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Electronic Payment Systems

Electronic Payment Systems. E-Commerce. Intro to Electronic Payment Systems. More than $900 billion transacted online Expected to swell to more than $3 trillion by 2003 Americans will spent more than $41 billion in 2002 By 2003, 183 million people will be shopping online. Payment Options.

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Electronic Payment Systems

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  1. Electronic Payment Systems E-Commerce

  2. Intro to Electronic Payment Systems • More than $900 billion transacted online • Expected to swell to more than $3 trillion by 2003 • Americans will spent more than $41 billion in 2002 • By 2003, 183 million people will be shopping online

  3. Payment Options Offline Cash Payments – 55% Check Payments – 29% Credit Cards – 15% Online Credit Cards – 65% Checking Account Withdrawl – 13% Electronic Cash – 13% ATM/ Debit card – 8%

  4. What Ways Can you Collect Payment? • Credit Card • Debit/ATM card • Certified Check / Money Order • COD • Smart Card • Server Scrip • Third Party Funds • Cash …… HOW?

  5. Credit Cards WHY are credit cards THE most common payment option? • Most customers have credit cards • Merchants have the accounts and equipment • Credit cards are widely accepted • LARGE corporations ensure payment • $1.3 trillion in credit and debit purchases annually What are some problems?

  6. Debit/ATM card • From 1997 through 2000, MasterCard and Visa debit transaction volume nearly tripled to $302 billion Less attractive as a option … why? • Fewer card holders • A bank gets about 60 cents on average from the merchant on a $40 transaction when a consumer uses a Visa debit card, he says. But it gets only about 17 cents for a $40 PIN-based debit card transaction because it goes through a different processing system.

  7. Certified Checks/Money Orders • Very secure and insurable method for receiving payment What are the drawbacks? • Must be mailed • Takes time for $$$ to be deposited • Not very convenient • Cost $$$$$ for customers to use

  8. Smart Cards • Smart cards - plastic cards with a local physical system for storing financial (and other) information • Smart Cards can use: • Embedded computer chip • Magnetic strip Smart cards get second look due to terrorism threat

  9. Server Scrip • Main Examples? • How could they have succeeded? • How does it work? • What benefits did it have? • Why did it fail?

  10. Electronic Checks • Draws funds from the customer’s checking account • How does it work? For the merchant? For the customer?

  11. Third Party Financial Institutions • Accept the risk of dealing with the customer for the merchant • Fees levied to cover that risk • How do they make their money?

  12. Future of Payment Systems • Must conform to consumer preferences – or change them … • Payment system MUST build large base of merchants and customers • Electronic money is easier to track • Privacy issues • Taxation issues • Legal & Policing issues • Brick & Mortar influence • Who pays for it??? Merchants? Customers?

  13. sites http://www.scmegastore.com/ • http://www1.slb.com/smartcards/ • http://www.usa.visa.com/personal/cards/visa_smart.html • http://www.usa.visa.com/business/merchants/

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