Electronic Commerce Payment Systems

Prepared by:Djafar VASIPOVUğurcan YEŞİLIRMAK

•Pay-Per-View Pages•Freemiums in Social Gaming World

•Credit Card•Stored Value•Online Credit Card Use•PayPal•Digital Cash•Online Stored Value Accounts

Electronic Commerce Payment Systems

Credit Card

•Represents an account that extends credit to consumers, permitting consumers to purchase items while deferring payment, and allows consumers to make payments to multiple vendors at one time

•Credit card associations – Nonprofit associations (Visa, MasterCard) set standards for issuing banks

•Issuing banks – Issue cards and process transactions

•Processing centers (clearinghouses) – Handle verification of accounts and balances

Stored Value Accounts

•Accounts created by depositing funds into an account and from which funds are paid out or withdrawn as needed

•Examples: Debit cards, gift certificates, prepaid cards, smart cards

•Debit cards: Immediately debit a checking or other demand-deposit account

•Online Peer-to-peer payment systems such as PayPal

Online Credit Card Use

• Processed in much the same way that in-store purchases are

• Major difference is that online merchants do not see or take impression of card, and no signature is available (Cardholder Not Present transactions)

• Participants include consumer, merchant, clearinghouse, merchant bank (acquiring bank) and consumer’s card issuing bank

Online Credit Card Use

Problems with Online CC Use

• Security – Neither merchant nor consumer are authenticated. Merchant gets consumers credit card number for possible later misuse.

• Cost – for merchants, around 3.5% of purchase price plus transaction fee of 20-30 cents per transaction

• Social equity – many people do not have access to credit

Other Online Payment Systems

Digital Cash

•One of the first forms of alternative payment systems

•Not really “cash” – rather, form of value storage and value exchange that have limited convertibility into other forms of value, and require intermediaries to convert.

•Many of early examples have disappeared; concepts survive as part of P2P payment systems.

PayPal

• One of e-commerce’s major success stories:▫ Went public in 2002; acquired by eBay October 2002 for

$1.5 billion• A “peer-to-peer” payment system using email.• Fills a niche that credit card companies avoided –

individuals and small merchants• Piggybacks on existing credit card and checking

payment systems• Weakness: suffers from relatively high levels of

fraud• PayPal has more than 35 million account

members and is available to users in 38 countries around the world

Online Stored Value Accounts

•Debit cards online•Permit consumers to make instant, online

payments to merchants and other individuals based on value stored in an online account

•Rely on value stored in a consumer’s bank, checking or credit card account

Pay Per View Pages

•The big web sites such as Yahoo!, MSNBC, etc. are able to charge on a pay-per-view basis becuase they have the traffic to provide value to that model. It works in the same way a billboard on the side of the road or even a tv/radio commercial works in that they can say "We have 1mm users see this page every day, so this ad space is worth $X amount".

Pay Per View Pages

• The difference is that, these sites can "prove" how many times an ad is served up through exact tracking down to the user where the traditional media have to base their numbers off of a user group rating

• While an average site can provide this same exact user information, the traffic may not be heavy enough to warrant an advertiser to pay for your ad space. If they do, they won't pay as much because they are not getting as many views as the big sites do.

Pay Per View Pages

•Bottom line is the more traffic you have and the more targeted the audience the more you can charge for your ad space.

Pay Per View vs. Pay per Click

• The primary difference between Pay-per-Click and Pay-per-View is whether you or the advertising provider decides where your ads are placed.

• In the Pay-per-Click model, the search engines decide. They place your ads on search result pages and, optionally, on other pages throughout the web. When they bring you a customer, you are billed. The search engines have a financial incentive to place your ads only where they are most likely to be clicked on.

Pay Per View vs. Pay per Click

• If a Pay-per-Click ad were to cost $1 per click, the same Pay-per-View ad might costs $0.05 to $0.10 per view. The difference is that you decide where the ad is placed and pay whenever the ad is seen, rather than when it is clicked.

• For example, this newsletter is being read by businesspeople in the renewable energy industry. When an ad like this appears here...

Pay Per View vs. Pay per Click

• ... then there is no doubt that it is reaching its intended audience. It doesn't matter whether the ad is clicked on or not because it is valuable simply because it is seen.

• Pay-per-View advertising appears on websites and in newsletters. Like Pay-per-Click advertising, Pay-per-View ads generate ‘click-through' statistics that show what percentage of people who saw the ad and clicked on it. When considering Pay-per-View advertising, there are some important considerations:

Advertising Provider:

•The company providing the advertising needs to be relevant, trusted, and have the technology to accurately track the views. In order to be effective, your ad needs to be seen by the right people. You need to be confident that the advertising provider has detailed demographics on its readers. With Pay-per-Click this doesn't matter, but with Pay-per-View it is critical.

