E Commerce

Unit III: INTERNET EXTRANET AND ELECTRONIC PAYMENT SYSTEM

INTERNET

The internet is a global network of interconnected computers, servers, phones,

and smart appliances that communicate with each other using the transmission
control protocol (TCP) standard to enable a fast exchange of information and files,
along with other types of services.

The internet is a global hub of computer networks — a network of connections

wherein users at any workstation may, with authorization, receive data from
every other system (and often interact with users working on other computers).

Internet infrastructure comprises optical fiber data transmission cables or copper

wires, as well as numerous additional networking infrastructures, such as local
area networks (LAN), wide area networks (WAN), metropolitan area networks
(MAN), etc. Sometimes wireless services such as 4G and 5G or WiFi necessitate
similar physical cable installations for internet access.
 Internet Corporation for Assigned Names and Numbers (ICANN) in the United
States controls the internet and its associated technologies, such as IP addresses.

The Federal Networking Council (FNC) defined the Internet as a global

information system logically linked by a globally unique address space based on
the Internet Protocol (IP), supporting communications using the TCP/IP suite, and
providing high-level services.
Here's a more detailed breakdown of the FNC's definition:
 Global Information System:
The Internet is not just a collection of networks, but a unified system for
information exchange.
 Logically Linked by IP:
The Internet uses the Internet Protocol (IP) or its extensions for addressing and
routing data packets, ensuring that information can find its way across the
network.
 TCP/IP Suite:
The Internet relies on the Transmission Control Protocol/Internet Protocol
(TCP/IP) suite for reliable and efficient communication.
 High-Level Services:
The Internet provides and supports various high-level services, such as email,
web browsing, and file sharing, built upon the underlying infrastructure.

ARPANET:

The internet was first envisioned in the form of ARPANET by the Advanced
Research Projects Agency (ARPA) of the U.S. government in 1969. The initial goal
was to create a network that would enable users of a research computer at one
institution to “communicate” with research computers at another institution.
Since communications can be sent or diverted across several directions, Arpanet
could continue to operate even if a military strike or any other calamity damages
portions of the network.
 COMPONENTS OF INTERNET:

Different networks and devices, directing data packets to their Infrastructure:

 Fiber Optic Cables:
These are the backbone of the internet, transmitting data over long distances at
high speeds using light signals.
 Routers:
These devices facilitate communication between destinations Physical.
 Modems:
Modems convert digital signals into analog signals and vice versa, allowing
devices to connect to the internet.
 Servers:
These are powerful computers that store and deliver content, applications, and
services to users across the internet.
 Gateways:
Gateways connect different network segments, allowing devices on separate
networks to communicate.
 Bridges:
Bridges connect different network segments, functioning much like multilingual
translators.
2. Communication Protocols:
 IP Addresses:
Every device on the internet needs an IP address to be identified and to
communicate with other devices.
 Protocols:
These are sets of rules that govern how data is transmitted and formatted over
the internet, ensuring reliable and efficient communication.
 TCP/IP:
This is the fundamental protocol suite that underpins the internet, enabling
reliable data transmission.
 HTTP/HTTPS:
These protocols are used for transferring web pages and other content over the
internet.
3. Other Important Components:
 Connectivity:
The ability of devices to connect to the internet and communicate with each
other.
 Cloud:
The cloud refers to the internet ecosystem where computing resources are
delivered as services.
 Firewall:
A security system that protects networks from unauthorized access and
malicious traffic.
 Email Directories:
These are systems that store and manage email addresses, allowing users to
send and receive emails.
 InterNIC:
The Internet Network Information Center, which played a crucial role in the
early development and growth of the internet.
Architecture of the Internet:

The Internet architecture is based on a simple idea: ask all networks to carry a
single packet type, a specific format, the IP protocol. Besides, this IP packet must
have an address defined with sufficient generality to identify each computer and
terminals scattered throughout the world. This architecture is illustrated in Figure.

The user who wishes to make on this internetwork must store its data in IP
packets delivered to the first network to cross. This first network encapsulates the
IP packet in its packet structure, package A, which circulates in this form until an
exit door, where it is decapsulated to retrieve the IP packet. The IP address is
examined to locate, thanks to a routing algorithm, the following network to cross,
and so on until arriving at the destination terminal.

To complete the IP, the US Defense added the TCP protocol; specify the nature of
the interface with the user. This protocol further determines how to transform a
stream of bytes in an IP packet while ensuring the quality of transport of this IP
packet. Both protocols, assembled under the TCP / IP abbreviation, are in the
form of a layered architecture. They correspond to the packet level and message-
level reference model.

