Chapter 5, Online Monetary Transactions

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Chapter 5
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
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Online Monetary Transactions

• Risanuri Hidayat, Ir., M.Sc.

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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

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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

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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
  merchants account

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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

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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

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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

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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

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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)

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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

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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 

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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 buyers
  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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5.10 E-Billing

• Electronic Bill Presentment and Payment (EBPP)
• Offers ability to present a companys 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

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5.10 E-Billing

• Services to enable EBPP on a companys site
• Derivion
• Provides billers with electronic capabilities in
  conjunction with Paytrusts 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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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

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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 

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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

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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

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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