Assignment on

CHAPTER 15: GETTING THE MONEY

Subject code: BAN 385

Submitted To:Md. Zillur RahmanAssistant ProfessorDept. of Business AdministrationShahjalal University of Science and Technology

Submitted By: Team OneSyeda Fatima Banu 2009731007Muhsina Jannat2009731015Sharmistha Tribedi 2009731020Taskia Akter 2009731039Mahmuda Akter 2009731045

Learning Objectives:• Real-world Cash and Electronic Cash

• Key Requirements for Internet-based Systems

• Electronic Transaction System

• Secure Electronic Transactions

• Electronic Payment Media

• Methods of E-payment

• General Guide to E-payment

• Issues and Implications

Money offers the following features:

• Money is a medium of exchange to simplify transactions, a

standard of value to decide the worth of goods, and a store of

value to facilitate savings.

Real World Cash: Money

Convenience

Wide acceptance

Anonymity

No hidden cost of use

No audit trail

• E-Money: an electronic media for making payments.

• There are four types of e-money:

1. Identified and online (+I+L): credit card and debit card

transactions

2. Identified and offline (+I-O): purchasing by check or postal

money order

3. Anonymous and online (-I+L): cash payments

4. Anonymous and offline (-I-L): electronic cash

Electronic Money (E-Money)

ACID Test1. Atomicity

2. Consistency

3. Isolation

4. Durability

ICES Test1. Interoperability

2. Conversion

3. Economy

4. Scalability

There are two distinct sets of properties should be considered

in money transfer:

Internet Based Payments

Electronic Currency

Credit Cards

Debit Cards

Smart Cards

• Electronic Payment: financial transactions made without use

of paper documents.

• Users: PayPal, Brodia, CyberCash, e-cash, eCharge,

InternetCash, iPIN, Qpass, Windows Live ID etc.

• Four main Internet based payment systems:

Properties of E-Payment System

•Several nontechnical properties are relevant to an

electronic payment system -

▫Acceptability

▫Ease of Integration

▫Customer Base

▫Ease of Use and Access

Electronic Transaction System: CyberCash• Electronic transaction system makes it possible to process

transactions over the Internet.

• CyberCash is an internet payment service which offered a

range of e-commerce solution using E-Transaction System.

• Initially provided an e-wallet software to consumers and

software to merchants to accept credit card payments.

• They offered "CyberCoin", a micropayment system modeled

after the NetBill research project.

• On January 1, 2000, CyberCash fell victim to the Y2K Bug,

got bankrupt on March 11, 2001.

Secure Internet Credit Card Payment Process• The main CyberCash transaction systems centered on secure

credit card payment with the following procedures:

Secure Electronic Transactions (SET)• SET protocol is a proven standard for handling transactions

on the Internet.

• The system is administered jointly by Visa and MasterCard to ensure reliable E-Payment Media.

• It was developed with four important goals:

1. Confidentiality of payment

2. Integrity of transmitted data

3. Authentication of card user

4. Interoperability across network providers.

Classical flow of a SET Transaction

Electronic Payment Media• Different companies, such as PayPal, WebMoney etc are

working as Electronic Payment Medias to transfer E-Payment.

• There are three types of electronic payment media

1. Trusted third party: Banks, that maintain all sensitive

information.

2. Notational fund transfer-related type: Visa/Master

Card’s SET based transactions.

3. Digital cash or electronic money: allows the transfer of

money itself which carry values.

Credit Card•Credit card is a plastic payment card issued by a

financial institution for the purchase of goods or

services on credit to users as a system of payment.

• Features of credit card:

▫Leaves a complete audit trail

▫Are not well suited for impulse buying

▫Are not convenient for making small products

Process of Credit Card Transaction

Risks of Using Credit Cards• Though monthly full payment is not made, interest will

be charged.• Interest charged from the date of purchase even before

the payment.• Credit card transactions result in immediate credit to the

merchant’s bank account as cash.• Card holder’s risk of losing a credit card amount to $50

and has to notify the issuing bank.• A card holder can dispute charges or purchases to the

card issuer if he is not satisfied.

