Electronic Payment Systems: MBA EX 9607 - Managing E-Business

Electronic Payment Systems
MBA EX 9607 – Managing E-Business
Faculty of Management Studies

University of Delhi
September 06, 2019
jyotidas2004@gmail,com
What Electronic Payment system is?
 Electronic Payment is a financial exchange that takes place online

between buyers and sellers. The content of this exchange is
usually some form of digital financial instrument (such as
encrypted credit card numbers, electronic cheques or digital
cash) that is backed by a bank or an intermediary, or by a legal
tender.
 Electronic payment system is a system which helps the
customer or user to make online payment for their shopping.
Features Electronic Payment system
Requirements For E-payments
The various factors that have lead the financial institutions to

make use of electronic payments are:
Decreasing technology cost:
The technology used in the networks is decreasing day by day.
Reduced operational and processing cost:

Due to reduced technology cost the processing cost of various
commerce activities becomes very less. A very simple reason to
prove this is the fact that in electronic transactions we save both
paper and time.
Increasing online commerce:
Some Examples Of EPS:-
Online Reservation
Online Bill Payment
Online Order Placing

(Nirulas)
Online Ticket Booking

(bookmyshow)
Two Storage Methods
 On-line
 Individual does not have possession personally of electronic cash
 Trusted third party, e.g. online bank, holds customers’ cash accounts
 Off-line
 Customer holds cash on smart card or software wallet
 Fraud and double spending require tamper-proof encryption
Two Storage Methods
E- CASH E- WALLETS
Off-line On-line
SMART CARDS
CREDIT CARDS
Two Storage Methods
Electronic Payment Systems
ElectronicPaymentSystems
E- Cash
 Like the serial numbers on real currency notes, the E-cash

numbers are unique.
 This is issued by a bank and represents a specified sum of
real money.
 It is anonymous and reusable.
E-Cash Security
 Complex cryptographic algorithms prevent double spending

• Anonymity is preserved unless double spending is attempted
 Serial numbers can allow tracing to prevent money laundering
E-Cash Processing
Merchant
1) Consumer buys e-cash from Bank
2) Bank sends e-cash bits to consumer

5 (after charging that amount plus fee)
4
3) Consumer sends e-cash to merchant
Bank 3
4) Merchant checks with Bank that e-
cash is valid (check for forgery or
2
fraud)
1
5) Bank verifies that e-cash is valid
Consumer 6) Parties complete transaction
E-Wallet
 The E-wallet is another payment scheme that

operates like a carrier of e-cash and other
information.
 The aim is to give shoppers a single, simple,
and secure way of carrying currency
electronically.
 Trust is the basis of the e-wallet as a form of
electronic payment.
Procedure for using an e-wallet
1. Download a wallet from the merchant’s website.

2. Decide on an online site where you would like to shop.
3. Fill out personal information such as your credit card number,
name, address and phone number, and where merchandise
should be shipped.
4. When you are ready to buy, click on the wallet button, the
buying process is fully executed.
Smart Cards
 A smart card, is any Smart Card Applications

pocket-sized card with
 Ticketless travel Seoul bus
embedded integrated system: 4M cards, 1B
circuits which can process transactions since 1996
data  Authentication
 ID
 This implies that it can
receive input which is  Medical records
processed and delivered  Ecash

as an output  Store loyalty programs
 Personal profiles
 Government
 Licenses
 Mall parking . . .
Smart card Processing
Credit Cards
 It is a Plastic Card having a Magnetic Number and code on it.

 It has Some fixed amount to spend.
 Customer has to repay the spend amount after sometime.
 Risk in using Credit cards

• Operational Risk
• Credit Risk
• Legal Risk
Processing a Credit cards payment
Secure Electronic Transaction (SET) Protocol
 Jointly designed by MasterCard and Visa with backing of

