1. Session 6: Electronic Payment Systems http://www.youtube.com/watch?v=Nu3W3ECxlM8- Online banking http://www.youtube.com/watch?v=sLfm0Wwdikg http://www.youtube.com/watch?v=rIauZfXevzw http://www.youtube.com/watch?v=A0XfyB65zbs – http://www.youtube.com/watch?v=B_2oj_Cxjcs - Ebanking http://www.youtube.com/watch?v=_Cs8UPOBjM4- E-Check http://www.youtube.com/watch?v=FeGfiMIYBP8 – Online payment Session 6: Electronic Payment Systems http://www.youtube.com/watch?v=Nu3W3ECxlM8- Online banking http://www.youtube.com/watch?v=sLfm0Wwdikg http://www.youtube.com/watch?v=rIauZfXevzw http://www.youtube.com/watch?v=A0XfyB65zbs – http://www.youtube.com/watch?v=B_2oj_Cxjcs - Ebanking http://www.youtube.com/watch?v=_Cs8UPOBjM4- E-Check http://www.youtube.com/watch?v=FeGfiMIYBP8 – Online payment http://www.youtube.com/watch?v=Nu3W3ECxlM8- http://www.youtube.com/watch?v=rIauZfXevzw http://www.youtube.com/watch?v=A0XfyB65zbs http://www.youtube.com/watch?v=B_2oj_Cxjcs http://www.youtube.com/watch?v=_Cs8UPOBjM4- http://www.youtube.com/watch?v=FeGfiMIYBP8 http://www.youtube.com/watch?v=Nu3W3ECxlM8- http://www.youtube.com/watch?v=rIauZfXevzw http://www.youtube.com/watch?v=A0XfyB65zbs http://www.youtube.com/watch?v=B_2oj_Cxjcs http://www.youtube.com/watch?v=_Cs8UPOBjM4- http://www.youtube.com/watch?v=FeGfiMIYBP8

2. 10 - 2 Payment Revolution Metal coins appeared in Italy and India between 10 th and 16 th century BC Metal coins appeared in Italy and India between 10 th and 16 th century BC Checks were introduced by Italian Merchants Checks were introduced by Italian Merchants Paper money was first introduced in Massachussets in 1690 Paper money was first introduced in Massachussets in 1690 Credit cards -1950 by Diners club in US Credit cards -1950 by Diners club in US

3. 10 - 3 Payment Revolution Cards and electronic payments taking place of cash and checks Cards and electronic payments taking place of cash and checks In 2003, combined use of debit and credit cards exceeded that of checks and cash In 2003, combined use of debit and credit cards exceeded that of checks and cash From 2000 to 2003, Volume of electronic transaction grew from 30bn to 45bn From 2000 to 2003, Volume of electronic transaction grew from 30bn to 45bn Debit cards, the fastest growing segment Debit cards, the fastest growing segment Cashless society Cashless society In US 90% of online payments done by Credit Cards(VISA, MASTER) In US 90% of online payments done by Credit Cards(VISA, MASTER)

4. 10 - 4 Payment Revolution Consumers in Germany, Netherlands and Japan use direct debit and bank cards Consumers in Germany, Netherlands and Japan use direct debit and bank cards Need for various e-payment mechanisms Need for various e-payment mechanisms Merchants offering multiple payments- 20% higher order conversion rate Merchants offering multiple payments- 20% higher order conversion rate Credit cards introduced in 1950s – but widespread use only post 1980s Credit cards introduced in 1950s – but widespread use only post 1980s Chicken and egg situation(buyer vs seller) Chicken and egg situation(buyer vs seller)

5. 10 - 5 Critical Success Factors Independence Independence Interoperability and Portability Interoperability and Portability Security Security Anonymity Anonymity Divisibility Divisibility Eas of use Eas of use Transaction fees Transaction fees Regulations Regulations

