E-payment System

Chapter,
We Will Learn:
In This
I nT h

E-payment System

Tools for Risk

Visitors to Management
E-payment Promoting
Websites Option for
Websites
E-payment
System

Modes and Methods Risk in

of E-payment System E-payment

-Debit Card -Security

- Credit Card Controls
-Smart Card
- Digital Cash/E-cash
Transfer (EFT)
FElectronic Fund

40 INTRODUCTION
for purchases can
the ways in which the payment electronic mode
Internet has
revolutionized
happen to be by
transactions
like cash and
made. More and
more
modes of payments
De through
traditional
easier and quicker
alternative

nstead of paying modes of payment offer an payment is that

Electronic electronic mode of
ueques. drawback of often leads to
But the modes of payment
oCarrying cash. electronic
c o n v e n i e n c e of
he Speed and
Overspending.
Electronic
Payment delivery of
4.1 except
Meaning of advertising
to paying Electronic
from electronie
means.

In everything
be done through
ommerce, is initiated,
technically E-payment
can transaction.
Ical products monetary used payment
commonly
paperless is
Payment
Cnt refersreceived
refers to E-payment
electronically.
businesses,
individuals,
enables
ocessed and
Sed and E-payment
nec)
d n i s m in
e - c o m m e r c e .
 4.2 E-commerce

governments and non-profit organizations to make cashless payments for

goods and services through cards, mobile phones or the internet. The examples
of e-payment are: paying for a product purchased using credit card, debit card
or smart card; salary credits directly to employees' accounts; etc.

4.1.1 Advantages of Electronie Payment

Following are the advantages of e-payment:
Increased Speed and Convenience: E-payment is very convenient as
compared to traditional paynment methods of cash and cheques. E
be made at any time of day or night from any part of
payment can

the world.
Eliminates the Security Risks: E-payment eliminates the security
risks associated with handling cash.
Competitive advantage to business: E-payment enables businesses
to make sales to customers who choose to pay electronically and gain
a competitive advantage over those who accept payment only through
traditional methods.
Time Saving: Through e-payment, money can be transferred between
virtual accounts within few minutes; while in traditional payment
methods such as cheques, it may take several days.
.Environment Friendly: E-payment eliminates the use of paper.

4.1.2 Disadvantages of Electronic Payment

Security Concerns: Inspite of stringent security measures, e-payments
are still vulnerable to hacking.
Disputed Transactions: In case the electronic money such as credit
card is misused by someone else, it is very difficult to receive a refund.
Increased Business Costs: E-payment systems come with an increased
need to protect sensitive financial information stored in a business's
computer systems from unauthorized access. Businesses have to incur
additional costs in procuring, installing and maintaining sophisticated
payment-security technologies.
The Lack of Anonymity. The information about all the transactions,
including the amount, time and recipient are stored in the database of
the payment system. The intelligence agency and tax authorities can
have access to this information.
The Necessity of Internet Access. E-payment cannot be
if Internet connection fails.
performe
4.2 Models and Methods of Electronic Payments
E-payment refers to paperless monetary transaction through electronic means.
 4.3
E p a y m e n I
tem
S p s t e m

E-payments Modes

E-Wallet
Debit
Cards|
Cards | Smart CardDigital Cash
Credit
Fig. 4.1 : E-payment Modes
in detail In the following
modes of e-payment have been explained
Tehs
esee

section.

4.2.1 Credit Cards

electronic
c o m m o n mode of
credit card of most is one
Davment using number linked with
is small plastic card with a unique
eavment. Credit card is used to read
embedded in it which
ay
It has also a magnetic strip via credit
a product
an account. When a customer purchases
card via card readers. and c u s t o m e r
credit on behalf of the c u s t o m e r
card issuer bank pays credit card bill.
card, credit he/she c a n pay the
after which involved
certain time period basis. The parties
has a
dues are settled on monthly
card
Generally credit are:
card payment
in the credit Customer
T h e card holder - who can accept
credit card payments.

The merchant - seller of product

holder's bank
card
issuer bank
The card the merchant's bank
acquirer bank
-

MasterCard.
The
example, Visa
or

T h e card
brand -

for
Process:
Payment
4.2.1.1 Credit Card
Desceription

Step customer on
his/her request.
credit card to
Step 1 Bank issues
and activates a
information to
merchant site or to
credit card a
product/service.
presents to purchase
Step 2
2 Customer he/she want
ep from whom brand company
for credit
merchant
from card amount of
server
asks for approval number and the
Step 3 Merchant
customer's
credit card
authorization
of
informs the
card and
purchase. authenticates
the credit merchant
whether

company informs the

Step 4 Card brand Merchant
the sales slip.
whether to proceed. M e r c h a n t keeps
merchant completed.
transaction
has been banks.
the to acquirer the credit
sales slip to clear
s u b m i t s the
Step 5 Merchant
the card
brand company

bank requests
Step 6 Acquirer
the payment. from the
issuer bank
amnunt
a m o u n t and gets clear
asks to
company company.

Step N
6 o w card brand transferred
to card
brand

amount gets
and
4.4 E-commerce

4.2.1.2 Advantages of Credit Cards

Following are advantages of credit cards:
Incentives: Some credit card companies offer incentives such as
credit cards. In addition,
loyalty points and cashbacks for paying through
some credit card companies offer insurance on large purchases.
Flexible Credit: Most credit cards offer interest free short term credit

in case the balance is cleared in full by the due date.

