Marketing bab2


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Marketing bab2

  1. 1. Chapter 4, Online Monetary Transactions Outline 4.1 Introduction 4.2 Credit-Card Transactions 4.2.1 Anatomy of a Credit-Card Transaction 4.2.2 Credit-Card Transaction Enablers 4.3 Online Credit-Card Fraud 4.4 Digital Currency 4.5 E-Wallets 4.6 Alternate Consumer Payment Options 4.7 Peer-To-Peer Payment 4.8 Smart Cards 4.9 Micropayments 4.10 Business-To-Business (B2B) Transactions 4.11 E-Billing 4.12 Developing Payment Standards
  2. 2. 4.1 Introduction <ul><li>Secure electronic funds transfer is crucial to e-commerce </li></ul><ul><li>Examination of how individuals and organizations conduct monetary transactions on the Internet </li></ul><ul><li>Credit-card transactions, digital cash and e-wallets, smart cards, micropayments and electronic bill presentment and payment </li></ul><ul><li>Electronic-payment enablers </li></ul>
  3. 3. 4.2 Credit-Card Transactions <ul><li>Popular form of payment for online purchases </li></ul><ul><li>Resistance due to security concerns </li></ul><ul><li>Many cards offer capabilities for online and offline purchases </li></ul><ul><ul><li>Prodigy Internet Mastercard </li></ul></ul><ul><ul><li>American Express Blue </li></ul></ul>
  4. 4. 4.2 American Express: Enabling Secure Payments on the Web <ul><li>Small business transactions </li></ul><ul><li>Blue for Business </li></ul><ul><ul><li>Blue allows business owners to carry a balance and conduct secure online and offline transactions </li></ul></ul><ul><li>American Express Purchase Protection Program </li></ul><ul><ul><li>Protects buyers against damaged goods </li></ul></ul><ul><li>Buyers Assurance Plan </li></ul><ul><ul><li>Offers an extended warranty on purchases made with the Blue card </li></ul></ul><ul><li>Online Wallet SM </li></ul><ul><ul><li>ExpressForm SM </li></ul></ul><ul><ul><li>Autobuy SM </li></ul></ul>
  5. 5. 4.2 American Express: Enabling Secure Payments on the Web <ul><li>Private Payments </li></ul><ul><ul><li>Provides a unique account number for each individual purchase </li></ul></ul><ul><li>American Express @ Work SM </li></ul><ul><ul><li>Facilitates larger corporations with enhanced integration technologies </li></ul></ul><ul><li>Online Program Management </li></ul><ul><ul><li>Allows corporations to manage the corporate accounts of a large number of employees </li></ul></ul>
  6. 6. 4.2.1 Anatomy of an Online Credit-Card Transaction <ul><li>To accept credit-card payments, a merchant must have a merchant account </li></ul><ul><li>Traditional merchant accounts accept only POS (point-of-sale) transactions </li></ul><ul><ul><li>Transactions that occur when you present your credit card at a store </li></ul></ul><ul><li>Card-not-present (CNP) transaction </li></ul><ul><ul><li>Merchant does not see actual card being used in the purchase </li></ul></ul><ul><li>Authentication </li></ul><ul><ul><li>The person is, in fact, who they say they are </li></ul></ul>
  7. 7. 4.2.1 Anatomy of an Online Credit-Card Transaction <ul><li>Authorization </li></ul><ul><ul><li>The money is available to complete the transaction </li></ul></ul><ul><li>Acquiring bank </li></ul><ul><ul><li>The bank with which the merchant holds an account </li></ul></ul><ul><li>Issuing bank </li></ul><ul><ul><li>The bank from which the buyer obtained the credit card, and the credit-card association </li></ul></ul><ul><li>Verification </li></ul><ul><li>Money issued to merchant after product/service is distributed </li></ul>
  8. 8. 4.2.1 Anatomy of an Online Credit-Card Transaction <ul><li>Step 1 </li></ul><ul><ul><li>Consumer makes a purchase at an online store, credit card information received by e-store </li></ul></ul><ul><li>Step 2 </li></ul><ul><ul><li>Credit card information is sent from the merchant to the acquiring bank </li></ul></ul><ul><li>Step 3 and Step 4 </li></ul><ul><ul><li>The credit card association and the issuing bank certify the transaction and the verification is sent to the acquiring bank </li></ul></ul><ul><li>Step 5 </li></ul><ul><ul><li>The merchant ships the product and payment is issued </li></ul></ul>
  9. 9. 4.2.2 Credit-Card Transaction Enablers <ul><li>Credit-Card Transaction Enablers </li></ul><ul><ul><li>Companies that have established business relationships with financial institutions that will accept online credit-card payments for merchant clients </li></ul></ul><ul><ul><ul><li>iCat </li></ul></ul></ul><ul><ul><ul><li>Trintech </li></ul></ul></ul><ul><ul><ul><li>Cybercash </li></ul></ul></ul><ul><ul><ul><li>NextCard, Inc. </li></ul></ul></ul>
