The impact of internet payment systems upon the retail sector - Essay Example

? The impact of internet payment systems upon the retail sector and Section # of Introduction This assignment highlights how internet payment systems have influenced the retail sector economy and its business. Internet has drastically changed the way we live our lives today, and is continuing to make its impact; each advancement seems like it is the ultimate stand point but very soon, it is over taken by another. One of the most classical and beneficial advancements of the internet, that has been critically beneficial for growing cross-border trade and commerce, has been the internet payment system or e-trading concept; some other titles for the same are e-shopping, e-business, e-marketing – where ‘e’ simply implies conducting transactions via electronic medium. Classically, ‘shopping’ or ‘purchases’ took place face-to-face i.e. purchase against cash. With the advancements of the banking system, some purchases moved against the cheque system, and then against credit cards – plastic money. However, the arrival of the ‘e’ age, it became critical to have a reliable source of payments since purchases technically took place over the internet. Such situation gave birth to the need of a medium of payment other than credit and debit cards. Subsequently, there came third-party payment systems such as PayPal, Bank-transfers, Alert-Pay, E-Gold, etc. With the advancements of ‘e’ purchases, such third-party systems have assisted in providing enhanced sales. The Impact of Internet Payment System on Retail Sector The retail sector has significantly benefited from the advent and advancements of the internet payment system. In particular, as the said system has eased the process of e-shopping with added security features. Initially, this turned out to be a huge competitive edge for the smaller retailers as they embedded e-shopping along with internet payment systems, providing the ease of shopping from home comfort to the customers, pushing the competing bigger names to adapt the same strategy. However, initially, the advantages of this internet payment system were not known to be gone as far as they are today. In the initial phase, it was just assumed to provide comfort and ease of shopping, reducing the cost of selling for the seller, increasing margins, reducing the waiting-line phenomenon to a higher degree. Today, the cross-functional advancement of the MIS has led the firms into realizing the long-run potential of the various aspects of such payment systems. Prior to such advancements, the concept of home delivery and cash-on-delivery prevailed, which was not very encouraged by the retailers across the world in all sectors and industries. Fake order placements and false addressing were common issues; but internet based payment systems have reduced such issues to a much greater extent, and also made the consumer market much more mature. As a buyer now knows that internet based payment system reveals complete identity and contact information, and with IP tracking facility over the internet, there are lesser chances of individuals involving themselves in such or similar activities. The first and foremost advantage of the internet payment system is the ease of marketing for the marketers; marketers rely solely on the information and crave for reliable and authentic sources of information. When purchases are made through paper money, the buyer remains unknown to the seller. However, when plastic money and internet payment systems are involved, the buyer no more remains anonymous; rather the buyer along with the buying habits and practices becomes visible to the marketer, and thus, marketers can develop groups and strata and segments to ensure that they target the right audience with the right combination of products and services. When it comes to e-marketing, marketers need as accurate of a data as possible, primarily due to the fact that e-marketing relies heavily on reaching the right customer – demographics and other data needs to be present. Consider the example of email marketing; how about a 12 year old receiving an email about the best car polish? Or assuming the example of SMS marketing, how would it sound if a teenager receives an SMS advertisement of maternity services? To avoid any and all similar situations, e-marketing needs to have a precise audience with known habits and behavioral variables. Reliable sources of data implies authentic information, which in turn implies effective marketing communication strategies, giving edge to the business against their respective competition. Not just the retail sector makes most of such data but this sort of data is also shared across the length of the supply chain for assisting various vendors and manufacturers into knowing the ground realities related to the consumer preferences and behaviors. Internet Payment Systems assist establishment of online businesses using models similar to that of amazon.com or ebay.com. Such start ups have been very common in the west of late, and similar systems provide protection against fraudulent transactions to both the visitors of the business, as well as to the business itself. Other than such auction and trading website, e-commerce has also flourished allowing the retail sector to create efficient costing for their set up. Additionally, some businesses have translated this cost saving towards cost reductions giving cost reduction benefits to the buyers. A classical example of the same is the services of Emirates.com in the Asian region of Pakistan; if a ticket is booked online and purchased from office or booked and purchased via any other medium (telephone, service counter, travelling