The Internet model completed with a third layer called the application level,
which includes different protocols for building Internet services. Email (SMTP), file
transfer (FTP), the transfer of hypermedia pages, transfer of distributed databases
(World Wide Web), etc., are some of these services. The figure shows the three
layers of Internet architecture.

IP packets are independent of each other and are individually routed in the
network by interconnecting devices, subnets, routers. The quality of service
offered by IP is minimal and provides no detection of lost or possibility of error
recovery packages.

TCP combines the functionality of the message-level reference model. It is a fairly

complex protocol with many options for solving all packet loss problems in the
lower levels. In particular, a lost fragment can be recovered by retransmission on
the stream of bytes. TCP uses a connection-oriented mode.

The flexibility of the Internet architecture can sometimes be a default. The extent
that global optimization of the network is carried out by sub-network subnet, by a
succession of local optimizations. It does not allow a homogeneous function in
different subnets traversed. Another essential feature of this architecture is to
place the entire control system, to say, intelligence and control of the network, in
the terminal machine, leaving virtually nothing in the network, at least in the
current version, IPv4, the IP protocol. The control intelligence is in the TCP
software on the PC connected to the network.

It is the TCP protocol that takes care of sending more or fewer packets according
to network load. Precise control window the maximum number of
unacknowledged fragments that may be issued. The TCP window control
increases or decreases the traffic following the time required to complete a round
trip. Over this time increases, Considering the more congested network, the
transmission rate must decrease to counter saturation. In return, the
infrastructure cost is meagre; no intelligence is not in the network. The service
provided by the network of networks corresponds to a quality called the best
effort, which means that the network does its best to carry the traffic. In other
words, the service quality is not assured.

The new generation of IP, IPv6, introduces new features that make the network
nodes smarter. The new generation of routers comes with QoS management
algorithms, which allow them to provide transportation that can meet time
constraints or packet loss. We expect the arrival of IPv6 for ten years, but it’s still
IPv4 IP that governs the world. Because every new need is achievable with IPv6,
IPv4 has been able to find the algorithms needed to do as well.

In IPv4, each new customer is treated the same way as those already connected,
with resources being distributed equitably among all users. The resource
allocation policies of telecom operator’s networks are different since, on these
networks, a customer who already has a certain quality of service does not suffer
any penalty because of the arrival of a new customer. As discussed, the now
advocated solution in the Internet environment is to encourage customers with
real-time requirements, using appropriate protocols, using priority levels.

INTRANET and EXTRANET

Intranet and extranet are both types of private networks, but they are used for
different purposes. An intranet is a network that is used solely by an
organization’s employees, while an extranet is a network that is used by a specific
group of external users, such as partners or customers. Intranets are typically
used for internal communication and collaboration, while extranets are used for
sharing information and resources with external parties. In terms of accessibility,
intranets are only accessible from within an organization, while extranets allow
external parties to access specific parts of the network with permission

INTRANET:

An intranet is a private network that is used solely by an organization’s

employees. It is typically built using the same technologies as the internet, such as
web browsers and servers, but it is only accessible from within the organization.
Intranets are used for a variety of purposes, including internal communication, file
sharing, and collaboration.

Intranets can be a powerful tool for improving productivity and streamlining

internal processes. They can be used to create a centralized location for
important information and documents, such as company policies, procedures and
employee handbooks.

Moreover, they can also be used to facilitate collaboration and communication

among employees, regardless of their location or department. This can be done
through features such as instant messaging, video conferencing, and forums.
Additionally, intranets can also be used to create online forms, portals and other
tools that automate internal processes, such as request for time off, or expense
report submission.

CHARCTERISTICS OF INTRANETS:

Shared Access to documents

Centralized Scheduling System
Individualization
Scalable
Standard based Technology
 Types Of Intranet:

 1- Corporate Intranet: It is used for internal communication and collaboration

within a company
 2-Departmental Intranet: It is used for specific departments or teams within an
organization
 3- Enterprise Intranet: It connects multiple organizations or subsidiaries
 4- Virtual Private Intranet (VPN): It allows remote employees to access internal
resources securely
 5- Extranet-Enabled Intranet: It allows external parties to access specific parts of
the network with permission.

Consideration in Internet Development:

Scalability

Interoperability

Configurability

Manageability

Availability

Reliability

Distributeability

Serviceability

Stability
 Architecture of Intranet:

Purpose and Function:

 Internal Communication & Collaboration: Intranets facilitate communication,
knowledge sharing, and collaboration among employees.
 Document Management: Centralized storage and access to company documents,
policies, and procedures.
 Workflow Automation: Streamlining internal processes through online forms,
portals, and tools.
 Employee Engagement: Creating a platform for announcements, updates, and
employee forums.

