Every country and shopper has their prefered method to pay online.

Worldwide there are more than 200 online payment methods and solutions.

Iscap number: 21030255

ELECTRONIC PAYMENT METHODS

STUDENT: NICULI GABRIEL EDUARD

1

CONTENTS: 1. ABOUT ELECTRONIC PAYMENT METHODS

2. BENEFITS OF ELECTRONIC PAYMENT

3. ELECTRONIC PAYMENT TYPES

3.1. CARD PAYMENTS

3.2. ALTERNATIVE PAYMENTS

3.3 DIGITAL WALLET PAYMENTS

2

1. ABOUT ELECTRONIC

PAYMENT METHODS

An electronic payment is any kind of non-cash payment that doesn't involve a paper check.

Methods of electronic payments include credit cards, debit cards and the ACH (Automated Clearing

House) network. The ACH system comprises direct deposit, direct debit and electronic checks (e-

checks).

For all these methods of electronic payment, there are three main types of transactions:

1. A one-time customer-to-vendor payment is commonly used when you shop online at an e-

commmerce site, such as Amazon. You click on the shopping cart icon, type in your credit card

information and click on the checkout button. The site processes your credit card information

and sends you an e-mail notifiying you that your payment was received. On some Web sites, you

can use an e-check instead of a credit card. To pay by e-check, you type in your account number

and your bank's routing number. The vendor authorizes payment through the customer's bank,

which then either initiates an electronic funds transfer (EFT) or prints a check and mails it to

the vendor.

2. You make a recurring customer-to-vendor payment when you pay a bill through a regularly

scheduled direct debit from your checking account or an automatic charge to your credit card.

This type of payment plan is commonly offered by car insurance companies, phone companies

and loan management companies. Some long-term contracts (like those at gyms or fitness

centers) require this type of automated payment schedule.

3. To use automatic bank-to-vendor payment, your bank must offer a service called online bill

pay. You log on to your bank's Web site, enter the vendor's information and authorize your bank

to electronically transfer money from your account to pay your bill. In most cases, you can

choose whether to do this manually for each billing cycle or have your bills automatically paid

on the same day each month.

So, the payment system is an operational network - governed by laws, rules and standards - that links

bank accounts and provides the functionality for monetary exchange using bank deposits. The payment

system is the infrastructure (consisting of institutions, instruments, rules, procedures, standards, and

technical means) established to effect the transfer of monetary value between parties discharging

mutual obligations. Its technical efficiency determines the efficiency with which transaction money is

used in the economy, and risk associated with its use.

3

2. BENEFITS OF

ELECTRONIC PAYMENT Electronic payment is very convenient for the consumer. In most cases, you only need to

enter your account information -- such as your credit card number and shipping address -- once. The information is then stored in a database on the retailer's Web server. When you come back to the Web site, you just log in with your username and password. Completing a transaction is as simple as clicking your mouse: All you have to do is confirm your purchase and you're done.

Electronic payment lowers costs for businesses. The more payments they can process

electronically, the less they spend on paper and postage. Offering electronic payment can also help businesses improve customer retention. A customer is more likely to return to the same e-commerce site where his or her information has already been entered and stored.

With all the benefits of electronic payment, it's no wonder that its use is on the rise. More than 12 billion ACH payments were made in 2004, a 20 percent increase from 2003 . The 2004 Federal Reserve Payments Study noted that from 2000 to 2003, electronic payments grew as payment by check declined, which suggests that electronic payments are replacing checks.

In order to better serve their customers, banks are swiftly moving to offer online bill pay

services. Grant Thornton's 2005 survey of bank executives found that 65 percent of community banks and 94 percent of large banks offer 24/7 online bill payment . Most of these services are free to members and coordinate easily with personal software programs such as Quicken or MS Money. Alternatively, consumers can subscribe to online bill pay services such as Paytrust or Yahoo! Bill Pay. These services charge a monthly fee in exchange for the convenience of paperless bill paying.

3. ELECTRONIC PAYMENT

TYPES 3.1. CARD PAYMENTS

Cards could be seen as the 'key' to the consumers bank account, whether it is a deposit

(debit), a loan (credit) or a stored value (prepaid). Cards can be used to 'unlock' and transfer the

shoppers money to the online merchant. The most common worldwide used and accepted credit

and debit card brands are VISA, VISA Electron, VISA Debit, MasterCard, MasterCard Debit, Maestro,

American Express, Diners Club International, Discover, JCB and UnionPay.

4

Next to these globally recognised card brands, there are also country or region-based card brands

like Hipercard in Brazil, BC Card in South Korea, Dankort in Denmark and Carte Bleue in France.

We subdivide card payments into credit card, debit card, prepaid card and gift & loyalty card

payments. These 4 card payment types have different characteristics which justify separate

classification.

