E- Payment System - Assignment Example

?E- Payment System Executive summary With the rapid development of networking technologies during the early 1990’s human being witnessed the commercialization of internet and massive growth in the field of electronic commerce (E-commerce). Organizations across the globe are incorporating internet into their system in order to gain competitive advantage and to create a core competency. Majority of the early adapters got hugely benefitted for its inclusion. Earlier E-commerce was considered to be a core competency for the organizations however at present it has been a necessity in order to survive in the market place. The report will highlight on the different existing methods of online payment and will try to explain the pros and cons of the methods. The report will also try to underline a comparison among the mentioned methods. Apart from that the report will also emphasize on the aspect of database security of the seller. Table of Contents Table of Contents 3 Introduction 4 Method 1: Credit or Debit Card 5 Method 2: Cash on Delivery 6 8 Method 3: Mobile Phone Payment 8 Matrix Comparison 10 Security 11 References 12 Introduction In spite of the incident of dot-com bust, internet has changed the way organizations carry out their business. Internet helps an organization in finding new avenues of generating revenue, achieving new set of customers and also managing the supply chain of the business. Internet has significantly impacted on the global economy (Reynolds, 2004, p.5). Organizations also understood that internet is one the best medium of carrying out the business in a cost effective way and directly selling the products to the end user, thereby restricting entry of any third party. Thus during the early 1990’s the concept of e-commerce were hugely incorporated into the business process of the organizations. Electronic commerce or what is commonly known as e-commerce is an application which facilitates online selling and buying of goods and services. It offers online fund transfer; Electronic Data Exchange (EDI), online marketing and different other applications. The major advantages of using e-commerce are maximization of speed in the context of service delivery, reduction in the overall cost and also quicker response to the customers. Electronic commerce also plays crucial role in the process of online payment. Online payment method refers to the process of directly transferring funds to the seller’s bank account. The biggest advantage of an online payment option is that it instantly completes the entire process of payment. The electronic payment options which are accepted in e-commerce include credit cards, debit cards, cash cards and internet banking. Furthermore in order to conduct international money transfers there are several online platforms such as PayPal, alert pay and Google checkout among other which aid in the process of transferring money. Therefore in order to facilitate online payment options issues such as convenience of customer and technical infrastructure and the security of the method must be taken into account. Thus modern systems need to be incorporated for better and smoother transaction. The recommended methods of payments are summarized below:- Method 1: Credit or Debit Card A debit or a credit card is one of the most widely used and accepted method of payment. Credit cards or debit cards are generally issued by banks or any other financial institutions. In this payment method the user directly transfers the money to the seller’s bank account either from its own bank account or through the credit issued by the banking authority. The process is also very simple, thus it will provide huge convenience to the customers. Furthermore it also consumes very less time the payment process can be carried out within few minutes. In case of customers making use of credit card they need to repay it later to issuing authority while on the contrary debit card users pay real time from their respective bank account (Radu, 2003, p.2). The option also provides high security to both the parties. The personal details of the customer such as its transaction pin code and other passwords remains very much safe and do not gets disclosed. It also offers scam protection and other insurance benefits. The advantages offered by a credit or debit card are as follows:- 1. The payments made via credit or a debit card is traceable. The current status of the payment can be easily tracked online. Therefore it offers convenience and security to the customer. 2. The payment is instant and offers convenience. Thus it hugely benefits the company as prior to the delivery the payment is received. 