INTERNET MARKETINGCHAPTER 6Electronic Payment Systems Pranjoy Arup Das www.pranjoyed.wordpress.com
Topics to be covered as per syllabus 1. Introduction to Internet Marketing: meaning, scope and importance of internet marketing, Application of internet marketing, Internet versus Traditional marketing. Business to Consumer and Business to Business Internet Marketing, Internet Marketing Strategy 2. Online buyer behavior and models: The marketing mix in an online context : product, price, distribution, promotion, people, process and physical evidence ; Managing the Online customer experience : planning website design, Understanding site user requirements, site design and structure, developing and testing content, service quality. 3. Characteristics of interactive marketing communications: Integrated internet marketing communication (IIMC) ; Online Promotion techniques : Search engine marketing, online PR, Interactive advertising, online partnerships, viral marketing, opt-in-e-mail, offline communications 4. Foundation of Social Media Marketing: Social media & its platforms, Meaning, Social media strategy, tactics; creating and managing communities. 5. Business Models & revenue models over Internet: Introduction to E-Business - Electronic business, Electronic Commerce, Types of Electronic Commerce, Benefits, Value chain in E-commerce, Internet based Revenue Models, E-Commerce Models, Strategies for E-commerce Digital Commerce, Mobile Commerce, E-governance, E -commerce in India, Emerging trends in e-business. 6. Electronic Payment Systems: concept of e-money, Electronic payment system, types of electronic payment systems, smart cards, stored value cards and other electronic payment systems, B2B electronic payments, infrastructure issues in EPS, Electronic fund transfer.
Electronic Payment is a financial exchange that takes place online between buyers and sellers or merchants. • Growing importance of electronic payment systems – > Decreasing technology cost: computers are now cheap and Internet is becoming free almost everywhere in the world. > Reduced operational and processing cost: Saves both paper and time. > Growth in e-commerce: The above two factors are influencing many organisations to go online and many others are following them.
Common electronic payment systems include: * Electronic fund transfer (EFT) * Payment cards * Electronic money (e-money/e-cash) * Electronic wallets (e-wallets) * Micro-payment systems * Peer to peer payments
ELECTRONIC FUND TRANSFER (EFT): • Electronic transfer of money by financial institutions. • EFT is used for transferring money from one bank account directly to another without any paper money changing hands. • In India, the Real-time gross settlement (RTGS)& National Electronic Fund Transfer (NEFT) systems facilitate electronic transfer of funds. • For NEFT the transfer limits are Rs. 10,000 to Rs. 2 Lac • For RTGS, the limits are Rs. 2 lac to Rs. 50 Lac
PAYMENT CARDS: • Cards containing stored financial value that can be transferred from the customer’s computer to the seller’s or merchant’s computer. • Credit cards, debit cards, smart cards, stored value cards are commonly used payment cards.
Credit cards may be issued by credit card companies (e.g., MasterCard, Visa) or by major banks. • Can be used to buy goods and services online upto a certain limit through a system called card not present (CNP) transaction. • Online sellers additionally verify by asking for additional information such as the security code printed on the back of the card, date of expiry, and billing address.
Debit cards are issued banks to their account holders. • The function of a debit card is just like that of a cheque and is linked directly to a customers bank account. • Can be used like a credit card to buy goods and services online. • Debit card is considered a faster and safer mode of payment.
A Stored Value Card or a pre-paid card contains funds stored by the issuer in the form of binary-coded data. • These cards can be bought and used like debit cards except that they do not contain the identity of the user. • They can be remotely accessed through codes and passwords and used for online shopping.
A smart card is about the size of a credit card, made of a plastic with an embedded microprocessor chip that holds important financial and personal information. • Smart cards can accommodate a variety of applications that allow the customer to make purchases from a credit account, debit account, or stored value on the card. • The chip can also hold electronic cash in an encrypted form secured by a password. • The cash can be transferred using the password and a special key (unique alpha-numeral provided by the issuing bank / issuer. • Smart cards are broadly classified into two groups: Contact: This type of smart card must be inserted into a special card reader to be read and updated. Contact-less: This type of smart card can be read from a short distance using radio frequency. A contact-less smart card allows data to be transmitted to a special card reader without any physical contact.
