Unit-II

Syllabus:
• Electronic payment systems:
• payment gateways,
• payment cards,
• credit cards,
• debit cards,
• smart cards,
• e-credit accounts,
• e-money,
• marketing on the web,
• categories of e-commerce,
• EDI,
• marketing strategies,
• advertising on the web,
• customer service and support,
• internet banking,
• introduction to m-commerce,
• case study: e-commerce in passenger air transport,
• element of e-commerce,
• issues of e-commerce.
Electronic Payment System
What is Electronic Payment System?
Electronic Payment System (e-Payment) is a type of payment conducted
via electronic or online mediums.
Online payment systems eliminate the need for cash or cheque
payments. It is a unique payment method that allows you to conduct
online transactions via digital wallets, bank cards and internet banking
systems.
The funds are directly debited from your bank account.
Electronic payments allow customers to pay for goods and services
electronically. This is without the use of checks or cash.
Normally e-payment is done via debit cards, credit cards or direct bank
deposits.
But there are also other alternative payment methods such as e-wallets
and cryptocurrencies.

Payment Gateways:
Payment gateways are online platforms that facilitate the secure
transfer of funds between customers and merchants during online
transactions.
They act as a bridge between the customer’s payment method (such as
credit cards, debit cards, or digital wallets) and the merchant’s bank
account.
Types of Payment Gateways in E-commerce:
In e-commerce, payment gateways can be categorized into several
types based on their functionality and integration methods:
1. Hosted Payment Gateways:
These gateways redirect customers to a secure payment page hosted by
the gateway provider to complete the transaction.
After payment, customers are redirected back to the merchant's
website.
Examples include PayPal Standard and 2Checkout.
2. Integrated Payment Gateways:
Integrated gateways allow customers to complete the entire checkout
process on the merchant's website without being redirected. The
payment form is embedded directly into the website's checkout page.
Examples include Stripe and [Link].
3. API-Based Payment Gateways:
These gateways provide developers with APIs (Application Programming
Interfaces) to integrate payment functionality directly into the e-
commerce platform.
This offers more customization and control over the payment process.
Examples include Stripe and Braintree.
4. Mobile Payment Gateways:
These gateways are optimized for mobile devices and facilitate
payments made through mobile apps or mobile-optimized websites.
Examples include PayPal Mobile SDK, Google Pay and Apple Pay.
5. Virtual Terminal Gateways:
Virtual terminals allow merchants to manually enter payment
information for phone or mail orders.
This is useful for businesses that also accept payments outside of the
online store. Examples include Square and PayPal Virtual Terminal.
6. Direct Debit Gateways:
These gateways enable merchants to accept payments directly from
customers' bank accounts, typically through Automated Clearing House
(ACH) transactions.
Examples include GoCardless and DirectPay.
7. Digital Wallet Gateways:
Digital wallets like Apple Pay, Google Pay, and Amazon Pay act as
intermediaries between customers and merchants, allowing users to
securely store payment information and make purchases with just a few
clicks.
Each type of payment gateway offers unique features and advantages,
and the choice depends on factors such as the business's specific
requirements, target audience, security considerations, and integration
capabilities with the e-commerce platform.
Here are some popular payment gateways:
1. PayPal: Widely used globally, PayPal offers a user-friendly interface
and supports various payment methods, including credit/debit cards
and bank transfers.
2. Stripe: Known for its developer-friendly tools and customizable
options, Stripe provides seamless integration, supports multiple
currencies, and offers robust security features.
3. Square: Square offers a range of payment solutions, including online,
mobile, and in-person transactions. It's known for its simplicity and
transparent pricing.
4. [Link]: A long-standing player in the industry, authorize. Net
offers a suite of payment solutions with advanced fraud detection and
security features.
5. 2Checkout: 2Checkout, now known as Verifone, provides a global
payment platform supporting multiple payment methods and
currencies.
6. Adyen: Popular among large enterprises, Adyen offers a unified
platform for online, mobile, and in-store payments, with support for
over 250 payment methods.
7. Braintree: Owned by PayPal, Braintree offers robust payment
processing with features like vaulting for securely storing customer
payment information.
8. Worldpay: A global payment processing company, Worldpay offers a
range of solutions for e-commerce businesses, including online
payments and fraud prevention services.
9. Amazon Pay: Leveraging the trust and convenience of Amazon,
Amazon Pay enables customers to use their Amazon account
information to make purchases on third-party websites.
Payment Cards:
Payment cards are physical or virtual cards issued by financial
institutions that enable cardholders to make transactions.
There are several types of payment cards:
1. Credit Cards:
• Allow users to borrow money up to a predefined credit limit.
• Users must repay borrowed amounts along with interest
charges.
• Often come with rewards programs such as cashback, travel
rewards, or points for purchases.
2. Debit Cards:
• Linked directly to the cardholder's bank account.
 • Transactions deduct funds directly from the associated bank
account.
• Typically, don't involve borrowing or interest charges.
3. Prepaid Cards:
• Loaded with a specific amount of money by the cardholder.
• Not linked to a bank account.
• Can be used until the prepaid balance is depleted.
4. Charge Cards:
• Allow users to make purchases with a line of credit.
• Generally, require the balance to be paid in full at the end of
each billing cycle.
• Often come with no pre-set spending limit.
5. Gift Cards:
• Prepaid cards typically issued by retailers or financial
institutions.
• Can be used to make purchases up to the value stored on the
card.
• Often given as gifts and usable at specific stores or across
multiple retailers.
6. Contactless Payment:
• Many payment cards support contactless payment technology.
• Enables quick and easy transactions by tapping the card on a
compatible terminal.
• Enhances convenience and reduces the need for physical
contact during transactions.
Credit Cards:
A credit card is a financial tool issued by a bank or financial institution
that allows cardholders to borrow money up to a predetermined credit
limit to make purchases, pay for services, or withdraw cash advances.

