Payment Systems. Payment Revolution 1970: Electronic Funds Transfer between banking industries 1980:...

Payment SystemsPayment Systems

Payment RevolutionPayment Revolution

• 1970: Electronic Funds Transfer between banking industries

• 1980: Electronic Data Interchange (EDI) for e-commerce between companies

• 1990: WWW (the Internet) provides an easy-to-use technology for information publishing and dissemination

Payment CardsPayment Cards

payment cardelectronic card that contains information that can be used for payment purposes

- Credit cards- Charge cards- Debit cards

Payment Cards(cont’d)Payment Cards(cont’d)

Credit CardCredit Card

Credit Card: + -Credit Card: + -

AdvantagesAdvantages DisadvantagesDisadvantages•Secure with the use of

encryption. Third party authenticates users. Credit card numbers need not be passed over the network in some systems. Basic financial system in place already. Card company's indemnify customers in the case of fraud. Existing system is accepted by users.

•Over the counter and Internet transactions possible. Portable.

•Costs too high, especially for low value transactions. No anonymity. Does not allow micro-merchants. Involves several connections over the net in-order to complete a payment. No standardized process. Traceability through third party.

Electronic ChequeElectronic Cheque

Electronic Cheque(cont’d)Electronic Cheque(cont’d)

Electronic Cheque: + -Electronic Cheque: + -

AdvantagesAdvantages DisadvantagesDisadvantages•Clearing process already in

place.•Secure with the use of

encryption.•Third party authenticates

users.•Basic system in place

already.•Risk is limited to the value of

the cheque and if cashed without proper ID, bank indemnifies the customer.

•Existing system is used and trusted by consumers.

•Migration form paper cheques to electronic cheques is not huge.

•High costs of involving third parties to an already cost process.Involves several connections over the net in-order to complete payment.Slow method, no immediate transfer of funds Payment is still made via traditional payment methods Costs are too high for low value transactionsNo anonymity. Internet use only Not portable No immediate confirmation No guarantee of payment upon receiving a cheque.

• in form of smart cards

• behaves like cash, offering immediate transfer of value

• requires no signature, PIN, or transaction authorization

Electronic CashElectronic Cash

Electronic Cash: + -Electronic Cash: + -

AdvantagesAdvantages DisadvantagesDisadvantages•Eliminates the third party•Secure with the use of

encryption•Allows micro-merchant

payments•Allows anonymity•Mirrors cash so easy

acceptance•Fast•Low cost perfect for low

value transactions•Once received it has value

immediately•Software solution no extra

hardware required

•Uses proprietary currencies thus depend on issuing companies to honour their internet cash

•Consumers are slow to trust such a system

•Tied to specific machines (wallet on hard drive)

•For internet use only•Not portable

Smart CardSmart Card

Smart Card(cont’d)Smart Card(cont’d)

Smart Card: + -Smart Card: + -

AdvantagesAdvantages DisadvantagesDisadvantages•Flexibility in adding

applications giving extra value to consumers.

•Secure with the use of passwords/pins.

•Over the counter and Internet transactions possible.

•Low costs.• Ideal for low value

transactions.Risk is limited to the value of the cash sent on the network.Mobile source of money.Can be used for online and offline transactions.Immediate transfer of funds.

•Hardware specifications pose a problem. Does not allow micro- merchants.Uses proprietary currencies thus depend on issuing companies to honor their internet cash.Anonymity.