Payment methods on the internet

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Payment methods on the internet

• Credit cards.
• Debit cards.
• ACH transfers (ACH Automated Clearing House).
• Foreign and Cross-Border Payments.
• Mobile Payments.

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Credit cards
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Credit-card transactions generally involve four
participants

• Purchaser who holds a credit card.
• Issuer that issues the credit card.
• Merchant.
• Acquirer that collects payment for the
  merchant. (the acquirer is so named because it
  acquires the transaction from the merchant and
  then processes it to obtain payment from the
  issuer)
• Issuer and acquirer could be the same person

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The relationship between the card-holder and the
card issuer

• The issue commits to pay for purchases made with
  credit card.
• Cardholder promise to reimburse the issuer over
  time.
• That relationship is exactly the opposite
  of the common cheking relationship

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The merchant have to pay an amount of the
transaction, which based on

• The type of transaction (the fee is higher for
  transactions in which a card isnot swiped)
• network (American Express and Discover charge
  more than Visa and MasterCard)
• The characteristics of the merchant (high-volume
  and creditworthy merchants pay less)
• This fee aprox. 1-3 percent.

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Features of credit cards

• The consumer have a right to cancel a payment (on
  the basis of any defense that the cardholder
  could assert against the original merchant)
• Protection for error in credit-card transaction
  (the merchant failed to deliver the goods and
  services)
• Protection against unauthorised charges
• Truth-in-Lending Act (USA)

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Problems

• Fraud
• Privacy
• Micropayments

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Credit cards on the internet

• Enter credit card number, vaalidity, nema and
  surname (3 digit card verification code) on the
  merchant web-page
• Identification by PIN code
• Smart card or chip cards
• Biometric identification

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Apsisaugojimas nuo sukciavimo kreditinemis
kortelemis

• Hot list
• Sophisticated analysis of transaction information
  to identify transactions that match profiles of
  fraudulent behavior
• Geolocation technology, which examines the ISP
  through which the purchaser is connecting (to
  assess the likelihood that the purchaser would be
  contacting the merchant from that location)
• digit card verification code

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MasterCard SecureCode programa
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Privacy

• The interlopers will steal data from internet
  merchants
• The merchants and issuers themselves will make
  use of data for reasons that trouble consumers
• The sofware response in the form of disposable
  credit-card numbers that inhibit the aggregation
  of payment information (Orbiscom)

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Mycropayments

• Software that gathers up a large number of a
  consumers small transactions and then uses a
  conveentional payments system to chargethe the
  consumer for the transactions periodically
  (normally once a month)
• The consumer deposits money in advance (perhaps
  20) through some conventional payment system and
  then replenishes the funds whenever they are
  consumed (Bitpass)
• Model which aggregates a number charges and then
  when the aggregate amount reaches a certain point
  (perhaps 8 to 10), charges the aggregate amount
  to the customers credit card (MicroCreditCard)
• Model works through an internet or wireless
  service provider to obtain a reliable
  identification of the payor from the payors
  point of access to the internet or wireless
  network (NTT DoCoMo, iPin, Trivnet)

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Debit cards
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Two classes of debit card

• PIN-based (online) cards (lowers the risk of
  fraud. The charges to merchants for PIN-based
  transactions are much lower than the charges for
  conventional credit-card tranactions (rarely more
  than 35 cents per transaction))
• PIN-less (offline) cards (are authorised by
  presentation of the card and the cardholders
  signature (the transaction cost roughly 1 percent
  of the transaction amunt))

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ACH transfers (ACH Automated Clearing
House)(www.nacha.org) The Electronic Payments
Association
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In 2003, customers initiated almost 700 million
of those transactions, with an average amount of
291

• 80 of the payment have been to pay bills.
• 18 - to transfer funs.
• 1 - to make purchases.

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Foreign and Cross-Border Payments
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Bank transfers shoud satisfy

• A consumer can request a bank transfer directly
  from the merchants site
• The merchant can verify the transfer in real time
• Shipment can be made immediately

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Mobile Payments
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Mobile payments in 2005

• JAV 600 million
• Europe 1.7 billion
• Japan 3.5 billion
• Estonia 40 of parking meter charges

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The main mobile payments categories

• So-called in-band or content payments, normally
  payments for information or content delivered
  diretly to the telephone. (DoCoMo)
• out-of-bands payments purchases in which a
  telephone is used to purchase something that
  cannot be delivered to the telephone.
• Proximity payments when telephone is used to
  makea payment by communication with a local
  device such as a parking meter or vending
  machine.

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The methods of collecting for those payments

• Aggregation method. (charges for i-Mode usage are
  simply added to the monthly mobile-phone bill
  payments can be forwarded from the telephone
  company to the appropriate content provider)
• The second method is for the merchant to use
  information sent from the telephone to conduct a
  contemporaneous credit- or debit-card
  transaction. (that method makes much more sense
  for larger transactions)