6. 10 - 6 Setting up a e-Payment System Authorization Authorization Settlement Settlement Own a payment software Own a payment software Use POS operated by an acquirer Use POS operated by an acquirer Use a POS operated by a payment system provider Use a POS operated by a payment system provider

7. 10 - 7 Key participants Acquiring bank Acquiring bank Credit card association Credit card association Customer Customer Issuing bank Issuing bank Merchant Merchant Payment processing service Payment processing service Processor Processor

8. 10 - 8 Key tools in combating frauds Address verification System(AVS)(82%) Address verification System(AVS)(82%) Manual Review (73%) Manual Review (73%) Card Verification Number(56%) Card Verification Number(56%) Fraud screens and decision models(53%) Fraud screens and decision models(53%) Negative files(45%) Negative files(45%) Card association payer authentication services(55%) (Master and VISA securecode) Card association payer authentication services(55%) (Master and VISA securecode) Impact: Rejection of orders(12.5% outside US and Canada) Impact: Rejection of orders(12.5% outside US and Canada)

9. 10 - 9 Smart Cards Looks like a plastic payment card Looks like a plastic payment card Embedded chip Embedded chip With Microprocessor and memory chipWith Microprocessor and memory chip Just memory chip with nonprogrammable logicJust memory chip with nonprogrammable logic Microprocessor is not a computer Microprocessor is not a computer Programs and data must be downloaded from and activated by other device(like ATM machine) Programs and data must be downloaded from and activated by other device(like ATM machine)

10. 10 - 10 Types of Smart Cards Contact Card Contact Card Small gold plate (One half inch dia on the front)Small gold plate (One half inch dia on the front) Data to and fro the reader using thisData to and fro the reader using this EPROM and EEPROM cards(Most are EEPROM)EPROM and EEPROM cards(Most are EEPROM) Contactless (Proximity) Card Contactless (Proximity) Card Chip and Embedded AntennaChip and Embedded Antenna Card reader or other device also with AntennaCard reader or other device also with Antenna Mass-transit applications like paying bus or train faresMass-transit applications like paying bus or train fares Work at short range, just a few inchesWork at short range, just a few inches Hybrid card Hybrid card

11. 10 - 11 Smart card reader Read/Write device Read/Write device Act as a mediator between card and host system that stores application data and process transactions Act as a mediator between card and host system that stores application data and process transactions Two types: Contact and Proximity Two types: Contact and Proximity Interoperability between card and reader technologies Interoperability between card and reader technologies Global platform(globalplatform.org)- specs for smart cards and devices Global platform(globalplatform.org)- specs for smart cards and devices Smart card OS(JAVA and MULTOS) Smart card OS(JAVA and MULTOS)

12. 10 - 12 Store Valued Cards Monetary value is stroed on magnetic strip Monetary value is stroed on magnetic strip Cardholders name is not printed on it Cardholders name is not printed on it Anyone can get it without any financial standing or bank account Anyone can get it without any financial standing or bank account Rely on Same network, encrypted communications and E-banking protocols Rely on Same network, encrypted communications and E-banking protocols Close loop (Single use e.g issued by a shopping merchant like timezone) Close loop (Single use e.g issued by a shopping merchant like timezone) Open loop (multipurpose cards, various retailers, payroll, govt benefits, prepaid- itzcash, Citi Cash card) Open loop (multipurpose cards, various retailers, payroll, govt benefits, prepaid- itzcash, Citi Cash card)

13. 10 - 13 Electronic checks Electronic version of paper check Electronic version of paper check Account no, 9 digit ABA routing no, bank account type, name of the bank account and transaction amount Account no, 9 digit ABA routing no, bank account type, name of the bank account and transaction amount They use digital signatures for signing and endorsing and They use digital signatures for signing and endorsing and Digital certificates to authenticate the payer, the payer’s bank and bank account Digital certificates to authenticate the payer, the payer’s bank and bank account They are delivered either by direct transmission using telephone lines or by public networks such as the Internet. They are delivered either by direct transmission using telephone lines or by public networks such as the Internet.

