E-COMMERCE PAYMENT SYSTEM

 E-COMMERCE PAYMENT SYSTEM

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What Is an Electronic Payment System? 

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"Simply put, electronic payments allow customers to pay for goods and services electronically. This is without the use of checks or cash. Normally e-payment is done via debit cards, credit cards or direct bank deposits."

An e-commerce payment system (or an electronic payment system) facilitates the acceptance of electronic payment for offline transfer, also known as a subcomponent of electronic data interchange (EDI), e-commerce payment systems have become increasingly popular due to the widespread use of the internet-based shopping and banking.

Credit cards remain the most common forms of payment for e-commerce transactions. As of 2008, in North America almost 90% of online retail transactions were made with this payment type. It is difficult for an online retailer to operate without supporting credit and debit cards due to their widespread use. Online merchants must comply with stringent rules stipulated by the credit and debit card issuers (e.g. Visa and Mastercard) in accordance with bank and financial regulation in the countries where the debit/credit service conducts business.

E-commerce payment system often use B2B mode. The security of customer information, business information, and payment information base is a concern during the payment process of transactions under the conventional B2B e-commerce model.

For the vast majority of payment systems accessible on the public Internet, baseline authentication (of the financial institution on the receiving end), data integrity, and confidentiality of the electronic information exchanged over the public network involves obtaining a certificate from an authorized certificate authority (CA) who provides public-key infrastructure (PKI). Even with transport layer security (TLS) in place to safeguard the portion of the transaction conducted over public networks—especially with payment systems—the customer-facing website itself must be coded with great care, so as not to leak credentials and expose customers to subsequent identity theft.

Despite widespread use in North America, there are still many countries such as China and India that have some problems to overcome in regard to credit card security. Increased security measures include use of the card verification number (CVN) which detects fraud by comparing the verification number printed on the signature strip on the back of the card with the information on file with the cardholder's issuing bank.

There are companies that specialize in financial transaction over the Internet, such as Stripe for credit cards processing, Smartpay for direct online bank payments and PayPal for alternative payment methods at checkout. Many of the mediaries permit consumers to establish an account quickly, and to transfer funds between their on-line accounts and traditional bank accounts, typically via automated clearing house (ACH) transactions.

The speed and simplicity with which cyber-mediary accounts can be established and used have contributed to their widespread use, despite the risk of theft, abuse, and the typically arduous process of seeking recourse when things go wrong. The inherent information asymmetry of large financial institutions maintaining information safeguards provides the end-user with little insight into the system when the system mishandles funds, leaving disgruntled users frequently accusing the mediaries of sloppy or wrongful behavior; trust between the public and the banking corporations is not improved when large financial institutions are revealed to have taken flagrant advantage of their asymmetric power, such as the 2016 Wells Fargo account fraud scandal.

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What are the methods of online payment?

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There are varied types of electronic payment methods such as online credit card transactions, e-wallets, e-cash and wireless payment system. Credit cards constitute a popular method of online payment but can be expensive for the merchant to accept because of transaction fees primarily. Debit cards constitute an excellent alternative with similar security but usually much cheaper charges. Besides card-based payments, alternative payment methods have emerged and sometimes even claimed market leadership.

Bank payments

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This is a system that does not involve any sort of physical card. It is used by customers who have accounts enabled with Internet banking. Instead of entering card details on the purchaser's site, in this system the payment gateway allows one to specify which bank they wish to pay from. Then the user is redirected to the bank's website, where one can authenticate oneself and then approve the payment. Typically there will also be some form of two-factor authentication.

It is typically seen as being safer than using credit cards, as it is much more difficult for hackers to gain login credentials compared to credit card numbers. For many eCommerce merchants, offering an option for customers to pay with the cash in their bank account reduces cart abandonment as it enables a way to complete a transaction without credit cards.

Mobile money wallets

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In some developing countries, many people do not have access to banking facilities, especially in tier II and tier III cities. Taking the example of India, there are more mobile phone users than there are people with active bank accounts. Telecom operators, in such locations, have started offering mobile money wallets which allow adding funds easily through their existing mobile subscription number, by visiting physical recharge points close to their homes and offices and converting their cash into mobile wallet currency. This can be used for online transaction and eCommerce purchases.

What are the 4 types of payments?

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What are the types of payments?

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1-Cash (bills and change): Cash is one of the most common ways to pay for purchases. ...

2-Personal Cheque (US check): These are ordered through the buyer's account. ...

3-Debit Card: Paying with a debit card takes the money directly out of the buyer's account. ...

4-Credit Card: Credit cards look like debit cards.

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What are the advantages & disadvantages of E-Payment?

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ADVANTAGE

1- Increased Speed 

 2-Convenience. ...

3- Increased Sales. ...

4-Reduced Transaction Costs. ...

DISADVANTAGE

1-Security Concerns. ...

2-Disputed Transactions. ...

3- Increased Business Costs.

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Write some name of Payment service provider.

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A payment service provider (PSP) is a third-party company that assists businesses to accept electronic payments, from credit cards and debit cards to crypto payments. PSPs act as intermediaries between those who make payments, i.e. consumers, and those who accept them, i.e. retailers. 

Some of the most renowned PSPs are:

1. Adyen

2. PayPal

3. Stripe

There are more than 900 payment providers in the world. More than 300 offer services for Europe and North America. The global payment service provider market is expected to reach ~ $88 Bn by 2027 from ~ $40 Bn in 2019. 

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What is the operating procedures of payment service providers (PSPs)?

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PSPs establish technical connections with acquiring banks and card networks, enabling merchants to accept different payment methods without the need to partner with a particular bank. They fully manage payment processing and external network relationships, making the merchant less dependent on banking institutions.

PSP can also offer risk management services for card and bank based payments, transaction payment matching, reporting, fund remittance and fraud protection. Some PSPs provide services to process other next generation methods (payment systems) including cash payments, wallets, prepaid cards or vouchers, and even paper or e-check processing.

PSP fees are typically charged in one of two ways: as a percentage of each transaction, or as a fixed cost per transaction.

US-based online payment service providers are supervised by the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat money laundering, terrorist financiers, and other financial crimes.

European payment service providers are supervised based on the European Payment Services Directive.

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What are the types payment service providers?

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There are three categories of payment service providers:

1-Payment institutions: enterprises holding a licence specifically for providing payment services.

2-Exempt payment service providers: organisations exempt from the licence requirement under the Exemption Regulation.

3-Banks and electronic money institutions: organisations authorised to act as a payment service provider under their licences, to the extent permitted under those licences. They are excepted from the licence requirement for payment service providers. 

Explain about security concerns about online payment.

Each merchant remains responsible for his own actions and must accordingly ensure that the selected provider observes the guidelines, e.g. with regard to data protection. Compliance with PCI DSS guidelines is important. There are four levels of PCI compliance, that must be respected by the PSP. Depending on the volume of transactions as well as other details about the level of risk assessed by payment brands, the payment service provider has to follow higher standards.

The levels are following:

Level 1 – Over 6 million transactions annually;

Level 2 – Between 1 and 6 million transactions annually;

Level 3 – Between 20,000 and 1 million transactions annually;

Level 4 – Less than 20,000 transactions annually.

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DR. PRAVEEN KUMAR-9760480884

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