DEFINITION OF ELECTRONIC PAYMENT SYSTEM

The definition of an electronic payment system is a way of paying for a goods or

services electronically, instead of using cash or a check, in person or by mail. An example of
an electronic payment system is Pay Pal. An example of an electronic payment system is
the use of a credit card.

E-Commerce or Electronics Commerce sites use electronic payment where

electronic payment refers to paperless monetary transactions. Electronic
payment has revolutionized the business processing by reducing paper
work, transaction costs, labour cost. Being user friendly and less time
consuming than manual processing, helps business organization to expand
its market reach / expansion. Some of the modes of electronic payments
are following.

Credit Card

Debit Card

Smart Card

E-Money

Electronic Fund Transfer (EFT)

Credit Card
Payment using credit card is one of most common mode of electronic
payment. Credit card is small plastic card with a unique number attached
with an account. It has also a magnetic strip embedded in it which is used
to read credit card via card readers. When a customer purchases a product
via credit card, credit card issuer bank pays on behalf of the customer and
customer has a certain time period after which he/she can pay the credit
card bill. It is usually credit card monthly payment cycle. Following are the
actors in the credit card system.

The card holder - Customer

The merchant - seller of product who can accept credit card payments.

The card issuer bank - card holder's bank

The acquirer bank - the merchant's bank

The card brand - for example , visa or mastercard.

Credit card payment process

Step

Description

Step 1

Bank issues and activates a credit card to customer on his/her

request.

Step 2

Customer presents credit card information to merchant site or to

merchant from whom he/she want to purchase a product/service.

Step 3

Merchant validates customer's identity by asking for approval

from card brand company.

Step 4

Card brand company authenticates the credit card and paid the
transaction by credit. Merchant keeps the sales slip.

Step 5

Merchant submits the sales slip to acquirer banks and gets the
service chargers paid to him/her.

Step 6

Acquirer bank requests the card brand company to clear the

credit amount and gets the payment.

Step 6

Now card brand company asks to clear amount from the issuer
bank and amount gets transferred to card brand company.

Debit Card
Debit card, like credit card is a small plastic card with a unique number
mapped with the bank account number. It is required to have a bank
account before getting a debit card from the bank. The major difference
between debit card and credit card is that in case of payment through debit
card, amount gets deducted from card's bank account immidiately and
there should be sufficient balance in bank account for the transaction to get
completed. Whereas in case of credit card there is no such compulsion.
Debit cards free customer to carry cash, cheques and even merchants
accepts debit card more readily. Having restriction on amount being in bank
account also helps customer to keep a check on his/her spendings.

Smart Card
Smart card is again similar to credit card and debit card in apperance but it
has a small microprocessor chip embedded in it. It has the capacity to store
customer work related/personal information. Smart card is also used to
store money which is reduced as per usage.
Smart card can be accessed only using a PIN of customer. Smart cards are
secure as they stores information in encrypted format and are less
expensive/provides faster processing.Mondex and Visa Cash cards are
examples of smart cards.

E-Money
E-Money transactions refers to situation where payment is done over the
network and amount gets transferred from one financial body to another
financial body without any involvement of a middleman. E-money
transactions are faster, convenient and saves a lot of time.
Online payments done via credit card, debit card or smart card are
examples of e-money transactions. Another popular example is e-cash. In

case of e-cash, both customer and merchant both have to sign up with the
bank or company issuing e-cash.

Electronic Fund Transfer

It is a very popular electronic payment method to transfer money from one
bank account to another bank account. Accounts can be in same bank or
different bank. Fund transfer can be done using ATM (Automated Teller
Machine) or using computer.
Now a day, internet based EFT is getting popularity. In this case, customer
uses website provided by the bank. Customer logins to the bank's website
and registers another bank account. He/she then places a request to
transfer certain amount to that account. Customer's bank transfers amount
to other account if it is in same bank otherwise transfer request is
forwarded to ACH (Automated Clearing House) to transfer amount to other
account and amount is deducted from customer's account. Once amount is
transferred to other account, customer is notified of the fund transfer by the
bank.

E-COMMERCE PAYMENT SYSTEM

n e-commerce payment system facilitates the acceptance of electronic payment for online
transactions. Also known as a sample of Electronic Data Interchange (EDI), e-commerce payment
systems have become increasingly popular due to the widespread use of the internet-based
shopping and banking.
Over the years, credit cards have become one of the most common forms of payment for ecommerce transactions. In North America almost 90% of online retail transactions were made with
this payment type.[1] Turban et al. goes on to explain that it would be difficult for an online retailer to
operate without supporting credit and debit cards due to their widespread use. Increased security
measures include use of the card verification number (CVN) which detects fraud by comparing the
verification number printed on the signature strip on the back of the card with the information on file

with the cardholder's issuing bank.[2] Also online merchants have to comply with stringent rules
stipulated by the credit and debit card issuers (Visa and MasterCard)[3] this means that merchants
must have security protocol and procedures in place to ensure transactions are more secure. This
can also include having a certificate from an authorized certification authority (CA) who
provides PKI(Public-Key infrastructure) for securing credit and debit card transactions.
Despite widespread use in North America, there are still a large number of countries such as China,
India and Pakistan that have some problems to overcome in regard to credit card security. In the
meantime, the use of smartcards has become extremely popular. A Smartcard is similar to a credit
card; however it contains an embedded 8-bit microprocessor and uses electronic cash which
transfers from the consumers card to the sellers device. A popular smartcard initiative is the VISA
Smartcard. Using the VISA Smartcard you can transfer electronic cash to your card from your bank
account, and you can then use your card at various retailers and on the internet.
There are companies that enable financial transactions to transpire over the internet, such
as PayPal. Many of the mediaries permit consumers to establish an account quickly, and to transfer
funds into their on-line accounts from a traditional bank account (typically via ACH transactions),
and vice versa, after verification of the consumer's identity and authority to access such bank
accounts. Also, the larger mediaries further allow transactions to and from credit card accounts,
although such credit card transactions are usually assessed a fee (either to the recipient or the
sender) to recoup the transaction fees charged to the mediary.
The speed and simplicity with which cyber-mediary accounts can be established and used have
contributed to their widespread use, although the risk of abuse, theft and other problemswith
disgruntled users frequently accusing the mediaries themselves of wrongful behavioris associated
with them.