Purchase Power and Ease of Purchase: Credit cards make it easier
to buy things without carrying large amounts of cash. Moreover, credit
cards can also be useful in times of emergency.
Building a Credit Line: Having a good credit history is often important,
not only when applying for credit cards, but also when applying for
things such as loans, rental applications, or even some jobs. Having
a credit card and using it wisely (making payments on time and in full
each month) helps in building a good credit history.
Cash Withdraws: Credit cards can be used to withdraw cash through
ATMs.
Record Keeping: Credit cards allow accurate record-keeping by
consolidating purchases into a single statement.

4.2.1.3 Disadvantages of Credit Cards

Following are the disadvantages of credit cards:
Disputed Transactions: In case the credit card is misused by someone
else, it is very difficult to receive a refund. Using a eredit card.
especially remotely, introduces an element of risk as the card details
may fall into the wrong hands resulting in fraudulent purchases on the
card. Fraudulent unauthorized
or charges may take months to dispute.
investigate, and resolve.
The Lack of Anonymity: The information about all the transactions,
including the amount, time and recipient are stored in the database of
the payment system. The intelligence agency and tax authorities ean
have access to this information.
Credit Card Charges: Credit card provider companies charge fee for
issuing credit cards. They also levy penalty if payment is not made
within due dates.
Budget Overruns: The biggest disadvantage of credit cards is that
they encourage people to spend money that they don't have. Most
EpaymentSYstem
4.5

balance each
credit cards do not require the holder to pay off the
holder has Rs. he/she may be able to spend up
1000,
month. If the to the holder
5000 on credit card. It may seem like 'free money'
to Rs. and tend
card holder become an impulsive buyer
at that time. The may
because of the ease of using credit
cards. Cards can
to overspend
which the card holder
encourage the purchasing of goods and services
cannot really afford.
may result
in some
Stolen Cards: Lost or stolen cards
Lost or
inconvenience.
unwanted expense and
a relatively expensive
way of
Rates: Credit cards are
High Interest used carefully, especially because
of
these not
obtaining credit if
are

costs.
interest rates and other
the high
4.2.2 Debit Cards linked
small plastic card with a unique number
Debit card, like credit card is a account before
It is required to have a bank
number.
account cardholder to pay
with the bank enables the
card from the bank. Debit card
getting a debit
his/her account. The major difference
directly through debit
for his/her purchases in case of payment through
credit card is that there
between debit card and account immediately
and
card's bank
deducted from to get
card, amount gets account for the transaction
balance in bank
should be sufficient no such compulsion.
credit card there is
whereas case of
in
completed;
Cards
Advantages of Debit
4.2.2.1
debit cards:
advantages of using to
Following are the are very simple use.

Debit cards
to Use: account,
and
Convenient
of holder's bank
Simple directly out
is taken This is much
Since the payment be done instantly.
already exists, it can
through, or
to go
where the money
credit
transaction

to wait for a the expenses.

faster than having
cover
cash to
having enough
about withdraw cash from
to worry
having can be used to
withdrawals:
Debit cards
Cash
number that is
ATMs. four digit pin
are protected
by a purchase
Debit cards
needed to make almost any
Security:
This pin is deal of protection
cardholder.
great
set by the authentication gives a
Pin
with debit card.
card is have
against theft. obtain a debit
required to
only thing with a small
Issuance: The bank
account

Easy can open a

account.
Anyone
a bank
 4.6 E-commerce

different than credit

minimum deposit. This makes debit cards much
on the credit
cards, because approval for a credit card largely depends
score and pay1ment histories. None of
these things are taken into
account when getting a debit card.
is that the debit
Strong Budgeting Tool: One ofthe biggest advantage
card holder cannot spend more than what the cardholder has in her/
his bank account. This helps in preventing accumulation of new debts.
Ease of Purchase: Debit cards make it easier to buy things without
carrying large amounts of cash.

4.2.2.2 Disadvantages of Debit Cards

Following are the disadvantages of debit cards:
.Credit Score: Unlike credit cards, the cardholder of debit card cannot
build up credit score. That means that cardholder's good habits or
track record go unnoticed by credit lenders.
Card Fee: Banks charge fee for using debit cards.
.The Lack of Anonymity: The information about all the transactions,
including the amount, time and recipient are stored in the database of
the payment system. The intelligence agency and tax authorities can
have access to this information.

4.2.3 Smart Card

Smart card is a prepaid card similar to credit card and debit card in appearance
but it has a small microprocessor chip embedded in it. It has the capacity
to store customer's personal information such as financial
facts, private
encryption keys, credit card numbers, account information, health insurance
information, and so on.. Smart cards combine the advantages of both debit
card and credit card. These cards are available to anyone, regardless of credit
ratings or income of the applicant of the smart card. Moreover, smart cards
are not linked to any bank account. For this reason, smart card holder is not
mandated to have a bank account. Smart card is also used to store
money
which is reduced as per usage. Mondex and Visa Cash cards are examples of
smart cards. The smart card holder has to load
money onto the card by paying
cash or through transfer from his/her bank account. After
loading the money
onto the card, the cardholder can use the card to
spend money up to the
limit of loaded amount in the same
way as using a credit or debit card. Once
the loaded amount is
spent, the cardholder may reload money onto the card.
In general, the
chip of a smart card contains the following components as
shown in Figure 4.2
 ent System

Data stored 4.7

read into the card/
only
data memory
Stores temporaryproduction stage at the For
storing long term data
but can
until the power is be erased
electrically
on... Provides dak...
Microchip with
nechanical contacts
input/output function'
RAM
ROM VO EPROM
CPU
***

