Learning E-payments [Ecommerce Notes]

Now its time to know more about E-Payments.

Basics

Before jumping to e-com related jargons, let’s spend a while on basics on banking /payment systems.

Banking originated in ancient era, where royal palaces, temples were used as secure place for safekeeping of grain and other commodities. Receipts for stored commodities were used for transfers not only to the original depositors but also to third parties, including tax gatherers and traders.

Bank notes were introduced during 1694 by Bank of England as central banking system
On following steps during 1775 continental congress issued paper money to finance revolutionary war. Thereafter in 1800s and early 1900 saw issuance of state bank notes, gold certificates. And finally in 1913 Federal Reserve act was created to further structure roadmap.

Cheque : Its written order on a bank or other financial institution to pay money belonging to the owner of cheque to cheque presenter. Personal cheque is drawn on individual bank account, while cashier cheque is drawn on financial institution.

Money Order : It is an order for the payment of a specified amount of money, usually issued and payable at a bank or post office. It’s feasible for people who don’t have back account or circumstances where cheques are not accepted in payments.

Credit Card : It is a valuable piece of plastic , i.e. plastic card used instead of cash or cheques to pay for buying goods/services. Credit card companies send monthly statement of charges made by credit card. Users can make full payment or partial payment, later one comes with interest/finance charges attached to same.

Debit Card : It’s also plastic used to procure good/services, but it’s important to note it’s linked to bank account. Bank deducts transactions made directly from account. It good workaround for people, who for contend (i.e. not to fell in trap of credit card companies)
And want to avoid carrying actual cash with them.

Before you learn more about electronic payments you need to get an idea about online transaction. Check out the various events that lead to an Online Transaction.

1. Online Shopping: The user short list an item to procure on the net.
   
2. Starting the Transaction Once you feed shipping and credit card information, the user is presented with summary which includes items, price, billing information, delivery schedule, terms n conditions (if any). The payment process is secured with industrial strength encryption and forwarded with the order form to the merchant's CyberCash CashRegister.
   
3. CashRegister Picks up Merchant Information
   
4. The merchant's identification information is automatically added to the encrypted payment request.
   
5. Path from CyberCash Firewall till the Bank remains encrypted, payment request is forwarded over the Internet cloud and is received via a secure firewall by CyberCash CashRegister server.
   
6. CyberCash swift passes payment request to the merchant's financial institution, which float it across to consumer's credit card bank to approve or decline payment authorization.
   
7. Credit Card Bank / Institution Sends Approval.
   
8. Users credit card bank revert its response through the merchant's financial institution to the merchant's CashRegister.
   
9. The shopper also receives confirmation of credit card approval.
   
10. The entire authorization process takes under 20 seconds.(Courtesy technology  )
    
11. Transaction is Completed and Captured
    
12. The merchant delivers the items to the shopper.
    
13. The merchant requests financial settlement, of the transaction through the CashRegister server.
    
14. Funds are transferred to the merchant's account by its financial institution
    

Electronic Payment Schemes Now, let’s start rolling the e- related stuff! The twenty-first century way to pay is by electronic or digital cash (or one can say virtual cash also), which allows consumers to pay for goods/ services by transmitting a number from one computer to another. These numbers function much like the serial numbers on "real money”, they are unique and represent a specific amount of actual cash. Unlike credit-card transactions, electronic-cash transactions are anonymous. E-cash works just like paper cash. Once it is withdrawn from an account it does not leave a trail of digital crumbs. E-cash by its nature is portable and therefore more convenient for mobile commerce (Internet-capable cell phones and personal digital assistants). Couple of well known players in industry on this domain: Pay Pal - A U.S.-based system that allows individuals in the United States to send money to each other via email. First-E - A European, Internet-only bank. Mondex - Electronic cash that is made available via "smart card." eCash (formerly DigiCash) - One of the early developers of electronic payment systems There is variety of options for electronic payments; usual ones include use of credit, debit and charge cards. In order to accept any of aforesaid cards, e business, must have a merchant account, payment-processing software and procedure to protect its customers and itself (most important) against any type of fraud, phishing, hacking related activities.