Ebiz 05 Online Monetary Transactions Outline5.1 Introduction5.2 Credit-Card Transactions5.3 E-Wallets5.4 Alternate Consumer Payment Options5.5 Digital Currency5.6 Peer-To-Peer Payments5.7 Smart Cards5.8 Micropayments5.9 Business-to-Business (B2B) Transactions5.10 E-Billing5.11 Online Banking

1. © 2001 Prentice Hall, Inc. All rights reserved.
Chapter 5, Online Monetary
Transactions
Outline
5.1 Introduction
5.2 Credit-Card Transactions
5.3 E-Wallets
5.4 Alternate Consumer Payment Options
5.5 Digital Currency
5.6 Peer-To-Peer Payments
5.7 Smart Cards
5.8 Micropayments
5.9 Business-to-Business (B2B) Transactions
5.10 E-Billing
5.11 Online Banking

2. © 2001 Prentice Hall, Inc. All rights reserved.
5.1 Introduction
• The electronic transfer of funds is key to
conducting e-business successfully
• Discussion includes:
– How individuals and organizations perform monetary
transactions on the Internet
– Payments by credit card, cash, and check; payments to
businesses; peer-to-peer payments; banking and bill paying
– Companies who are developing online payment technology
– Products, software, and services that these companies
produce

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5.2 Credit-Card Transactions
• Customers fear credit-card fraud
– Credit cards have been developed to accommodate online and
offline payments
• The Prodigy Internet Mastercard guarantees online fraud
protection
• To accept credit-card payments, a merchant must have a merchant
account with a bank
– Specialized Internet merchant accounts have been established to
handle online credit-card transactions
• Transactions are processed by banks or third-party services
• Traditional merchant accounts accept only POS (point-of-sale)
transactions
– Those that occur when you present your credit card at a store

4. © 2001 Prentice Hall, Inc. All rights reserved.
5.2 Credit-Card Transactions
• Companies enable merchants to accept credit-card
payments online.
– These companies have established business relationships
with financial institutions that will accept online credit-card
payments for merchant clients.
– CyberCash and iCat
– Trintech

5. © 2001 Prentice Hall, Inc. All rights reserved.
5.2 CyberCash Feature
• Enables businesses to receive payments through Internet
– CashRegister
• 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
• Establishes direct connection between its servers and the Web
sites of its e-business customers
• Customer enters credit-card and shipping information
• 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

6. © 2001 Prentice Hall, Inc. All rights reserved.
5.2 CyberCash Feature
• CyberCash Instabuy allows customers to store
their purchasing information in an Instabuy e-
wallet
– An e-wallet electronically stores purchasing information
• Using redundant servers, or identical servers for
back up if one server fails, CyberCash is able to
minimize downtime
• CashRegister keeps track of transactions
• All financial information transmitted via the
Internet is encrypted and digitally signed
• CyberCash offers fraud detection to protect
merchants

7. © 2001 Prentice Hall, Inc. All rights reserved.
5.3 E-Wallets
• E-wallets
– Keep track of your billing and shipping information so that it
can be entered with one click at participating merchants’
sites
– Store e-checks, e-cash and credit-card information
• Credit-card companies offer a variety of e-wallets
– Visa e-wallets
– MBNA e-wallet allows one-click shopping at member sites
– Entrypoint.com offers a personalized desktop toolbar
that includes an e-wallet
• A group of e-wallet vendors have standardized
technology with Electronic Commerce Modeling
Language (ECML)

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5.4 Alternate Consumer Payment
Options
• Checks or money orders through the mail
• Cash on delivery (COD)
• Debit cards
– offer an alternative for card-holders to access their accounts
– funds are instantly deducted from checking account
– Can withdraw cash from Automatic Teller Machines (ATMs)
• Checking-account numbers
– Companies such as AmeriNet allow merchants to accept
checking-account numbers as a valid form of payment
• AmeriNet provides authorization, account settlement,
distribution and shipping (fulfillment) and customer service
inquiries

