E-Commerce - Payment
Systems
IT 8309/CS 8308: E-COMMERCE
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What is E-payment?
• Electronic payment refers to paperless monetary transactions.
• Electronic payment has revolutionized the business processing by
reducing the paperwork, transaction costs, and labor cost.
• It helps business organization to expand its market reach/expansion
• The key components of this payment system are the payers and
payees, financial institutions, electronic devices, communication
networks, payment gateways, and mobile payment apps.
• An online payment system works by connecting a digital storefront to
the payment processing network of your choice using a payment
gateway
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Selcom
• Selcom is financial and payment service provider across sub-Saharan
African with a full range of electronic payment products and services
focusing on digital, card and card-less processing services.
• Further, all mobile money operators in the country are integrated
with Selcom's bill payment gateway.
• Grow your business with Selcom Integration Partners (SIPs)
([Link]
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Fig: Components of ecommerce payment
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• Listed below are some of the types e-commerce payments system −
• Credit Card
• Debit Card
• Smart Card
• E-Wallet
• Electronic Fund Transfer (EFT)
• Cash on delivery
• Mobile payment
• Cryptocurrency
• Buy Now Pay Later
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Credit Card
• Credit cards are the base of modern e-commerce payment systems
• Credit card is small plastic card with a unique number attached with
an account.
• It has also a magnetic strip embedded in it which is used to read
credit card via card readers.
• When a customer purchases a product via credit card, credit card
issuer bank pays on behalf of the customer and customer has a
certain time period after which he/she can pay the credit card bill
• They are some of the most trusted payment systems because
payment processors like Visa, American Express, Mastercard, etc.,
have been around for quite a while and are trusted by businesses.
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• Following are the actors in the credit card system.
• The card holder − Customer
• The merchant − seller of product who can accept credit card
payments.
• The card issuer bank − card holder's bank
• The acquirer bank − the merchant's bank
• The card brand − for example , visa or Mastercard.
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Debit Card
• Debit card, like credit card, is a small plastic card with a unique
number mapped with the bank account number.
• It is required to have a bank account before getting a debit card from
the bank.
• The major difference between a debit card and a credit card is that in
case of payment through debit card, the amount gets deducted from
the card's bank account immediately and there should be sufficient
balance in the bank account for the transaction to get completed;
whereas in case of a credit card transaction, there is no such
compulsion.
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• Debit cards free the customer to carry cash and cheques.
• Even merchants accept a debit card readily. Having a restriction on
the amount that can be withdrawn in a day using a debit card helps
the customer to keep a check on his/her spending.
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Smart Card
• Smart card is again similar to a credit card or a debit card in
appearance, but it has a small microprocessor chip embedded in it.
• It has the capacity to store a customer’s work-related and/or personal
information.
• Smart cards are also used to store money and the amount gets
deducted after every transaction.
• Smart cards can only be accessed using a PIN that every customer is
assigned with.
• Smart cards are secure, as they store information in encrypted format
and are less expensive/provides faster processing.
• Mondex and Visa Cash cards are examples of smart cards.
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E-Wallet
• An e-wallet is similar to a prepaid account that allows customers to
store numerous debit cards, credit cards, etc., in a secure
environment.
• It eliminates the need to enter financial information every time the
customer wants to make a payment.
• The use of e-wallets is rising with each passing day.
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Mobile Payments
• These are transactions conducted using a mobile device, such as a
tablet or smartphone, for various goods and services.
• They have become more prevalent in recent years as they offer
convenience and security to both consumers and businesses.
• Mobile payments can be used in different situations, such as paying
for purchases at retail stores by scanning a code or tapping a device,
buying digital goods and services within apps, or transferring money
between individuals.
• Mobile payments can also provide benefits such as rewards,
discounts, loyalty programs, and cross-border remittances.
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Buy Now, Pay Later (BNPL)
• It is a kind of short-term financing option that lets customers make
purchases and pay for them at a future date.
• BNPL is generally structured like an instalment-based money lending
process that involves consumers, financiers, and merchants.
• Consumers can buy something upfront with minimal or no initial
payment and clear the balance over 4 or fewer payments.
• BNPL typically charges no interest or fees, and consumers can choose
to link their debit card, bank account or credit card for automatic or
manual repayment.
• BNPL is a flexible and convenient payment option that can enhance
consumer spending power and financial inclusion.
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Electronic Fund Transfer (EFT)
• It is a very popular electronic payment method to transfer money
from one bank account to another bank account.
• Accounts can be in the same bank or different banks.
• Fund transfer can be done using ATM (Automated Teller Machine) or
using a computer.
• Nowadays, internet-based EFT is getting popular. In this case, a
customer uses the website provided by the bank, logs in to the bank's
website and registers another bank account. He/she then places a
request to transfer certain amount to that account.
• Once the amount is transferred to other account, the customer is
notified of the fund transfer by the bank.
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Cryptocurrency
• It is digital money that is not controlled by any central authority.
• It uses cryptography and computers to secure and verify transactions.
• Bitcoin is the most popular cryptocurrency, which uses a public
ledger called blockchain.
• To use cryptocurrency, a customer needs a wallet and an exchange.
• A wallet stores the private keys, which are a type of password.