Product Category: 

•Some products may be unique or highly innovative and lend themselves to Pay-per-View over Pay-per-Click. For example, SunMateSolarPanels.com has a unique product for residential solar thermal air. Pay-per-Click would be useless here because no one searches for "SunMate." Pay-per-View ads on a site like RenewableEnergyAccess.com, on the other hand, would give them the opportunity to introduce the new concept to solar dealers and installers.

Ad Content: 

• The wording of the ad needs to be different for Pay-per-Click and Pay-per-View. A Pay-per-Click ad is specific and entreats the reader to click, but only if they are interested. A Pay-per-Click ad claiming "Free Solar Panels" but only offering them with the purchase of a $10K system will spend a fortune on clicks from everyone who wants something for free. The same ad as Pay-per-View would be far more effective on a solar-oriented site where most people who see the ad are interested in buying a system anyway.

Tracking:

• There are two ways to track the effectiveness of ads; clickthrough statistics and simply asking people where they heard about you. Neither method is highly accurate and depends on the product, industry, and offer. Some advertising campaigns require thousands of sales to be successful, others require only one. Typically, an excellent clickthrough response for a targeted Pay-per-View website ad is about 5 clicks per thousand views (0.5%). Newsletter Pay-per-View ads can average 3 clicks per thousand.

So,

•Pay-per-View advertising can be an ideal way to promote your product or service to a well-defined target audience. It is critical, though, that you deal only with well-known, reputable providers and that you design the advertising campaign and the ad itself with Pay-per-View in mind.

Pay-per-View pages:The Next itunes

• Problem; A reader is travelling to Rome,Italy,on his or her next vacation and only wants a couple of chapters from holiday travel guide to ıtaly not the whole guide.Selling pages,chapters or any other sections of a book or journal onlıne for under$5 is another story.The barrier is not technical,it is financial.Fee is big problem.

• Solution;The purchase of single items are aggregated until the total purchase amount makes it cost-effective to submit the payment to the credit or debit card issuer.

•Problem;the major difference between social games and video games is that the former are free.If players don’t have to pay,where does the return on investment for companies like EA?

•Solution;• Advertising• Freemium

Freemiums in Social Gaming World

“In a freemium game it’s not a rational decision to pay; it’s an emotional one.”

• The emotions that freemium preys upon tend toward the primal: they’ll make you wait (or let you buy faster progress), and they’ll make you want revenge (which you just need to gear up a bit more to achieve). They’ll make you want to top the leaderboards, make you jealous of what other players have that you do not (rather like in real life!), or offer you an even more heightened sense of accomplishment if you’d just kindly drop a few cents here and there. Or they’ll try and offer you more and better thrills.

• And it’s worth noting that these methods aren’t just limited to social and mobile games

Q1.What is freemium ?

The word freemium is made up from the words free and premium. It describes a business model where you give a core product away for free and sell premiumproducts; like the way Skype gives away free computer calls and sells voicemail, calls to landlines and other products.

Examples• The internet phone service Skype is a prime example of

the Freemium business model. The program that enables you to call between computers is offered free. If you want to call from a computer to a landline or have a voicemail associated with your Skype account you have to pay. The free program has hundreds of millions of users and only 10% of these free users are paying customers.

• This succinctly illustrates how Freemium has become a very popular business model in the software and internet services industry. Similar successful models are also emerging in the publishing, consulting and music industry.

Q.2

•An assessment of social networks' potential hinges on three metrics: subscriber growth, time spent on the network, and CPMs.

•advertising rates, measured on a CPM (cost per thousand impressions) basis , are likely to remain low compared to other forms of online advertising as well as traditional media.

Q.3 Zong System vs Spare change system• Spare Change

Spare Change is a payment application currently on social networks Facebook, MySpace, and Bebo that lets users make purchases from social network applications and games and then make payment via PayPal. Users can open a Spare Change account and fund it with a credit card, PayPal, bank account, or mobile phone. According to the Web site, consumers can use Spare Change balances to purchase hundreds of applications easily—an "iTunes-style business model for social networks.

• ZongZong is a payment provider that allows consumers to purchase virtual currency, gifts, and other applications on social networks via the mobile phone in lieu of traditional payment methods. Zong uses the mobile carriers with whom it partners to bill customers for their transactions. Once the consumer has paid his or her mobile phone bill, Zong in turn pays the merchant. The distinguishing feature for Zong’s business model for micropayments is its nine-year relationship with mobile carriers globally. However, at this time Zong is currently available for digital goods and services only.