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ECT 250: Survey of ecommerce technology

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In Japan: consumers rely on bank transfers, cash on delivery (to local ... PayPal, Yahoo PayDirect, MoneyZap. 23. Online stored value PS ... – PowerPoint PPT presentation

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Title: ECT 250: Survey of ecommerce technology


1
ECT 250 Survey of e-commerce technology
  • E-commerce payment systems

2
Most common payment systems(number of
transactions)
3
Most common payment systems(dollar amount)
4
Types of payment systems
  • Cash is legal tender defined by a national
    authority to represent value
  • Float is the period of time between a purchase
    and the actual payment
  • Checking transfers are funds transferred directly
    via a signed draft or check from a consumers
    checking account to a merchant or other individual

5
Types of payment systems
  • Credit card an account that extends credit to
    consumers, permits consumers to purchase items
    while deferring payment, and allows consumers to
    make payments to multiple vendors at one time
  • Credit card associations (VISA) are nonprofit
    organizations that set standards for issuing
    banks. They act as financial intermediaries
    minimizing the risk for transacting partners.
  • Issuing banks issue the cards and process
    transactions
  • Processing centers or clearing houses handle
    verification of accounts and balances

6
Types of payment systems
  • Stored value payments systems are accounts
    created by depositing funds into an account and
    from which funds are paid out or withdrawn as
    needed
  • Debit cards immediately debit a checking or other
    demand deposit account
  • Accumulating balance payment systems are accounts
    that accumulate expenditures and to which
    consumers make periodic payments

7
(No Transcript)
8
Current payment systems
  • Online payment is heavily influenced by the
    countrys financial infrastructure.
  • In the US 95 of online payment is done using cc
  • Outside the US, only 50 is done by cc
  • In Europe consumers rely more on debit cards and
    checks
  • In Japan consumers rely on bank transfers, cash
    on delivery (to local convenience stores) and
    accumulated balance accounts with the phone
    company

9
An online CC transaction
10
Limitations of CC transactions
  • Security neither the merchant not the consumer
    can be fully authenticated
  • Merchant Risk consumers can repudiate charges
    even after the item has been shipped
  • Cost 3.5 of purchase plus transaction/set-up
    fee
  • Social Equity
  • Young adults do not have credit cards
  • Almost 100 million adult Americans cannot afford
    cards or are considered poor risks

11
Secure Electronic Transaction Protocol
  • SET is an open standard for e-commerce developed
    by MasterCard and Visa as a way to facilitate
    improved security for CC transactions
  • Uses a digital certificate to verify a senders
    identity
  • Transaction details are passed along to the bank,
    minimizing repudiation issues

12
How SET works
13
Need for new payment systems
  • Non traditional online transactions have resulted
    in a need for new payment systems
  • Peer to peer payment systems online auctions
    between individuals
  • Micropayments purchasing a single music track,
    downloading a news article, or the chapter of a
    book

14
B2C digital payment systems
  • Digital Wallets
  • Digital Cash
  • Online Stored Value Systems
  • Smart Card Stored Value Systems
  • Digital Accumulating Balance Payment Systems
  • Digital Credit Card Payment Systems
  • Digital Checking Payment Systems

15
Digital wallets
  • Emulates the functionality of a traditional
    wallet
  • Authenticates the consumer through the use of
    digital certificates or other encryption methods
  • Stores and transfers value
  • Secures the payment process from the consumer to
    the merchant

16
Functionalities of DW
17
Potential benefits
  • Consumer
  • Faster order entry
  • Reduced risk of fraud or theft
  • Merchant
  • Lower transaction costs
  • Expanded marketing/branding
  • Some consumer retention
  • Who will supply the DW?
  • Who owns the wallet and its information?
  • Where will the DW reside?
  • What standard should be used?

18
Client-based DW
GatorMasterCard Wallet
  • Are software applications that consumers install
    on their computer
  • Offer consumer convenience by automatically
    filling out forms at online stores
  • Merchant installs software to receive the data
  • Good idea if
  • Sell millions of them
  • Become the single viable solution to shop online

19
Server-based DW
Microsoft Passport Novell DigitalMe
  • Are software-based authentication and payment
    services and products
  • Sold to financial institutions that market the
    systems to merchants either directly or as a part
    of their financial service package
  • Charge the merchant a set-up fee plus monthly
    minimum fees, and transaction fees

20
Microsofts passport
21
Obstacles
  • Consumers resist downloads
  • Consumers distrust server-based digital wallet
    because of privacy concerns
  • No standard for digital wallets exists
  • Many companies have failed trying to break into
    this line of business (Digicash)

22
Digital cash (or e-cash)
  • Not really cash, instead a form of value storage
    or value exchange that have limited
    convertibility into other forms of value and
    require intermediaries to convert
  • Early attempts were difficult to use.
  • Failures Digicash, First Virtual
  • Limited success Millicent
  • Online auctions inspired P2P systems that have
    proven more successfulPayPal, Yahoo PayDirect,
    MoneyZap

23
Online stored value PS
  • Permit consumers to make instant, online payments
    to merchants and other individuals based on value
    stored in an online account
  • Some require the download of a digital wallet
    Monetta, eCharge
  • Others allow user to sign up and transfer money
    from an existing CC account into an online stored
    value account Ecount, Rocketcash, VisaBuxx

24
Smart Cards
  • Are stored value systems based on
    credit-card-sized plastic cards that have
    embedded chips that store personal information
  • Could hold 100 times more data than CC
  • Multiple CC numbers
  • Health insurance information
  • Personal identification information
  • Bank account data

25
How Ecount.com workes
26
Other digital payment systems
  • Digital accumulating balance allow users to make
    micropayments and purchases on the Web,
    accumulating a debit balance for which they are
    billed at the end of the monthqPass, iPIN,
    Millicent
  • Digital credit cards seek to extend the
    functionality of existing credit cards for use as
    online shopping payment tools. Improve
    authentication, and privacy, reduce
    fraudeCharge, Billpoint

27
How eCharge works
28
Digital checking
eChecksAchexBillpoint
  • Seek to extend the functionality of existing
    checking accounts for use as online shopping
    payment tools
  • Check-processing currently costs 0.75-3 per
    check
  • Simple systems used to pay individuals
  • Complex systems used by the Treasury to transfer
    billions of dollars electronically

29
How eCheck works
30
Electronic Billing Presentment and Payment
systems (EBPP)
  • Allow consumers to view monthly bills
    electronically and pay them through electronic
    funds transfers from bank or credit card accounts
  • Life-cycle cost of a bill 3-7
  • Overall cost of billing 4-8 of GDP
  • 90 of EBPP use is B2C, real potential is in B2B
  • Grew from 3 mil in 1999 to 15 mil in 2002

31
Types of EBPP
  • Biller-direct sign up with the company directly,
    but infrastructure is usually supplied by another
    company. Verison, Billserv, Princeton econ
  • Consolidators collect bills for the
    consumerCheckFree, Paytrust
  • Portals similar to consolidators but also offer
    other financial management servicesYahoo, AOL,
    Excite, Cyberbills.com, PayMyBills.com

32
B2B payment systems
  • More complex than B2C systems
  • Must link into existing ERP and EDI systems
  • Two main types
  • Systems that replace traditional banks
  • Existing banking systems extending to the B2B
    marketplace

33
B2B payment systems
34
Some conclusions
  • There is still a large potential for development
    and improvement of online payment systems
  • One of the big obstacles to new technologies is
    the lack of standards
  • Especially when it comes to money there is a
    resistance to adoption of new systems both on the
    consumer and the merchant side
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