agent, etc), the price is 7% higher than when tickets are booked and purchased online. This is a live and common example on how the internet fares for retail sector are discounted compared to that for the brick-and-mortar model. Some businesses appreciate and acknowledge online purchases by giving customers various discounts and offers for online shopping, while others enhance their profit margins through the cost saving achieved as costs reduce. A simple search on Google or any other search engine reveals the presence of online or e-shopping websites providing a wide variety of products and services not just domestically but across the borders as well. The crux of this discussion reveals the fact that the retail sector has become highly competitive and embedding such systems initially does provide a competing edge and a first mover advantage but gradually the whole sector moves towards a similar strategy due to the reaped benefits for the first mover. Over all, the competency of the retail sector has increased drastically. On a general note, increase in competency of a sector is beneficial for the mass customer base of a region. The Influence on Economy and Economic Factors Retail sector in an economy is the driving force for economic progress because it links the manufacturing sector directly to the consumer’s spending, and the resulting taxes assist the government in moving ahead with its developmental projects. Internet payment systems make goods comparatively cheaper because the competitive arena increases number of competitors increase, and thus monopolistic powers decline. When consumers have better purchasing power, they tend to spend more, and thus economy benefits. The phenomenon of internet payment system is beneficial for the economy of a system primarily because, as mentioned, it facilitates the development of new businesses at grass roots level by easing their payment scheduling and related matters. Management of financial and money matters is a critical proposition for a new business, and ease in such an aspect provides a comfort zone for a fresh start-up. Thus, the economics of a nation moves to an expansionary mood. The reducing costs due to internet payment mechanisms also ensure lower prices of commodities, and the combination of the rising levels of inflation that exist today, such a scenario can be considered a huge plus. Another critical influence on the economics of a nation is the cross border trade; a classical example would be amazon.com that ships its products and services to consumers across the world, bridging the knowledge gap and enhancing the reach of the consumers from across the world. Subsequently, there exists no product across the world that would remain local in its own context; the true essence of global structure has revived by means of internet payment system and e-marketing activities. In the context of the same, marketing across mailboxes and portals at a global scale has enhanced. When a customer is known to a retailer, emails are exchanged to report various offers and discounts. By means of these emails, various types of spies are unleashed into the consumer inbox that keep a track of consumer activities in the sense of the type of websites visited, and picking up key terms from conversations about preferences such as someone chatting about a new phone and showing willingness to purchase; this data would be tracked by a retailer and would target a similar deal towards the cluster of similar customers. Flaws and Drawbacks In accordance with the law of nature that no man made activity or system is perfect, internet payment systems have high degree of security issues; despite having various degrees of security levels deployed, and advancements still being made, the systems are still not fool-proof. There have been a number of fraudulent transactions with various internet payment systems. Other than third party frauds, a simple research on Google reveals that many individual customers have been deprived of their hard earned money by a number of internet payment systems, which makes the system quite unreliable. Conclusion & Summary Internet payment methods have not succeeded in capturing the complete market of brick-and-mortar model. However, the success rate of the same is appreciable. To reduce the number of frauds at the payment systems, there have been various checks and balances being applied. Internet payment methods have considerably enhanced the retail sector of the economy; let it be airlines industry or automobile sector or any other commodities. E-transaction is a classical phenomenon that was the initial cause of hunting for internet based payment mechanisms; the same has assisted the retail consumers in easing the transaction process, reduce time for a transaction and increases the comfort for conducting the transaction. Mobile payment is the upcoming technology i.e. the next phase of internet payment mechanisms and is considered to be the next generation technology. Ultimately, the world is moving towards a convenient life that can only become more and more convenient. Bibliography Brad Kleindl and James L. Burrow, E-Commerce Marketing, 2004 Donal O'Mahony, Michael A. Peirce, Hitesh Tewari, and O'Mahony Donal, Electronic Payment Systems for E-Commerce. 2001 Janice Reynolds, The Complete E-Commerce Book, Second Edition: Design, Build & Maintain a Successful Web-based Business. 2004 Kenneth Laudon and Carol Guercio Traver, E-Commerce 2011, 2010 Vesna Hassler, Security Fundamentals for E-Commerce (Artech House Computer Security Series. New Series. 2000 Weidong Kou, Payment Technologies for E-Commerce, 2003 Ward Hanson and Kirthi Kalyanam, Internet Marketing and e-Commerce, 2006 Read More