A ASmart Card Controls the operation of the

smart card
Fig.
4.2: Schematic View
of a Smart Card
42.3.1 Advantages of Smart Cards
Smart cards have the following advantages:
No Credit Check: Smart card does not offers any credit limit.
Therefore, no credit check is required for getting a smart card.
Smart Card Holder cannot go in Debt: As smart card does not offer
any credit facility, the cardholder cannot go in debt. Cardholder can
only spend the amount loaded onto the card.
Holder Sets the Spending Limit: In smart card, the holder ofthe
card sets his/her spending limit instead of the card provider. Once the
the card with
loaded amount is over, the card holder can easily top-up
additional amount.
can be used to prove
the identity of the
ldentification: Smart cards
cardholder.
store picture and finger prints of the
card holder as they can
several cards;
smart cards, there is no need to carry
Flexibility: With a stored value
cash
Card, a debit card,
one card can act as an
Identity cards can be
information. Smart

card, and a repository of personal is relieved of

remembering
cardholder
lost. Moreover,
casily replaced, if
sensitive or
Several passwords. safe place to store
are a PIN-
Smart cards on the
card can be
storage: stored
Data The
information information,
information. addition to storing
protected. In
nportant information
read/write Moreover,
protected and/or
information.

processing called smart

capable of
are
These cards
o a r t cards are encrypted.
can be information.

cards and process

Lored on smart store cash from
allow to withdraw

ards because they can be used to

cards
Smart
Withdraws:

ash
banks.
i 4.8
E-commerce
Acts as a Type of Bank Account: Smart cards are an alternative to
a
traditional bank account and are a
cards are not linked to any bank account.
new way to manage money.
Smart

4.2.3.2 Disadvantages of Smart Cards

Smart cards have the following disadvantages:
Loss of Sensitive Data: If the smart card is stolen or is lost, the
sensitive information stored in it would also be lost.
Easy to loose and steal: Small size of smart cards makes it easy to
loose and steal.
Hackers: Smart can be used as potential area by hackers and computer
viruses.
Acceptance: Some smart cards are not widely accepted.
4.2.3.3 Uses of Smart Cards
Smart cards may be used for the
following purposes:
For Toll Payment: The users of smart cards can
use it to pay toll-
tax on the
highways. With smart cards which operate on radio
frequencies, drivers do not have to stop to pay tolls. This avoids
waiting in queues at toll plazas
Universities and Schools: Universities and schools can issue
smart
cards to its students for ID The
purposes. students may use these
cards at libraries, canteen, and book stores of
the college.
Authentication: Smart cards can be used as a means of
and verification.
authentication
Telephone Industry: Prepaid phone cards and sim cards are another
commonly used application of smart cards.
Ticketing: Another commonly used application of smart cards is for
fast ticketing in public
transport such as Metro in Delhi and parking.
Loyalty Cards: Many retailers have started
using cards
smart as
loyalty cards.
Health Insurance: Smart cards can
be used in health insurance schemes.
4.2.4 Digital Cash or E-Cash
Digital cash is another mode of
e-payment. Digital cash is a system tha'
allows a person to pay for
one computer to
goods or services by transmitting a number fro
another. Like the serial numbers on real
digital cash numbers are unique. Each one is issued currency notes, tn
a
specified sum of real money. Digital cash by a bank and represen
in the user's purchased from bank is stored
computer which can be spent while
making
electronic purchas
EPamen
nt System 4.9

ternet. Digital cash can also be stored on electronically sensitive

ver t h e
cash for online
uch as smartcards. Digital cash can be used in place of
dssuch.
real cash,
CAetions. One of the key features of digital cash is that, like characteristics
reusable. No other e-payment mode has the
r anonymous and That when a cash amount is sent from
nity and reusability.
f a n o n y m i t
is, digital
the buyer.
erto a vendor, there is way to obtain information about
no
differences between digital cash and
credit card
one of the key
This is cash payments are difficult to be tracked by investigative
etems. Digital cash
and tax authorities. Another key difference is that a digital
encies must have a
digital cash, the customer
certificate canasbe reused. To obtain
cash certificates can be purchased only by
transferring
hank account digital
bank account.
from
amount
of Digital Cash
4.2.4.1 Advantages
of digital cash:
Following are the advantages
and digital cash. In digital cash,
untraceable
Provides fully anonymous Digital cash
seller without revealing his/her identity.
the pay to the
can is withdrawn from
notes. Once e-cash
works just like real currency without leaving a
transaction
can be spent or given
away
an account, it
trail. cash
When the bank issuing digital
N o double spending
problems. deletes
verifies the serial number, it
cash and
receives the electronic As such, the
serial
of circulation forever.
takes it out
the number and
and used again.
number cannot be copied use of the
The security and
hardware required. stored
N o additional
secure
location. It can be
physical
dependent on any can be sent by
e-mail o r
digital cash is not smartcards and
disk or on
in computer hard
Internet. denial by the
because it prevents
M e r c h a n t s would prefer
digital cash account.
c u s t o m e r ' s bank
in
customer or lack of funds
Cash
4 . 2 Disadvantages
of Digital
cash:
of digital tackle
disadvantages the bank. To
ollowing are the
Olowing
overhead
between merchant and
the digital cash
Communications
has to verity
the payee The
problem, the
transactions.

double spending in each of

he bank at the point of sale
cash requires
extra
bandwidth.

wIith the

of the legitimacy
of digital
when the
traft+c is high. The real time
verification especially bank servers.

drawback between
tis a major synchronization
maintain
needs to
Verification also requires bank server

r e c o r d s - the serial
numbers.