Key Components of Intranet Architecture:

 Information Architecture (IA):
This focuses on how content is organized, labeled, and structured to ensure
users can easily find what they need.
 Navigation:
A clear and intuitive navigation system is crucial for user experience, allowing
easy access to information.
 Content Management System (CMS):
A system for managing and publishing content, including documents, images,
and other media.
 Security:
Implementing security measures to protect sensitive data and ensure only
authorized users can access the intranet.
 Hardware:
Servers, network infrastructure, and other hardware components necessary for
running the intranet.
 Software:
Operating systems, web servers, database management systems, and other
software applications.

INTRANET SOFTWARE:
Microsoft SharePoint Igloo
SAP Net Blink
Sitecore Workvivo
Oracle Fusion Jive Software
Joomla IBM Websphere

Advantages and Disadvantages of Intranet:

 Applications of Intranet:

Communication and Collaboration:

 Internal News and Updates:
Intranets serve as a platform to share company news, announcements, and
updates, ensuring employees are informed and engaged.
 Team Communication:
Intranets can facilitate team communication through forums, discussion boards,
and project-specific channels, fostering collaboration and knowledge sharing.
 Social Media for Employees:
Some intranets incorporate social media features, allowing employees to
connect and engage with each other, building a sense of community.

Knowledge Management and Information Access:

 Document Management System:
Intranets can host a document management system, allowing employees to
store, organize, and access company documents securely.
 HR Portal:
Intranets can serve as an HR portal, providing employees with access to HR-
related information, such as policies, procedures, benefits, and payroll
information.
 Training and Learning Materials:
Intranets can host training modules, learning resources, and internal knowledge
bases, enabling employees to upskill and stay informed.

Workflow Optimization and Automation:

 Workflow Automation:
Intranets can automate processes like leave requests, expense reports, and
document approvals, improving efficiency and reducing paperwork.
 Project Management:
Intranets can support project management by providing tools for task
assignment, progress tracking, and communication within project teams.
 Customer Relationship Management (CRM):
Some intranets can integrate with CRM systems, allowing employees to access
customer information and manage interactions.

Employee Engagement and Culture:

 Employee Recognition and Rewards:
Intranets can feature employee recognition programs and reward systems,
boosting morale and engagement.
 Company Culture and Values:
Intranets can be used to reinforce company culture and values, promoting a
positive and inclusive work environment.
 Feedback and Surveys:
Intranets can facilitate employee feedback collection through surveys and polls,
helping organizations improve and adapt.

EXTRANET:

 What it is:
An extranet is a private network that uses the internet to allow partial access to
authorized partners, suppliers, vendors, and other organizations for the purpose
of sharing operations and information.
 Purpose:
The primary goal is to facilitate secure communication, collaboration, and data
exchange between an organization and its external stakeholders.
 How it differs from an intranet:
While an intranet is a private network for internal use within a company, an
extranet extends that network to authorized outsiders, allowing them to access
specific resources and applications.
Examples:
 A company using an extranet to allow suppliers to access order status updates and
product information.
 A bank using an extranet to allow customers to access their accounts and perform
transactions.
 A university using an extranet to allow alumni to access information and connect
with the university.

Key Characteristics:
 Private Network:
Extranets are not open to the public like the internet, but rather designed for
specific, trusted users.
 Controlled Access:
Access to the extranet is restricted to authorized individuals or organizations,
ensuring data security and privacy.
 Extended Intranet:
Extranets build upon the infrastructure of an organization's internal network
(intranet).
 Business-to-Business:
Extranets are often used for collaboration and information sharing between
businesses, enabling processes like supply chain management, order processing,
and customer service.
 Security Measures:
Extranets employ security technologies like firewalls, encryption, and VPNs to
protect sensitive information.
 Uses Internet Protocols:
Extranets typically use the same internet protocols, like TCP/IP, as the internet,
but with added security measures.

Types of Extranets:

 Private Extranet: Uses a private, leased line to link intranets of different

organizations.
 Public Extranet: Uses the public internet for communication, with added security
measures.
 Virtual Private Network (VPN) Extranet: Uses VPN technology to create a secure,
encrypted connection between the organization's network and external users.
Examples of Extranet Use Cases:
 Supply Chain Management:
Suppliers can access order information, track inventory levels, and receive
updates on shipments.
 Customer Service:
Customers can access account information, track orders, and submit support
requests.
 Collaboration:
Partners can collaborate on projects, share documents, and communicate in
real-time.
 E-commerce:
Customers can place orders and manage their accounts online.