Here's a detailed explanation of credit cards:

• Credit Limit: Every credit card has a predefined credit limit, which
is the maximum amount of money the cardholder can borrow
from the card issuer.
The credit limit is determined by the card issuer based on factors
such as the cardholder's credit history, income, and
creditworthiness.
• Borrowing: When a cardholder uses a credit card to make a
purchase or pay for a service, they are essentially borrowing
money from the card issuer.
Unlike a debit card, where funds are deducted directly from the
cardholder's bank account, credit card transactions create a
balance owed to the card issuer.
• Billing Cycle and Statements: Credit card transactions are grouped
into billing cycles, typically lasting one month.
At the end of each billing cycle, the cardholder receives a
statement detailing all transactions made during that period, the
total amount owed (outstanding balance), and the minimum
payment due.
• Minimum Payment vs Full Payment: The cardholder is required to
make at least the minimum payment by the due date indicated on
the statement.
The minimum payment is usually a small percentage of the
outstanding balance, typically around 1-3%.
While making the minimum payment keeps the account in good
standing, it's advisable to pay the full balance to avoid interest
charges.
• Interest Charges (APR): If the cardholder carries a balance beyond
the grace period (the period between the end of the billing cycle
and the due date), interest charges apply.
Credit cards have an Annual Percentage Rate (APR), which
represents the annualized interest rate applied to the outstanding
balance.
The APR can vary based on factors such as the card issuer, the
cardholder's creditworthiness, and the type of transaction (e.g.,
purchases, cash advances).
• Fees: Credit cards may come with various fees,
o including:
o Annual Fee: A yearly fee charged for owning the credit card.
o Late Payment Fee: A fee charged for missing the minimum
payment deadline.
o Overlimit Fee: A fee charged when the cardholder exceeds
their credit limit.
o Cash Advance Fee: A fee charged for withdrawing cash from
the credit card.
 o Foreign Transaction Fee: A fee charged for transactions
made in a foreign currency or processed outside the
cardholder's country.
• Rewards and Benefits: Many credit cards offer rewards programs,
such as cashback, points, or miles for purchases.
These rewards can be redeemed for travel, merchandise,
statement credits, or other perks. Additionally, credit cards may
offer benefits such as purchase protection, extended warranties,
travel insurance, rental car insurance, and access to airport
lounges.
• Credit Score Impact: Credit card activity, including payment
history, credit utilization, and length of credit history, influences
the cardholder's credit score.
Responsible credit card usage, such as making on-time payments
and maintaining a low credit utilization ratio, can positively impact
the cardholder's credit score.
Conversely, missed payments, high balances, and other negative
factors can lower the cardholder's credit score.
• Security Features: Credit cards typically come with security
features to protect against fraud and unauthorized transactions.
These features may include EMV chips (which create a unique
code for each transaction), fraud monitoring systems, purchase
alerts, and the ability to dispute unauthorized charges.
Debit Cards:
A debit card is a payment card issued by a financial institution,
typically linked to the cardholder's checking or savings account, that
enables the cardholder to make purchases, pay for services, or
withdraw cash directly from their bank account.
Here's a detailed explanation of debit cards:
• Linked to Bank Account: A debit card is directly linked to the
cardholder's bank account, either checking or savings.
When the card is used for transactions, the funds are deducted
directly from the linked account.
• No Borrowing Involved: Unlike credit cards, where transactions
create a balance owed to the card issuer that needs to be repaid,
using a debit card means the cardholder is spending their own
money from their bank account.
• Spending Limit: While debit cards don't have a traditional credit
limit like credit cards, the spending limit is determined by the
available balance in the linked bank account. The cardholder can
only spend up to the amount available in their account.
• ATM Withdrawals: Debit cards can be used to withdraw cash from
ATMs (Automated Teller Machines).
The cardholder can access cash from their bank account through
ATMs using their debit card and a Personal Identification Number
(PIN).
 • Point-of-Sale Transactions: Debit cards can be used for point-of-
sale transactions at merchants, where the cardholder can swipe,
insert (chip), or tap the card to make purchases.
The purchase amount is deducted from the linked bank account
immediately or within a few days, depending on the merchant's
processing time.
• PIN-based and Signature-based Transactions: Debit card
transactions can be processed either as PIN-based or signature-
based.
PIN-based transactions require the cardholder to enter their
Personal Identification Number (PIN) at the point of sale, while
signature-based transactions require the cardholder to sign a
receipt.
• Overdraft Protection: Some debit card accounts may offer
overdraft protection, allowing transactions to be approved even if
the available balance in the linked account is insufficient.
However, this feature may come with fees and interest charges.
• Direct Deposits and Online Payments: Debit cards can receive
direct deposits, such as paychecks or government benefits,
directly into the linked bank account.
Additionally, they can be used for online payments and bill
payments, where the funds are deducted from the linked account.
• Security Features: Debit cards typically come with security
features such as EMV chips, which provide enhanced protection
against counterfeit fraud.
Some cards may also offer fraud monitoring services and zero-
liability protection for unauthorized transactions.
In summary, a debit card provides convenient access to funds in a bank
account for making purchases, withdrawing cash, and conducting
various financial transactions. It allows cardholders to spend their own
money without incurring debt, making it a useful tool for managing
everyday expenses and finances.
Smart Cards:
A smart card is a small, pocket-sized plastic card that contains an
embedded integrated circuit chip. This chip can store and process data
securely, providing various functionalities depending on the
application.
Smart cards come in two main types:
▪ Contact Smart Cards
▪ Contactless Smart Cards.

Contact Smart Cards:

These cards have a gold-plated contact pad embedded on the surface,
which must physically touch the card reader for communication.
The integrated circuit chip within the card typically includes a
microprocessor and memory, enabling the card to execute commands
and store data securely.
Contact smart cards are commonly used in applications requiring
higher security, such as banking, government IDs, access control
systems, and secure authentication.
Contactless Smart Cards:
Contactless smart cards utilize radio frequency (RFID) or near-field
communication (NFC) technology for communication with the card
reader without the need for physical contact.
They contain an embedded antenna that enables wireless
communication with compatible card readers.
Contactless smart cards are popular in applications where convenience
and speed are crucial, such as public transportation systems, access
control, and payment systems.
Components of a Smart Card:
• Integrated Circuit Chip:
The core component of a smart card, which contains a
microprocessor and memory for processing data and executing
commands.
• Memory:
Smart cards have non-volatile memory (EEPROM) to store data
securely, including personal information, cryptographic keys, and
transaction history.
• Contacts or Antenna: Contact smart cards have metal contacts for
communication with the card reader, while contactless cards have
an embedded antenna for wireless communication.
Applications of Smart Cards:
• Authentication: Used for secure authentication in various
systems, such as logging into computers, accessing secure
facilities, and verifying identity.
• Identification: Commonly used for personal identification,
including national ID cards, employee badges, electronic
passports, and healthcare cards.
• Payment Systems: Widely used in payment systems, including
credit cards, debit cards, and prepaid cards, for secure
transactions.
• Transportation: Employed in transit systems for fare payment,
including metro cards, electronic toll collection, and parking
access cards.
E-Credit Accounts:
E-credit accounts, also known as electronic credit accounts or e-credit
lines, are digital financial accounts provided by banks, financial
institutions, or online lenders that enable users to access credit
electronically.
These accounts allow individuals or businesses to borrow money up to
a predefined credit limit, which can be used for making purchases,
paying bills, or covering other expenses.
Here's a more detailed description:

▪ Digital Access: E-credit accounts are accessed and managed

entirely online or through mobile banking applications. Users can
monitor their account activity, check balances, make payments,
and request credit line increases or decreases through digital
platforms.
▪ Credit Limit: When opening an e-credit account, the financial
institution assigns a credit limit to the user based on factors such
as credit history, income, and other financial considerations. This
limit represents the maximum amount of credit that the user can
borrow.
▪ Interest Charges: Borrowers are typically charged interest on the
outstanding balance of their e-credit account. Interest rates may
vary depending on factors such as the user's creditworthiness,
prevailing market rates, and the terms of the credit agreement.
▪ Fees and Charges: In addition to interest, e-credit accounts may
have associated fees and charges, such as annual fees, late
payment fees, or cash advance fees. These fees vary depending
on the terms and conditions of the account.
▪ Security Measures: Financial institutions implement security
measures to protect e-credit accounts from unauthorized access
and fraud. These measures may include multi-factor
authentication, encryption, fraud monitoring, and transaction
alerts.
E-Money:
E-money, short for electronic money, refers to digital currency stored
and transacted electronically. Unlike physical cash, e-money exists only
in electronic form and is typically stored in accounts or devices such as
bank accounts, mobile wallets, or prepaid cards.
Here's a brief overview:
▪ Digital Currency: E-money represents a digital equivalent of
traditional currency (e.g., dollars, euros) and is often issued and
regulated by financial institutions, technology companies, or
governments.
▪ Storage and Transactions: E-money can be stored and accessed
through various electronic means, including bank accounts,
mobile apps, smart cards, and online platforms. Users can make
transactions, such as purchases, transfers, and payments,
electronically using their e-money balance.
Types of E-money:
▪ Bank Deposits: E-money can be held in electronic accounts
offered by banks or financial institutions, similar to traditional
bank deposits.
▪ Mobile Wallets: Many mobile payment apps offer e-money
functionality, allowing users to store funds in digital wallets linked
to their smartphones.
▪ Prepaid Cards: Prepaid cards, such as gift cards or prepaid debit
cards, store e-money balances that users can spend at
participating merchants.
▪ Cryptocurrencies: Some digital currencies, like Bitcoin and
Ethereum, function as forms of e-money, although they operate
independently of traditional financial systems.
Marketing on the Web:
Marketing on the web, often referred to as digital marketing or online
marketing, encompasses a wide range of strategies and tactics aimed
at promoting products, services, or brands through digital channels.
This form of marketing leverages the internet and various online
platforms to reach and engage with target audiences.
Here are some key aspects of marketing on the web:
▪ Website Optimization: Having a well-designed and user-friendly
website is crucial for online marketing. Websites serve as the
central hub for businesses to showcase their products or services
and provide valuable information to visitors.
Optimization involves ensuring that the website is easy to
navigate, loads quickly, and is optimized for search engines (SEO)
to improve visibility.
▪ Search Engine Marketing (SEM): SEM involves promoting
websites by increasing their visibility in search engine results
pages (SERPs) through paid advertising methods like pay-per-click
(PPC) advertising.
This includes Google Ads, Bing Ads, and other platforms where
advertisers bid on keywords related to their business.
▪ Search Engine Optimization (SEO): SEO focuses on improving
organic (non-paid) visibility in search engine results. This involves
optimizing website content, meta tags, and other elements to
rank higher for relevant keywords. Effective SEO practices help
increase organic traffic and improve the website's authority and
credibility.
▪ Content Marketing: Content marketing revolves around creating
and distributing valuable, relevant content to attract and engage
a target audience. This content can take various forms, including
