Frankfurt School of Finance and Management - Thesis Example

CHAPTER 1
1.1 Background
There are many types of payment systems in the world now, but the doubt lies in matters of security. It is very important to identify a secure way of online payment mode. In e-commerce, the transaction usually takes place between the client, the trader, and the bank. The client transfers the money to the seller through the web with the help of online banking services and the desired product is delivered to the buyer at his/ her doorstep (Abrazhevich 1-3).

An electronic payment system must have the following characteristics:
Security: The most important thing in an online payment system is the security of transactions. Unfortunately, electronic money is considered a simple file like the other files, which can be copied. So the problem of copying or double-spending the money should be avoided.

Transferability: This deals with the transfer of funds from one account to another without a bank intermediary.

Flexibility: The payment gateway must give enough flexibility to the buyers and sellers to make payments from alternative forms of payment options.

Reliability: The payment system must be available to eliminate system errors (Bhasker 357-358).

It has been studied that in the year 2010, the market share for credit card payments increased by about 40 percent in North America. Due to this reason, American Express launched digital payment systems in the year 2011. This would offer different forms of payment systems to the customers. In Latin America, about 70 percent of the customers prefer online payment systems to traditional payment methods. In Brazil systems like SafetyPay, and BrasPag is working together to bring about a revolution in the online payment market. Another online payment service provider PayPal is also used and considered by many people around the world as a safe source of money transfer online (Gardner “What Happens When You Don’t Future Proof”).

It has also been studied that in 2010, online payment systems through credit cards are the most popular in Europe.