Abstract
The human never stop to build up new things. Day by day humans are adding new technology and improvement in the world. While electronic commerce (e-commerce) continues to have a deeply impact on the global business environment, technologies and applications have begun to focus more on more. Now a day’s customers and businesses are using the internet to conduct business and to run it which gives an incredible growth for e-commerce. Ecommerce engages different kinds of phases like www, digital rights management, security, privacy issues and electronic payment systems. Now days in market areas there are different types of electronic payment systems available.
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In this Ecommerce issue paper, we will discuss the different types of payment system which are currently being used in the market-place and further going to discuss in favor of and defraud of each type of payment system. At finally, it is fast and steady progress technologically electronic payment systems in the recent years, as most focused on integration between the various components needed in the complete purchasing process to produce end-to-end solutions rather than in the actual payment systems.
Introduction
The technology of the Internet and the development of electronic commerce have grown up in a running business environment where payment transactions are able to take place without face-to-face communication. When the internet came in 1958 the ecommerce was not found till early 1990s but in past 14 years the technologies are developing new technique rather then before. The success of electronic payment is the one of the reasons behind the unbelievable growth of e-commerce.
The technologies are developing ecommerce business but in the market very hard to define e-commerce. What is e-commerce? The E – Commerce can be defined as a combination of several cores like communication, interface, business process, online media, as a structure of a market. Business are marketing and selling their products to the customers on the internet and customer willing to buy their products by visiting the medium of website of the organizations. It involves digitally enabled commercial transactions within organizations. The Digitally enabled transactions consist of all transactions directed by digital real time technology such as Desktops, Laptops and handheld devices like PDA, Cell Phones, iphone.
When it comes to payment options, nothing is more convenient than electronic payment. But still this mode of payment is not as popular as typical transactions. There are different kinds of electronic payments systems like Credit cards, Digital cash, EFTPOS, Digital accumulating balance payment systems, Digital credit accounts, Online stored value systems. We will discuss how each of them does work and their benefits and boundaries.
How Electronic Transaction Works
The concept of digital wallet is relevant to many of the new digital payment systems. It tries to follow the functionality of traditional wallet. Most important functions includes authentication consumer through use of digital certificates or other encryption methods and store and transfer value trough secure payment process from consumer to merchant. Digital wallet is mostly use in M-commerce. There are two types of digital wallet: client side and server side.
Every electronic payment system depends on some type of encryption and utilization of digital certificates. With an encryption algorithm, the original text is changed into cipher text, which is decrypted by the receiver and transformed into clear-text. The encryption algorithm utilizes a key, a binary number often ranging in length from 40 to 128 bits. After being encrypted, the information is considered to be coded and therefore ”locked.” The recipient uses another key to ”unlock” the coded information, restoring it to its original binary form (Eletronic payment system, 2010).
Digital Cash is one of the best forms of payment systems. In Digital cash, Customer establishes an account at bank and download digital wallet with private and public keys. Then bank sends e-cash through encrypted and authenticated messages coins as customer requested. While purchasing online customer gives e-cash to merchants. Merchant transfers e-cash to bank and bank credits merchant’s account.
Credit cards are main form of online payment, accounting for around 80% of online payments in 2004-2005. This transaction is similar with the same way that in-store payment purchases. Customer makes purchase via World Wide Web. They get connected securely to merchant server via SSL (by Netscape) and asked to provide credit card details. While merchant contacts to clearing house on secure line, clearing house verifies account, expiry date and balance with issuing bank. At the end, bank transfers funds to merchant’s bank account and sends customer a monthly billing statement. Credit cards have limitation like safety, asking price and social equity with compatibility. So many people do not have access to credit cards and so many people even cannot afford cards still yet (Laudon & Traver, 2007).
