What are the modes of electronic payments ?
E-Commerce Payment Systems one of the modes of electronic payments are following.
1) Credit Card 2)Debit Card 3)Smart Card 4)E-Money 5)Electronic Fund Transfer (EFT)
1)Credit Card:- Credit card is a small plastic card with a unique number attached to an account When a customer purchases a product via credit card, the credit card issuer bank pays on behalf of the customer and the customer has a certain time period after which he/she can pay the credit card bill. It is usually a credit card monthly payment cycle.
2) Debit Card:- Debit card, like a credit card is a small plastic card with a unique number mapped with the bank account number. The major difference between a debit card and a credit card is that in case of payment through a debit card, the amount gets deducted from the card's bank account immediately and there should be sufficient balance in the bank account for the transaction to get completed whereas in case of credit card there is no such compulsion.
3) Smart Card:- Smart card is again similar to credit card and debit card in appearance but it has a small microprocessor chip embedded in it. It has the capacity to store customer work-related/personal information. The smart card can be accessed only using a PIN(Personal Identification Number) of the customer.
4) E-Money E(Electronic):- Money transactions refer to situations where payment is done over the network and amount gets transferred from one financial body to another financial body convenient and save a lot of time. Online payments done via credit card, debit card or smart card are examples of E-money transactions.
5) Electronic Fund Transfer (EFT):- It is a very popular electronic payment method to transfer money from one bank account to another bank account. Accounts can be in the same bank or different bank. Now a day, internet-based EFT is getting popular.
OR,
Some of the modes of electronic payments are the following.
1) Credit Card
2) Debit Card
3) Smart Card
4) E-Money
5) Electronic Fund Transfer EFT
Credit Card
Payment using a credit card is one of the most common modes of electronic payment. A credit card is a small plastic card with a unique number attached to an account. It also has a magnetic strip embedded in it to read credit cards via card readers. When a customer purchases a product via credit card, the credit card issuer bank pays on behalf of the customer and the customer has a certain time period after which he/she can pay the credit card bill. It is usually a credit card monthly payment cycle. Following are the actors in the credit card system. The cardholder – Customer The merchant - seller of product who can accept credit card payments. The card issuer bank - card holder's bank The acquirer bank - the merchant's bank The card brand - for example, visa or MasterCard.
Credit card payment process
Step Description
Step 1 Bank issues and activates a credit card to the customer on his/her request.
Step 2 Customer presents credit card information to merchant site or to a merchant from whom he/she wants to purchase a product/service.
Step 3 Merchant validates customer's identity by asking for approval from card Brand Company.
Step 4 Card brand company authenticates the credit card and paid the transaction by credit. Merchant keeps the sales slip.
Step 5 Merchant submits the sales slip to acquirer banks and gets the service charges paid to him/her.
Step 6 Acquirer bank requests the card brand company to clear the credit amount and gets the payment.
Step 6 Now card brand company asks to clear the amount from the issuer's bank and the amount gets transferred to the card brand company.
Debit Card
Like a credit card, a debit card is a small plastic card with a unique number mapped with the bank account number. It is required to have a bank account before getting a debit card from the bank. The major difference between a debit card and a credit card is that in case of payment through a debit card, the amount gets deducted from the card's bank account immediately and there should be sufficient balance in a bank account for the transaction to get completed.
Smart Card
A smart card is again similar to a credit card and debit card in appearance but it has a small microprocessor chip embedded in it. It has the capacity to store customer work-related/personal information. A smart card is also used to store money which is reduced as per usage. The smart card can be accessed only using the PIN of the customer. Smart cards are secure as they store information in an encrypted format and are less expensive/provide faster processing. Mondex and Visa Cash cards are examples of smart cards.
E-Money
E-Money transactions refer to situations where payment is done over the network and the amount gets transferred from one financial body to another financial body without any involvement of a middleman. E-money transactions are faster, convenient, and save a lot of time. Online payments done via credit card, debit card or smart card are examples of e-money transactions. Another popular example is e-cash. In the case of e-cash, both customer and merchant both have to sign up with the bank or company issuing e-cash.
Electronic Fund Transfer:
It is a very popular electronic payment method to transfer money from one bank account to another bank account. Accounts can be in the same bank or different bank. Fund transfer can be done using ATM AutomatedTellerMachine or using the computer. Now a day, internet-based EFT is getting popular. In this case, the customer uses a website provided by the bank. Customer logins to the bank's website and registers another bank account. He/she then places a request to transfer a certain amount to that account. The customer's bank transfers the amount to other accounts if it is in the same bank otherwise transfer request is forwarded to ACH Automated Clearinghouse to transfer the amount to another account and the amount is deducted from the customer's account. Once the amount is transferred to another account, the customer is notified of the fund transfer by the bank.
- Payment cards are all types of plastic cards that consumers use to make purchases:
- Credit cards:- such as a Visa or a MasterCard, has a preset spending limit based on the user’s credit limit.
- Debit cards:- emoves the amount of the charge from the cardholder’s account and transfers it to the seller’s bank.
- Charge cards:- such as one from American Express, carries no preset spending limit.
- Open and closed-loop systems will accept and process payment cards.
- A merchant bank or acquiring bank is a bank that does business with merchants who want to accept payment cards.
- Software packaged with your electronic commerce software can handle payment card processing automatically.
- Electronic cash is a general term that describes the attempts of several companies to create value storage and exchange system that operates online in much the same way that government-issued currency operates in the physical world.
- Concerns about electronic payment methods include: • Privacy • Security • Independence • Portability • Convenience
- Two approaches to holding cash: online storage and offline storage.
- Online cash storage means that an online bank is involved in all transfers of electronic cash. Offline cash storage is the virtual equivalent of money you keep in your wallet. However, it must prevent double or fraudulent spending.
- Electronic wallets make shopping more efficient.
- Electronic wallets store shipping and billing information, including a consumer’s first and last names, street address, city, state, country, and zip or postal code.
- E.g. Microsoft .NET passport, yahoo! Wallet
- A smart card is a plastic card with an embedded microchip containing information about you.
- A smart card can store about 100 times the amount of information that a magnetic strip plastic card can store.
- A smart card contains private user information, such as financial facts, private encryption keys, account information, credit card numbers, health insurance information, etc.
- E.g. Mondex smart card, Octopus smart card
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