Lecture E-commerce and e-business for managers - Chapter 4: Online monetary transactions

Chapter 4 provides knowledge of online monetary transactions. This chapter includes contents: Credit-card transactions, online credit-card fraud, digital currency, e-wallets, alternate consumer payment options, peer-to-peer payment, smart cards, business-to-business (B2B) transactions, e-billing, developing payment standards.

• Secure  electronic  funds  transfer  is  crucial  to  e­ commerce 

• Examination of how individuals and organizations  conduct monetary transactions on the Internet 

• Credit­card  transactions,  digital  cash  and  e­ wallets,  smart  cards,  micropayments  and  electronic bill presentment and payment 

• Electronic­payment enablers

• Popular form of payment for online purchases 

• Resistance due to security concerns

• Many cards offer capabilities for online and  offline purchases

– Prodigy Internet Mastercard

– American Express Blue

4.2 American Express: Enabling  Secure Payments on the Web

– ExpressFormSM

– AutobuySM

4.2 American Express: Enabling  Secure Payments on the Web

• Online Program Management 

– Allows corporations to manage the corporate accounts of a large number of employees  

• Verification

• Money issued to merchant after product/service is  distributed

Card Transaction

• Step 1

– Consumer makes a purchase at an online store, credit card information received by e­store

• Step 2

– Credit card information is sent from the merchant to the acquiring bank

• Step 3 and Step 4

– The credit card association and the issuing bank certify the transaction and the verification is sent to the acquiring bank

• Step 5

– The merchant ships the product and payment is issued

Enablers

• Credit­Card Transaction Enablers

– Companies that have established business relationships with financial institutions that will accept online credit­card 

secure environment over the Web

• Establishes direct connection between its servers and the Web sites of its e-business customers

• Customer enters credit-card and shipping information

• Information sent to CyberCash for validation, once validation

is received, purchase can be completed and funds are transferred electronically from customer accounts to merchant’s account

CyberCash FraudPatrol. (Courtesy of CyberCash™, Inc CyberCash is a registered trademark of CyberCash Inc., 

in the United States and other countries.)

• Chargeback

– When a credit­card holder claims a purchase was made by an unauthorized individual, or when a purchase was not 

received – The charges in question are not the responsibility of the 

credit­card holder – On the Internet, neither a scan of the card nor a signature is registered and the cost is incurred by the merchant

• Digital cash 

– Stored electronically, used to make online electronic 

payments– Similar to traditional bank accounts

– Used with other payment technologies (digital wallets) 

– Alleviates some security fears online credit­card transactions– Allows those with no credit cards to shop online

– Merchants accepting digital­cash payments avoid credit­card transaction fees

– eCash Technologies, Inc. is a secure digital­cash provider that allows you to withdraw funds from your traditional bank account

• Gift cash, often sold as points, can be redeemed at  leading shopping sites 

– An effective way of giving those without credit cards, the ability to make purchases on the Web

– Flooz 

• Points­based rewards 

– Points are acquired for completing specified tasks including visiting Web sites, registering or buying products

– Points can then be redeemed

– Beenz

Using eCash on the Web. (Courtesy of eCash Technologies, Inc and ©2000 eCash.)

• E-wallets

– Keep track of your billing and shipping information so that it can be entered with one click at participating sites

– Store e-checks, e-cash and credit-card information

• Credit-card companies offer a variety of e-wallets

– Visa e-wallets

– MBNA e-wallet allows one-click shopping at member sites

– Entrypoint com offers a personalized desktop toolbar that includes an e-wallet

• A group of e-wallet vendors have standardized

technology with Electronic Commerce Modeling

Language (ECML)

Options

EntryPoint Internet Toolbar. (Courtesy of EntryPoint. Inc.)