3. This mode of payment will hugely attract the impulse buyers and eventually increase the overall sales volume. Earlier studies revealed that accepting credit cards simply boosts the sales figures. Disadvantages 1. The only disadvantage of making use of the plastic cards is that the user needs to provide all the information of the card. Thus a risk of fraudulent always remains. Method 2: Cash on Delivery Cash on delivery is a way of monetary transaction between the seller and the buyer where the payment is made to the seller during the time when the actual delivery is made. This mode of payment is hugely getting popularized around the world. Almost every company indulged in the business of online selling is incorporating the method of cash on delivery. This gives huge convenience to the customer. In this method cash physically handed over to the seller however the mode of payment and ordering is done absolutely online. Therefore the basis of the method is considered online. Some of the third world countries where online payment is still perceived as way of fraudulent, cash on delivery hugely help to get their reliance and trust. This will also help in amplifying the sales volume as the customers who do not holds a plastic card can also become a potential customer for the company. Thus the market becomes wide open and enlarges hugely. However there are some risks associated with this method such as consumers can reject the order during the time of delivery or there can be some problems regarding the shipping charges. Despite of the associated risks cash on delivery is considered as one of the most convenient and widely accepted way of payment around the world. The advantages of cash on delivery are as follows:- 1. It will offer the customer to scrutinize the ordered product during the time of delivery. Moreover this method also helps to target those customers who do not hold credit or debit card facilities. 2. This will also give a competitive advantage to the company. As all the competitors has not yet incorporated the strategy of cash on delivery. Disadvantages 1. The process of cash on delivery is a bit slower as compared to other mechanisms. It also hugely depends upon the location of the buyer. 2. The buyer may intentionally delay the process and therefore the company may have to bear the carrying cost. 3. The cost associated with legal actions i.e. for the ‘breach of contract’ is also very high. Figure 1 (Source: Oecd, 2006, p.14) Method 3: Mobile Phone Payment Mobile phone payment method is a modern method for paying online money. In other words the financial transactions which are carried out for the process of buying and selling goods and services are carried out with the help of a mobile phone (Tilborg & Jajodia, 2011, p.788). Presently majority of the telecom service providers offer mobile payment options to its customers. The payment options are either prepaid or postpaid according to the user’s choice and consequently provide huge convenience to the consumers. The primary reason for recommending mobile payment option is the huge number of mobile ownership among the people. Recent study reveals that almost over 5.6 billion people possess mobile phone. The advantages of mobile payment are as follows:- 1. It provides huge security to the entire transaction. The process is also very safe as because the user do not need to enter the credit or debit card details. 2. The outcome of incorporating mobile payment option may boost the sales figures of the company and can target to a mass. Disadvantages 1. It becomes difficult for the customers to completely read the instructions of the payment considering the small display of mobile phones. Figure 2 (Source: Oecd, 2006, p.16) Matrix Comparison Method of payment Convenience of Users Security Risks Plastic cards High Medium Risks related to fraudulent of personal information. Cash on delivery Very high Low Risk is mainly on the part of seller as the buyer may breach the contract. Mobile Phone Payment Medium, as due to its small display there are problems in understanding the instructions. Very high security compared to other modes. It hugely depends upon the speed of internet and the capability of the handset. Security The 21st century is witnessing enormous intensification of cyber crime. Hacking has become a matter of concern for all the organizations. The hackers allegedly steal information of the company and their customers by flouting the database security. Therefore it becomes necessity for the companies to strengthen the security of the database in order to safeguard their private information’s. The following are the recommended techniques by which the database can be secured from foreign attacks. The company must install anti-spam and other scanning software to protect the database from hackers. The administrator password for database access must be regularly changed. The database must be strongly fire walled. Specialized firewall and internet security software can impact positively on the security. Development of a secured area where the transaction will be taking place. References Oecd. (2006). Online Payment Systems for E-commerce. Retrieved from http://www.oecd.org/dataoecd/37/19/36736056.pdf. Radu, C. (2003). Implementing Electronic Card Payment Systems. London: Artech House. Reynolds, J. (2004). The Complete E-Commerce Book: Design, Build & Maintain a Successful Web-Based Business. Massachusetts: Focal Press. Tilborg, H. C. A. V., & Jajodia, S. (2011). Encyclopedia of Cryptography and Security (2nd ed.). New York: Springer. Read More