They differ in terms of usage, scale, accceptance, regionality, security, costs, liabilities and more.

Credit Cards

Credit cards are physical or digital cards which represent a credit account. Online they are used by

entering the card number, although sometimes the physical card is needed for authentification.

Prepaid cards

A prepaid card is a physical card or a unique number with a fised maximum amount. They can be

purchased offline and used online.

Debit Cards

Debit cards are physical or digital cards which represent a debit account. Online they are used by

entering the card number, although sometimes the physical card is needed for authentification.

Gift/Loyalty Card

Gift cards represent a stored value of money. The two broad categories of gift cards are merchant-

issued gift cards or bank-issued gift cards.Aloyalty card contains information thet is used to identify

the buyer at every transaction. The company that issued the card offer rewards for repreated

business.

3.2. ALTERNATIVE PAYMENTS

Alternative Payments have seen an uplift in the last years. Why? Some of them provide great ease

of mind for both consumer and merchant.

Alternative Payments like online bank transfers and direct debits are often associated with low and

fixed transaction costs, safe and secure transaction types, guaranteed payments and swift

settlement.

Popular alternative payment method brands areiDeal (Online Bank Transfer, the

Netherlands),Klarna (invoice, Sweden), ACH (Checks, United States) and Interac (Online Bank

Transfer, Canada).

We subdivide alternative payments into Online Banking, Direct Debits, Bank Transfers, Mobile

Carrier Billings, Cash on Delivery and Pay-by-Invoice.

5

Bank Tramsfers

These payment methods connect with the shoppers bank where the shopper can authorize a

transfer. The transfer is prepared by the merchant and only has be authorized by the shopper within

his own online bank environment

Mobile carrier billing

These are payment methods that require a mobile phone to authentificate the shopper. Some of

these collect the money via the phone ill (carrrier billing), others behave like a wallet.

Invoices

These methods take over the collection tisk of the payment. They quarantee payment to the

merchant, either by some sort of insurance or by taking over the invoicing process. To do this, they

perform their own assessment of the shoppers risk profile and accepts or declines it online.

Specials

The Specials payment category is

one that cannot be categorized yet

and where the payment method has

only been considered a way of

payment on the internet fairly

recent. An example of such a method

is Bitcoin.

Direct Debits

A payment method where the

merchant initiates a money transfer

from a shopper to itself. In most

cases a mandate (either paper or

electronic, with different levels of authentification) is required.

Cash on Delivery

A payment method that uses physical tokens, coins or bank notes which are handed over at the time

of delivery of goods.

Checks

A checks is a payment method where a (virtual) form (the check) is submitted. The value of the

check is determined when filling out the form. The amount is collected whenever the receiver of the

form hands in the check

6

3.3. DIGITAL WALLET PAYMENTS

Digital Wallets or eWallets are the ones to watch. Digital Wallets are expected to gain global

footprint rapidly if they have not already. They provide improved payment experience and simplify

online and mobile checkout. Especially on mobile devices consumers appreciate an enhanced and

swift payment experience.

These digital wallets should be seen as the virtual look-a-like of our physical wallet. These eWallets

can contain (pre-registered) credit cards, debit cards, gift and loyalty cards and provide access to

alternative payment methods like online bank transfers. Some eWallets allow the consumer to

preload money into their wallets.

PayPal's Wallet is probably best known to many.MasterPass by MasterCard, V.me by Visa, QIWI

wallet and Allied Wallet are digital wallet brands on the rise.

There are 2 types of Digital Wallets we need to distinguish (some of the Digital Wallet suppliers

offer both types):

Preloaded Digital Wallet

A Preloaded Digital Wallet is a wallet which is prepaid and has e-money preloaded to use as an

alternative to cash. Users of the wallet have to fund the wallet before they can pay for an online

transaction. They can add funds to the wallet via various ways of payment such as cards or

alternative payment methods. The

balance on the wallet is used to pay for

online and mobile transactions.

This type of Digital Wallet is the

traditional eWallet model.

Pass-Through Digital Wallet

A Pass-Through Digital Wallet is where

the eWallet authenticates the user, but the

transaction is being settled on a linked

payment system, such as a bank account,

a credit, debit or prepaid card. The user of

the Wallet is not using the funds stored in

the Wallet but selects during the moment

of payment one of the 'stored' payment methods to finalize the payment to the merchant.

Traditional Preloaded Digital Wallet brands have added this type to their offering allowing the user

to choose between either two at the point of checkout. This is why you will find most of the

Preloaded Wallet suppliers offering both types.

7

REFERENCES

http://money.howstuffworks.com/personal-finance/online-banking

http://en.wikipedia.org/wiki/Payment_system

http://en.wikipedia.org/wiki/E-commerce_payment_system

https://www.about-payments.com/knowledge-base/methods