9. Payment Systems
Traditional debt transfer systems are credit
cards and bank transfer. And in B2C e-commerce,
credit cards have
become the prevalent form of on-line payment.
This is probably due to circumstances in the US,
where e-commerce first took off. There, credit
cards are commonplace, but there exists no
widespread system of direct bank transfer.
Moreover, Americans still settle many payments
with paper cheques – a means clearly not suited
to electronic transactions.
However,
owing to consumer security concerns about the
digital transfer of credit card details across
the Internet, companies with an interest in
promoting electronic transactions have developed
various secure payment systems involving
different strengths of encryption.
Comment
Although it is consumers who are most
concerned about giving credit card information
on line (curiously, people who will gladly
hand over their credit card to anyone looking
like a waiter in a restaurant, will be very
reluctant to provide credit card information
over a highly secure system on the Internet),
it is retailers who are at the greatest risk.
Credit card companies are quick to do a
chargeback (i.e. demand the payment back
from the retailer) whenever a consumer has a
complaint about an on-line sale.
Unfortunately, a number of dishonest
individuals have taken advantage of this
policy, making substantial purchases and then
doing a chargeback. Be sure to discuss this
issue with your bank when establishing a
merchant account to accept credit card payment
over the Internet. Also ensure that your
payment system is secure – not only the
software, but staff collecting payment,
printed documents with credit card data, etc.
Addressing consumer fears over submitting credit
card details on-line, several companies have
developed systems that allow more secure
transactions to take place. These systems range
from the use of encryption to protect credit
card details to the development of new methods
of payment such as electronic cash systems which
involve the exchange of digital payment tokens
directly between the parties.
To
create trust and confidence, the payment system
should be chosen carefully and an encryption
system and details about data security during
data transfer should be provided. However,
vendors should be developing such systems as
much for their own security as their customers’.
In cases of misuse of sensitive data, especially
credit card numbers and bank details, the burden
of proof is with the supplier.
The
digital transmission of products and services
has prompted calls for the development of
payment technology that will allow consumers to
transfer value digitally in order to pay for
these products and services.
Rapid
developments in on-line commerce mean that
payment systems are needed not only for the sale
of products and services, but also for new
methods of advertising and information
retrieval. Both the digital transfer of products
for value and new advertising methods, such as
paying consumers to view web sites or fill out
questionnaires, have prompted the creation of
systems which can immediately transfer value and
are suitable for low value transactions. New and
specially developed payment systems include
smart cards (Visacash, Proton, Mondex), e-cash,
cybercash (software stored on the computer),
micropayment systems and loyalty schemes.
The
advantages of digital cash are peer-to-peer
transfers, anonymous purchasing, certainty of
payment for the retailer, and suitability for
low value purchases.
The
Electronic Money Directives provide that
electronic money institutions (i.e. undertakings
other than banks and credit institutions) can
issue electronic money throughout the European
Union based on a single licence obtained in one
Member State. These institutions also fall under
a single supervisory regime.
In the
different Member States, issuers may find
themselves subject to differing regulations.
While the issuance of electronic money is still
restricted to credit institutions in some
countries, in others commercial organisations
are free to provide this service. The
differences arise from the Member States’
divergent interpretations of the activities of
electronic money issuers.
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