ELECTRONIC MONEY ( E CASH): • Standard money converted into an electronic format to pay for online purchases. • e-cash enables transactions between customers without the need for banks or other third parties. • E-cash usually operates on a smart card, which includes an embedded microprocessor chip. • The microprocessor chip stores cash value and the security features that make electronic transactions secure.
How the e-cash system works: • A customer or merchant signs up with one of the participating banks or financial institutions. The customer receives specific software to install on his or her computer. • The software allows the customer to download “electronic coins” against the customer's bank account or against a credit card, to his or her desktop. The software manages the electronic coins. • When buying goods or services from a web site that accepts e-cash, the customer simply clicks the “Pay with e-cash” button. • When the customer accepts a payment, the software subtracts the payment amount from the balance and sends the payment to the bank or the financial institution of the seller.
ELECTRONIC WALLETS: • They are similar to smart cards as they include store financial value and data for online payments. • Electronic wallets are very useful for frequent online shoppers. • E wallets are commercially available for pocket, palm-sized, handheld, and desktop PCs. • They store personal and financial information such as credit cards, passwords, PINs, and much more. • E-wallets can also store e-checks, e-cash and your credit-card information for multiple cards.
MICRO PAYMENTS: • Micro-payments are used for small payments on the Web. • Eg. Buying one song, one chapter of a book, one article from an e-zine etc. • Similar to e-wallets, where the customer transfers some money into the e-wallet on his or her desktop and then pays for digital products by using this e-wallet. • IBM offers micropayment wallets and servers. • Sellers may outsource their micro-payment system or tie up with a micro payment service provider.
PEER TO PEER PAYMENTS: • A peer-to-peer payment service allows the transfer of digital cash (e-Cash) via e-mail between two people. • This system bypasses intermediaries such as banks, credit card companies etc. • The most well known service provider is PAYPAL.
PAYPAL : • PayPal allows a user to send money to anyone with an e-mail address, regardless of what bank either person uses, or whether or not the recipient is pre-registered with the service. • User has to open an account on the paypal website and register the amount to be sent. • The money is taken from the persons credit card or bank account. • Once sent, a payment notification is sent to the recipient, and an account is set up in the recipient's name. • The recipient registers with PayPal and has gets access to the account containing the payment. • The funds in this account can he transferred to the recipient's bank account by direct deposit or mailed by cheque from PayPal. • The PayPal system can also be used to for bidding at auctions. • If one refers someone to PayPal, the person will receive a small monetary reward.
BITCOINS • SSA 10 – Learn more about bitcoins. Try to understand what they are and how they are used. Also try and identify the advantages and disadvantages of using bit-coins from both buyer and seller point of view .
Electronic payment systems in B2B organizations • B2B involves more participants and more complex processes. • Business transactions include procurement, contract administration, fulfillment, financing, insurance, credit ratings, shipment validation, order matching, payment authorization, remittance matching and general ledger accounting. • Electronic Invoice Presentment and Payment (EIPP) – the process by which companies present invoices and make payments to one another through the Internet – is a promising tool in the business-to-business environment. It is a type of Extranet.
There are three EIPP models: > Seller Direct > Buyer Direct > Consolidator • SELLER DIRECT: A seller raises an Invoice on the buyer on the seller’s EIPP system. An email notification is sent to alert the buyer. Buyer collects invoice from EIPP system. Sellers bank collects the payment against the Invoice from the buyer’s bank. • BUYER DIRECT: A buyer buys from seller and requests the seller to raise his Invoice on the buyers EIPP system. An email notification is sent to alert the seller. Buyers bank pays the sellers bank against the Invoice. (NEW CONCEPT – NOT YET IN PRACTICE) • CONSOLIDATOR : A consolidator EIPP acts as an intermediary, collecting and compiling invoices from multiple sellers for multiple buyersand making them available to the buyers and sellers.