Huge database of coin for all the used coins'

database
an ever-growing
4.10 E-commerce
issued by
Digital cash cannot guarantee anonymity. If the digital cash issued by
bank to A is received back by it from B, it can be easily inferred that
A had paid digital cash to B.
Theoretically, digital cash avoids double spending. But electronic files
can be duplicated.

4.2.4.3 Steps Involved in Digital Cash Payment

The electronic cash transactions take place in three distinct and independent
phases. These are:
1. Phase I : Obtaining electronic cash
The steps involved in obtaining electronic cash are:
(a) The consumer must have an account with Central On-line bank.
He requests his or her bank to transfer money to e-cash account
to obtain electronic cash. The consumer uses e-cash software on
the computer to generate random number
against requested money.
(b) The consumer bank transfers money from the customer's account
to e-cash account.
(c) From e-cash account money is transferred to consumer. The
consumer saves the electronic cash on a hard drive or a smart card.
2. Phase II :
Purchasing with electronic cash
This phase is executed whenever the consumer desires to make a
purchase with electronic cash. It can take place at any time after the
consumer has obtained electronic cash from e-mint. A
make purchases more than once consumer can
of electronic cash. The
as long as he or she does not run out
steps involved are:
(a) The consumer selects the goods and transfers
to the merchant
the electronic cash
by means of generating random
number which
encrypt e-cash are known as blinded
coins. This methods avoids
double spending of this
money.
(b) The merchant delivers the
3. Phase IlI:
goods to consumer.
Redeeming cash by merchant
This phase occurs
whenever the merchant is
electroniccash. The steps involved ready to redeem the
are:
(a) The merchant transfers the
electronic
Alternatively, the merchant may sendcash to the e-cash account.
the electronic cash to its
bank and the bank in
turn redeems the
account, money from e-casn
(6) E-cash account
transfers,
the merchant's account. money to the merchant's bank for crediting
 nent System 4.11

Customer Bank (Merchant)

2 Send the blinded coins
to the bank
the blinded coins 3 Debit the account
Generate
4 Return the signed and sign the blinded
blinded coins coins
coins
5 Unblind the 6 Pay by the coins
8 Check the validity of
the coins and whether 7 Deposit the coins
they have been spent
and credit the accoun9 Confim the depos
accordingly
service
Ship goods or perform the

Fig. 4.3: Basic Operation of E-cash System

4.2.5 Electronic Wallet

used
where one can stock money, to be
account
E-wallet is an online prepaid contains stored
amount
is electronic device that
when required. E-wallet an
amount can be
used to make
protected. This stored For
that is password transactions comfortably and instantly.
e-commerce and
other online
ete.
Mobinic Pocket
example; Paytm,
E-Wallet
4.2.4.1 Advantages of
of e-wallet: credit
Following are the advantages time to enter
do not have
consumers online
Time Saving:
At times For making
online payments.
time of making without
card details at the can make
payment
consumers

e-wallet,
payments through
card details. that money
entering the security to
ensure

e-wallets offer password

Security: All access. of
unauthorized in the form
IS secured from
incentives
provide
e-wallet providers
e-wallets.

Many made through

nl s ccentives:
o u n t s and
cash backs for
payments
eliminate the need to
c o n v e n i e n t as they
E-wallets are
Convenient:
convenient
more
carry physical wallets. provides
technology those
E-wallet deal with
Advantage: Consumers prefer to employ
Competitive method. businesses
that
processing The
ansaction technology. market.
this the
that
facilitate
competitive
edge in
companies the
technology enjoy
this technology,
4.12
E-commerce
4.2.5.2 Disadvantages of E-Wallet
Following are the disadvantages of e-wallet:
International Restrictions: E-wallet obtained in one country cannot
be used in someother country.
Limited Merchants: There are many stores like Amazon that do not
offer e-wallets.
E-wallets are Dependent on the Devices: E-wallets can only be used
online via devices such as laptop, smartphone or tablet. The use of
e-wallets is highly dependent on these devices. If there is some problem
with these devices such as low-battery, e-wallets would be of no
use
Danger of Losing Money: e-wallets are not as safe as credit or debit
cards because credit and debit cards are protected with 3D secure
password and without the knowledge of 3D password, no one can use
credit or debit card for making
payments. But in the case of e-wallet,
if consumer's
smartphone is lost or stolen, anybody can use wallet
money with digital wallet app. If e-wallet is password protected, the
password can be easily cracked.
4.2.5.3 Where E-Wallets can be used?
Online grocery stores: Big
Basket.com, an online food and grocery
store offers e-wallet
facility for simple payment options. E-wallet on
this site can be filled up
ranging from Rs.10 to Rs. 10,000.
Utility Bills Payment: Payment the electricity bill, mobile
tickets, cab payments can be made with bill, theatre
Mobikwik. These e-wallets can be filled and Paytm, payumoney and
banking, credit cards, debit recharged using net
cards or even cash payments at their retail
outlets.
Fly prepaid: Money can be saved up with wallets
fly to book
tickets.
E-wallet on mobile: Airtel
money has transformed mobile
e-wallet. The money stored in Airtel phone into
several shopping sites such as Money wallet can be used on
ebay, Home
My Show. All that is needed to avail this Shop 18, Myntra and Book
facility is an Airtel connection.
Buying Online: Major e-commerce sites, such
e-wallet facility where
consumers can create an e-wallet
as
Flipkart have
to Rs.10,000 at a and fill it up
time.
Recharging Mobile Phones and DTH connections: A
can be done mobile recharge
automatically
auto disconnect
at
munkey.in, e-wallet service, on a"
an
missed call to their nurnber. A
consumer can also op"
E-payment System 4.13

for scheduled recharge option in which a filled e-wallet can recharge

a number or DTH connection on fixed dates of the month.

