What are different form of E-Payment system?

 Forms of E- Payment System

1.  Online Credit Card Transaction System 
2. Digital Cash 
3. Online Stored Value System
4. Digital Accumulating Balance Payment System 
5. Digital Credit Account 
6. Digital Checking 

1. Online Credit Card Transaction System 

• Works on mutual trust between consumer and merchant
•  Merchants never see the actual card (card not present transaction)
• No card impression is taken
• No signature is available 
• Charges can be disputed later by the consumer 
• Merchant faces the risk of the transaction being disallowed in case of dispute 

How online credit card transaction works 

Some information about How online credit card transaction works 

• Processed in much the same way that in-store purchases are

•  The major difference is that online merchants do not see or take an impression of a card, and no signature is available. 

• Participants include consumer, merchant, clearinghouse, merchant bank (acquiring bank), and consumer’s card issuing bank

 Five parties involved in this transaction

a) Consumer

 b) Merchant 

c) Clearinghouse 

d) Merchant bank

 e) Issuing bank

Step 1:- When the customer wants to pay, a secret tunnel through the internet is created using SSL, and credit card information is sent to the merchant

Step 2:- Once the credit card information is received, the merchant contacts a clearinghouse 

Step 3:-  The clearinghouse requests the issuing bank to authenticate and verify the customer account balance 

Step 4:-  Issuing bank credits merchant account

 

Credit Card E-commerce Enablers ( Internet Payment Service Provider) 

• Provides merchant a secure merchant account

• Provides payment processing software installed on merchant’s site 

• collects transaction information from merchant’s site 

• routes the transaction via VeriSign ( Internet security service provider) payment gateway to the appropriate bank 

• ensures a customer is authorized to make a purchase 

• funds transferred to a merchant account

Limitations of Online Credit Card Payment Systems

• Security – neither the merchant nor consumer can be fully authenticated
• Cost – for merchants, around 3.5% of the purchase price plus a transaction fee of cents per transaction
• Social equity – many people do not have access to credit cards (young adults, plus almost 100 million other adult Americans who cannot afford cars or are considered poor risk)

2.Digital cash (Electronic cash or e-cash )

• An alternative payment system developed for e-commerce in which unique, authenticated tokens representing cash value are transmitted from consumer to merchants.

• In these schemes, users would deposit money in a bank or provide a credit card. Banks would issue digital tokens (unique encrypted numbers) for various denominations of cash, and consumers could “spend” these at merchant sites. In return, merchants submit these electronic token to their banks.

• Digital cash can also be used for micropayments or larger purchases. Digital cash is currency represented in electronic form that moves outside the normal network of money (paper currency, coins, checks, credit cards).

• Users are supplied with client software and can exchange money with another e-cash user over the Internet or with a retailer accepting e-cash.

• eCoin.net is an example of a digital cash service. In addition to facilitating micropayments, digital cash can be useful for people who do not have credit cards and wish to make Web purchases.

• Other examples include E-gold, DigiCash, First Virtual, and Millicent, etc.

How does Digital Cash work? 

• Digital cash schemes operate in the following manner: – A user installs a "cyber wallet" onto the computer. – Money can be put in the wallet by deciding how much is needed and then sending an encrypted message to the bank asking for this amount to be deducted from the user's account. 

• The bank then generates "serial numbers", encrypts the message, signs it with its digital signature and returns it. 

• The user is now entitled to use the message (coin or token) to spend it at merchant sites. 

• Merchants receive e-cash during a transaction and see that it has been authorized by a bank.

3.Online stored value systems 

• Online stored value systems allow customers to make instantaneous payments to various merchants contingent on the value they have stored in the system.

• One of the most prominent examples of an online stored-value system would be PayPal. PayPal works by linking the user’s online account with a credit, debit, or checking account that he/she currently possesses.

• When a transaction is processed, PayPal automatically debits the user’s account and credits the merchant’s account, without having to transfer any sensitive customer credit information. 

• Other Examples:- Alert Pay, Web Money, 2Checkout, Google Checkout, Payza, Sage Pay, Dwolla, Open Pay, Go cardless, Net Banx 

Smart Cards as Stored Value Systems 

• Another kind of stored value system based on credit-card sized plastic cards that have embedded chips that store personal information 

• Two types:  Contact  Contactless 

• Examples: Mondex, American Express Blue

4. Digital accumulated balance payment

• Accumulated balance digital payment systems enable users to make micropayments and purchases on the Web, accumulating a debit balance that they must pay periodically on their credit card or telephone bills.

• It means, Balances accumulate and customers are billed monthly with their regular phone, credit card bills.

• IPIN has been widely adopted by online music sites that sell music tracks for 99 cents. It invoices customers through existing consumer billing services such as telephone and wireless service companies, Internet service providers, and banks.

• PaymentOne, payment plus (AOL service )and Trivnet enable consumers to charge small purchases to their monthly telephone bill.

5. Digital Credit Card Payment Systems 

• Extend the functionality of existing credit cards for use as online shopping payment tools 

•  Focus specifically on making use of credit cards safer and more convenient for online merchants and consumers

•  Example: e. Charge

• It authenticates both parties by verifying digital certificates 

• It automatic form completion 

• Credit card bills paid at month-end by credit or debit account or a bank account 

6. Digital checking payment systems

• Digital checking payment systems, such as Western Union MoneyZap and eCheck, extend the functionality of existing checking accounts so they can be used for online shopping payments.

•  Digital checks are less expensive than credit cards and much faster than traditional paper-based checking. 

• These checks are encrypted with a digital signature that can be verified and used for payments in electronic commerce. Electronic check systems are useful in business-to-business electronic commerce.