Automotive Network Exchange: “The Largest Extranet”

The Automotive Network Exchange (ANX), a large private extranet that connects
automotive suppliers to
automotive manufacturers

The ANX Network is a secure private network that uses standard, open Internet
protocols but carries all traffic over private lines leased from various carriers.
Through IPsec and end-to-end encryption, the ANX Network provides secure
service to its customers like that of a typical virtual private network (VPN).

It is different from a typical VPN in that the routers that make up its network
check every packet to make sure it comes from an IP address on the private
network. Thus, nobody but ANX customers can get into the network. Triple DES
encryption protects a customer’s data from the potential malicious behavior of
another customer.
Founded in 1995 by Automotive Industry Action Group (a consortium of major US
auto companies), ANX since 1999 has been owned and operated by ANX
eBusiness Corp., formerly a division of Leidos/SAIC but acquired in 2006 by One
Equity Partners. Since 2006, ANX has expanded into other markets and now
provides managed security, compliance assurance, and connectivity services to
businesses in the healthcare and retail as well as automotive sectors.

Differences between Extranet, Intranet, and Internet:

An intranet is a private, internal network restricted to members of an
organization, focusing on enhancing internal communication and operations. In
contrast, An extranet bridges the gap between the internal and external,
extending select parts of the intranet to trusted external entities like vendors and
partners.
On the other hand, the Internet is a vast, public network, facilitating global
communications and information exchange without the boundaries of
organizational affiliations or specific permissions.
Characteristics Extranet / Portal Intranet Internet

Access Restricted to specific Restricted to Open to all users

external and internal organization members worldwide
users

Purpose Collaboration with Internal communications Global sharing and

trusted external parties and operations communication

Security High (specific access High (restricted to Varies (from highly

controls) employees) secure to public)

Examples of Vendor management, Employee portals, HR Websites, global

Usage supply chain or partner resources, internal platforms, public
communications communications forums

Costs and Moderate (specific setup Moderate-High Low-Moderate

Infrastructure required) (customized setup) (depending on scale)
 ELECTRONIC PAYMENT SYSTEM
In e-commerce, an electronic payment system (EPS) enables cashless transactions
for buying and selling goods or services online, using methods like credit cards,
debit cards, e-wallets, and online banking.
Here's a more detailed explanation:
What is an Electronic Payment System (EPS)?
 An EPS is a method of making financial transactions or paying for goods and
services through an electronic medium, without the use of checks or cash.
 It facilitates the transfer of funds between individuals or businesses using digital
means.
 In the context of e-commerce, EPS allows customers to pay for products or
services online using various methods.
 These systems have revolutionized online business, making it easier for both
businesses and customers.
 Types of E-commerce Payment Systems:
 Credit Cards: A popular method of online payment, allowing customers to pay
with borrowed funds.
 Debit Cards: Directly linked to a user's bank account, allowing immediate transfer
of funds.
 E-Wallets: Prepaid accounts that enable users to store various payment methods
securely.
 Online Banking: Customers can make purchases directly from their bank
accounts.
 Mobile Payments: Using smartphones to make purchases quickly and easily.
 Smart Cards: Cards with embedded microprocessors for enhanced security and
data storage.
 Bank Transfers: Funds are electronically transferred directly from the payer's
bank account to the payee's.
 Peer-to-Peer Transfers: Services like PayPal or Paytm allow individuals to transfer
funds to each other.
 Virtual Currencies: Digital currencies like Bitcoin can be used for online
payments.
 Payment Gateways: These connect a digital storefront to a payment processing
network, facilitating secure transactions.

Benefits of E-commerce Payment Systems:

 Convenience: Customers can make purchases anytime and anywhere with
internet access.
 Speed: Transactions are processed quickly and efficiently.
 Security: Encryption and other security measures protect sensitive information.
 Reduced Costs: Businesses can reduce transaction costs and paperwork.
 Increased Reach: Online payment systems help businesses extend their market
reach.
 User-Friendly: The systems are designed to be easy to use for both businesses
and customers.
Secure Electronic Transaction(SET):
SET is a security protocol that enhances online payment security and
integrity, especially those involving debit and credit cards. SET protects electronic
payments by encrypting personal card details and authenticating users through
digital certificates. SET ensures that only authorized parties can access sensitive
information and that transactions are not tampered with.
SET was developed in the late 1990s by Visa and MasterCard, in collaboration
with several technology and Internet companies, such as Microsoft, IBM, Verisign
and Netscape. The aim was to create a standard and universal protocol for
securing online payments and promoting the growth of e-commerce.