• Peer-to-peer transactions

– Allow online monetary transfers between consumers

– eCash allows the transfer of digital cash via e-mail between two people who have accounts at eCash-enabled banks

– PayPal offers X payments

• Allows user to send money to anyone with an e-mail address

• Can be used to enable credit-card payment for auction items in

real time (the transaction begins processing immediately after

it is initiated), reducing the risk of fraud or overdrawn accounts

– BillPoint

• Allows buyers to submit electronic payments to sellers’ checking accounts

– Tradesafe.com (larger transactions, B2B)

• Smart card

– Card with computer chip embedded on its face, holds more information than ordinary credit card with magnetic strip

– Contact smart cards

• To read information on smart cards and update information,

contact smart cards need to be placed in a smart card reader – Contactless smart cards

• Have both a coiled antenna and a computer chip inside, enabling the cards to transmit information

– Can require the user to have a password, giving the smart card a security advantage over credit cards

• Information can be designated as "read only" or as "no access"

• Possibility of personal identity theft

– eCharge enables companies to offer this option to customers

• eCharge uses ANI (Automatic Number Identification) to verify 

the identity of the customer and the purchases they make

• Companies using Millicent payment technology allow customers to make micropayments using credit or debit cards, prepaid purchasing cards or

by adding purchases to a monthly Internet Service Provider bill or phone bill

• Millicent handles all payment processing needed for the operation of an e-business, customer support and distribution services

Transactions

• Business-to-business (B2B) transactions

– Fastest growing sector of e-commerce payments

– Payments are often larger than B2C transactions and involve complex business accounting systems

• EBT (Electronic Benefits Transfer)

– Defined by the USDA as the electronic transfer of

Transactions

capabilities of B2B size

digital payment and settlement services

– Payment is digitally signed, secured and authenticated via

digital payment authentication (DPA)

– Compatible with all enterprise resource planning (ERP)

systems and can adapt electronic records for companies, banks and each member of a given transaction 

Transactions

• Electronic consolidation and reconciliation of the  business transaction process

– Companies can keep track of a transaction from order­to­cash settlement while reducing administrative costs, errors, waste and complexity in the supply chain 

• eTime Capital

• Order­fulfillment providers

– Companies attempting to bring supply chain expertise and logistical services to Internet businesses 

• Internet­based electronic B2B transactions will 

augment, but not replace, traditional Electronic 

Data Interchange (EDI) systems

Transactions

• Provides a global B2B e­commerce infrastructure 

– Cross­border data management and payment

• Buyer creates pre­formatted electronic purchase  order and presents document to seller 

• Purchase order data stored electronically in 

TradeCard database, and electronic invoices and  packing slips are produced from data

• Uses a patented "data compliance engine" to check  documents against original purchase order

– If discrepancies are found, concerned parties are notified 

immediately and can negotiate to resolve the conflict

third-party logistics services provider (3PL)

– Industry terminology for a shipping company

• When confirmation is received and compliance

transaction by sending request for payment to the buyer’s financial institution

• TradeCard enables large-scale and large-dollar commerce without credit-card payment through direct interaction with existing financial institutions

4.10 TradeCard Feature

• Electronic Bill Presentment and Payment (EBPP) 

– Offers ability to present a company’s bill on multiple 

platforms online and actual payment processes– Payments are generally electronic transfers from consumer 

checking accounts, conducted through the ACH (Automated 

Clearing House)

• Current method for processing electronic monetary transfers – Paytrust 

• Users send bills directly to Paytrust which scans them and  places them online 

• E­mails customers about newly arrived bills and payment­due  dates

• Makes automatic payments on any bill up to a threshold 

• Offers billing companies the technology and expertise needed

to transfer from paper to electronic billing through iNetBillerSM

– Encirq

• Partners with banks that issue credit cards, presenting the

consumer with an illuminated statement (interactive statement,

placing special offers from retail merchants to correspond with the itemized charges on a credit-card statement)  

• Builds highly specific consumer profiles each time charges is received

– Can service any biller and present consumers with all their bills in one interactive online environment

• If the company or person you wish to pay does not offer electronic billing, you can still set up payment to them from any bank account using the

pay everyone service

• For billers, the e-billing option adds convenience and lower costs

• All payments and outstanding bills can be tracked online and consumers have interactive access to their entire payment histories

• Essential to the success of e­commerce 

• Businesses offering domestic and international 

services must have assurance that payment will be  received, that it is secure and that it is valid 

• Open Financial Exchange (OFX) 

– Developed and presented by Intuit, Microsoft and Checkfree 

in 1997 – To serve as a standard mechanism for the exchange of 

financial information 

• A PIN code authorizes the transaction