An Introduction….
E - payment
SYSTEM
TABLE OF CONTENTS
4.
TYPES
3.
FEATURES
1.
INTRO
5.
BENEFITS
6.
DEMERITS
2.
HISTORY
7.
E-PAYMENT
GATEWAYS
8.
CONCLUSION
ELECTRONIC PAYMENTS
E-payments are an electronic or digital way of transferring funds. Essentially, you can utilise electronic payment methods to transfer funds as an alternative to cash payments. It is a collective phrase for many different kinds of payment methods available and the processing of transactions and their application within online merchants and e-commerce websites. The growth in electronic banking and e-commerce is fueled by:
HOW IT ALL STARTED
FEATURES of e-payment system
The payment infrastructure should not only be robust but also available and accessible to a wide range of consumers and sellers of goods and services. The value stored in the electronic cash should be honored and accepted by other banks and financial institutions for reconciliation.
Users and businesses want a payment system that is reliable because the availability of services and smooth running of an enterprise will depend on the availability and successful operation of the payment infrastructure.
The users should be completely shielded infrastructures. The user should be completely shielded from a system or single point failure.
Linkability of an electronic payment system implies that payments can be associated with a particular user, or that it is possible to recognize several payments originating from some user.
Users can be linked to their spending even if the system they use is anonymous. A relation between the user and his payments can be established.
Digital currency should be stored in a form that is resistant to replication, double-spending, and tampering. At the same time, it should offer protection from the intruders trying to tap it to unauthorized use, when transmitted over the internet.
The user of the payment mechanism should be able to use it as easily as real currency. This requires that the payment system should be well integrated with the existing applications and processes that acquire the role of transacting parties in e-commerce.
The payment system infrastructure should be scalable, to be able to handle the addition of new users and merchants, so that systems will perform normally without performance degradation and maintain the quality of service. It should be able to offer the same performance and cost per transaction overheads with a growing number of customers and transactions.
This characteristic refers to the desire of users to protect their privacy, identity and personal information. In some transactions, the identities of the parties could be protected by anonym it.
Anonymity means that it is not possible to discover someone’s identity or to monitor an individual’s spending patterns.
Applicability of a payment system is defined as the extent to which it is accepted for payments at points of sale, or at online e-commerce sites.Debit cards and credit cards have high applicability, as one can pay with them in a variety of places. The applicability of a payment system may vary from country to country.
Authorization type is defined as the form of control over the validity of transactions. The authorization type can be offline. Offline authorization means that users of the system can exchange money while not connected to a network, without a third party mediating the transaction. Paper cheques are the example of offline authorization.
Payment systems should be in a position to accept several forms of payment rather than limiting the users to a single form of currency.
Efficiency here refers mainly to the cost overheads involved in the operation of digital payments. The cost of payment per transaction should be negligible.
Trust refers to the degree of customers confidence that their money and personal information will be safe, and that all parties involved will not act against users’ interests. Users need to trust that payments will be bot be stolen or misused.
PHASES OF E-PAYMENTS
REGISTRATION: This phase involves the registration of the payer and the payee with the issuer and acquirer respectively. Most electronic payments designed require registration of payers and payees with their corresponding banks so there is a link between their identities and their accounts held at the bank.
INVOICING: In this phase, the payee obtains an invoice for payment. This is accomplished by either browsing and selecting products for purchase from the merchant’s (payee’s) website in case of purchases made through the internet or obtaining an electronic invoice using other electronic communication medium like email
PAYMENT SELECTION AND PROCESSING: In this phase the payer selects type of payment, (card based, e-cash, e-cheque, etc.,) based on the type of payment the payee accepts
PAYMENT AUTHORISATION AND CONFIRMATION: In this phase, the acquirer on receiving payment details from the payee authorises the payment and issues a receipt containing the success or failure of the payment to the payee
PHASE-4
PHASE-3
PHASE-2
PHASE-1
TYPES OF E-PAYMENT SYSTEM
Digital cash
DIGITAL CASH also known as E-CASH or MICRO CASH is a system of purchasing cash credits in relatively small amounts, storing the credits in your computer and then spending them when making electronic purchases over the internet. It is best suited for making real time payments over the internet whereas setting uo and using digital cash is more complicated than using conventional cash.
Examples of types of digital money are CRYPTOCURRENCIES, CENTRAL BANK DIGITAL CURRENCIES, AND STABLECOINS.
PROPERTIES OF E-CASH:
WORKING OF E- CASH
1.ISSUE OF DIGITAL CASH
2.SEND DIGITAL CASH
3.ASK FOR PAYMENT
BANK
PERSON A
PERSON B
CURRENCY SERVER
Currency Server was designed to be the most advanced currency-enabling component on the market. It provides exchange rate information and currency internationalization, conversion and rounding services via COM, . NET and SOAP Web services, and Ajax-style scripting. The the different currencies depending upon the machine usedcurrency server is a special term used in EPS whereby the customer and merchant can exchange the different currencies depending upon the machine used.