AIM: Secure Electronic Transaction (SET) is a secure electronic payment

system that ensures the confidentiality and authentication of online transactions.
It was developed to address the security concerns associated with online
payments and provide a safe environment for conducting transactions over the
Internet. SET works by encrypting sensitive financial information for all parties
involved in the Transaction.
 Success or Failed: The Secure Electronic Transaction (SET) protocol, designed to
secure online credit card payments, ultimately failed to gain widespread adoption
due to its complexity, high costs, and inconvenience for users and businesses,
being replaced by simpler alternatives like SSL/TLS and 3D Secure.

Why did it fail?

 Complexity and Cost: SET required digital certificates, which added complexity and
cost for both businesses and consumers.
 Inconvenience: The process of using SET was perceived as cumbersome and
inconvenient compared to simpler alternatives.
 Emergence of Alternatives: Simpler and more widely adopted security protocols
like SSL/TLS (now HTTPS) and 3D Secure emerged, making SET less competitive.
 Visa's Shift to 3-D Secure: Visa and other card providers eventually adopted 3-D
Secure as the primary security framework for online payments, further diminishing
the relevance of SET.

Alternative Security Protocols:

 SSL/TLS (HTTPS): This protocol is now the standard for securing communication
between web browsers and servers, ensuring data encryption and integrity.
 3-D Secure: This framework provides additional security for online credit/debit card
transactions, often requiring authentication through a separate channel.
 Common Protocols and Technologies:
 Secure Sockets Layer (SSL) and Transport Layer Security (TLS):
These are cryptographic protocols that encrypt data transmitted between a web
browser and a server, ensuring secure communication.
 Secure Electronic Transaction (SET):
An early security protocol designed to secure credit card transactions on the
internet, using digital certificates and encryption to protect cardholder
information.
 Payment Card Industry Data Security Standard (PCI DSS):
A security standard for handling credit card information, requiring businesses to
implement specific security measures to protect cardholder data.
 Public Key Infrastructure (PKI):
A system that uses digital certificates and public/private keys to authenticate
users and encrypt data, commonly used in SET and other security protocols.
 Digital Certificates:
Electronic documents that bind a public key to a specific entity, used for
authentication and encryption.
 Two-Factor Authentication (2FA):
 A security measure that requires users to provide two different forms of
verification, such as a password and a code sent to their phone, to access an
account.
 Biometric Authentication:
Using unique physical characteristics, such as fingerprints or facial recognition,
to verify a user's identity.
 Unified Payments Interface (UPI):
An innovative e-payment system that allows users to conduct various financial
transactions using their smartphones.
 Bharat BillPay:
A secure and integrated online ecosystem that simplifies the payment of
recurring bills.

How Protocols Work:

1. Transaction Initiation:
A user initiates a payment through an electronic payment system, such as a
mobile app or online banking platform.
2. Data Encryption:
The payment details, including card information or other sensitive data, are
encrypted using a security protocol like SSL/TLS or SET.
3. Data Transmission:
The encrypted data is transmitted securely to the payment gateway or
merchant's server.
4. Authentication:
The payment gateway or merchant's server verifies the user's identity using
digital certificates or other authentication methods.

5. Transaction Processing:
The payment gateway processes the transaction, contacting the card issuer or
bank to authorize the payment.
6. Funds Transfer:
 Once authorized, the funds are transferred from the payer's account to the
payee's account.

7. Security Measures:
Throughout the process, security protocols like encryption, authentication, and
data integrity measures are used to protect the transaction and sensitive data.

Security Schemes in Electronic Payment System:

Electronic payment systems employ various security schemes,
including encryption (SSL/TLS), tokenization, multi-factor authentication (MFA),
PCI DSS compliance, and 3D Secure, to protect sensitive data and ensure secure
transactions.
Here's a more detailed explanation of these security schemes:
1. Encryption (SSL/TLS):
 What it is:
SSL (Secure Sockets Layer) and TLS (Transport Layer Security) protocols encrypt
data transmitted between a user's device and a payment system's server,
preventing interception by unauthorized parties.
 How it works:
SSL/TLS establishes a secure connection using encryption algorithms, ensuring
that sensitive information like credit card details remains confidential during
transmission.

2. Tokenization:
 What it is:
Tokenization replaces sensitive payment data (like credit card numbers) with a
unique, non-sensitive token.
 How it works:
Instead of storing the actual card number, the system stores a token, which is a
random string of characters that represents the card information. This token is
used for subsequent transactions, reducing the risk of data breaches.
 3. Multi-Factor Authentication (MFA):
 What it is:
MFA requires users to verify their identity using multiple factors, such as a
password and a one-time code sent to their phone or a fingerprint.
 How it works:
By requiring multiple forms of verification, MFA significantly reduces the risk of
unauthorized access to payment systems.