4.3 PAYMENT GATEWAY

credit cards or other forms of
Payment gateway is a means of authorizing second
are being made each
electronic payments. Millions of online payments different
be conducted in several
all over the world. These transactions may
Electronic Fund Transfers (EFT). But
the major proportions
ways, including A payment
are being performed
based on payment gateway technology.
bank.
between a website and a
allows a secure connection directly
gateway direct placement
website and bank facilitates
This direct connection betweena
and straight deposit into a bank account. Payment
of payments on a website website that allows the
website
e-commerce
on an
gateway is an application website's account. A payment
account with the
to link the client payment and banks so that
websites
s e r v e r that is
dedicated to linking
gateway is a and
can be completed
in real-time. PayPal
transactions
online credit card gateways.
of the most popular payment
WorldPay are some authorizes credit card
gateway is a service that
In simple words, A payment the funds into
merchant's
them securely, and deposits
as a credit
payments, processes the same functions
gateway performs these
bank account. A payment or retail store,
it just performs
restaurant
machine at a
card swipe of in person.
made online instead
functions for purchases and accept or
that authorizes, verify,
computer processes merchant through
It is a system of transactions on
behalf of the
credit/debit card
decline
secure Internet connections.

work?
payment gateway for
4.3.1 How does
a transactions
credit card
that processes
is the service from online store they
A payment gateway customer is buying something site
E-commerce
When a
checkout process.
the customer.
the
credit card numbers during gateway to
authorize the
enter their information to payment submitted
credit card credit card
information
sends that If the
the payment. credit card
and process on file with the
transaction intormation

matches the then transfer

payment gateway the payment gateway will
to the
the charge
is approved, merchant
account.

and card into

Company c r e d i t / d e b i t
below:
from
customers
process,
explained
the money is a five step
gateway Online Shop.
payment
The working of i n f o r m a t i o n in an

credit card to Internet

Customer inputs and sends it securely
1. encrypts
data
Gateway
2. The Payment
c u s t o m e r ' s issuing
Merchant Account.
for
authorisation by the
reviewed
transaction is
3. The
bank.
 4.14 E-commerce

4. The result is encrypted and sent back through the gateway.

5. Merchant gets the results and decides whether or not to fulfil the order.

How Payment Gateway Works?

Internet Merchant
Online Shop Payment Gateway Account
(3

Fig. 4.4: How Payment Gateway Works

4.3.2 Advantages of Payment Gateway
Following are the advantages of payment gateway:
Visitors stay on Site: The major advantage of using payment gateway
to the merchants is that the customers will not leave their website to
make payment. All user information and credit card details are inputted
on merchant's website which means that customer has to perform
fewer steps. Moreover, re-directing users to a separate website for
payment often leads to mistrust and payment abandonments.
Secure Transaction: A payment gateway checks and validates online
transactions. It protects merchants and customers from instances of
fraud.
Ease of Use: Anyone with basic computer knowledge can perform
business transactions using payment gateways.
Rapid Deployment: A merchant can
immediately utilize payment
gateway service for his/her online store.
Real time transactions and
payments: Payment gateway allows
merchants to accept credit cards directly on their websites.
Using
payment gateway, credit card transactions are processed in real-time;
the merchant gets paid
immediately and that the customers get instant
feedback as to whether their payment has been
accepted or declined.
Time-saving: Payment gateway saves time as no manual processing
is required.

4.3.3 Disadvantages of Payment Gateway

Following are the disadvantages of payment gateway:
Risk on Sensitive Information: A
payment gateway deals with
customers' information. Therefore, a payment gateway company will
have files on all sensitive customers' data such as customers' names,
E-payment System 4.15

banks accounts, credit card numbers, passwords, etc. The payment

gateway companies can potentially sell these data to interested parties
without the customers knowing about it.
Technical Problems: A payment gateway is basically a software whicn
may face technical problems. In such cases, the customer would not
be able to access payment gateways and consequently online payments.
Moreover technical problems in payment gateways would render
merchant's website inoperative.
.Customers' Uneasiness: Customers tend to stay away from any web-
based software when making online transactions that involve disclosing
payment gateway
personal information. If a merchant company gets areasons or another,
service but the customers do not utilize it for some
losses.
then the merchant would have to incur heavy
is
In case of online merchants with small turnover, payment gateway
would be
not a cost-effective option. In such cases, manual processing

a better option.

