Assignment onCHAPTER 15: GETTING THE MONEY Subject code: BAN 385
Submitted To:Md. Zillur RahmanAssistant ProfessorDept. of Business AdministrationShahjalal University of Science and TechnologySubmitted By: Team OneSyeda Fatima Banu 2009731007Muhsina Jannat 2009731015Sharmistha Tribedi 2009731020Taskia Akter 2009731039Mahmuda Akter 2009731045
Learning Objectives:• Real-world Cash and Electronic Cash• Key Requirements for Internet-based Systems• Electronic Transaction System• Secure Electronic Transactions• Electronic Payment Media• Methods of E-payment• General Guide to E-payment• Issues and Implications
Real World Cash: Money• Money is a medium of exchange to simplify transactions, a standard of value to decide the worth of goods, and a store of value to facilitate savings. Money offers the following features: Convenience No hidden cost of use Wide acceptance No audit trail Anonymity
Electronic Money (E-Money)• E-Money: an electronic media for making payments.• There are four types of e-money:1. Identified and online (+I+L): credit card and debit card transactions2. Identified and offline (+I-O): purchasing by check or postal money order3. Anonymous and online (-I+L): cash payments4. Anonymous and offline (-I-L): electronic cash
There are two distinct sets of properties should be consideredin money transfer:ACID Test1. Atomicity 3. Isolation2. Consistency 4. DurabilityICES Test1. Interoperability 3. Economy2. Conversion 4. Scalability
Internet Based Payments• Electronic Payment: financial transactions made without use of paper documents.• Users: PayPal, Brodia, CyberCash, e-cash, eCharge, InternetCash, iPIN, Qpass, Windows Live ID etc.• Four main Internet based payment systems: Electronic Currency Debit Cards Credit Cards Smart Cards
Properties of E-Payment System• Several nontechnical properties are relevant to an electronic payment system - ▫ Acceptability ▫ Ease of Integration ▫ Customer Base ▫ Ease of Use and Access
Electronic Transaction System: CyberCash• Electronic transaction system makes it possible to process transactions over the Internet.• CyberCash is an internet payment service which offered a range of e-commerce solution using E-Transaction System.• Initially provided an e-wallet software to consumers and software to merchants to accept credit card payments.• They offered "CyberCoin", a micropayment system modeled after the NetBill research project.• On January 1, 2000, CyberCash fell victim to the Y2K Bug, got bankrupt on March 11, 2001.
Secure Internet Credit Card Payment Process• The main CyberCash transaction systems centered on secure credit card payment with the following procedures:
Secure Electronic Transactions (SET)• SET protocol is a proven standard for handling transactions on the Internet.• The system is administered jointly by Visa and MasterCard to ensure reliable E-Payment Media.• It was developed with four important goals: 1. Confidentiality of payment 2. Integrity of transmitted data 3. Authentication of card user 4. Interoperability across network providers.
Electronic Payment Media• Different companies, such as PayPal, WebMoney etc are working as Electronic Payment Medias to transfer E-Payment.• There are three types of electronic payment media 1. Trusted third party: Banks, that maintain all sensitive information. 2. Notational fund transfer-related type: Visa/Master Card’s SET based transactions. 3. Digital cash or electronic money: allows the transfer of money itself which carry values.
Credit Card• Credit card is a plastic payment card issued by a financial institution for the purchase of goods or services on credit to users as a system of payment.• Features of credit card: ▫ Leaves a complete audit trail ▫ Are not well suited for impulse buying ▫ Are not convenient for making small products
Risks of Using Credit Cards• Though monthly full payment is not made, interest will be charged.• Interest charged from the date of purchase even before the payment.• Credit card transactions result in immediate credit to the merchant’s bank account as cash.• Card holder’s risk of losing a credit card amount to $50 and has to notify the issuing bank.• A card holder can dispute charges or purchases to the card issuer if he is not satisfied.
Credit Card Laundering• A violation of merchants agreement with the bank or credit card company.• Allowing a person to use a merchant account though he has no own merchant account.• Customers and credit card issuing company face losses and write off the amount to bad debt.• Simple procedure for earning extra cash by merchant.• Often turns into losses beyond all commissions.• This practice is illegal and strictly prohibited.
Debit Card• Debit card is a payment card that transfers funds directly from the customer’s bank account to the merchant. It look exactly like credits cards, except they directly tap customer’s checking account every time he makes a purchase or a withdrawal.• Features of Debit Card: Convenience Widely Accepted than checks Easy Application No Grace Payment Period Less Protection for Undelivered Items Risks for Merchants - Overspent Customers
Difference between Debit and Credit Card Debit card Credit cardA debit card takes money Credit card charges money todirectly from customer’s customers line of credit.banking accountDebit card is a quick-pay-now There is generally a graceprocess where no grace period period of approximately thirtyis given. days before interest is charged in credit card purchase.Debit card carries less security With credit card purchases,for undelivered, defective or customer can contest thefraudulent items. charge and put a hold on payments.Debit cards are used for retail Credit cards are used for largeor small purchases on faith. businesses.
Smart Card• A thin and credit card sized piece of plastic provide identification, authentication, data storage and application processing• Contains a half-inch-square area that serves as the card’s input/output system• With a built-in chip capable of storing information in its memory• Used typically for electronic processes such as financial transactions• First produced by Motorola, in 1977
Uses & Applications of Smart Card• Provides users with the ability to make a purchase• Holds cash, ID information, and a key to a house or an office• Provides three categories of applications - 1. Authenticate an individual’s claim of personal identification 2. Authorization for things like drug prescription fulfillment and voting purposes 3. Transaction processing and capturing fingerprint• Provides encryption and decryption of messages to ensure security, integrity, and confidentiality• Acts as a carrier of value, called as an Electronic Purse
DigiCash and E-Cash• DigiCash: ▫ Another alternative method of digital payment ▫ Leaves no audit trail ▫ Offers true digital economy ▫ Resistance from the treasury department ▫ One such digital cash system is CyberCoin• E-Cash: • Electronic currency service • Requires a client-server interaction • Customers buy it with a secure credit card transaction • Safest way for fraudulent protection
E-Wallet• An electronic payment system that operates like a carrier of e-cash and information in the same way a real world wallet functions.• It gives the shopper a single, simple, and secure way of carrying currency electronically.• Trust is the basis of the e-wallet as a form of electronic payment.• The most popular wallet vendors are Brodia.com, IBM, Yahoo!, Trintech, eWallet, CyberCash, America Online and so on.
Electronic Funds Transfer and AutomatedClearing House• Electronic Funds Transfer (EFT) ▫ A computer-based system that facilitates the transfer of money between two financial institutions.• Automated Clearing House (ACH) ▫ Where Bank’s transactions involve more than one financial institution routing to debit and credit the correct accounts.
M-Commerce and M-Payment ▫ The ability to secure payments over wireless devices like mobile phones and personal digital assistant (PDA). ▫ Depends on its payment infrastructure, delivering confidential data safely and reliably. ▫ Capable of handling payments between authorized parties in a consistent and interoperable manner. ▫ Products and services are - Mobile ATM, Mobile ticketing, vouchers, coupons and loyalty cards, Content purchase and delivery, Location-based services, Mobile banking, brokerage. Auctions, Mobile marketing and advertising etc.
Issues and Implications Regarding ElectronicPayment Methods and Methodologies• Consumer Needs• Corporate Processes• Corporate Strategy• Regulation of Competition• Economics & Social Processes