How
does a customer be it a home user or another business pay? This is
a simple question, but one that lies at the heart of E-commerce and has attached
to it all of the baggage of the security dimension.
The short answer is
that for the home consumer payment will be primarily as it is in the external
world by credit card. But it is not the only answer, even for the domestic
Internet shopper. And any company wanting to exploit an E-commerce opportunity
needs to know the alternatives.
What is important to
understand is that there is nothing really new about transferring money through
the wires: financial institutions have been involved in electronic banking
for years, and every consumer understands that nowadays the bank does not ship
his money from one place to another in a truck, rather that it moves it
electronically.
The old commercial
practices also remain in place for businesses moving from traditional methods to
the Internet: there can still be monthly accounts or payment in advance.
There can still be credit cards and there can still be small change
transactions, although in a way that is novel.
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EDI is simply the
exchange of information, order, goods or services between two or more partners
over an electronic network. The average person knows of it through such
things as bank transactions, even the way a paycheck makes it way from an
employer to an employee's account. But today EDI is a
backbone of business to business transactions on the Internet. It controls the way
purchase orders are transmitted not by surface mail but electronically
direct to the supplier in an instant: it allows for the immediate processing at
the receiving end so that material to be purchased can be shipped without delay,
and an electronic shipment notification returned to the buyer. It provides a means
for the electronic exchange of invoices and orders, of financial payments and
receipts. It means that the
process of ordering, checking stocks, contacting suppliers and then devising
shipment is automated. Materials can be dispatched on the same day
as the order is placed, suppliers send their shipping documents electronically
to the buyer and since the invoice can be sent directly to a customers accounts
payable system it speeds payment for the goods. And merchants who want
to process voice or fax orders through an Internet Payment manager can still do
so they just send their orders electronically for processing, with the
advantage that all merchant sales, regardless of origin are captured, processed,
reported and funds deposited in the sites' bank account. |
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Customers build up a
"wallet" by transferring money from existing regular bank account to
Internet wallet software, or transfer funds from their credit cards into it,
just like an ATM cash advance. The difference between
an ATM and an electronic wallet is that the actual money stays with the bank. A consumer can set confirmation thresholds in his wallet "preferences" |
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These are payments
that often customers prefer not to make by credit cards and the supplier
prefers not to handle with the credit card system. Such small amounts are
uneconomical to process. CyberCoin was the
Internet's first micropayment service. It will handle amounts as small as a few
cents an amount certainly not feasible using credit cards. It transfers small
payments from the customers E-wallet to the merchant. It works, as far as
the customer is concerned, just by clicking on a button on the merchant's page.
The major point is that no actual money is held, either by the merchant or by
CyberCoin. It is all within the original bank. As far as the customer is concerned the transaction is just like clicking on an icon on a Web page. The merchant presents a "payment" icon on his web page and the user clicks on it. If the payment is
greater than that specified by the consumer in his Ewallet threshold (see above)
then a dialogue box pops up allowing the consumer to change the parameters,
while those below the threshold are accepted without further intervention. |
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Credit
cards. SET Secure Electronic transactions
SET was developed by
Visa and MasterCard in conjunction with a range of technology suppliers and is
being used in the United States and 19 European countries. Basically it
encrypts the data on a payment card transaction, then verifies that both parties
in an E-commerce transaction are genuine. The Business Software
Alliance estimates it would take a casual hacker 38 years to crack a SET code,
because the algorithms on which it is based are so complex. The problem is that
such systems can be difficult to install and manage. And as
such, they are managed by various companies. It works this way: the
managing company handles the initial exchange of address and credit card
information from the would-be purchaser, then traces it through the
risk-management procedure, checking the bank's credit card facilities and
seeking approval. It also checks the list of stolen or lost cards, and
finally if all is well it sends it to the bank for processing. It
also often sends a "post approval" notice to the merchant, before the
merchant's server returns an online receipt. All of this takes place in less
time than it takes to read the explanation. |
© 2000
eICEPower
525 Technology Park, Suite 109, Lake Mary, FL 32746
Phone: 800-229-2881
e-mail: sales@eicepower.com
Until
recently Electronic Data Interchange 
Electronic wallets are what they seem to be locations online which
customers can use as they would the wallet or purse in their pocket.
It
is possible to pay in small amounts, from a few pennies to a few pounds (or
whatever currency is in use in the area of the transaction) using E-wallets and
the system known as CyberCoin.
Secure
Electronic Transactions (SET) are the way that payment is made, through secure
credit card transactions, over the Net.