2001 Prentice Hall, Inc. All rights reserved. Chapter 5, Online Monetary Transactions Outline 5.1...

2001 Prentice Hall, Inc. All rights reserved.

Chapter 5, Online Monetary Transactions

Outline5.1 Introduction5.2 Credit-Card Transactions5.3 E-Wallets5.4 Alternate Consumer Payment Options5.5 Digital Currency5.6 Peer-To-Peer Payments5.7 Smart Cards5.8 Micropayments5.9 Business-to-Business (B2B) Transactions5.10 E-Billing5.11 Online Banking


5.1 Introduction

• The electronic transfer of funds is key to conducting e-business successfully

• Discussion includes:– How individuals and organizations perform monetary

transactions on the Internet

– Payments by credit card, cash, and check; payments to businesses; peer-to-peer payments; banking and bill paying

– Companies who are developing online payment technology

– Products, software, and services that these companies produce


5.2 Credit-Card Transactions

• Customers fear credit-card fraud– Credit cards have been developed to accommodate online

and offline payments• The Prodigy Internet Mastercard guarantees online fraud

protection

• To accept credit-card payments, a merchant must have a merchant account with a bank– Specialized Internet merchant accounts have been

established to handle online credit-card transactions• Transactions are processed by banks or third-party services

• Traditional merchant accounts accept only POS (point-of-sale) transactions– Those that occur when you present your credit card at a store


5.2 Credit-Card Transactions

• Companies enable merchants to accept credit-card payments online. – These companies have established business relationships

with financial institutions that will accept online credit-card payments for merchant clients.

– CyberCash and iCat

– Trintech


5.2 CyberCash Feature

• Enables businesses to receive payments through Internet– CashRegister

• Makes it possible for merchants to receive credit-card numbers, offer the numbers to the appropriate financial institution for validation and accept credit-card payments in a 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


5.2 CyberCash Feature

• CyberCash Instabuy allows customers to store their purchasing information in an Instabuy e-wallet– An e-wallet electronically stores purchasing information

• Using redundant servers, or identical servers for back up if one server fails, CyberCash is able to minimize downtime

• CashRegister keeps track of transactions• All financial information transmitted via the

Internet is encrypted and digitally signed • CyberCash offers fraud detection to protect

merchants


5.3 E-Wallets

• E-wallets– Keep track of your billing and shipping information so that it

can be entered with one click at participating merchants’ 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)


5.4 Alternate Consumer Payment Options

• Checks or money orders through the mail• Cash on delivery (COD)• Debit cards

– offer an alternative for card-holders to access their accounts

– funds are instantly deducted from checking account

– Can withdraw cash from Automatic Teller Machines (ATMs)

• Checking-account numbers – Companies such as AmeriNet allow merchants to accept

checking-account numbers as a valid form of payment• AmeriNet provides authorization, account settlement,

distribution and shipping (fulfillment) and customer service inquiries


5.5 Digital Currency

• Digital cash – Stored electronically, used to make online electronic

payments

– Digital cash accounts are similar to traditional bank accounts

– Digital cash used with other payment technologies (digital wallets)

– Alleviates some security fears online credit-card transactions

– Digital cash allows those with no credit cards to shop online

– Merchants accepting digital-cash payments avoid credit-card transaction fees

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


5.5 Digital Currency

• 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

• Points-based rewards – Points are acquired for completing specified tasks including

visiting Web sites, registering or buying products

– Points can then be redeemed

– Beenz


5.6 Peer-To-Peer Payments

• 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)


5.7 Smart Cards

• 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


5.8 Micropayments

• Merchants pay fee for each credit-card transaction • Micropayments

– Payments that generally do not exceed $10, allows companies offering nominally priced products to profit

• To offer micropayments, some companies form strategic partnerships with utility companies – 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

• Outsource payment-management systems (Qpass)


5.8 Millicent Feature

• Millicent is a micropayment technology provider• 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


5.9 Business-to-Business (B2B) 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

• PaymentechTM – Payment solution provider for Internet point-of-sale

transactions– Brick-and-mortar and electronic merchants choose from

transaction-processing options including debit cards, credit cards, checks and EBT authorization and settlement

• EBT (Electronic Benefits Transfer) is defined by the USDA as the electronic transfer of government funds to retailers for the benefit of the needy



• eCredit provides real-time, credit-transaction capabilities of B2B size

• Clareon facilitates B2B transactions by providing 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



• Electronic consolidation and reconciliation of the business transaction process– Companies can keep track of a transaction from order-to-

cash settlement while reducing administrative costs, errors, waste and complexity in the supply chain

• eTime Capital

• Order-fulfillment providers– Companies attempting to bring supply chain expertise and

logistical services to Internet businesses

• Internet-based electronic B2B transactions will augment, but not replace, traditional Electronic Data Interchange (EDI) systems


5.9 TradeCard Feature

• Provides a global B2B e-commerce infrastructure – Cross-border data management and payment

• Buyer creates pre-formatted 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


5.9 TradeCard Feature

• TradeCard awaits delivery confirmation from a third-party logistics services provider (3PL)– Industry terminology for a shipping company

• When confirmation is received and compliance met, TradeCard completes the financial 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


5.10 E-Billing

• 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

• E-mails customers announcements of newly arrived bills and impending payment-due dates

• Makes automatic payments on any bill up to a threshold amount


5.10 E-Billing

• Services to enable EBPP on a company’s site– Derivion

• Provides billers with electronic capabilities in conjunction with Paytrust’s service

• 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


5.10 CheckFree Feature

• CheckFree is a consolidation service that 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


5.11 Online Banking

• Internet-only banks – Offer convenience and lower rates to their customers– Establishing a physical presence

• The hybrid bank model – Going online has become important for the survival and

growth of small local banks– Smaller banks will usually partner with third-party service

providers to make the transition to the Internet

• Glass-Steagle Act– Prohibited financial institutions from engaging in multiple

financial operations– Was repealed so now banks, brokerages and insurance

companies are permitted to offer a wide range of financial services


5.11 Online Banking

• Claritybank.com – Internet-only bank that specializes in loans to new-economy

firms

– Offers a customized portal service and a B2B center

• OneCore.com – Targets small businesses

– Offers packages to businesses at different stages of growth

– Offers financial-overview services

– Payroll and 401K services, enabling of credit-card processing for would-be merchants and payables streamlining services

– An "electronic financial officer" is available who will answer business financial questions via e-mail


5.11 Wells Fargo Feature

• Wells Fargo provides of online banking services– Services are broken into three main sectors; personal

finance, small business and commercial banking

• Offers customers personal banking, free bill-paying and checking-account comparisons

• Planning to use its portal site as a financial aggregator– allowing people to view information from all of their

financial accounts in one place on the Internet

• Establishing specialized resource centers for students, retirees and those purchase cars or homes


5.11 NetBank Feature

• Netbank is the largest bank operating solely on the Internet

• Customers benefits– Can open checking, savings and credit accounts

– Can plan for retirement using IRAs and other investment accounts, conduct online trading, and obtain mortgage, car and business loans over the Web

– Receive a line of credit, free online bill payment and presentment, ATM card and Visa credit card

2001 Prentice Hall, Inc. All rights reserved. Chapter 5, Online Monetary Transactions Outline 5.1...

Documents

Transcript of 2001 Prentice Hall, Inc. All rights reserved. Chapter 5, Online Monetary Transactions Outline 5.1...