4.4 VISITORS TO WEBSITE

are invisible as not identify themselves.

visitors they do
Majority of the website whether
website visitors actively read the content to find out
Many of the for. Online customers gather
the e-business can deliver what they are looking
decide to buy. It is critical
for sales
a lot of information
before they finally
research phase
into what occurred during the buyer's
team to have insight have visited,
and points based on web pages they
such as their interests pain etc. it is very
downloaded, search terms they have used,
content they have website visitors to ensure that
the different types of
important to understand understanding of factors that influence
one. This
the website caters to each of the website.
the performance
the chance for a sale helps in improving
Website Visitors
Different Types of
into following categories:
be classified
website can
The visitors to the information.
visitors just surf the site for
These
1. Browsing visitors: influenced by elements
of design than
more heavily
Such visitors are be an impulse
purchase they make will
because any
other people
purchase. visitors do not intend to purchase
visitors: These
Focused Research information. Some will
2. want product
just they research in order to
duringthe current visit; later and are doing
intention of buying typically beginning
have the These visitors are
decision. sites.
informed
make a nore may be actively comparing
and
visit cycle information and are
almost
or engaged:in a
repeat product
finding
focused on
They are very
 4.16 E-commerce
Indifferent to the effect of design features. The only design feature that
can really affect them is navigation that makes it difficult for them to
find the information they want.People looking'at car insurance sites for
several months before their renewal is due are a typical example. They
will purchase when their renewal is due, but not now.
3. Background research visitors: These visitors are simply interested in
the product area in general and visit to the website to increase their
overall knowledge. Hobbyists are a typical example. While they also
show repeat visit patterns, the time between visits is likely to be much
greater than visitors doing research in order to buy. These people are
closer to browsing visitors in terms of the factors that will
influence
them to purchase, as any
purchase they make will be an impulse buy.
4. Focused visitors: These visitors intend make a purchase on this
to
visit. On most sites, the
majority of these people will be repeat visitors
coming directly to the site. After them, the next largest
group will be
people who found the site via a targeted search in a search
cost and nature of the engine. The
product directly influences the proportions of
these two. The more
it will have on the
expensive a product is, and the greater the impact
purchaser's life, the more likely the purchaser is
to be a repeat visitor. These
visitors are likely to have visited the
before as a research visitor. Most site
visitors start out as browsers or
researchers, only becoming focused visitors on their final
visit. purchase
The visitors may reach the site
1. Through search
through any of the following mode:
engine query: These visitors reach a website
search engine query. via
the answer to a
They visit the site with a
specific target- to get
question, to find
an
advertisement that offers more information, etc. If the website has
information for the reader, there is
a good chance
that the reader will click
on it. Search
visitors rarely stay on a website engine website
for long or do
reading the information provided on the site. anything beyond the
answer to their Once they find the
query, they leave your site.
2. Direct Traffic: This refers
to website visitors
address directly into their who type the website
from a friend, or browser. They may have heard your site
a
they have already used
your site before. For
person looking for a pair of shoes example,
to their browser types
address bar.Of course, not
in ebay.com or
amazon.com
a website will
end up
buying. Some will comeeveryone who arrives in
things. Nonetheless, direct traffic is just come to check out
can have. the best kind of
traffic a website
3. Referral Traffic: Website
visitors who reached the
site by clicking on
Epaymen Ystem 4.17

site
a link from another site are called referral traffic. The referring
Referral traffic
could be another website, blog, forum, article directory.
is more targeted than search engine traffic.
Factors that
influence website visitors to buy online:
than
Someone who is just browsing is much less likely to purchase
1. intention of
someone who has come to
the site with the specific
of the
Purchase is also affected by the cost
probability
purchasing. costs.
product, previous purchase experience and shipping
increase the chance of a

2. Positive
visit effects, such as clear images, decrease the
visit effects, such as poor navigatión,
sale, while negative own effect, multiple
chance of a sale. Not only
does each visit have its
accumulated effect.
visits create an after
the shopper had
effect refers to the experience
3 The purchase or negative
Purchasing effects can have a positive
previous purchases. reduces the
severely
impact. For example, failing to deliver the product increases the
whereas swift delivery
chance of a repeat purchase,
chance. for sale is successful
determine whether a product offered
is purchased and
not
It is fairly easy to of view; if a product
or not from a visitor's point leads to repeat order,
it is even
sold
a success.
If a product successful, if
returned, it is of view, a product is
From a buyer's point successful is less straight
more successful. is
whether a website is
a website
it is usable. Determining matrix used to
determine whether
"hits".
question. The
most
common
successful site has lot of
website: a
is the popularityof the
s u c c e s s of
determine the
Successful criteria to
hits is not the only facilitates users
But the number of how well a site
of s u c c e s s is
measure

a website. The
best
their goals.
inaccomplishing
WEBSITE P R O M O T I O N TOOLS

4.5 the success of e-commerce

mean
does not
necessarily promote the
website important to
Creating a it is equally different
in
e-commerce,
site traffic. The
succeed increasing
Venture. To audience i.e.,
wider
website to reach following:
include the of the website.
tools heart and soul
website promotion website is
the
innovative.
Content of the relevant,
,Content: should be good, love.
website c u s t o m e r will
content of the that the targeted
The website- visitors
and of high quality targeted
visitors to
interesting, in driving
content helps customers.
High-quality paying
spend aa lot oftheir
become of their
eventually Internet
Internet u
us e r s
that can motion: website
for promotion: Promoting a
media social
media sites.
U s e social activities
on
different
time doing
4.18 E-commerce
on social media can in building a network of
hclp potential audience
and customers for the brand. A few examples of social media are:
Twitter- With over half a billion registered users, Twitter users
can post messages of up to 140 characters, share photos and
videos, create custom lists, send direct messages, and more.
Promote content on Twitter organically, with Twitter cards, or
paid promotions.
>Facebook The social media giant has over a billion users and
lets users connect with friends, share links, photos, videos, and
events, join groups, and more. There are options for promoting
content organically and through paid promotions.
Pinterest- We can share our images and videos on customizable
boards and "repin" others' images. Pinterest has nearly 50 million
users.
Linkedln - A business-focused online network where users share
links, add connections, join groups, write recommendations, and
search for connections by company, industry, skills, and more.
Marketers can share content through company updates, sponsored
updates and Linkedin Pulse posts.
Googlet+- Google's sociai network allows users to set up
"Hangouts" using video chat, and create "Circles" of people for
organizing contacts and targeting messaging.
Offerpop - Offerpop is a social media platform for businesses to
recruit, engage and convert customers.
SlideShare - Upload and share slide presentations, gain insight into
who's viewing presentations, collect business leads and more.
3. Build associative meaning: Web should provide information which
can be used by visitor. Power of hypertext can be used to link related
information.
4. Maintain competitiveness Web designers must ensure that their
designs include the lowest possible costs to the users. User costs
include download time, information-retrieval time, and the effort required
to use and understand information.
5. Efficiently use resources: When designing and implementing a Web,
those features should be selected that meet the user's needs with the
least amount of space, access time, graphics, and long-term maintenance
requirements. Only those features should be incorporated in the Web
that are efficient to operate, elegant to use, and easy to maintain.
5. Focus on user needs: A Web should not be built for the personal
taste of the designers, the convenience of the implementers, or the
E-payment System
4.19