9. © 2001 Prentice Hall, Inc. All rights reserved.
5.5 Digital Currency
• Digital cash
– Stored electronically, used to make online electronic
payments
– Digital cash accounts are similar to traditional bank accounts
– Digital cash used with other payment technologies (digital
wallets)
– Alleviates some security fears online credit-card transactions
– Digital cash allows those with no credit cards to shop online
– Merchants accepting digital-cash payments avoid credit-card
transaction fees
– eCash Technologies, Inc. is a secure digital-cash provider
that allows you to withdraw funds from your traditional bank
account

10. © 2001 Prentice Hall, Inc. All rights reserved.
5.5 Digital Currency
• Gift cash, often sold as points, can be redeemed at
leading shopping sites
– An effective way of giving those without credit cards, the
ability to make purchases on the Web
– Flooz
• Points-based rewards
– Points are acquired for completing specified tasks including
visiting Web sites, registering or buying products
– Points can then be redeemed
– Beenz

11. © 2001 Prentice Hall, Inc. All rights reserved.
5.6 Peer-To-Peer Payments
• Peer-to-peer transactions
– Allow online monetary transfers between consumers
– eCash allows the transfer of digital cash via e-mail between
two people who have accounts at eCash-enabled banks
– PayPal offers X payments
• Allows user to send money to anyone with an e-mail address
• 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
– BillPoint
• Allows buyers to submit electronic payments to sellers’
checking accounts
– Tradesafe.com (larger transactions, B2B)

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5.7 Smart Cards
• Smart card
– Card with computer chip embedded on its face, holds more
information than ordinary credit card with magnetic strip
– Contact smart cards
• To read information on smart cards and update information,
contact smart cards need to be placed in a smart card reader
– Contactless smart cards
• Have both a coiled antenna and a computer chip inside,
enabling the cards to transmit information
– Can require the user to have a password, giving the smart
card a security advantage over credit cards
• Information can be designated as "read only" or as "no access"
• Possibility of personal identity theft

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5.8 Micropayments
• Merchants pay fee for each credit-card transaction
• Micropayments
– Payments that generally do not exceed $10, allows
companies offering nominally priced products to profit
• To offer micropayments, some companies form
strategic partnerships with utility companies
– eCharge enables companies to offer this option to customers
• eCharge uses ANI (Automatic Number Identification) to verify
the identity of the customer and the purchases they make
• Outsource payment-management systems (Qpass)

14. © 2001 Prentice Hall, Inc. All rights reserved.
5.8 Millicent Feature
• Millicent is a micropayment technology provider
• 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
• Millicent handles all payment processing needed
for the operation of an e-business, customer
support and distribution services

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5.9 Business-to-Business (B2B)
Transactions
• Business-to-business (B2B) transactions
– Fastest growing sector of e-commerce payments
– Payments are often larger than B2C transactions and involve
complex business accounting systems
• PaymentechTM
– Payment solution provider for Internet point-of-sale
transactions
– Brick-and-mortar and electronic merchants choose from
transaction-processing options including debit cards, credit
cards, checks and EBT authorization and settlement
• EBT (Electronic Benefits Transfer) is defined by
the USDA as the electronic transfer of government
funds to retailers for the benefit of the needy

16. © 2001 Prentice Hall, Inc. All rights reserved.
5.9 Business-to-Business (B2B)
Transactions
• eCredit provides real-time, credit-transaction
capabilities of B2B size
• Clareon facilitates B2B transactions by providing
digital payment and settlement services
– Payment is digitally signed, secured and authenticated via
digital payment authentication (DPA)
– Compatible with all enterprise resource planning (ERP)
systems and can adapt electronic records for companies,
banks and each member of a given transaction

17. © 2001 Prentice Hall, Inc. All rights reserved.
5.9 Business-to-Business (B2B)
Transactions
• Electronic consolidation and reconciliation of the
business transaction process
– Companies can keep track of a transaction from order-to-
cash settlement while reducing administrative costs, errors,
waste and complexity in the supply chain
• eTime Capital
• Order-fulfillment providers
– Companies attempting to bring supply chain expertise and
logistical services to Internet businesses
• Internet-based electronic B2B transactions will
augment, but not replace, traditional Electronic
Data Interchange (EDI) systems