4. PCI DSS Compliance:

 What it is:
PCI DSS (Payment Card Industry Data Security Standard) is a set of security
standards designed to ensure that businesses that process, store, or transmit
credit card information maintain a secure environment.
 How it works:
PCI DSS compliance involves implementing various security measures, including
encryption, access controls, and regular security audits, to protect cardholder
data.

5. 3D Secure:
 What it is:
3D Secure is a security protocol that adds an extra layer of authentication to
online card transactions.
 How it works:
3D Secure verifies the cardholder's identity by requiring them to enter a
password or a one-time code sent via text message or email, reducing the risk of
fraudulent transactions.
 Steps of Online Credit Processing:

Online credit card processing involves several key steps: the customer initiates a
transaction, the merchant's payment gateway sends the card details to a payment
processor, which then verifies the card and requests authorization from the card
network and issuing bank, and finally, if approved, the funds are transferred to
the merchant's account.
1. Transaction Initiation:
 The customer initiates the transaction by entering their credit card details on the
merchant's website or app.

2. Data Transmission to Payment Gateway:

 The merchant's website securely transmits the card information to the payment
gateway, which is a service that facilitates online payments.

3. Payment Processor Verification:

The payment gateway sends the transaction details to the payment processor,
which verifies the card information and requests authorization from the card
network (e.g., Visa, Mastercard).
 4. Authorization Request:
 The card network sends the authorization request to the customer's issuing bank
(the bank that issued the credit card).

5. Authorization Response:
 The issuing bank checks for sufficient funds, verifies the transaction details, and
sends an authorization response (approval or decline) back to the card network.

6. Funds Transfer:
 If the transaction is approved, the payment processor initiates the funds transfer
from the issuing bank to the merchant's acquiring bank (the bank that the
merchant uses to process payments).

7. Settlement:
 The merchant's acquiring bank deposits the funds into the merchant's account,
minus any processing fees.
Advantages and Disadvantages of Credit Cards:

Benefits of Credit Cards:

1. Easy access to credit

The biggest advantage of a credit card is its easy access to credit. Credit
cards function on a deferred payment basis, which means you get to use your
card now and pay for your purchases later. The money used does not go out of
your account, thus not denting your bank balance every time you swipe.

2. Building a line of credit

Credit cards offer you the chance to build up a line of credit. This is very important
as it allows banks to view an active credit history, based on your card repayments
and card usage. Banks and financial institutions often look to credit card usage as
a way to gauge a potential loan applicant's creditworthiness, making your credit
card important for a future loans or rental applications.

3. EMI facility
If you plan on making a large purchase and don't want to sink your savings into it,
you can choose to put it on your credit card as a way to defer payment. In
addition to this, you can also choose to pay off your purchase in equated monthly
installments, ensuring you aren't paying a lump sum for it and denting your bank
balance. Paying through EMI is cheaper than taking out a personal loan to pay for
a purchase, such as a television or an expensive refrigerator.

4. Incentives and offers

Most credit cards come packed with offers and incentives to use your card. These
range from cash back to rewards point accumulation each time you swipe your
card, which can later be redeemed as air miles or used towards paying your
outstanding card dues. Lenders also offer discounts on purchases made through a
credit card, such as on flight tickets, holidays or large purchases, helping you save.

5. Flexible credit
Credit cards come with an interest-free period, which is a period of time during
which your outstanding credit is not charged interest. Ranging between 45-60
days, you can avail free, short-term credit if you pay off the entire balance due by
your credit card bill payment date. Thus, you can benefit from a credit advance
without having to pay the charges associated with having an outstanding balance
on your credit card.

6. Record of expenses
A credit card records each purchase made through the card, with a detailed list
sent with your monthly credit card statement. This can be used to determine and
track your spending and purchases, which could be useful when chalking out a
budget or for tax purposes. Lenders also provide instant alerts each time you
swipe your card, detailing the amount of credit still available as well as the
current outstanding on your card.

7. Purchase protection
Credit cards offer additional protection in the form of insurance for card
purchases that might be lost, damaged or stolen. The credit card statement can
be used to vouch for the veracity of a claim, if you wish to file one.

Disadvantages of Credit Cards:

1. Minimum due trap

The biggest con of a credit card is the minimum due amount that is displayed at
the top of a bill statement. A number of credit card holders are deceived into
thinking the minimum amount is the total due they are obliged to pay, when in
fact it is the least amount that the company expects you to pay to continue
receiving credit facilities.
This results in customers assuming their bill is low and spending even more,
accruing interest on their outstanding, which could build up to a large and
unmanageable sum over time.