14. 10 - 14 Internet banking Make the purchase you want. Make the purchase you want. Select the payment option using internet banking. Select the payment option using internet banking. You have to enter your User ID and Login Password. You have to enter your User ID and Login Password. Then select the Bank using which we desire to pay. Then select the Bank using which we desire to pay. Your transaction password should be entered. Your transaction password should be entered. Your selected account will be debited by the purchase amount. Your selected account will be debited by the purchase amount.

15. 10 - 15 Internet banking-ADV 1. Available for 24 hours a day, 7 days a week. 2. No need to stand in queues. 3. The account can be operated from anywhere – all you need is a computer with internet access. 4. Integrated security. 5. You can apply for a majority of the services such as loans, savings accounts, mortgages, etc., on-line. 6. It can be used for paying bills through on-line which saves both time and money on postage. 7. Through internet banking we can easily compare services offered by different banks. We can buy financial products and apply for loans by choosing the best bank for us to apply by such comparison. 8. We can even buy insurance online through Internet banking services. 9. Stocks and bonds and other investments can be managed with online banking from our home or office independent of a financial intermediary like a stockbroker. 1. Available for 24 hours a day, 7 days a week. 2. No need to stand in queues. 3. The account can be operated from anywhere – all you need is a computer with internet access. 4. Integrated security. 5. You can apply for a majority of the services such as loans, savings accounts, mortgages, etc., on-line. 6. It can be used for paying bills through on-line which saves both time and money on postage. 7. Through internet banking we can easily compare services offered by different banks. We can buy financial products and apply for loans by choosing the best bank for us to apply by such comparison. 8. We can even buy insurance online through Internet banking services. 9. Stocks and bonds and other investments can be managed with online banking from our home or office independent of a financial intermediary like a stockbroker.

16. 10 - 16 Internet banking-Disadv The internet connection costs should be met by the customer while using the service. The internet connection costs should be met by the customer while using the service. The account cannot be accessed if there is a failure in the internet connection. The account cannot be accessed if there is a failure in the internet connection. The bank and the account holder would not be having any personal interaction. The bank and the account holder would not be having any personal interaction. Working through the internet banking can be slow with a 56K modem. Working through the internet banking can be slow with a 56K modem. You cannot deposit physical cash into your account, online. For that you need to visit the bank. You cannot deposit physical cash into your account, online. For that you need to visit the bank. For obtaining cash floats or to use an ATM machine to withdraw cash we will have to visit the bank personally. For obtaining cash floats or to use an ATM machine to withdraw cash we will have to visit the bank personally.

17. 10 - 17 NEFT and RTGS National Electronic Fund Transfer (NEFT) is an online system for transferring funds of financial institution, especially for the banks in India. This service is used mainly to transfer funds below Rs 100000 National Electronic Fund Transfer (NEFT) is an online system for transferring funds of financial institution, especially for the banks in India. This service is used mainly to transfer funds below Rs 100000 The instant funds transfer system, known as the Real Time Gross Settlement(RTGS) cannot be used for an amount below Rs. 1 lakh by the banks as per the instructions of the banking regulator, the Reserve Bank of India. The instant funds transfer system, known as the Real Time Gross Settlement(RTGS) cannot be used for an amount below Rs. 1 lakh by the banks as per the instructions of the banking regulator, the Reserve Bank of India. The main difference between NEFT and RTGS is that the NEFT works on net settlement basis and RTGS works on gross settlement basis The main difference between NEFT and RTGS is that the NEFT works on net settlement basis and RTGS works on gross settlement basis The NEFT involves four settlement cycles a day 9.30 am, 10.30 am, 12 pm and 4 pm and RTGS facilitates online transfer The NEFT involves four settlement cycles a day 9.30 am, 10.30 am, 12 pm and 4 pm and RTGS facilitates online transfer

18. 10 - 18 E- Banking Case Study Case Study