  10. 10. 4.2.2 CyberCash Feature <ul><li>Enables businesses to receive payments through Internet </li></ul><ul><ul><li>CashRegister </li></ul></ul><ul><ul><ul><li>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 </li></ul></ul></ul><ul><ul><ul><li>Establishes direct connection between its servers and the Web sites of its e-business customers </li></ul></ul></ul><ul><ul><ul><li>Customer enters credit-card and shipping information </li></ul></ul></ul><ul><ul><ul><li>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 </li></ul></ul></ul>
  11. 11. 4.2.2 CyberCash Feature <ul><li>CyberCash Instabuy allows customers to store their purchasing information in an Instabuy e-wallet </li></ul><ul><ul><li>An e-wallet electronically stores purchasing information </li></ul></ul><ul><li>Using redundant servers , or identical servers for back up if one server fails, CyberCash is able to minimize downtime </li></ul><ul><li>CashRegister keeps track of transactions </li></ul><ul><li>All financial information transmitted via the Internet is encrypted and digitally signed </li></ul><ul><li>CyberCash offers fraud detection to protect merchants </li></ul>
  12. 12. 4.2.2 CyberCash Feature CyberCash FraudPatrol. (Courtesy of CyberCash™, Inc. CyberCash is a registered trademark of CyberCash Inc., in the United States and other countries.)
  13. 13. 4.3 Online Credit-Card Fraud <ul><li>Chargeback </li></ul><ul><ul><li>When a credit-card holder claims a purchase was made by an unauthorized individual, or when a purchase was not received </li></ul></ul><ul><ul><li>The charges in question are not the responsibility of the credit-card holder </li></ul></ul><ul><ul><li>On the Internet, neither a scan of the card nor a signature is registered and the cost is incurred by the merchant </li></ul></ul><ul><li>Visa </li></ul><ul><ul><li>High-risk business models </li></ul></ul><ul><ul><li>“ Best Practices” </li></ul></ul><ul><li>Mastercard </li></ul><ul><ul><li>Uses the three digit pin code on the back of the card </li></ul></ul>
  14. 14. 4.4 Digital Currency <ul><li>Digital cash </li></ul><ul><ul><li>Stored electronically, used to make online electronic payments </li></ul></ul><ul><ul><li>Similar to traditional bank accounts </li></ul></ul><ul><ul><li>Used with other payment technologies (digital wallets) </li></ul></ul><ul><ul><li>Alleviates some security fears online credit-card transactions </li></ul></ul><ul><ul><li>Allows those with no credit cards to shop online </li></ul></ul><ul><ul><li>Merchants accepting digital-cash payments avoid credit-card transaction fees </li></ul></ul><ul><ul><li>eCash Technologies, Inc. is a secure digital-cash provider that allows you to withdraw funds from your traditional bank account </li></ul></ul>
  15. 15. 4.4 Digital Currency <ul><li>Gift cash, often sold as points, can be redeemed at leading shopping sites </li></ul><ul><ul><li>An effective way of giving those without credit cards, the ability to make purchases on the Web </li></ul></ul><ul><ul><li>Flooz </li></ul></ul><ul><li>Points-based rewards </li></ul><ul><ul><li>Points are acquired for completing specified tasks including visiting Web sites, registering or buying products </li></ul></ul><ul><ul><li>Points can then be redeemed </li></ul></ul><ul><ul><li>Beenz </li></ul></ul>
  16. 16. 4.4 Digital Currency Using eCash on the Web. (Courtesy of eCash Technologies, Inc. and ©2000 eCash.)
  17. 17. 4.5 E-Wallets <ul><li>E-wallets </li></ul><ul><ul><li>Keep track of your billing and shipping information so that it can be entered with one click at participating sites </li></ul></ul><ul><ul><li>Store e-checks, e-cash and credit-card information </li></ul></ul><ul><li>Credit-card companies offer a variety of e-wallets </li></ul><ul><ul><li>Visa e-wallets </li></ul></ul><ul><ul><li>MBNA e-wallet allows one-click shopping at member sites </li></ul></ul><ul><ul><li> offers a personalized desktop toolbar that includes an e-wallet </li></ul></ul><ul><li>A group of e-wallet vendors have standardized technology with Electronic Commerce Modeling Language (ECML) </li></ul>
  18. 18. 4.6 Alternate Consumer Payment Options <ul><li>Checks or money orders through the mail </li></ul><ul><li>Cash on delivery (COD) </li></ul><ul><li>Debit cards </li></ul><ul><ul><li>Offer an alternative for card-holders to access their accounts </li></ul></ul><ul><ul><li>Funds are instantly deducted from checking account </li></ul></ul><ul><ul><li>Can withdraw cash from Automatic Teller Machines (ATMs) </li></ul></ul><ul><li>Checking-account numbers </li></ul><ul><ul><li>Companies such as AmeriNet allow merchants to accept checking-account numbers as a valid form of payment </li></ul></ul><ul><ul><ul><li>AmeriNet provides authorization, account settlement, distribution and shipping ( fulfillment ) and customer service inquiries </li></ul></ul></ul>
  19. 19. 4.6 Alternate Consumer Payment Options EntryPoint Internet Toolbar. (Courtesy of EntryPoint. Inc.)