2. Hidden costs
Credit cards appear to be simple and straightforward at the outset, but have a
number of hidden charges that could rack up the expenses overall. Credit cards
have a number of taxes and fees, such as late payment fees, joining fees, renewal
fees and processing fees. Missing a card payment could result in a penalty and
repeated late payments could even result in the reduction of your credit limit,
which would have a negative impact on your credit score and future credit
prospects.
 3. Easy to overuse
With revolving credit, since your bank balance stays the same, it might be
tempting to put all your purchases on your card, making you unaware of how
much you owe. This could lead to you overspending and owing more than you can
pay back, beginning the cycle of debt and high interest rates on your future
payments.

4. High interest rate

If you do not clear your dues by your billing due date, the amount is carried
forward and interest is charged on it. This interest is accrued over a period of time
on purchases that are made after the interest-free period. Credit card interest
rates are quite high, with the average rate being 3% per month, which would
amount to 36% per annum.

5. Credit Card fraud

Though not very common, there are chances you might be victim of credit card
fraud. With advances in technology, it is possible to clone a card and gain access
to confidential information through which another individual or entity can make
purchases on your card. Check your statements carefully for purchases that look
suspicious and inform the bank immediately if you suspect card fraud. Banks
usually waive off charges if the fraud is proven, so you will not have to pay for
purchases charged by the thief.

Advantages and Disadvantages of Debit Card:

Debit cards offer convenient access to funds and help with budgeting, but they
lack features like cashback rewards and may lead to overdraft fees if not managed
carefully.
Advantages:
 Convenience: Debit cards are widely accepted and allow for easy payments and
cash withdrawals from ATMs.
 Budgeting Tool: Since purchases are directly debited from your account, debit
cards can help you avoid overspending and stay within your budget.
 Security: Debit cards often have PIN protection and fraud detection features,
offering a level of security against unauthorized transactions.
  No Interest Charges: Unlike credit cards, debit cards don't charge interest, so you
don't incur debt if you spend more than you have.
 Easy Access to Funds: You can easily access your money for everyday purchases
and withdrawals.
 No Annual Fees: Many debit cards don't have annual fees, unlike some credit
cards.
 Easy to Obtain: Debit cards are generally easier to obtain than credit cards, as
they are linked to your bank account.

Disadvantages:
 Limited Fraud Protection:
Debit cards may offer less protection against fraud compared to credit cards,
and unauthorized transactions can directly impact your bank account.
 Overdraft Fees:
If you spend more than you have in your account, you may incur overdraft fees.
 No Credit Building:
Using a debit card doesn't contribute to building your credit score, unlike credit
cards.
 Spending Limits:
Debit cards often have spending limits, which can be inconvenient for large
purchases.
 Identity Theft:
Although less common than with credit cards, debit card information can still be
stolen and used for fraudulent transactions.
 No Rewards or Benefits:
Debit cards typically don't offer rewards programs, cashback, or other benefits
like credit cards.
 Fees:
While many debit cards don't have annual fees, you may still encounter fees for
certain transactions, such as ATM withdrawals at non-network ATMs.
 Electronic Fund Transfer:

In e-commerce, Electronic Funds Transfer (EFT) refers to the digital

movement of money from one bank account to another, encompassing various
online payment methods like credit/debit cards, online bank transfers, and digital
wallets, facilitating secure and efficient transactions.

What is EFT?
 EFT is a digital method of transferring money from one bank account to another,
without the need for physical checks or cash.
 It's a broader term that includes various electronic payment methods.

EFT in E-commerce
 In e-commerce, EFT is used for online payments, where customers pay merchants
via online bank account transactions, debit cards, or credit cards using a payment
processor.
 Examples include online bank transfers, credit card payments, and digital wallet
transactions.

How it works
 The sender initiates the transfer electronically, and the request goes through digital
networks to the sender's bank and then to the recipient's bank.
 The transfer is usually completed within a few days.

Benefits of EFT in E-commerce

 Speed and Efficiency: EFTs are faster and more efficient than traditional payment
methods like checks or cash.
 Security: EFTs are generally considered secure, as transactions are encrypted and
take place over secure networks.
 Convenience: EFTs allow for easy and convenient payments, as they can be made
from anywhere with an internet connection.
 Cost-effectiveness: EFTs can be more cost-effective for businesses than traditional
payment methods, as they reduce the need for physical checks and cash handling.