• An exchange lets them buy and sell cryptocurrencies.
• Customers can use cryptocurrency to pay online to other users or
merchants who accept it.
• Cryptocurrency is an innovative way of using money, but it has risks
and challenges, such as volatility, security, and regulation.
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Prepaid Cards
• It is a financial tool that lets customers load a specific amount of
money onto the card in advance.
• They can use it to make purchases online or in-store, pay bills, or even
give it as a gift card to friends or family.
• Prepaid cards are versatile and convenient, as they do not require a
bank account, credit check, or interest charges.
• One can only spend the amount they have loaded on the card, which
helps them control their budget and avoid overspending.
• Prepaid cards are also safer than keeping cash.
• They are replaceable if lost or stolen.
• Some prepaid cards also offer rewards and discounts for using them.
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Conclusion: E-commerce payment system
• Different types of payment methods, such as credit cards, debit cards,
cryptocurrencies, and digital wallets, offer flexibility to customers.
• Choosing the best payment gateway is essential for a seamless
customer experience.
• If one payment system fails, your customer can immediately switch to
another without feeling stuck.
• Cart abandonment issue is on the rise, and one of the reasons is that
customers do not find their preferred e-commerce payment system.
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• How do I add a payment system to my e-commerce website?
• To add a payment system to your e-commerce website, you need to
integrate a payment gateway. A payment gateway is a service that
securely processes online transactions. You can choose from various
payment gateways available and integrate them into your website
through API integration or plugins.
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• How do I create an e-payment system?
• Creating an e-payment system involves several steps:
• You need to have a secure platform for processing online
transactions.
• You must establish partnerships with banks and financial
institutions to facilitate payments.
• You need to develop user-friendly interfaces and ensure the
security of customer data during transactions.
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E-Commerce - Security Systems
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Security
• Security is an essential part of any transaction that takes place over
the internet.
• eCommerce security is the guideline that ensures safe transactions
through the internet. It consists of protocols that safeguard people
who engage in online selling and buying goods and services.
• Customers will lose his/her faith in e-business if its security is
compromised.
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• Following are the essential requirements for safe e-
payments/transactions :−
• Confidentiality − Information should not be accessible to an
unauthorized person. It should not be intercepted during the
transmission.
• Integrity − Information should not be altered during its
transmission over the network.
• Availability − Information should be available wherever and
whenever required within a time limit specified.
• Authenticity − There should be a mechanism to authenticate a
user before giving him/her an access to the required information
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Essential requirements for safe e-payments/transactions…..
• Non-Repudiability − It is the protection against the denial of order or
denial of payment. Once a sender sends a message, the sender
should not be able to deny sending the message. Similarly, the
recipient of message should not be able to deny the receipt.
• Encryption − Information should be encrypted and decrypted only by
an authorized user.
• Auditability − Data should be recorded in such a way that it can be
audited for integrity requirements.
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Measures to ensure Security
• Encryption − It is a very effective and practical way to safeguard the
data being transmitted over the network. Sender of the information
encrypts the data using a secret code and only the specified receiver
can decrypt the data using the same or a different secret code.
• Digital Signature − Digital signature ensures the authenticity of the
information. A digital signature is an e-signature authenticated
through encryption and password.
• Security Certificates − Security certificate is a unique digital id used to
verify the identity of an individual website or user.
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Security Protocols in Internet
1. Secure Socket Layer (SSL)
• It is the most commonly used protocol and is widely used across
the industry.
• It meets following security requirements −
• Authentication
• Encryption
• Integrity
• Non-reputability
• "[Link] is to be used for HTTP urls with SSL, where as "http:/"
is to be used for HTTP urls without SSL.
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2. Secure Hypertext Transfer Protocol (SHTTP)
• SHTTP extends the HTTP internet protocol with public key encryption,
authentication, and digital signature over the internet.
• Secure HTTP supports multiple security mechanism, providing
security to the end-users.
• SHTTP works by negotiating encryption scheme types used between
the client and the server.
• S-HTTP secures individual messages, making it suitable for situations
where only specific parts of the communication need to be secured.
HTTPS, on the other hand, secures all data transmitted over a secure
connection, providing a higher level of security for all communication
between the client and the server
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3. Secure Electronic Transaction
• It is a secure protocol developed by MasterCard and Visa in collaboration.
Theoretically, it is the best security protocol. It has the following
components −
• Card Holder's Digital Wallet Software − Digital Wallet allows the card
holder to make secure purchases online via point and click interface.
• Merchant Software − This software helps merchants to communicate
with potential customers and financial institutions in a secure manner.
• Payment Gateway Server Software − Payment gateway provides
automatic and standard payment process. It supports the process for
merchant's certificate request.
• Certificate Authority Software − This software is used by financial
institutions to issue digital certificates to card holders and merchants,
and to enable them to register their account agreements for secure
electronic commerce.
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Use solid-rock Firewalls
• Use effective e-commerce software and plugins to bar untrusted
networks and regulate the inflow and outflow of website traffic. They
should provide selective permeability, only permitting trusted traffic
to go through.
• It ensures that the only traffic that accesses your eCommerce store
consists of the real users.
• You can trust the Astra firewall to stop Spam, XSS, CSRF, malware,
SQLi, and many other attacks on your website.
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