  20. 20. 4.7 Peer-To-Peer Payments <ul><li>Peer-to-peer transactions </li></ul><ul><ul><li>Allow online monetary transfers between consumers </li></ul></ul><ul><ul><li>eCash allows the transfer of digital cash via e-mail between two people who have accounts at eCash-enabled banks </li></ul></ul><ul><ul><li>PayPal offers X payments </li></ul></ul><ul><ul><ul><li>Allows user to send money to anyone with an e-mail address </li></ul></ul></ul><ul><ul><ul><li>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 </li></ul></ul></ul><ul><ul><li>BillPoint </li></ul></ul><ul><ul><ul><li>Allows buyers to submit electronic payments to sellers’ checking accounts </li></ul></ul></ul><ul><ul><li> ( larger transactions, B2B) </li></ul></ul>
  21. 21. 4.8 Smart Cards <ul><li>Smart card </li></ul><ul><ul><li>Card with computer chip embedded on its face, holds more information than ordinary credit card with magnetic strip </li></ul></ul><ul><ul><li>Contact smart cards </li></ul></ul><ul><ul><ul><li>To read information on smart cards and update information, contact smart cards need to be placed in a smart card reader </li></ul></ul></ul><ul><ul><li>Contactless smart cards </li></ul></ul><ul><ul><ul><li>Have both a coiled antenna and a computer chip inside, enabling the cards to transmit information </li></ul></ul></ul><ul><ul><li>Can require the user to have a password, giving the smart card a security advantage over credit cards </li></ul></ul><ul><ul><ul><li>Information can be designated as &quot;read only&quot; or as &quot;no access&quot; </li></ul></ul></ul><ul><ul><ul><li>Possibility of personal identity theft </li></ul></ul></ul>
  22. 22. 4.9 Micropayments <ul><li>Merchants pay fee for each credit-card transaction </li></ul><ul><li>Micropayments </li></ul><ul><ul><li>Payments that generally do not exceed $10, allows companies offering nominally priced products to profit </li></ul></ul><ul><li>To offer micropayments, some companies form strategic partnerships with utility companies </li></ul><ul><ul><li>eCharge enables companies to offer this option to customers </li></ul></ul><ul><ul><ul><li>eCharge uses ANI (Automatic Number Identification) to verify the identity of the customer and the purchases they make </li></ul></ul></ul><ul><li>Outsource payment-management systems ( Qpass ) </li></ul>
  23. 23. 4.9 Millicent Feature <ul><li>Millicent is a micropayment technology provider </li></ul><ul><li>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 </li></ul><ul><li>Millicent handles all payment processing needed for the operation of an e-business, customer support and distribution services </li></ul>
  24. 24. 4.10 Business-to-Business (B2B) Transactions <ul><li>Business-to-business (B2B) transactions </li></ul><ul><ul><li>Fastest growing sector of e-commerce payments </li></ul></ul><ul><ul><li>Payments are often larger than B2C transactions and involve complex business accounting systems </li></ul></ul><ul><li>Paymentech TM </li></ul><ul><ul><li>Payment solution provider for Internet point-of-sale transactions </li></ul></ul><ul><ul><li>Brick-and-mortar and electronic merchants choose from transaction-processing options including debit cards, credit cards, checks and EBT authorization and settlement </li></ul></ul><ul><li>EBT (Electronic Benefits Transfer ) </li></ul><ul><ul><li>Defined by the USDA as the electronic transfer of government funds to retailers for the benefit of the needy </li></ul></ul>
  25. 25. 4.10 Business-to-Business (B2B) Transactions <ul><li>eCredit provides real-time, credit-transaction capabilities of B2B size </li></ul><ul><li>Clareon facilitates B2B transactions by providing digital payment and settlement services </li></ul><ul><ul><li>Payment is digitally signed, secured and authenticated via digital payment authentication (DPA) </li></ul></ul><ul><ul><li>Compatible with all enterprise resource planning (ERP) systems and can adapt electronic records for companies, banks and each member of a given transaction   </li></ul></ul>
  26. 26. 4.10 Business-to-Business (B2B) Transactions <ul><li>Electronic consolidation and reconciliation of the business transaction process </li></ul><ul><ul><li>Companies can keep track of a transaction from order-to-cash settlement while reducing administrative costs, errors, waste and complexity in the supply chain </li></ul></ul><ul><ul><ul><li>eTime Capital </li></ul></ul></ul><ul><li>Order-fulfillment providers </li></ul><ul><ul><li>Companies attempting to bring supply chain expertise and logistical services to Internet businesses  </li></ul></ul><ul><li>Internet-based electronic B2B transactions will augment, but not replace, traditional Electronic Data Interchange (EDI) systems </li></ul>
  27. 27. 4.10 Business-to-Business (B2B) Transactions PAYTRUST SmartBalance™ screen shot. (Courtesy of Paytrust, Inc.)