Following are the types of currency servers:-
The various applications where currency servers are used as written below:-
CREDIT CARD
A credit card is a type of credit facility, provided by banks that allow customers to borrow funds within a pre-approved credit limit. It enables customers to make purchase transactions on goods and services. The credit card limit is determined by the credit card issuer based on factors such as income and credit score, which also decides the credit limit.
The credit card information includes credit card number, cardholder’s name, expiration date, signature, CVC code, etc. The best part about a credit card is that it is not linked to a bank account. So, whenever you swipe your credit card, the amount is deducted from your credit card limit, not your bank account. You can use it to pay for food, clothes, take care of medical expenses, travel expenses, and other lifestyle products and emergency services.
WORKING OF CREDIT CARD
SMART CARDS
A smart card is a physical card that has an embedded integrated chip that acts as a security token. Smart cards are typically the same size as a driver's license or credit card and can be made out of metal or plastic. They connect to a reader either by direct physical contact -- also known as chip and dip -- or through a short-range wireless connectivity standard such as radio-frequency identification (RFID) or near-field communication. Smart card microprocessors or memory chips exchange data with card readers and other systems over a serial interface. The smart card itself is powered by an external source, usually the smart card reader.
Smart cards communicate with readers via direct physical contact or using RFID or another short-range wireless connectivity standard. The chip or processor on the card contains data that the card reader accesses. The processor on the card contains a basic operating system (OS) that lets the card hold, transmit and protect the data.
The card reader passes data from the smart card to its intended destination, usually a payment or authentication system, over a network connection
DEBIT CARDS
A debit card is a payment card that deducts money directly from a consumer’s checking account when it is used. Also called “check cards” or "bank cards," they can be used to buy goods or services; or to get cash from an automated teller machine or a merchant who'll let you add an extra amount onto a purchase. It is linked to the user's checking account at a bank or credit union. The amount of money that can be spent with it is tied to the account size (the amount of funds in the account). Debit cards usually have daily purchase limits and purchases can be made with or without a PIN. If the card has a major payment processor’s logo, it often can be run without one, just as a credit card would be.
Three types of DEBIT CARDS :-
Digital wallet
A digital wallet (or electronic wallet) is a financial transaction application that runs on mobile devices. It securely stores your payment information and passwords. These applications allow you to pay when you're shopping using your device so that you don't need to carry your cards around. You enter and store your credit card, debit card, or bank account information and can then use your device to pay for purchases.
DIGITAL WALLETS can also store:
ELECTRONIC CHEQUE
E-Cheque is an electronic counterpart of paper cheque. It turns the cheque writing and deposit processes totally online. Paying with e-Cheques will be an entirely paperless experience. It is in PDF format. It has similar layout of a paper cheque with the display of a standardized e-Cheque logo on the face of e-Cheque. It has the same legal status as paper cheque. It is not negotiable nor transferable. It must be addressed to a payee and deposited to the payee’s bank account only. It can be used to make Hong Kong Dollar, US Dollar and Renminbi payments
Issuance of e-Cheque
Step 1 – Log onto your Internet banking account
Step 2 – Select e-Cheque Issuance service
Step 3 – Input the payee name, cheque date and cheque amount in figures
Step 4 – The bank will generate the e-Cheque with the digital signature based on the payer’s given instruction
Step 5 – Download and send the e-Cheque to the payee through electronic means (e.g. by email)
This Photo by Unknown Author is licensed under CC BY-NC
benefits of e-payment system
E-payments enable you to make purchases with a simple tap or swipe. Transactions are processed and completed within a couple of minutes. While it is faster than paying with a paper check or other instruments, it also saves you the time and hassles associated with arranging cash.
With electronic payment systems, you do not have to wait in long queues at ATMs or bank branches to withdraw cash. The lines at checkout counters are also shorter, with each transaction taking less time. You can also use these online payment systems to pay for a wide variety of products on online shopping websites, thus eliminating the need to visit stores physically.
This Photo by Unknown Author is licensed under CC BY-NC
The payments made using e-payment methods reflect in your bank statement or digital wallets. You also receive instant e-mails and SMS alerts after every transaction. You can check for the credit/debit of funds in your account based on the chosen method of e-payment. In case funds are debited wrongly, the transaction is reversed within 24-48 hours.
Now that you know what is e payment and its various types, you can choose your preferred method of online transactions. You can also download your bank’s mobile wallet or app to conduct electronic transactions in a secure, hassle-free manner.
