Electronic payment Methods: • Defined: It is alternative payment mechanism for electronic transactions instead of traditional payment methods like cheque,cash, credit card and debit card etc 1. Magnetic stripe cards defined: • A magnetic stripe is a plastic card that has magnetically encoded stripe on its exterior. • Magnetic stripe card applications • Bank debit cards and credit cards • Telephone cards • Employee identification cards • Building and machine access privileges cards • Types of magnetic stripe card • Online stripe cards • Off line stripe cards • Smart card hybrid
Online stripe card • This card is used to read customer information from the stripe then this information is used to access the information about the card holder from the central computer. • e.g. debit, credit cards, library cards etc. • Offline magnetic stripe cards: • These cards store information that can be interpreted by the card reader and can be altered. • Smart cards • Def: A smart card is a plastic card similar to credit card but it contains the microprocessor and storage unit. • Features: • More expensive to issue • Stored info is not physically damaging • Not damaged from magnetic field • More data can be stored as compared to magnetic stripe. • Types of smart cards • Memory smart cards • Intelligent smart cards
Memory smart: • These cards are used to record the monetary value or unit value which a card holder can spend. It contains the less information and processing capabilities than intelligent smart cards. • Intelligent smart cards: • Intelligent smart cards have more processing and information storage capabilities than memory smart card. • Electronic purse: • The monetary value which is loaded into smart card’s microprocessor that can be used by consumers for purchases. Smart card reader is used to read the smart cards and smart card reader is compatible with magnetic reader • Smart cards in telephones: • When smart cards are introduced in cellular and line phones they cab be used for the following purpose • Pay for items purchased over the phones • Down load money from bank account • Transfer balance between accounts • Check bank account balance
Uses of smart cards other than the processing information: • National identification codes • Driving license • Immigration detail • Health details
Electronic checks: • Electronic checks are internet payment mechanism with which the payor (business or individual) instructs its financial institution to pay a specific amount to payee. • Facilities provided by electronic check on web site: • Present the bill to payor • Allow the payor to initiate payment of invoice • Provide remittance information • Allow the payor to initiate automatic payment authorization for pre specified amount or range of amount • Interface with the financial management software and transaction processing software • Allow payments to be made to new businesses with which the payor has never transacted before
FSTC: Financial service technology consortium is a group of service providers, industrial partners, Govt. agencies, universities working for the enhancement of financial service industry. • FSTC’s electronics check service: • This service uses the e-mail; the entire payment process is shortened the payment cycle from one week for paper checks to two days. Electronic check service use temper resistant signature smart card and public key cryptography for digital signature. • Electronic cash: • It is term used to refer the prepaid stored value the can used for electronic purchases in lieu of cash. Magnetic stripe cards, smart cards and electronic checks can be classified as electronic cash.
1. Audit implication: • Verification of cash, accounts receivables, sales and cash disbursement accounts are important component of a financial audit. When all business activities and payment activities are performed electronically then electronic audit is required which is performed by accounting professionals by the use of CAATs. • 2. Electronic bill presentment and payment systems: • Accounting professional have great potential in providing services for electronic bill presentment and payment systems by the use of proprietary software solutions for such systems.
Electronic funds Transfer (EFT): • EFT is a system in which computer user transfers his funds for making payments to supplier or for paying salaries to employee’s bank account or transfer funds from one account to another account by issuing electronic instruction to his bank. • EFT Systems: • SWIFT (The Society of World Wide Interbank Financial Telecommunications) Ltd. • It a UK based EFT system operated for transfer of funds internationally between the banks. E.g in UK all banks are members of SWIFT and all banks of other countries also have their corresponding accounts with EFT systems in their countries. These accounts are used to settle payments but authorization to transfer is given by SWIFT. • CHAPS (Clearing Houses Automated Payments) • It is also EFT system used for interbank funds transfer by using BACS (Bankers Automated Clearing Service). • Many companies pay the salaries by using BACS service by providing data to their banks.
Electronic point of sales (EPOS): • Def: the system in which computers are used for immediate recording of retail sales transaction and stock information after the completion of transaction in retail shop. • This method is commonly used in retailing
Advantages of EPOS: • It automatically provides information relating to • sales transactions • activity level • utilization of floor space • reorder requirement • Cost of financing the business can be lowered • Automatically producing daily sales summary • Stock movement • Prices for charged and margins obtained • Change in demand for a products • Profit maximization for each product can be determined • Price comparison of all products in shop to align the prices • Changes of demands for different qualities can be identified
EFTPOS: • The system used by banking organizations for the transfer of funds between accounts and the provision of (point-of-sale) services to customers.