Online Payment System

Online Payment System 

There are many modes under the online payments system. In this method, a third party must be involved. Credit card,debit card, money transfers, and recurring cash or ACH disbursements are all electronic payment methods. Electronic payment technologies are magnetic stripe card, Secured Payment Gateway (SPG), E-Wallet, Mobile Payment, Smart Cards, E-Billings, Net Banking etc. 

Mode of Online Payment Systems

A credit card is a system of payment named after the small plastic card issued to users of the system. In the case of credit cards, the issuer lends money to the consumer (or the user) to be paid later to the merchant. Credit cards allow the consumers to ‘revolve’ their balance, at the cost of having interest charged. Most credit cards are issued by local banks or credit unions.The credit card was the successor of a variety of merchant credit schemes. It was first used in the 1920’s, in the United States, specifically to sell fuel to a growing number of automobile owners. In 1938, several companies started to accept each other’s cards.The card is issued by bank with different credit unions along with their logos(VISA/MASTERCARD/DISCOVER/AMERICAN EXPRESS) are called acquirers who sign up with the merchants, while the banks are called issuers.Credit card issuers usually waive interest charges if the balance is paid in full each month, but typically will charge full interest on the entire outstanding balance from the date of each purchase if the total balance is not paid. 

Debit Card:

A debit card (also known as a bank card) is a plastic card which provides an alternative payment method to cashwhen making purchases. Functionally, it is similar to writing a cheque, as the funds are withdrawn directly from eitherthe bank account (often referred to as a cheque card), or from the remaining balance on the card. 

In some cases, thecards are designed exclusively for use on the Internet, and so there is no physical card.The use of debit cards has become wide-spread in many countries and has overtaken the cheque, and in someinstances cash transactions by volume. Like credit cards, debit cards are used widely for telephone and Internetpurchases.

Debit cards can also allow for instant withdrawal of cash, acting as the ATM card for withdrawing cash and as acheque guarantee card. Merchants can also offer “cashback”/”cashout” facilities to customers, where a customer can withdraw cash along with their purchase.

Difference between Credit and Debit Card

For consumers, the difference between a “debit card” and a “credit card” is that the debit card deducts the balancefrom a deposit account, like a checking account, whereas the credit card allows the consumer to spend money oncredit to the issuing bank. In other words, a debit card uses the money you have and a credit card uses the money you don’t. 

Secured Payment Gateway (SPG)

As the internet increasingly becomes the hunting ground for snoopers and scammers, secure communication are essential, Secure Payment Gateway, using the Secure Socket Layer (SSL) technology allow Gateway, Card holders, Merchants, Processors and others to encrypt and safely communicate sensitive and confidential data over the web.

Secure Socket Layer (SSL)

A small electronic file that uniquely identifies individuals and servers on the internet. Secure Socket Layer certificate the web browser to authenticate an internet site before entering confidential information such as user name or password. Typically, Digital Secure Socket Layer certificates are issued by “certification authorities” who are trusted and independent parties that ensure validity. 

Digital Wallet

A digital wallet (also known as an e-wallet) allows users to make electronic commerce transactions quickly and

securely.A digital wallet functions much like a physical wallet. The digital wallet was first conceived as a method of storing various forms of electronic money (e-cash), but with little popularity of such e-cash services, the digital wallet has evolved into a service that provides internet users with a convenient way to store and use online shopping information.A digital wallet has both a software and information component. The software provides security and encryption for the personal information and for the actual transaction. Typically, digital wallets are stored on the client side and are easily self-maintained and fully compatible with most e-commerce web sites. A server-side digital wallet, also known as a thin wallet, is one that an organisation creates for and about you and maintains on its servers. Server-side digital wallets are gaining popularity among major retailers due to the security, efficiency, and added utility that it provides to the end-user, which increases their enjoyment of their overall purchase.The information component is basically a database of user-inputted information. This information consists of your shipping address, billing address, payment methods (including credit card numbers, expiry dates, and security numbers), and other information.

Mobile Payment

Mobile payment (also referred to as mobile web payment or WAP billing) is the collection of money from a consumer via a mobile device such as their mobile phone, SmartPhone, Personal Digital Assistant (PDA) or other such device.Mobile payment can be used to purchase any number of digital or hard goods, such as:

• Music, videos, ringtones, games, wallpapers and other digital goods.
•  Books, magazines, tickets and other hard goods.

There are two primary models for mobile payments:

•  Premium SMS based transactional payments.
•  Mobile Web Payments (WAP).

Mobile payment solutions have been widely adopted by a wide range of leading companies, for example World WrestlingEntertainment for the sale of audio and videos.