Benefits of Migrating to Electronic Payments for B2B: • Cost reduction • Improved fraud detection and error reduction • Increased availability of cash • Automation of labor intensive, manual processes • Utilizing resources in more productive ways • Reduction in the need for space and resources.. Going Green!
How to set up an electronic payment system • The first step is to implement any of the several online payment gateway services such as PayPal, Google Checkout, PayU, Citrus, and CCAvenue on the online seller’s website. • A payment gateway authorizes payments for e-businesses and online retailers. (Equivalent of Payment Countersin shops) • To add a payment gateway button, an online seller has to log on to the gateway’s website and register with all required details. • A code will be given by the gateway which the seller has to paste on the seller’s product webpage. • When a customer clicks on the payment button, he will be taken to a secure payment gateway where he can pay through credit card or other payment options available. • Once the seller is notified about the payment, the order is processed further.
Websites offering online payment facilities must have an SSL Certificate to make transactions secure. • A Secure Sockets Layer (SSL) certificate verifies the identity and authenticity of a website and its owner. • The certificate is issued by trusted authorities such as VeriSign. An SSL website address starts with https. • With a valid SSL certificate, a website can display a security padlock in browsers to indicate that it can be trusted. It also enables data encryption to deter hackers. • An SSL certificate can be purchased for Rs. 500 to Rs.5,000 per year from providers such as GoDaddy, NameCheap, Hostgatoretc.
Infrastructure & Security issues in electronic payment systems • In order to ensure the integrity and security of each electronic transaction and other EPSs, the following security measures and technologies need to be adopted: * Authentication * Digital signatures * S-HTTP * Secure Electronic Transmission (SET).
AUTHENTICATION: • The process of verification of the authenticity of a person and/or a transaction. • There are many tools available to confirm the authenticity of a user. • For instance, passwords and ID numbers are used to allow a user to log onto a particular site, CAPTCHA
Digital Signature: • A digital signature is an individuals signature in electronic form. • A digital signature includes any type of electronic message encrypted with a secured key that is able to identify the message. • Digital signatures help to authenticate and seal electronic documents and maintain privacy. • Digital Signature is a must for electronic tendering.
SECURE HYPER TEXT TRANSFER PROTOCOL (S-HTTP): • A protocol for transmitting data securely over the World Wide Web. • Similar to SSL, S-HTTP is designed to transmit individual messages (Client to client) securely. • SSL creates a secure connection between a client and a server , over which data can be sent securely.
SECURE ELECTRONIC TRANSMISSION (SET) : • A protocol governing the credit card processing system. • SET creates electronic versions of credit card transactions. • The privacy in the SET payment environment is maintained through encryption of the payment information with the help of special keys or codes. • Through SET, credit card numbers can be kept secret even from sellers.
Knowledge corner • Encryption is the process of encoding messages (or information) in such a way that eavesdroppers or hackers cannot read it, but that authorized parties can. • In an encryption scheme, the message or information (referred to as plaintext) is encrypted using an encryption algorithm, turning it into an unreadable ciphertext. • This is usually done with the use of an encryption key, which specifies how the message is to be encoded. • An authorized party, however, is able to decode the ciphertext using a secret decryption key.
PUBLIC KEY CRYPTOLOGY: • Cryptography is the process of encrypting or encoding data into an unreadable format, called cipher text. • The cipher text has to be decrypted to read the data. • Typically, a single key is used to encrypt and decrypt messages. • In public key cryptology, two keys are used – one public key to encrypt data and one private to decrypt the data. • The private key is available only to the recipient of the data. The data cannot be read without it. • The public key can only encrypt but not decrypt. • Public key cryptology is used to design digital signatures, SET etc.
Eg. of PKC SYEWVTPKSHUWJAUDQVSEYGFWPHSLIEARDIBRHTGSD