Another advantage of e-payments is that it helps build a cashless economy, especially in the urban areas of the country, by reducing the reliance on cash. Reduced cash usage in the urban sectors enables banks to distribute more cash in the rural parts of the nation where e payments are uncommon.
Cash transactions bring their own set of risks, such as robbery, misplacement, or other similar incidents. However, electronic payment systems come equipped with security protocols that ensure the safety of your funds. Banks use highly secure practices like two-factor authentication, PIN (Personal Identification Numbers) and OTPs (One Time Passwords) to protect your funds from thefts or fraudulent activities.
DEMERITs of e-payment system
As discussed in the previous point, using online payments come with a lot of security risks. Without proper security measures, fraudsters can easily hack important financial information and data. And since there aren’t any verification systems like facial recognition or biometrics, criminals can easily get away without getting caught.
One of the main disadvantages of online payments is the technological illiteracy among many people, especially the older generation. Since they don’t have enough knowledge on how to go about using technology or smartphones, they refrain from using online payment methods. A lot of them also fear the complexities of it and continue to use traditional methods of payment. This is a huge drawback in developing countries like India.
Some banks limit the number of transactions you can do in a day or the maximum amount you can transfer in a day. Most online transactions also have a time limit under which you need to complete the process (like receiving and accepting OTPs). All these limitations can prove to be pretty inconvenient to some users.
Online payments are subject to technical failures or downtime, just like any other software that is dependent on technology. Though tech maintenance operations are announced in advance and usually take place during the night, sometimes, it can cause frustration among online shoppers. Especially when it takes place without prior warning, a lot of businesses experience heavy bounce rates.
If you are a registered user with a website who uses online payments pretty often, there are high chances that the online portal can have access to your personal information or bank account details. Though most transactions use OTPs (one-time passwords), the need for password protection arises in such situations. Especially if you are someone who deals with different banks, you might face the risk of a privacy breach.
Just as more and more people are shifting to online payments and preferring them over other traditional forms of payment, so are cybercriminals. ID thefts, phishing attacks, and database exploits are becoming more common. In order to prevent these and increase security, businesses install a lot of payment-security softwares and eventually incur a lot of costs.
If you find someone using your electronic money, you can file a complaint with your bank or online payment processor. However, if you are unable to find the personal details of the person or for that matter, any details about them, then you cannot file a complaint or receive a refund. It gets tricky in such situations.
Most online payments are done with the help of credit/debit cards, ATM cards, or identity cards. So if you lose any of these, automatically, your online payment accounts that are linked to your cards will be at risk too. Of course, you can block your cards after informing the bank, but the time between losing your card and blocking it may prove to be risky as many transactions by fraudsters can take place during that time period.
Unlike physical transactions, there are no ways to identify if the person making the online payment is the one he/she is claiming to be. Since there are no verification methods like photographs or signatures, most online payments are done behind a veil of anonymity. This can lead to a considerable amount of forgery and identity theft.
E-PAYMENT GATEWAYS
A PAYMENT GATEWAY is an online payments service that, when integrated with the e-commerce platform, is devised as the channel to make and receive payments. The procedure to receive payments includes the customer requiring to fill in some details, like credit/debit card number, expiry date, and CVV. Post this, the customer proceeds to make a payment, which then, gets transferred from the buyer’s account to the seller’s (merchant’s) account.
The main role of an E-payment gateway is to approve the transaction process between merchant and customer.
It plays a vital role in the online transaction process and authorizes transactions between merchants and customers.
It helps the e-commerce platform aggravate its existence with ease of payments to offer to its customers.Besides, it also leads to the e-commerce platform gaining rapport for leading to not only quick and secure payments but also convenience and success with the same every time.
A payment gateway service can be provided by banks directly or a payment service provider authorized by a bank.
HOW IT WORKS
TYPES
E-PAYMENT GATEWAYS
1.PAYPAL
2.AMAZONPAY
3.SKRILL
4.STRIPE
5. 2CHECKOUT
6.AUTHORIZE.NET
7.PAYZE
8.SECURION PAY
9.BLUE SNAP
10.BRAINTREE
CONCLUSION
Digital payments are shaping the e-commerce industry in ways more than one. As both a business owner and a customer, it is pretty much expected of you to have online payment options.
Though it is mainly considered to be advantageous for many obvious reasons, online payments have their own set of disadvantages that you need to be aware of. After all, in today’s digital world, every convenient feature comes with a bit of risk! With proper precautions and management, you can overcome most of these disadvantages. E-payment systems vividly improve our banking experience. The Covid-19 pandemic converted even the most “cash-loyal” shoppers into electronic money users. For that reason, merchants have to adopt various e-payment solutions to meet the customers’ growing expectations.
The increasing popularity of the NFC technology and biometric security layers makes e-payments even more secure and convenient.
Customers and merchants have become more open to “non-cash” payments, as their benefits are hard to ignore.