Payment card
From Wikipedia, the free encyclopedia

Example of two credit cards

An example of the front of a typicaldebit card:

1.

Issuing bank logo

2.

EMV chip

3.

Hologram

4.

Card number

5.

Card brand logo

6.

Expiration date

7.

Cardholder's name

A payment card is a device that enables its owner (the cardholder) to make a payment by electronic
funds transfer.[1] The most common types of payment cards are credit cards and debit cards.
Payment cards are usually embossed plastic cards, 85.60 53.98 mm in size, which comply with
the ISO/IEC 7810 ID-1 standard. They usually also have an embossed card number conforming with
the ISO/IEC 7812numbering standard.
Most commonly, a payment card is electronically linked to an account or accounts belonging to the
cardholder. These accounts may bedeposit accounts or loan or credit accounts, and the card is a
means of authenticating the cardholder. However, stored-value cards are cards that store money on
the card itself.

Types[edit]
Payment cards can be distinguished on the basis of the features of each type of card, including:

Credit card[edit]
Main article: Credit card
The issuer of a credit card creates a line of credit (usually called a credit limit) for the cardholder on
which the cardholder can draw (i.e. borrow), either for payment to a merchantfor a purchase or as

a cash advance to the cardholder. Most credit cards are issued by or through local banks or credit
unions, but some non-bank financial institutions also offer cards directly to the public.
The cardholder can choose either to repay the full outstanding balance by the payment due date or
to repay a smaller amount, not less than the "minimum amount", by that date. In the former
case, interest is typically not charged; while in the latter case, the cardholder will be charged with
interest. The rate of interest and method of calculating the charge vary between credit cards, even
for different types of card issued by the same company. Many credit cards can also be used to take
cash advances through ATMs, which also attract interest charges, usually calculated from the date of
cash withdrawal. Some merchants charge a fee for purchases by credit card, as they will be charged
a fee by the card issuer.

Debit card[edit]
Main article: Debit card

Purchasing by debit card

With a debit card (also known as a bank card, check card or some other description) when a
cardholder makes a purchase, funds are withdrawn directly either from the cardholder's bank
account, or from the remaining balance on the card, instead of the holder repaying the money at a
later date. In some cases, the "cards" are designed exclusively for use on the Internet, and so there
is no physical card.[2][3]
The use of debit cards has become widespread in many countries and has overtaken use of
cheques, and in some instances cash transactions, by volume. Like credit cards, debit cards are
used widely for telephone and internet purchases.
Debit cards can also allow instant withdrawal of cash, acting as the ATM card, and as a cheque
guarantee card. Merchants can also offer "cashback"/"cashout" facilities to customers, where a
customer can withdraw cash along with their purchase. Merchants usually do not charge a fee for
purchases by debit card.

Charge card[edit]
Main article: Charge card
With charge cards, the cardholder is required to pay the full balance shown on the statement, which
is usually issued monthly, by the payment due date. It is a form of short-term loan to cover the
cardholder's purchases, from the date of the purchase and the payment due date, which may
typically be up to 55 days. Interest is usually not charged on charge cards and there is usually no
limit on the total amount that may be charged.[citation needed] If payment is not made in full, this may result
in a late payment fee, the possible restriction of future transactions, and perhaps the cancellation of
the card.

ATM card[edit]
Main article: ATM card
An ATM card (known under a number of names) is any card that can be used in automated teller
machines (ATMs) for transactions such as deposits, cash withdrawals, obtaining account
information, and other types of transactions, often through interbank networks. Cards may be issued
solely to access ATMs, and most debit or credit cards may also be used at ATMs, but charge and
proprietary cards cannot.
The use of a credit card to withdraw cash at an ATM is treated differently to an POS transaction,
usually attracting interest charges from the date of the cash withdrawal. The use of a debit card
usually does not attract interest. Third party ATM owners may charge a fee for the use of the ATM.

Stored-value card[edit]
Main article: Stored-value card
With a stored-value card, a monetary value is stored on the card, and not in an externally recorded
account. This differs from prepaid cards where money is on deposit with theissuer similar to a debit
card. One major difference between stored value cards and prepaid debit cards is that prepaid debit
cards are usually issued in the name of individual account holders, while stored-value cards are
usually anonymous.
The term stored-value card means that the funds and or data are physically stored on the card. With
prepaid cards the data is maintained on computers controlled by the card issuer. The value stored
on the card can be accessed using a magnetic stripe embedded in the card, on which the card
number is encoded; using radio-frequency identification (RFID); or by entering a code number,
printed on the card, into a telephone or other numeric keypad.

Fleet card[edit]
Main article: Fleet card
A fleet card is used as a payment card, most commonly for gasoline, diesel and other fuels at gas
stations. Fleet cards can also be used to pay for vehicle maintenance and expenses, at the
discretion of the fleet owner or manager. The use of a fleet card reduces the need to carry cash, thus
increasing the security for fleet drivers. The elimination of cash also helps to prevent fraudulent
transactions at the fleet owner's or manager's expense.
Fleet cards provide convenient and comprehensive reporting, enabling fleet owners/managers to
receive real time reports and set purchase controls with their cards, helping to keep them informed
of all business related expenses