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5.9 TradeCard Feature
• Provides a global B2B e-commerce infrastructure
– Cross-border data management and payment
• Buyer creates pre-formatted electronic purchase
order and presents document to seller
• Purchase order data stored electronically in
TradeCard database, and electronic invoices and
packing slips are produced from data
• Uses a patented "data compliance engine" to check
documents against original purchase order
– If discrepancies are found, concerned parties are notified
immediately and can negotiate to resolve the conflict

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5.9 TradeCard Feature
• TradeCard awaits delivery confirmation from a
third-party logistics services provider (3PL)
– Industry terminology for a shipping company
• When confirmation is received and compliance
met, TradeCard completes the financial
transaction by sending request for payment to the
buyer’s financial institution
• TradeCard enables large-scale and large-dollar
commerce without credit-card payment through
direct interaction with existing financial
institutions

20. © 2001 Prentice Hall, Inc. All rights reserved.
5.10 E-Billing
• Electronic Bill Presentment and Payment (EBPP)
– Offers ability to present a company’s bill on multiple
platforms online and actual payment processes
– Payments are generally electronic transfers from
consumer checking accounts, conducted through the
ACH (Automated Clearing House)
• Current method for processing electronic monetary transfers
– Paytrust
• Users send bills directly to Paytrust which scans them and places
them online
• E-mails customers announcements of newly arrived bills and
impending payment-due dates
• Makes automatic payments on any bill up to a threshold amount

21. © 2001 Prentice Hall, Inc. All rights reserved.
5.10 E-Billing
• Services to enable EBPP on a company’s site
– Derivion
• Provides billers with electronic capabilities in conjunction with
Paytrust’s service
• Offers billing companies the technology and expertise needed
to transfer from paper to electronic billing through iNetBillerSM
– Encirq
• 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)
• Builds highly specific consumer profiles each time charges is
received

22. © 2001 Prentice Hall, Inc. All rights reserved.
5.10 CheckFree Feature
• CheckFree is a consolidation service that can
service any biller and present consumers with all
their bills in one interactive online environment
• 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
• For billers, the e-billing option adds convenience
and lower costs
• All payments and outstanding bills can be tracked
online and consumers have interactive access to
their entire payment histories

23. © 2001 Prentice Hall, Inc. All rights reserved.
5.11 Online Banking
• Internet-only banks
– Offer convenience and lower rates to their customers
– Establishing a physical presence
• The hybrid bank model
– Going online has become important for the survival and
growth of small local banks
– Smaller banks will usually partner with third-party service
providers to make the transition to the Internet
• Glass-Steagle Act
– Prohibited financial institutions from engaging in multiple
financial operations
– Was repealed so now banks, brokerages and insurance
companies are permitted to offer a wide range of financial
services

24. © 2001 Prentice Hall, Inc. All rights reserved.
5.11 Online Banking
• Claritybank.com
– Internet-only bank that specializes in loans to new-economy
firms
– Offers a customized portal service and a B2B center
• OneCore.com
– Targets small businesses
– Offers packages to businesses at different stages of growth
– Offers financial-overview services
– Payroll and 401K services, enabling of credit-card
processing for would-be merchants and payables
streamlining services
– An "electronic financial officer" is available who will
answer business financial questions via e-mail

25. © 2001 Prentice Hall, Inc. All rights reserved.
5.11 Wells Fargo Feature
• Wells Fargo provides of online banking services
– Services are broken into three main sectors; personal
finance, small business and commercial banking
• Offers customers personal banking, free bill-
paying and checking-account comparisons
• Planning to use its portal site as a financial
aggregator
– allowing people to view information from all of their
financial accounts in one place on the Internet
• Establishing specialized resource centers for
students, retirees and those purchase cars or homes

26. © 2001 Prentice Hall, Inc. All rights reserved.
5.11 NetBank Feature
• Netbank is the largest bank operating solely on the
Internet
• Customers benefits
– Can open checking, savings and credit accounts
– Can plan for retirement using IRAs and other investment
accounts, conduct online trading, and obtain mortgage, car
and business loans over the Web
– Receive a line of credit, free online bill payment and
presentment, ATM card and Visa credit card