Electronic Payment Systems Chapter 12 Electronic Payment Systems

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Learning Objectives Understand the shifts that are occurring with regard to noncash and online payments. Discuss the players and processes involved in using credit cards online. Discuss the different categories and potential uses of smart cards. Discuss various online alternatives to credit card payments and identify under what circumstances they are best used. Describe the processes and parties involved in e-checking. Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Learning Objectives Describe payment methods in B2B EC, including payments for global trade. Discuss electronic bill and invoice present and payment. Understand the sales tax implications of e-payments. Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

12.1 The Payment Revolution Crucial factors that determine whether a method of e-payment achieves critical mass: Independence Interoperability and Portability Security Anonymity Divisibility Ease of Use Transaction Fees Regulations Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

12.2 Using Payment Cards Online Electronic card that contains information that can be used for payment purposes. Credit cards Charge cards Debit cards Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Using Payment Cards Online PROCESSING CARDS ONLINE authorization Determines whether a buyer’s card is active and whether the customer has sufficient funds. settlement Transferring money from the buyer’s to the merchant’s account. payment service provider (PSP) A third-party service connecting a merchant’s EC systems to the appropriate acquirers; PSPs must be registered with the various card associations they support. Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Using Payment Cards Online FRAUDULENT CARD TRANSACTIONS Card verification number (CVN) 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. Address Verification System (AVS) VIRTUAL CREDIT CARDS Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 12.3 Smart Cards smart card An electronic card containing an embedded microchip that enables predefined operations or the addition, deletion, or manipulation of information on the card. Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Smart Cards Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Smart Cards SECURING SMART CARDS Smart cards store or provide access to either valuable assets or to sensitive information. Because of this, they must be secured against theft, fraud, or misuse. In general, smart card are more secure than conventional payment cards. Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 12.4 Stored-Value Cards stored-value card A card that has monetary value loaded onto it and that usually is rechargeable. Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 12.5 E-Micropayments e-micropayments Small online payments, typically under $5. Five basic micropayment models: Aggregation Direct payment Stored value Subscriptions Á la carte Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 12.6 E-Checking e-check A legally valid electronic version or representation of a paper check. Automated Clearing House (ACH) Network A nationwide batch-oriented electronic funds transfer system that provides for the interbank clearing of electronic payments for participating financial institutions. Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall E-Checking Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

12.7 Electronic Bill presentment and Payment Electronic Bill presentment and Payment (EBPP) One area where e-checks and the ACH play a prominent role is the area of e-billing; Paying recurring bills via the Internet. E-billing also is known as Electronic Bill presentment and Payment (EBPP). Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Electronic Bill presentment and Payment Types of E-billing 1) Online banking 2) Biller direct 3) Bill consolidator Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Exhibit 12.5 © Prentice Hall 2004

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Exhibit 12.6 Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

12.8 B2B Electronic Payments Current B2B payment practices Enterprise invoice presentment and payment(EIPP) Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

B2B Electronic Payments EIPP Models Seller Direct Buyer Direct Consolidator EIPP Options ACH Network purchasing cards (p-cards) Special-purpose payment cards issued to a company’s employees to be used solely for purchasing nonstrategic materials and services up to a preset dollar limit. Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

B2B Electronic Payments Fedwire letter of credit (L/C) A written agreement by a bank to pay the seller, on account of the buyer, a sum of money upon presentation of certain documents. Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 12.9 The sales tax issue Salestax.com. Sales tax clearinghouse. CyberSource. Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Exercises Key teams Automated clearing house E-micropayment Enterprise invoice presentment and payment Letter of credit Internet exercises Go to cybersource.com. Identify the services it provides for B2B e-payments. Describe the features of CyberSource’s major products that provide these merchant services. Chapter 11 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall