Electronic Payments

Traditionally，all payment transactions involved some form of paper，whether a check，an invoice，a credit card slip，or cash.Now we can pay all of our monthly bills with a few clicks of the mouse，purchase products without leaving our desk，and have our paycheck directly deposited into our bank account.

Definition and Characteristics

An electronic payment is a payment that is transmitted electronically either over telephone lines，or between Web sites on the Internet.No tangible currency such as a bank note or check changes hands.Any information required to make the payment，such as a credit card number or Personal Identification Number(PIN)，exists only in digital form.

Electronic Payment Options for B2C

We can divide electronic payments for B2C into two categories—payment made for goods and services purchased online，and payments made in response to bills and invoices.In the first instance，the consumer selects a product，completes an online form，and selects a payment method，such as credit card，debit card，e-cash or e-check.In the second instance，a consumer authorizes a bank to transfer money from a bank account to specified recipients，such as the telephone company or a utility company.

Electronic Payment Options for B2B

Electronic Data Interchange(EDI)describes the electronic transfer of data between companies engaged in B2B e-Business.EDI relates to most of the activities required to do business with trading partners，and has existed in various forms for many years.Activities suitable for EDI include placing orders with suppliers，issuing invoices，and processing payments.EDI can also be described as paperless trading.Figure 1 describes some of the benefits of EDI for B2B e-Business.

Figure 1:Benefits of electronic data interchange

Electronic Payment Process

A customer who decides to purchase an item from an online business is transferred to a secure server where he or she enters a credit card number into a form.The information entered into the secure server is encrypted using security technologies.The payment information moves to the online transaction server，where the payment is authorized(or declined)，depending on whether the credit card number is valid and the customer has sufficient credit to cover the purchase.If the credit card information is valid and funds are available，the information is transmitted to the institution or organization that receives payments owed to the merchant，and a deposit is made to the merchant'bank account.The consumer is informed that the transaction has been processed，and shipping the goods has been initiated.If the goods are shipped electronically，such as a downloadable computer game，then the entire process could take no more than a minute or two from the time the customer submits the payment to the time that the file appears on the customer's hard drive，depending on the size of the file and the computer's download speed.

Electronic Payment Options

The methods used to pay for products services online include credit cards，electronic cash(e-cash)，software wallets or purses，and smart cards.

1.Credit Cards

A credit card provides a consumer with a preset spending limit，such as$2，000，$5，000.Customers can charge items up to their spending limit each month，and then either pay off the entire credit card balance，or pay a minimum amount and then pay interest on the unpaid balance.Some analysts maintain that up to 90 percent of all consumer transactions are made with a credit card such as Visa or MasterCard.The payment process is described in Figure 2.

Figure 2:Online payment process

2.E-Checks

An e-check is an encrypted representation of a paper check.Consumers fill in the check online，then send it via a secure server to the recipient.The amount specified on the e-check is electronically withdrawn from the sender's account，and then deposited into the recipient's account.

3.E-Cash

E-cash is also referred to as script，digital cash，or digital coins.A consumer can buy e-cash and store it in a digital wallet on a hard drive.The digital wallet is electronically linked to the consumer's bank account and can be refilled at any time.Since e-cash is drawn directly from a bank account，it very much resembles real cash.While credit card payments are always attached to an individual or a company，payments made with e-cash are preauthorized and anonymous.E-cash is often used to pay for electronic goods，such as software，games，and reference materials，received over the Internet. Some forms of e-cash can be purchased online and then e-mailed to a recipient，who then can use it to purchase products from Web sites that accept e-cash payments.

4.Smart Cards

Smart cards look like credit cards，but are embedded with a low-cost integrated microprocessor chip that provides the consumer with the means to conduct everyday transactions，such as making phone calls，accessing an Automatic Teller Machine(ATM)，and paying for public transportation.Smart cards are also used to store personal identity，medical，and insurance information.Many smart cards are used in conjunction with a password or PIN.Already very popular in Europe in the form of phone cards and transportation cards，worldwide use of smart cards could dramatically increase as they become more sophisticated and capable of storing electronic cash for use in handling online transactions.

5.Electronic Wallets

Electronic wallets，or e-wallets，are also referred to as digital wallets.An e-wallet is a software program that contains a user's payment information in encrypted form to ensure its security.For example，an individual's e-wallet could contain credit card numbers，bank account numbers，contact information，and shipping location.This information can then be automatically and securely transferred to an online order form.

6.Virtual Credit Cards

Closely allied to e-wallet is the concept of the virtual credit card.A virtual credit card is an image of a credit card placed on the computer desktop.With one click of the credit card image，the cardholder accesses account information and pays for online purchases.Customers can even drag and drop the virtual card from the desktop onto an online checkout page.The credit card number and contact information is automatically entered into the checkout form，and the customer just needs to enter a PIN or other form of identification to authorize the transaction.

Notes

1.PIN:Personal Identification Number个人识别码

2.EDI:Electronic Data Interchange电子数据交换，无纸贸易

3.credit card:A card issued by a bank or business authorizing the holder to buy goods or services on credit.Also it is called charge card.信用卡。

4.balance:The amount that is left over in an account.账户余额。

5.smart card:A plastic card resembling a credit card that contains a computer chip，which enables the holder to perform various operations，such as mathematical calculations，paying of bills，and the purchasing of goods and services.智能卡。

6.ATM:Automatic Teller Machine自动存取款机

Further Exploration

A business operating in the real world must obtain a merchant account in order to accept credit card payments.When a business goes on the Internet，it can choose to upgrade its existing merchant account to accept online credit card payments，obtain a new online merchant account.

Can you learn more about merchant account by surfing on the Internet for further exploration?