Bangladesh) and a large network of POS terminals at different shops

Discount on purchases available from many retail shops/outlets Having a bank account with EBL is not required

Minimum age: 18 years

http://www.ebl.com.bd

1. What is it?

EBL Travel Card is a prepaid Visa card available over the counter to both EBL and non-EBL customers. It has been specially designed to give you more convenient access to your own money – in the USD – while you're traveling.

Purchase an EBL Travel Card and you can have your foreign exchange ready to use anywhere outside Bangladesh, you will no longer need to worry about running after money exchange houses while you are abroad.

It's a Visa Card, which means it is accepted at over 24 million locations worldwide – including shops, car rental companies, travel agents and ATMs.

ConvenienceThe EBL Travel Card is easy to purchase as no bank account or credit check is

required. You don't even need to be an EBL customer to buy one. All you have to do is fill up the Application form, provide a copy of your passport and get the amount endorsed from EBL.

http://www.ebl.com.bd/EBL-Travel-Card.php

What are the benefits of the EBL Travel Card?

1.It's prepaid – load a maximum of $ 3,000 for Non-SAARC countries and $ 1,000 for SAARC countries & Myanmar. The amount is determined by Bangladesh Bank for a calendar year. World wide ATM access to withdraw cash (75% of the loaded amount) in local currency through any Visa-enabled ATM.

02. No transaction fee for purchases

03. Accepted electronically at over 24 million locations worldwide

04. Privilege of a backup card to be safe against lost or theft of your primary card

05. PIN-protected for your security

06. Roaming cell phone bill payment facility

07. Reloadable in Bangladesh against remaining individual travel quota

08. 24-hour access to your balance and transaction history through EBL Cards Center (+88 044 7670 1031-34)

http://www.ebl.com.bd/EBL-Travel-Card.php

What are the limits and how much I can have on the card?

http://www.ebl.com.bd/EBL-Travel-Card.php

Minimum initial purchase of value

$ 50

Limit

$ 3,000 for Non SAARC Countries

$ 1,000 for SAARC Countries & Myanmar

24 hour ATM Cash withdrawal limit 75% of the loaded amount in

maximum 8 transactions per day

24 hour purchase transaction limit 100% of the loaded amount in

maximum 12 transactions per day

To provide EBL Visa Platinum cardholders with the highest levels of service and product delivery, we offer products and services of premium quality to ensure customer satisfaction at the optimum level.Maximum Credit LimitEBL Visa Platinum cardholders are our top priority customers with high income levels, it is imperative that the credit limit supports the premium positioning of EBL Visa Platinum by providing maximum purchasing power to these cardholders. In keeping with the needs of this segment, EBL Visa Platinum cards are offered at a maximum credit limit of BDT 500,000 or as guided by the Central Bank. This maximum credit limit may be converted into USD or local currencies using the market exchange rate and local purchasing power.

Lower Interest RateEBL Visa Platinum cardholders are the privileged ones and so is the interest rate. All your purchases are charged at 2.17% per month where a regular card is charged at 2.5% per month. This gives you to spend more with lower cost.

ABBL VISA Debit Card Services

Card Activation   • After receiving the card, sign the acknowledgement slip and send it to Card Division or any branch of      ABBL or call Card Division for activation.   • Put your signature on the signature panel at the back of your card.

Caution during making transactions   • Please do not let your card be taken out of your sight at any merchant outlet to prevent possible Misuse   • After using your card at a merchant outlet, please ensure that the card returned to you is yours   • Before signing the Sales Slip check at the amount charged   • Retain your copy of the Sales Slip of all transactions until they appear in your Card Account Statement for your future reference

ABBL VISA Debit Card Services

PIN Maintenance   • Destroy the PIN mailer after memorizing your PIN   • Do not write the PIN on the card or keep the PIN inside your wallet   • Change the PIN every month

Highest Cash Withdrawal Facility

Silver Debit Card comes with per day Tk. 30,000/- cash withdrawal facility. However, upon request you can draw up to Tk. 80,000/- per day. White Debit Card comes with per day Tk. 20,000/- cash withdrawal facility. However, upon request you can draw up to Tk. 60,000/- per day. For enhanced amount of cash withdrawal, you need to contact AB Bank Branches or our Customer Care Center. To avail this facility you need to fill up cash withdrawal limit enhancement form.

ABBL VISA Debit Card Services

Highest Purchase LimitAt Branch POS, Silver cardholder can withdraw BDT 300,000/- and White cardholder can withdraw BDT 200,000/- per day. At Merchant POS, Retail purchase limit is BDT 200,000/- per day for Silver Debit Card and BDT 100,000/- per day for White Debit Card.

For Lost/Stolen CardFor lost Debit / Credit Card please email to the following address: cardsteam@abbank.com.bd or call our Card Division at +88 01199 222265. Your card will be replaced within 4-5 working days, and will be couriered to your mailing address you provided in your card application form.

Technology related to Plastic Card:

Plastic card is a plate with standard dimensions (85.6 mm. x 53.9 mm. x 0.76 mm.) produced from special, mechanic- and thermo-resistant type of plastic used to store information.

Magnetic Strip and Micro ChipAs electronic data media, the cards are divided into magnetic strip cards and integrated chip (microprocessor) cards. The first ones are called magnetic cards, the other ones are smart cards, or chip cards.

Benefits of Chip Card

Higher Memory / Storage Capacity More Secured More Reliable Biometric Security Information can be stored Less vulnerable to fraud PIN is not required

Standard features on a plastic card

(1) is the bank logo. (2) is the EMV chip (commonly referred to as 'Chip And

Pin') (3) is the Hologram (4) is the 16 digit card number (5) is the logo of the card type (6) is the expiry date (7) is the name of the cardholder

A diagram showing the front side of a typical credit/debit card.

(1) is the magnetic stripe. (2) is the signature strip (3) is the CVC2 code

A diagram showing the reverse side of a typical credit/debit card.

Standard features on a plastic card

Process of Online Payment by Credit CardsProcess of Online Payment by Credit Cards

Processing a Payment Card Transaction

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Mondex Smart Card Mondex is a smart card that holds and

dispenses electronic cash. Mondex requires special equipment such

as card reader to process. Containing a microcomputer chip, Mondex

cards can accept electronic cash directly from a user’s bank account.

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Digital Payment Systems and the Wireless Web

Mobile payment (m-payments) systems not very well established yet in U.S, but with growth in Wi-Fi and 3G cellular phone systems, this is beginning to change

Example: Qpass, AT&T and Wayport venture to provide mobile payment and billing called GoPort

Gartner predicts m-payments worldwide will total more than several trillion USD by 2012; majority of transactions will be micro-m-payments

Insight on Technology: Wireless Payments Follow Wi-Fi and Cellular Growth

In Europe, already a number of phone-based transaction systems

In U.S., development of Wi-Fi and Bluetooth expected to drive growth

Prerequisites: Development of the technology Technology must become widely available Technology needs backing of most of major

stakeholders Challenge: Getting all the players to agree on a

common secure platform for wireless e-commerce payment systems