Credit Card Laundering• A violation of merchant's agreement with the bank or

credit card company.

• Allowing a person to use a merchant account though he has no own merchant account.

• Customers and credit card issuing company face losses and write off the amount to bad debt.

• Simple procedure for earning extra cash by merchant.

• Often turns into losses beyond all commissions.

• This practice is illegal and strictly prohibited.

Debit Card• Debit card is a payment card that transfers funds directly

from the customer’s bank account to the merchant. It look exactly like credits cards, except they directly tap customer’s checking account every time he makes a purchase or a withdrawal.

• Features of Debit Card:ConvenienceWidely Accepted than checksEasy ApplicationNo Grace Payment PeriodLess Protection for Undelivered ItemsRisks for Merchants - Overspent Customers

Difference between Debit and Credit CardDebit card Credit card

A debit card takes money directly from customer’s banking account

Credit card charges money to customers line of credit.

Debit card is a quick-pay-now process where no grace period is given.

There is generally a grace period of approximately thirty days before interest is charged in credit card purchase.

Debit card carries less security for undelivered, defective or fraudulent items.

With credit card purchases, customer can contest the charge and put a hold on payments.

Debit cards are used for retail or small purchases on faith.

Credit cards are used for large businesses.

Smart Card• A thin and credit card sized piece of plastic provide

identification, authentication, data storage and application processing

• Contains a half-inch-square area that serves as the card’s input/output system

• With a built-in chip capable of storing information in its memory

• Used typically for electronic processes such as financial transactions

• First produced by Motorola, in 1977

Uses & Applications of Smart Card• Provides users with the ability to make a purchase

• Holds cash, ID information, and a key to a house or an office

• Provides three categories of applications -

1. Authenticate an individual’s claim of personal identification

2. Authorization for things like drug prescription fulfillment and voting purposes

3. Transaction processing and capturing fingerprint

• Provides encryption and decryption of messages to ensure security, integrity, and confidentiality

• Acts as a carrier of value, called as an Electronic Purse

DigiCash and E-Cash• DigiCash:

▫Another alternative method of digital payment▫Leaves no audit trail▫Offers true digital economy▫Resistance from the treasury department▫One such digital cash system is CyberCoin

• E-Cash:• Electronic currency service• Requires a client-server interaction• Customers buy it with a secure credit card transaction• Safest way for fraudulent protection

E-Wallet• An electronic payment system that operates like a carrier

of e-cash and information in the same way a real world

wallet functions.

• It gives the shopper a single, simple, and secure way of

carrying currency electronically.

• Trust is the basis of the e-wallet as a form of electronic

payment.

• The most popular wallet vendors are Brodia.com, IBM,

Yahoo!, Trintech, eWallet, CyberCash, America Online

and so on.

Electronic Funds Transfer and Automated Clearing House• Electronic Funds Transfer (EFT)

▫ A computer-based system that facilitates the transfer of money between two financial institutions.

• Automated Clearing House (ACH)▫ Where Bank’s transactions involve more than one

financial institution routing to debit and credit the correct accounts.

Generic Life Cycle of Check Clearance

M-Commerce and M-Payment▫The ability to secure payments over wireless devices like

mobile phones and personal digital assistant (PDA).

▫Depends on its payment infrastructure, delivering confidential data safely and reliably.

▫Capable of handling payments between authorized parties in a consistent and interoperable manner.

▫Products and services are - Mobile ATM, Mobile ticketing, vouchers, coupons and loyalty cards, Content purchase and delivery, Location-based services, Mobile banking, brokerage. Auctions, Mobile marketing and advertising etc.

General Guide to E-Payment• Using a secure Web browser

• Reading the Web site’s privacy policy carefully

• Figuring out merchant’s refund policies in advance

• Investigating the trustworthiness of the merchant before initiating a purchase

• Keeping a record of all online transactions and check e-mail and other contacts regularly

• Reviewing credit card statements line-by-line to ensure authenticity

Issues and Implications Regarding Electronic Payment Methods and Methodologies

•Consumer Needs

•Corporate Processes

•Corporate Strategy

•Regulation of Competition

•Economics & Social Processes

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