ELECTRONIC PAYMENT SYSTEMS

Introduction to Electronic Payment Systems, Process & Phases of Electronic payment systems, Benefits of Electronic Payment Systems, Risk Involved in Electronic Payment Systems, Types of B2C Electronic Payment Systems- Credit Card, Debit Card, E Cash, E Wallet, Smart Card, E Banking, E Check.

1. UNIT-3 [ELECTRONIC PAYMENT SYSTEMS ] Mr.Chethan.S
INFORMATION TECHNOLOGY FOR BUSINESS - II

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INFORMATION TECHNOLOGY FOR BUSINESS - II
UNIT-3
ELECTRONIC PAYMENT SYSTEMS



INTRODUCTION

 In India’s journey towards E-payments, digitization as well as
customers, are getting comfortable adopting new digital technologies.
 With customers are getting comfortable with online shopping, nowadays,
an ecommerce site and online payment acceptance is a must to have for
any business.
 Customers are happy with browsing and shopping at any time from
anywhere with just a few clicks and along with this rise of online
shopping and ecommerce, E-payments are gaining popularity.
 COVID and the limitation it has imposed on people who made online
payments the need of time. Many businesses are now offering their
products and services online.
 However, if you are a business and want to accept e payments, you have
to work on your electronic payment system to provide better and secure
service for your customers.

2. UNIT-3 [ELECTRONIC PAYMENT SYSTEMS ] Mr.Chethan.S
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ELECTRONIC PAYMENT SYSTEM


An e-payment or Electronic Payment system allows customers to pay for the
services via electronic methods.
They are also known as online payment systems. Normally e-payment is done
via debit, credit cards, direct bank deposits, and e-checks, other alternative
e-payment methods like e-wallets, bit coin, crypto currencies, and bank
transfers are also gaining popularity.
TYPES OF E-PAYMENT SYSTEM

1. Internet banking – In this case, the payment is done by digitally transferring
the funds over the internet from one bank account to another.
Some popular modes of net banking are, NEFT, RTGS, IMPS.

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GOVERNING BODY FOR E -PAYMENTS.







2. Card payments – Card payments are done via cards e.g. credit cards, debit
cards, smart cards, stored valued cards, etc. In this mode, an electronic payment
accepting device initiates the online payment transfer via card Credit/ Debit card
– An e payment method where the card is required for making payments
through an electronic device.

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3. Smart card – 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.

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4. Stored value card – A stored-value card (SVC) is a payment card with a
monetary value stored on the card itself, not in an external account maintained
by a financial institution.
They are an electronic development of token coins and are typically used in
low-value payment systems or where network access is difficult or expensive to
implement, such as parking machines, public transport systems, closed payment
systems in locations such as ships or within companies.

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5. Direct debit – Direct debit transfers funds from a customer’s account with
the help of a third party. These give a company permission to take money from
your bank account on a date agreed with you.
For example, you might use a Direct Debit to pay your gas and electricity
bills. The company need to notify you of any change to the amount or date.





6. E-cash – It is a form where the money is stored in the customer’s device
which is used for making transfers.

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Alternate payment methods – As technology is evolving, e-payment methods
kept evolving with it (are still evolving..) These innovative alternate e-payment
methods became widely popular very quickly thanks to their convenience.
E-wallet – Very popular among customers, an E-wallet is a form of prepaid
account, where customer’s account information like credit/ debit card
information is stored allowing quick, seamless, and smooth flow of the
transaction.
Mobile wallet – An evolved form of e-wallet, mobile wallet is extensively used
by lots of customers. It is a virtual wallet, in the form of an app that sits on a
mobile device. Mobile wallet stores card information on a mobile device.
The user-friendly nature of mobile wallets makes them easier to use. It offers a
seamless payment experience making customers less dependent on cash.
QR payments – QR code-enabled payments have become immensely popular.
QR code stands for ‘Quick Response’ code, a code that contains a pixel pattern
of barcodes or squares arranged in a square grid.Each part of the code contains
information. This information can be merchant’s details, transaction details, etc.
To make payments, one has to scan the QR code with a mobile device.
Contactless payments – Contactless payments are becoming popular for quite
some time. These payments are done using RFID and NFC technology.The
customer needs to tap or hover the payment device or a card near the payment
terminal, earning it a name, ‘tap and go’.
UPI payments – NPCI (National Payment Corporation of India) has developed
an instant real-time payment system to facilitate interbank transactions. This
payment system is titled UPI(Unified Payment Interface). Payments via UPI can
be made via an app on a mobile device.
Biometric payments – Biometric payments are done via using/scanning
various parts of the body, e.g. fingerprint scanning, eye scanning, facial
recognition, etc. These payments are replacing the need to enter the PIN for
making transactions making these payments more accessible and easy to use.
Payments are done via Wearable devices – Wearable devices are rapidly
becoming popular among customers. These devices are connected to the
customer’s bank account and are used to make online payments.

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An example of a wearable used for making an online payment is a smartwatch.
AI-based payments – As machine learning and Artificial Intelligence is
creating a revolution all around the world, AI-based solutions are becoming
more popular. Payments based on AI such as speakers, chatbots, ML tools, deep
learning tools, etc are making it easier for businesses to maintain transparency.
PROCESS OF ELECTRONIC PAYMENT SYSTEM

The following are the basic steps showing how a typical payment gateway
works:
Step 1: A customer places his or her order and then presses the Submit or
Checkout button, or its equivalent button, on the website.