of the planners. Instead, the Web serves the audience for which
whims
it is designed. Therefore, the first priority of the Web should be to
needs
meet the needs of the The Web designer focuses on user
users.
information to make
by using the purpose statement and audience
working with the
decisions about page organisation and layout. By
how effectively the design
Web analyst, the Web designer can evaluate
the Web°s purpose.
meets the needs of the audience for
should recognize that
a
The Web designer
7. Recognize porousness: of the Web. After entering
user enter a Web from any other point
may on a

Web, a user might not be able tointerpret cues that depend

a
next labels would
structure. For example, up, down or
Web's linking
mean very little.
Web
and efficient look and feel: The
8. Create a consistent, pleasing, of a
on all its pages
impression
design should aim to give
users an

consistent visual cues.

Each page of
coherent organisation and
common,
Web's identity and page purpose. The
users to the
the Web should cue users in accomplishing
their
Web's overall appearance
should help and
balance between simplicity
interfaces that strike a
objectives through appearance. In fact,
for an aesthetically pleasing
completeness and aim principles to
alleviate
is one of the best design
a consistent design
page
due to porousness.
the fractured experience of users real-time chats,
components such
as
Interactive
should be
9. Support interactivity: events, and similar opportunities
On-line communicate with
message boards, visitors to network and
enable
added in the site to their opinions and
comments.

interests and/or to express

others of similar aids related to
browser
: Although
navigation
u s e r navigation directories, annotations,
10. Support sessionhistory, built-in
functions such as hot-list, by users when
and visual aids might be employed
in a Web by
file management can support these
a Web designer hints
navigating a Web, information links. These links provide
and (information
supplying navigation the information on a page
about how to
use
information (navigation
to the users contextual
further or
how to get within the site
cues) and customers to navigate
should alow
cues). All pages
other page.
to any should provide
from any page Web design
freedom: A good should be
User control and users in the sense that the users

freedom to the kave taken by

control and which they might
redo those path on track
within the site.
able to undo or
able to get back
users
should be in simple
mistake. The should be displayed
1. R e c o v e r y from
error: Error messagesthe problem and
the ways to

indicate the source

of
language and
correct it.
4.20 E-commerce
13. Help desk: The Website should have a help desk where the user can
go for help on activities related to the product, service, how to order,
etc
14. Customer service option : Site should stay current with customer
service options such as accepting credit cards, shopping cart capabilities,
understandable return policies and other methods to stay competitive
while serving faithful visitors and customers.
15. Fecdback procedure: Customers' feedback should be encouraged.
After analyzing their comments, the best of their suggestions should
be implemented to better respond their needs.

4.6 RISKS MANAGEMENT OPTIONS FOR E-PAYMENT SYSTEM

Security is an essential part of any transaction that takes place over the
internet. Customer will lose faith in e-payment if its security is
compromised.
While making online payment, customers have to provide credit card and
payment account details and other personal information online. Internet is an
easy target for stealing money and personal information.

4.6.1 Risks Involved in E-payment

In order to manage the risk we need to understand the various
risks involved
in e-payments, these are:
Fraud: In e-payment, all the information such as credit card
number,
passwords, etc. are transmitted over the Internet. Internet is a public
network, and is susceptible to attacks from outside sources. An e
payment system offering 100% security is impossible or at least,
-

unaffordable. Electronic payment systems are

prone to fraud. The
common type of
e-payment frauds are:
ldentity theft: A customer uses a states card number to fraudulency
purchase products or services. Identity theft can be defined as the
misuse of personal data or documents in
order to impersonate
another individual to commit illicit
activities, e.g. to abuse the
victim's banking facilities or other assets.
The payment is done
usually after keying in a password and sometimes answering
security questions. There is no way of verifying the true
of the maker of the identity
transaction. As long
as the
security questions password and
correct, the system assumes the
are
of the person. If this legitimacy
information falls into the possession of
fraudsters, then they can misuse this information and divert funds
to an unauthorized account.
Phishing: Attackers use fraudulent e-mails and internet sits to
lure consumers into
revealing personal and/or financial information.
E-payment System