There is also digital credit card payment system sometimes also known as e-Charge. In this system, customer sign for e-charge account. After approving application, e-charge download digital wallet to customer’s account. Consumer uses this wallet during transaction. E-charge verifies account and balance. It also focus specially on making use of credit cards safer and more convenient for online merchants and consumers Online Stored Value Systems, customer establishes an account at E-count by credit or debit card. E-count verifies account and balance with consumer’s bank. It extends the functionality of existing credit cards for use as online shopping payment tools. While making purchase, customer either chooses a credit card option or sends cash to individuals via e-mail. At the end E-count transfer money to merchant or individuals.
In digital Checking also known as e-Check customer acquires electronic checkbook from authorized bank and use it for online purchase. During purchase, merchant authenticates consumer’s ID and issuing bank. Merchant deposits those e-checks to its bank. In next step Federal Reserve Bank come into roll, it certifies public keys to both consumer’s and merchant’s bank. At the end of this process, consumer’s bank transfer money to merchant’s bank. This system extends the functionality of existing checking accounts for use as online shopping payment tools.
When the terms come for security, The SET (Secure Electronic Transaction) Protocol will help to enhance the features. SET is an open protocol which has the potential to come out as a leading force in the securing of e transactions. It is critical to the success of e-commerce over the Internet and without privacy, consumer protection cannot be guaranteed, and without authentication, neither merchant nor consumer can be certain that valid transactions will happen. SET is the art of encoding and decoding messages over the internet. Even in the time of Julius Caesar, encoding and decoding was used to protect the confidentiality of messages. Secure electronic transactions will be an important part of e-commerce in future. Without such security, the interests of the merchant, the costumer, and the economic institution cannot be served. Privacy is also as important as achieving a trust. The ideal of the SET protocol is significant for the success of e-commerce. Nevertheless, it remains to be seen whether the protocol will be widely used in area of e-commerce.
(Asymmetric encryption with a public and a private key)
Transactional Model
Electronic payment systems are fall into three different types of model: cash based on, Post-paid and Pre-paid mechanism they use.
Cash based model: This model allows transfer of cash between users and merchants. In this model, there are no central transaction processing fees or no additional costs. Mondex is the best example for this model.
Post-paid model: This model gives the customer all the benefits a bank transaction like differed payment and insurance provided by the card issuer with some of extra charges.
Pre-paid model: This model allows transfer between customers as well as merchants, of pre-paid tokens. It arise central transactional processing cost while consumers may also have a risk of not receiving goods.
Limitations of Electronic Payment System
Although electronic payment system has numbers of benefits than traditional payment system, it also has limitations. Lack of co-operation, security, trust, complexity, lack of mutuality of benefits, inadequate marketing initiatives these are some of the main drawbacks of electronic payment system. After having secure lines and encrypted tools, online systems face hacking and vulnerable attacks. Not only that, consumers also faced privacy related issues by cookies. Consumers’ identity exposes by cookies as their interests. This is jackpot for marketing companies. Also there are dilemmas of taxation and import/ export duties created by electronic payment system.
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Conclusion
Most of payment systems described above offer a secure means directly related to transfer credit/debit details for settlement in the existing financial systems. This also suffers from transaction processing costs, ensuring that low value transactions cannot be cost-effective. Well known institutions are able to aid in EPS (electronic payment system) adoption through the provision of a large installed base of customers. This study has also found that these institutions play other crucial roles in EPS adoption. Large partners are able to provide EPS with association with trusted brand names and marketing boom. These result in the system gaining credibility and public awareness. Once this has been achieved the system is assessed by users on factors such as simplicity, security and mutuality of stakeholder benefits.
An electronic cash scheme, such as visa, Mondex and PayPal offers the user the ability to pay retailers and other consumers on the Internet as well as in the high street, over the phone and in the home. The payment requires no other participants than the payer and payee, so by having no transaction processing fees and allowing low value transactions to be cost-effective. This uses inherent security mechanisms to ensure the safety of transactions independent of the transmission protocol being used.
E-commerce on the Internet needs payment mechanisms that can serve for as much diversity as commerce in the real world. Large value transactions will require secure ways to use existing bank card mechanisms. At the end, finally, in light of the success of the iTunes music store and the emergence of micropayments via mobile phones, the issue of micropayments needs to be revisited.
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