blog posts, articles, videos, infographics, and social media posts.
Content marketing aims to build brand awareness, establish
thought leadership, and drive customer engagement.
▪ Social Media Marketing (SMM): SMM involves using social
media platforms like Facebook, Twitter, Instagram, LinkedIn, and
others to connect with audiences, build brand awareness, and
promote products or services.
 It includes activities such as posting engaging content, running
paid advertisements, and engaging with followers to foster
relationships and encourage brand loyalty.
▪ Email Marketing: Email marketing involves sending targeted
messages to a list of subscribers to promote products, announce
special offers, or provide valuable content.
Effective email marketing relies on segmentation,
personalization, and automation to deliver relevant messages
and drive conversions.
▪ Influencer Marketing: Influencer marketing leverages individuals
with a large following and influence on social media platforms to
promote products or services.
Collaborating with influencers can help businesses reach a wider
audience and build credibility through endorsements from
trusted figures.
▪ Online Advertising: In addition to search engine marketing,
online advertising includes various forms of display advertising,
remarketing/retargeting, and native advertising across websites,
blogs, and other online platforms.
Categories of E-Commerce:
E-commerce, or electronic commerce, refers to the buying and selling of
goods or services over the internet. There are several categories of e-
commerce, each with its own unique characteristics and business
models.
Here are some of the main categories:
➢ Business-to-Consumer (B2C):
• B2C e-commerce involves transactions between businesses
and individual consumers.
 • This is perhaps the most common type of e-commerce and
includes online retailers selling products directly to
consumers.
• Examples: Amazon, Walmart, eBay, and other online retail
stores.
➢ Business-to-Business (B2B):
• B2B e-commerce involves transactions between businesses,
where one business sells products or services to another
business.
• This category includes manufacturers selling to wholesalers or
retailers, as well as companies providing services to other
businesses.
• Examples: Alibaba, ThomasNet, and industry-specific
marketplaces.
➢ Consumer-to-Consumer (C2C):
• C2C e-commerce involves transactions between individual
consumers, where one consumer sells products or services to
another consumer.
• These transactions often take place through online marketplaces
or classified ads platforms.
• Examples: eBay, Craigslist, Facebook Marketplace, and
Poshmark.
➢ Consumer-to-Business (C2B):
• C2B e-commerce involves transactions where individual
consumers offer products or services to businesses.
• This category includes freelance platforms, where individuals
offer their skills or expertise to businesses on a contract basis.
• Examples: Upwork, Fiverr, and other freelance marketplaces.
 ➢ Business-to-Government (B2G):
• B2G e-commerce involves transactions between businesses and
government entities.
• This can include government procurement processes, where
businesses bid on contracts to provide goods or services to
government agencies.
• Examples: Government procurement portals and platforms for
bidding on government contracts.
➢ Consumer-to-Government (C2G):
• C2G e-commerce involves transactions where individual
consumers sell products or services to government agencies or
entities.
• This category may include individuals selling items to
government employees or agencies through online platforms.
• Examples: Online auctions for surplus government equipment or
goods.
➢ Mobile Commerce (M-Commerce):
• M-commerce refers to e-commerce transactions conducted
through mobile devices such as smartphones and tablets.
• This category encompasses various types of e-commerce
transactions, including B2C, C2C, and B2B, but with a focus on
mobile devices as the primary means of access.
• Examples: Mobile shopping apps, mobile banking apps, and
mobile payment services.

These categories of e-commerce encompass a wide range of business

models and transaction types, catering to different types of customers
and market needs. Businesses may operate in one or multiple
categories depending on their target market, products or services, and
strategic objectives.