Step 2: Once this happens, the website or the e-commerce platform takes the
customer to a payment gateway where he or she enters all the relevant
information about the bank or the card they are using to pay. The PG then takes
the user directly to the page of the issuing bank or a 3D secure page, asking for
the transaction to be authorized.

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Step 3: Once the payment gateway gets the approval for the transaction, the
bank then checks whether the customer has sufficient balance in the account to
make this transaction success or not
Step 4: The payment gateway sends a message to the merchant accordingly.
→ If the reply from the bank is a “No’”, then the merchant subsequently sends
an error message to the customer, telling them about the issue with the card or
the bank account.
→ If the response is a “Yes” from the bank portal, then the merchant seeks the
transaction from the bank

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Step 5: The bank settles the money with the payment gateway, which in turn
settles the money with the merchant
Once this process is completed, the customer gets a confirmation message of the
order is placed.

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BENEFITS OF ELECTRONIC PAYMENT SYSTEM


1. Instant Payment
2. Higher payment security
3. Better customer convenience
4. It’s easier to administer
5. Reduces Carbon Footprint
6. Low risk of theft
7. Transparent
8. Contactless
9. Variety of Choice

ELECTRONIC PAYMENT RETURNS

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CHALLENGES INVOLVED IN ELECTRONIC PAYMENT SYSTEM




Restrictions: In every payment system, there is a limit with regard to the
number of transactions you can do per day and the maximum amount you
can withdraw.
 The Need for Internet Access: When you have no Internet connection,
you cannot transact on your online account.
 Lack of Anonymity: Since the database of the payment system stores all
your transactions - like the name of recipient, amount and time - the
intelligence agency can access all your information. Decide on whether
that is good or bad.
 Risk of Being Hacked: E-payment system can be hacked it any time if
they do not have powerful security system and also Epayment users can
be hacked if they did not follow security regulations.

 False Identity: There are no means to verify if the person entering
information online is the same person, he claims to be. This is because
unlike physical transactions, the individual is not present in person, and
one's identity is not verified using a photograph or a physical signature.
RISK INVOLVED IN ELECTRONIC PAYMENT SYSTEM

14. UNIT-3 [ELECTRONIC PAYMENT SYSTEMS ] Mr.Chethan.S
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o Fraud: E-payments companies and their customers suffer billions of
dollars in fraud losses annually as it affects the entire epayments industry.
According to data from “ACI Worldwide” the number of fraud attempts
based on total population in 2015 increased to 1.49% compared to 1.39%
in 2014, i.e. one out of every 67 transactions was a fraudulent attempt in
2015 compared to one out of every 72 transactions in 2014. Which
represents a 7.1% increase during the year. All this numbers show how it
is very important to work against fraud attacks and how it is important to
have solutions for those attacks.
 Tax Evasion: Businesses are required by law to provide the government
with records of their financial transactions so that their tax compliance
can be checked. E-payment, however, can thwart tax collection efforts.
Until a company discloses the numerous e-payments it has made or
received during the tax period, the government will not know the truth
that may lead to tax evasion.
 Payment Conflicts: Payment problems also occur because payments are
not made manually, but through an automated system that can cause
errors. This is particularly important when payment is made on a daily
basis to several recipients.
For example, if you do not review your pay slip at the end of will pay
period, you could end up in a dispute due to such technical issues or
anomalies.
 Impulse Buying: E-payment systems promote pulse transactions,
particularly online, and consumers are likely to make a decision to buy an
item they find on sale online, as it will cost only a click to buy it via a
credit card. The buying of impulses leads to disorganized budgets and is
one of the drawbacks of e-payment systems.
 Dishonest providers and Merchants: Those who exploit and sell
consumers 'personal data in order to be used by advertisers in ads often
use this data for fraud purposes.

15. UNIT-3 [ELECTRONIC PAYMENT SYSTEMS ] Mr.Chethan.S
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WHAT IS B2C PAYMENT?

A B2C payment is one that occurs between a merchant and an individual for the
exchange of products and/or services. You're participating in a B2C transaction
when you go to the supermarket, petrol station, or any other retailer to make
purchases for personal use rather than on behalf of an organization.
In this digitally connected era, it’s clear that now is the time for organizations to
rethink the payment experience. To truly meet consumer demand today, B2C
organizations must ensure the payment experience is:
 User-friendly
 Fast and flexible
 Secure

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.

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DEBIT CARD

A debit card is a payment card that deducts money directly from a
consumer's checking account when it is used.

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E CASH

eCash was created by Dr. David Chaum under his company, DigiCash, in
1990.
 eCash can be defined as electronic cash. It's a way of paying for goods
and services that isn’t in physical cash. There are two forms of eCash, an
online form and an offline form.
 E-Money can be held on cards, devices, or on a server.

E WALLET

A digital wallet, also known as e-wallet, is an electronic device, online
service, or software program that allows one party to make electronic
transactions with another party bartering digital currency units for goods
and services.

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TYPES OF MOBILE WALLETS

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SMART CARD

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.





E-BANKING

Electronic banking is a form of banking in which funds are transferred through
an exchange of electronic signals rather than through an exchange of cash,
checks, or other types of paper documents.


E-CHECK

eCheck is a digital version of a paper check and is also known as an electronic
check, online check, internet check, and direct debit. eChecks use the
Automated Clearing House (ACH) to direct debit from a customer's checking
account into a merchant's business bank account, with the help of a payments
processor.

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