  28. 28. 4.10 TradeCard Feature <ul><li>Provides a global B2B e-commerce infrastructure </li></ul><ul><ul><li>Cross-border data management and payment </li></ul></ul><ul><li>Buyer creates pre-formatted electronic purchase order and presents document to seller </li></ul><ul><li>Purchase order data stored electronically in TradeCard database, and electronic invoices and packing slips are produced from data </li></ul><ul><li>Uses a patented &quot;data compliance engine&quot; to check documents against original purchase order </li></ul><ul><ul><li>If discrepancies are found, concerned parties are notified immediately and can negotiate to resolve the conflict </li></ul></ul>
  29. 29. 4.10 TradeCard Feature <ul><li>TradeCard awaits delivery confirmation from a third-party logistics services provider (3PL) </li></ul><ul><ul><li>Industry terminology for a shipping company </li></ul></ul><ul><li>When confirmation is received and compliance met, TradeCard completes the financial transaction by sending request for payment to the buyer’s financial institution </li></ul><ul><li>TradeCard enables large-scale and large-dollar commerce without credit-card payment through direct interaction with existing financial institutions </li></ul>
  30. 30. 4.10 TradeCard Feature
  31. 31. 4.11 E-Billing <ul><li>Electronic Bill Presentment and Payment (EBPP) </li></ul><ul><ul><li>Offers ability to present a company’s bill on multiple platforms online and actual payment processes </li></ul></ul><ul><ul><li>Payments are generally electronic transfers from consumer checking accounts, conducted through the ACH (Automated Clearing House) </li></ul></ul><ul><ul><ul><li>Current method for processing electronic monetary transfers </li></ul></ul></ul><ul><ul><li>Paytrust </li></ul></ul><ul><ul><ul><li>Users send bills directly to Paytrust which scans them and places them online </li></ul></ul></ul><ul><ul><ul><li>E-mails customers about newly arrived bills and payment-due dates </li></ul></ul></ul><ul><ul><ul><li>Makes automatic payments on any bill up to a threshold amount </li></ul></ul></ul>
  32. 32. 4.11 E-Billing <ul><li>Services to enable EBPP on a company’s site </li></ul><ul><ul><li>Derivion </li></ul></ul><ul><ul><ul><li>Provides billers with electronic capabilities in conjunction with Paytrust’s service </li></ul></ul></ul><ul><ul><ul><li>Offers billing companies the technology and expertise needed to transfer from paper to electronic billing through iNetBiller SM </li></ul></ul></ul><ul><ul><li>Encirq </li></ul></ul><ul><ul><ul><li>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)   </li></ul></ul></ul><ul><ul><ul><li>Builds highly specific consumer profiles each time charges is received </li></ul></ul></ul>
  33. 33. 4.11 CheckFree Feature <ul><li>CheckFree is a consolidation service </li></ul><ul><ul><li>Can service any biller and present consumers with all their bills in one interactive online environment </li></ul></ul><ul><li>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 </li></ul><ul><li>For billers, the e-billing option adds convenience and lower costs </li></ul><ul><li>All payments and outstanding bills can be tracked online and consumers have interactive access to their entire payment histories </li></ul>
  34. 34. 4.12 Developing Payment Standards <ul><li>Essential to the success of e-commerce </li></ul><ul><li>Businesses offering domestic and international services must have assurance that payment will be received, that it is secure and that it is valid </li></ul><ul><li>Open Financial Exchange (OFX) </li></ul><ul><ul><li>Developed and presented by Intuit, Microsoft and Checkfree in 1997 </li></ul></ul><ul><ul><li>To serve as a standard mechanism for the exchange of financial information </li></ul></ul>
  35. 35. 4.12 Jalda Feature <ul><li>Developed by Ericsson </li></ul><ul><li>An open standard online payment system that connects content providers (anyone selling a good or service on the Internet) with an Internet Payment Provider (IPP) </li></ul><ul><li>Accommodates transactions involving small fees </li></ul><ul><li>Purchases can be made through the Web and using wireless devices </li></ul><ul><li>A PIN code authorizes the transaction </li></ul>