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![Page 1: 2001 Prentice Hall, Inc. All rights reserved. Chapter 4, Online Monetary Transactions Outline 4.1Introduction 4.2Credit-Card Transactions 4.2.1 Anatomy.](https://reader035.fdocuments.in/reader035/viewer/2022081602/55174f4e550346a3338b495d/html5/thumbnails/1.jpg)
2001 Prentice Hall, Inc. All rights reserved.
Chapter 4, Online Monetary Transactions
Outline4.1 Introduction4.2 Credit-Card Transactions
4.2.1 Anatomy of a Credit-Card Transaction4.2.2 Credit-Card Transaction Enablers
4.3 Online Credit-Card Fraud4.4 Digital Currency4.5 E-Wallets4.6 Alternate Consumer Payment Options4.7 Peer-To-Peer Payment4.8 Smart Cards4.9 Micropayments4.10 Business-To-Business (B2B) Transactions4.11 E-Billing4.12 Developing Payment Standards
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2001 Prentice Hall, Inc. All rights reserved.
4.1 Introduction
• Secure electronic funds transfer is crucial to e-commerce
• Examination of how individuals and organizations conduct monetary transactions on the Internet
• Credit-card transactions, digital cash and e-wallets, smart cards, micropayments and electronic bill presentment and payment
• Electronic-payment enablers
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2001 Prentice Hall, Inc. All rights reserved.
4.2 Credit-Card Transactions
• Popular form of payment for online purchases • Resistance due to security concerns• Many cards offer capabilities for online and
offline purchases– Prodigy Internet Mastercard
– American Express Blue
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2001 Prentice Hall, Inc. All rights reserved.
4.2 American Express: Enabling Secure Payments on the Web
• Small business transactions• Blue for Business
– Blue allows business owners to carry a balance and conduct secure online and offline transactions
• American Express Purchase Protection Program – Protects buyers against damaged goods
• Buyers Assurance Plan – Offers an extended warranty on purchases made with the
Blue card
• Online WalletSM
– ExpressFormSM
– AutobuySM
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2001 Prentice Hall, Inc. All rights reserved.
4.2 American Express: Enabling Secure Payments on the Web
• Private Payments– Provides a unique account number for each individual
purchase
• American Express @ WorkSM – Facilitates larger corporations with enhanced integration
technologies
• Online Program Management – Allows corporations to manage the corporate accounts of a
large number of employees
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4.2.1 Anatomy of an Online Credit-Card Transaction
• To accept credit-card payments, a merchant must have a merchant account
• Traditional merchant accounts accept only POS (point-of-sale) transactions– Transactions that occur when you present your credit card at
a store
• Card-not-present (CNP) transaction– Merchant does not see actual card being used in the purchase
• Authentication– The person is, in fact, who they say they are
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2001 Prentice Hall, Inc. All rights reserved.
4.2.1 Anatomy of an Online Credit-Card Transaction
• Authorization– The money is available to complete the transaction
• Acquiring bank – The bank with which the merchant holds an account
• Issuing bank– The bank from which the buyer obtained the credit card, and
the credit-card association
• Verification• Money issued to merchant after product/service is
distributed
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4.2.1 Anatomy of an Online Credit-Card Transaction
• Step 1– Consumer makes a purchase at an online store, credit card
information received by e-store
• Step 2– Credit card information is sent from the merchant to the
acquiring bank
• Step 3 and Step 4– The credit card association and the issuing bank certify the
transaction and the verification is sent to the acquiring bank
• Step 5– The merchant ships the product and payment is issued
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4.2.2 Credit-Card Transaction Enablers
• Credit-Card Transaction Enablers– Companies that have established business relationships with
financial institutions that will accept online credit-card payments for merchant clients
• iCat
• Trintech
• Cybercash
• NextCard, Inc.
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4.2.2 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
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4.2.2 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
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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.)
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4.3 Online Credit-Card Fraud
• Chargeback– When a credit-card holder claims a purchase was made by an
unauthorized individual, or when a purchase was not received
– The charges in question are not the responsibility of the credit-card holder
– On the Internet, neither a scan of the card nor a signature is registered and the cost is incurred by the merchant
• Visa– High-risk business models– “Best Practices”
• Mastercard– Uses the three digit pin code on the back of the card
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4.4 Digital Currency
• Digital cash – Stored electronically, used to make online electronic
payments
– Similar to traditional bank accounts
– Used with other payment technologies (digital wallets)
– Alleviates some security fears online credit-card transactions
– 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
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4.4 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
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4.4 Digital Currency
Using eCash on the Web. (Courtesy of eCash Technologies, Inc.and ©2000 eCash.)
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4.5 E-Wallets
• E-wallets– Keep track of your billing and shipping information so that it
can be entered with one click at participating 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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4.6 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
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4.6 Alternate Consumer Payment Options
EntryPoint Internet Toolbar. (Courtesy of EntryPoint. Inc.)
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4.7 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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4.8 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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4.9 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)
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4.9 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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4.10 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) – Defined by the USDA as the electronic transfer of
government funds to retailers for the benefit of the needy
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4.10 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
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4.10 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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4.10 Business-to-Business (B2B) Transactions
PAYTRUST SmartBalance™ screen shot. (Courtesy of Paytrust, Inc.)
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4.10 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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4.10 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
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4.10 TradeCard Feature
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4.11 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 about newly arrived bills and payment-due dates
• Makes automatic payments on any bill up to a threshold amount
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4.11 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
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4.11 CheckFree Feature
• CheckFree is a consolidation service – 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
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4.12 Developing Payment Standards
• Essential to the success of e-commerce • Businesses offering domestic and international
services must have assurance that payment will be received, that it is secure and that it is valid
• Open Financial Exchange (OFX) – Developed and presented by Intuit, Microsoft and Checkfree
in 1997
– To serve as a standard mechanism for the exchange of financial information
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4.12 Jalda Feature
• Developed by Ericsson• 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)
• Accommodates transactions involving small fees• Purchases can be made through the Web and using
wireless devices• A PIN code authorizes the transaction