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Electronic Commerce. Semester 1 Term 1 Lecture 22. Other Emerging Financial Instruments. Several other electronic payment systems are currently being developed and tested These include: Debit cards Electronic benefit transfer cards Smart cards. Debit Cards at Point of Sale (POS).
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Electronic Commerce Semester 1 Term 1 Lecture 22
Other Emerging Financial Instruments • Several other electronic payment systems are currently being developed and tested • These include: • Debit cards • Electronic benefit transfer cards • Smart cards
Debit Cards at Point of Sale (POS) • The fastest growing number of electronic transactions today are debit card point of sale transactions • Such a transaction occurs when a customer uses a debit card to make a purchase from a merchant (supermarket, petrol station, shop or other store that accepts such cards instead of using cash, cheques or credit card)
How Debit Card Transactions Work • The transaction works much like a credit card transaction • For example, a customer gives an ATM card to the merchant for the purchase
How Debit Card Transactions Work (Contd.) • The merchant swipes the card through a transaction terminal, which reads the information; the customer enters his PIN and the terminal routes the transaction through the ATM network back to the customer’s bank for authorisation against the customer’s deposit account • The funds, once approved, are transferred from the customer bank to the merchant’s bank
Debit Cards and Electronic Benefits Transfer • Debit cards are being used extensively for electronic benefits transfer (EBT) • Electronic benefits transfer uses debit cards for the electronic delivery of benefits and entitlements to individuals who otherwise may not have bank accounts • In an EBT system, recipients access their benefits in the same way that consumers use debit cards to access their bank accounts electronically
Advantages of EBT • Electronic benefits transfer has several advantages over paper-based benefit distribution systems • It is less costly - it is designed to provide a low cost alternative to cashing cheques • EBT is more convenient than paper methods and is safer than carrying cash • It is convenient for retailers, by reducing the losses associated with theft, fraud and forgery of cheques • It is convenient for governments due to its easy tracking
Smart Cards • Smart cards use magnetic stripe technology or integrated circuit chips to store customer-specific information, including electronic money • The cards can be used to purchase goods or services, store information , control access to accounts and perform many other functions
Benefits of Smart Cards • Smart cards offer clear benefits to both merchants and consumers • They reduce cash-handling expenses and losses caused by fraud, expedite customer transactions at the checkout counter and enhance consumer convenience and safety • One reason for the success of smart cards is that their application focus is narrow and they build upon existing infrastructure e.g. credit, debit and ATM cards
Consumer Issues & Payment Systems • The consumer, assisted by the press and political influence can exert considerable influence in the development of payment systems • The key consumer issues associated with payment systems include: • Consumer protection from fraud arising from efficiency in record keeping • Transportation privacy and safety • Competitive pricing of payment services to ensure equal access to all consumers • Right to choice of institutions and payment methods