Premium SMS Based Transactional Payments

This is where the consumer sends a payment request via an SMS text message to a shortcode and a premium charge is applied to their phone bill. The merchant involved is informed of the payment success and can then release the paid-for goods.Since a trusted delivery address has typically not been given, these goods are most frequently digital with the merchant replying using a Multimedia Messaging Service to deliver the purchased music, ringtones, wallpapers, etc. A Multimedia Messaging Service can also deliver barcodes which can then be scanned for confirmation of payment by a merchant. This is used as an electronic ticket for access to cinemas and events or to collect hard goods.Transactional payments have been popular in Asia and Europe but are now being overtaken by mobile web payments (WAP) for a number of reasons:

1.Poor reliability – Transactional payments can easily fail as messages get lost.

2.Slow speed – Sending messages can be slow and it can take hours for a merchant to get receipt of payment. Consumers do not want to be kept waiting more than a few seconds. 

3.High cost – There are many high costs associated with this method of payment. The cost of setting up shortcodes and paying for the delivery of media via a Multimedia Messaging Service and the resulting customer support costs to account for the number of messages that get lost or are delayed.

4.Low payout rates – Operators also see high costs in running and supporting transactional payments which results in payout rates to the merchant being as low as 30%.

5.Low follow-on sales – Once the payment message has been sent and the goods received there is little else the consumer can do. It is difficult for them to remember where something was purchased or how to buy it again. This also makes it difficult to tell a friend. 

Mobile Web Payments (WAP)

This is where the consumer uses web pages displayed on their mobile phone to make a payment. This process is quickly replacing premium SMS based transactional payments for digital content and also enables the sale of physical goods.Using a familiar web payment model gives a number of proven benefits:

1.Follow-on sales where the mobile web payment can lead back to a store or to other goods the consumer may like. These pages have a URL and can be bookmarked making it easy to re-visit or share with friends.

2.High customer satisfaction from quick and predictable payments.

3.Ease of use from a familiar set of online payment pages.

Mobile web payment methods are now being mandated by a number of mobile network operators. A number of different actual payment mechanisms can be used behind a consistent set of web pages. Mobile payment systems are also used in developing countries for micropayments. 

Smart Cards

A smart card, chip card, or Integrated Circuit Card (ICC), is defined as any pocket-sized card with embedded integrated circuits which can process information. This implies that it can receive input which is processed – by way of the ICC applications – and delivered as an output. There are two broad categories of ICCs. Memory cards contain only non-volatile memory storage components, and perhaps some specific security logic. Microprocessor cards contain volatile memory and microprocessor components. The card is made of plastic, generally PVC, but sometimes ABS. The card may embed a hologram to avoid counterfeiting. Using smart cards also is a form of strong security authentication for single sign-on within large companies and organisations.

“smart card” is also characterised as follows:

• Contains a security system with tamper-resistant properties (e.g., a secure cryptoprocessor, secure file system, human-readable features) and is capable of providing security services (e.g., confidentiality of information in the memory).
• Asset managed by way of a central administration system which interchanges information and configuration settings with the card through the security system. The latter includes card hotlisting, updates for application data.
• Card data is transferred to the central administration system through card reading devices, such as ticket readers, ATMs, etc.

E-Billings

Electronic Billing (General) is the electronic delivery and presentation of financial statements, bills, invoices, and related information sent by a company to its customers. Electronic billing is also known as other payment models based on consumer-to-business and business-to-business:

• EBPP – Electronic Bill Presentment and Payment (typically focused on business-to-consumer billing and payment).
• EIPP – Electronic Invoice Presentment and Payment (typically focused on business-to-business billing and payment).

Electronic bill payment is a fairly new technique that allows consumers to view and pay bills electronically through the internet. There are a significant number of bills that consumers pay on a regular basis, which include: power bills, water, oil, internet, phone service, mortgages, car payments, etc. Systems send bills from service providers to individual consumers via the internet. The systems also enable payments to be made by consumers, given that the amount that appears on the e-bill is correct. Many banks are offering these online payment services for some time now, and are growing in popularity.

Net Banking

Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union or building society.Online banking solutions have many features and capabilities in common, but traditionally also have some that are application specific.

• The common features fall broadly into several categories-
• · Transactional (e.g., performing a financial transaction such as an account to account transfer, paying a bill, wire transfer… and applications… apply for a loan, new account, etc.).
• · Electronic bill payment.
• · Funds transfer between a customer’s own checking and savings accounts, or to another customer’s account.
• · Investment purchase or sale.

· Loan applications and transactions, such as repayments.

• · Non-transactional (e.g., online statements, check links, cobrowsing, chat).

· Bank statements.

• · Financial Institution Administration – features allowing the financial institution to manage the online

experience of their end users.

• · ASP/Hosting Administration – features allowing the hosting company to administer the solution across financial institutions.