4.21
This type of attack
is
by fraudsters can be called phishing. The information received
misused.
Skimming: Another popular form
duplication of electronic data from a of attacks is the unnoticed
easily create duplicate cards payment card. Fraudsters can
and withdraw
accounts. money from the
Denial of Service: A customer
not service falsely claims that the or she did
a
shipment.
Disputed Transactions: In case the credit card is misused
else, it is very difficult to by someone
receive Using
a refund. credit
especially remotely, introduces an element of risk card,a

as the card details

may fall into the wrong hands
resulting in fraudulent purchases on the
card. Fraudulent or unauthorized charges may take months to dispute,
investigate, and resolve. E-payments process cannot be reversed even
in cases the person making
the payment has entered the incorrect
account number inadvertently.
The Lack of Anonymity: The information about all the transactions,
including the amount, time and recipient are stored in the database of
the payment system. This is both the benefit and risk of using
e-payment. All e-payment modes except e-cash provide an audit trail
and the transaction can be traced from its inception. The intelligence
agency and tax authorities can have access to this information.
E-payments be easily concealed or manipulated to evade tax.
can

Payment Conflict: Payment conflicts often arise because the payments

are not done manually but by an automated system that can cause
is done on a regular
errors. This is especially common when payment
basis to many recipients.
risk of e-payments is that they encourage
Buyer's Habits: The biggest
that they don't have. Most credit cards do not
people to spend money
each month. E-funds may
balance
off the
require the holder to pay the time of making purchases.
'free money' to the holder at
seem like
an
and tend to overspend
impulsive buyer
become
The card holder may the
credit cards. Cards can encourage
of using
because of the ease card holder cannot really
and services which the
purchasing of goods
afford. is completely based on
Failures: E-payment system
Technology technology such as internet connectivity
failure in non-functioning
technology. Any etc. would lead io
low battery,
failures,
failures, power

of e-payment system.
4.22 E-commerce
4.6.2 Security Controls
ne important step in the cyclic process of security risk management in
e-commerce is to implement security controls. The objective of security

controls should be to eliminate or minimize computer vulnerability to

destruction, modification or disclosure of e-commerce assets. These assets
may reside in client computer, may travel through e-commerce channel, or
may be lying on the e-commerce server. Following are the security controls
in e-commmerce
i) Virus control: The client computer should be protected against any
possible virus threat. In the absence of such controls, the customers
may not develop trust in the Web site. Any such risk perceived by
client computer, user would deter from visiting the Web site, resulting
in loss of business. In order to detect and eliminate virus on the client
computer, anti-virus software must be installed. If updated regularly,
anti-virus software would be an effective tool.
(i) Integrity control: Client computer needs to be protected against
possible threat of violation of integrity of information exchanged by it.
In order to ensure that the information has not been changed during
transmission process, check sum operation can be performed on down
loaded files from a vendor.
(ii) Control for surfing illegitimate web-site: Client computer should
also be protected against the threats originating from illegitimate Web
site, in order to control the threat of a server site masquerading. For
controlling this threat, digital ID may be used. A digital ID is an
attachment to e-mail message or a program embedded in a Web pagge
that verifies that a user of Web site is that who they claim to be.
(iv) Privacy of the transaction information: One of the ways to prevent
attacks on transaction information is to encrypt it before sending it on
the Internet. Encryption is the process of transforming information
before communicating it to make it
unintelligible to all but the intended
recipient.
(v) Integrity of transaction information: E-commerce involves a client
browser sending payment information, order information, and payment
instructions to commerce server and the commerce server
with an electronic confirmation of the orders and details.responding
Integrity
iolation, occurs whenever a message is altered while in transit between
sender and receiver. A combination of
is tamper proof and authenticated. An
techniques create a message that
encryption message digest called
digital signature provides the merchant positive identification of
sender and assures the merchant that the the
message was not altered.
In this technique, the user
encrypts message using public/private key
E-payment System 4.23

and merchant decrypts the message with user's public key. This
control aims at ensuring message privacy and integrity. This also
reduces the risk from threat of spoofing.
control and authentication refer to controlling those who
)Access
have access to the e-commerce server and what is done to the
resources on the e-commerce server. Both physical access control
mechanism (firewall) and logical access control mechanism (a software
subsystem) can be used for an access control and authentication.
e-commerce
Understand the risks and train your staff: Exposure to
vii) fraud
risk depends on e-tailer's business policies, operational practices,
and the types of
detection and prevention tools, security controls,
in place. Everyone in organization
products and services that are be
with online transactions and
should understand the risks associated
risk management procedures.
able to implement established
services provider:
bank and merchant
(vii) Select the right acquiring will provide
bank and merchant services provider
The right acquiring
as they have a complete
effective risk management support
e - c o m m e r c e fraud
risk and liability. An adequate
understanding of risk
capabilities is also an important
customer data protection

management strategy.
content: website must include privacy,
essential website
ix) Develop be reliable and provide
return and refund policies. It must
shipping,
with easy and simple navigation.
customers
established sales order
risk reduction: A properly
Concentrate on E-tailer should
x) number of risk
concerns.

process will help address a

transaction fields and verify card and
indicate or highlight required customers over the internet.
receive from the
cardholder data that they structure: The
internal fraud
prevention
(xi) Design and implement on internal strategies and
store depends
combined
profitability of
e-commerce

management structure,
fraud. A risk fraud-related
controls for
minimizing
will help in avoiding
transaction controls,
with intelligent
losses. are a number of fraud-prevention
tools: There them
Can) Use
fraud-prevention
The most widely used among
Card Security Codes,
exposure.
reduce risk
tools to help Service (AVS), the
Verification
are the Address MasterCard
SecureCode.

Verified by Visa
and
implemented, the screening of
When properly items
fraud sereening: fraud for large-ticket
i ) Apply can help
minimize

transactions
online card
transactions,

and for high-risk