Microsoft, Netscape, IBM, GTE, SAIC, and others
 Designed to provide security for card payments as they travel on
the Internet
• Contrasted with Secure Socket Layers (SSL) protocol, SET validates
consumers and merchants in addition to providing secure transmission
 SET specification
• Uses public key cryptography and digital certificates for validating
both consumers and merchants
• Provides privacy, data integrity, user and merchant authentication,
and consumer nonrepudiation
The SET Protocol
Security Requirement of EPS
Security Requirements of EPS
Integrity Privacy
Ensuring that no Protecting transaction Safety

information is Non- details pertaining to
Authentication
altered or repudiation order and payment
destroyed during
Verification of transmission Protection against Making message
buyers and sellers denial of order indecipherable
identity before a placed or payment except by those
transaction is made received who have the
authorized key
What Is Payment Gateways?
A payment gateway is an e-commerce application service provider

service that authorizes payments for e-businesses, online Shopping, etc.
Payment gateway protects credit cards details encrypting sensitive

information, such as credit card numbers, to ensure that information
passes securely between the customer and the merchant and also between
merchant and payment processor.
How It works?
Electronic Payments In India
 Going the e-way
Electronic Payment Systems in India
•Ever-increasing technology changes.
•Growing Internet access and mobile subscriber base
•Rising consumer confidence.

•Convenient delivery/payment models
•India has been one of the fastest growing country for payment
cards in the Asia-Pacific region.
•India currently has approximately 46.1 million credit card and

944.5 million debit card in circulation.
REGULATION-
 The Reserve Bank of India (RBI) has been supportive in the development of electronic
payments
 In this direction, the “Payments and Settlement System Act” was enacted .
 Apart from being supporting, the RBI has also initiated various programs to encourage e-
payments.
CHANNELS OF PAYMENT-
 Indian banks have put in place various channels of electronic payments in place to
encourage customers to adopt the electronic mode.
 Channels like the Internet, mobile, ATMs, and drop boxes are some of the most frequently
used channels apart from bank branches.
MARKET MAPPING-
 E-payments processing market has two major players, namely Tech Process, and Bill Desk,
which is a pure play electronic transaction processing company.
Payment Systems Share FY2018-19-Volume Payment Systems Share FY 2018-19-Value
From these charts, it appears that

systems such as RTGS, NEFT and Paper
(Cheque) dominate in terms of value,
but not volume indicating that they are
used for higher value payments.
Digital Payments by Value

Digital Payments By Volume
Transforming From Paper Mode To Electronic Mode.
Two main reasons for such shift are:-
1. The regulator has mandated routing all high-value transactions

electronically to minimize movement of money and risk.
2. At the retail end, customers are realizing the efficiency of
electronic payments.
Technological Advancement in Electronic Payment
 Electronic Clearing Service (Credit and Debit).
 National Electronic Fund Transfer (NEFT).
THE RULING PLASTIC MONEY

 Credit cards
 Debit cards
 ATM Cards
Conclusion
 Expand Market beyond Traditional geographic market.

 Override traditional marketing system into digital marketing
system.
 Made human life convenient as a person can pay his
 payments online.
 Increasing the cardholder base will bring challenges to banks
 Designing new products and services
 Managing default rates
 Loyalty programmes

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Electronic Payment Systems

MBA EX 9607 – Managing E-Business

Faculty of Management Studies

 Electronic Payment is a financial exchange that takes place online

The various factors that have lead the financial institutions to

Reduced operational and processing cost:

Increasing online commerce:

Online Bill Payment

Online Order Placing

Online Ticket Booking

 Like the serial numbers on real currency notes, the E-cash

 Complex cryptographic algorithms prevent double spending

2) Bank sends e-cash bits to consumer

Consumer 6) Parties complete transaction

 The E-wallet is another payment scheme that

1. Download a wallet from the merchant’s website.

 A smart card, is any Smart Card Applications

processed and delivered  Ecash

 It is a Plastic Card having a Magnetic Number and code on it.

 Risk in using Credit cards

 Jointly designed by MasterCard and Visa with backing of

Security Requirements of EPS

Ensuring that no Protecting transaction Safety

A payment gateway is an e-commerce application service provider

Payment gateway protects credit cards details encrypting sensitive

 Going the e-way

•Ever-increasing technology changes.

•Growing Internet access and mobile subscriber base

•Rising consumer confidence.

•India currently has approximately 46.1 million credit card and

Payment Systems Share FY2018-19-Volume Payment Systems Share FY 2018-19-Value

From these charts, it appears that

Digital Payments by Value

Two main reasons for such shift are:-

1. The regulator has mandated routing all high-value transactions

 Electronic Clearing Service (Credit and Debit).

 National Electronic Fund Transfer (NEFT).

THE RULING PLASTIC MONEY

 Expand Market beyond Traditional geographic market.

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