Common EFT Transaction Types:

ACH (Automated Clearing House) Transfers: These are electronic payments
processed through the ACH network, commonly used for direct deposits, bill
payments, and recurring payments.
Direct Deposits: Employers deposit employee paychecks directly into their bank
accounts.
Direct Payments: Payments made to vendors or creditors.
Direct Debits: Recurring payments, such as utility bills or loan payments,
deducted from a bank account.
Wire Transfers: These are fast, secure, and often used for large international or
domestic payments.
Credit and Debit Card Transactions: Payments made using credit or debit cards,
both online and at point-of-sale (POS).
Online Bill Payments: Paying bills online through a bank's website or a third-party
payment platform.
Peer-to-Peer Payments: Sending money to friends or family using mobile
payment apps or online platforms.
ATM Transactions: Withdrawing cash or transferring funds at an Automated
Teller Machine (ATM).
E-checks: Digital versions of paper checks, used for online payments.
Mobile Payments: Using mobile devices (phones, tablets) to make payments.
Real-Time Payments (RTP): A system for immediate and real-time payments
between banks.
NEFT (National Electronic Fund Transfer): A method for transferring funds
between different bank accounts in India.
RTGS (Real-Time Gross Settlement): A method for transferring large sums of
money in real-time.
 IMPS (Immediate Payment Service): A method for transferring funds instantly
between bank accounts in India.
UPI (Unified Payments Interface): A real-time payment system in India that
allows for instant money transfers between bank accounts.

Stored Value Cards and E-Cash:

Stored Value Cards (SVCs):

 Definition:
SVCs are payment cards that store a predetermined amount of money on the
card itself, rather than being linked to a bank account or credit line.
 How they work:
You purchase the card with a specific amount, and then you can use it to make
purchases until the balance is zero.
 Examples:
Gift cards, prepaid cards, and some public transportation cards.
 Uses:
Used for various purposes, including gift-giving, specific retailer spending, travel
expenses, and government benefit payments.
 Types:
 Closed-loop: Can only be used at the issuing merchant or a specific network of
merchants.
 Open-loop: Can be used anywhere that accepts the card's network (e.g., Visa,
Mastercard).
E-cash:
 Definition: E-cash is a digital form of cash, stored in a digital wallet or account,
that can be used for online and in-person transactions.
 How it works: Users purchase cash credits, store them in their digital wallet, and
then use them for electronic purchases.
 Examples: Digital wallets like PayPal, Apple Pay, or Google Wallet.
 Uses: Online shopping, in-person purchases, and mobile payments.
 Benefits: Convenience, security, and anonymity.
 Magnetic Stripe Cards:
 Data Storage: Store data on a magnetic strip, which is easily swiped and read.
 Security: Static data on the stripe is vulnerable to skimming and cloning.
 Transaction: Swiping the card transmits the card number and other static data to
the reader.
 Example: Traditional credit and debit cards with a magnetic stripe on the back.

Chip Cards (EMV):

 Data Storage:
Utilize a microchip (EMV chip) to store data and generate unique, encrypted
codes for each transaction.
 Security:
More secure because the data is dynamic and encrypted, making it harder to
copy or clone.
 Transaction:
Inserting or tapping the card (depending on the reader) transmits the unique
transaction code, not the card number.
 Example:
Credit and debit cards with a small, square chip on the front.
 Benefits:
Reduces fraud, provides better security, and allows for more secure online
transactions.

Electronic Cheque System:

In e-commerce, an e-cheque (also known as an electronic check or ACH direct
debit) is a digital version of a traditional paper check, facilitating online payments
by transferring funds electronically from the payer's account to the payee's
account.
 Digital Equivalent:
An e-cheque is a digital version of a paper check, enabling online payments.
 Electronic Funds Transfer:
It facilitates the transfer of funds electronically from the payer's bank account to
the payee's bank account.
 ACH Network:
E-cheques typically utilize the Automated Clearing House (ACH) network for
processing.
 Security Features:
E-cheques often incorporate security features like authentication, digital
signatures, and encryption to enhance security.
 Paperless and Environmentally Friendly:
E-cheques are paperless and environmentally friendly alternatives to traditional
check payments
 Similar to Paper Cheque:
E-cheques have the same legal status as paper cheques

How e-Cheques Work:

1. Initiation:
The payment is initiated by the payer, who provides their bank account details
and the amount to be transferred.
2. Electronic Transfer:
The funds are transferred electronically from the payer's bank account to the
payee's bank account via the ACH network.
3. Verification:
The payer's bank verifies the account information and available funds.
4. Settlement:
The ACH network settles the transaction between the banks, completing the
payment.
 Benefits of Using e-Cheques:
 Faster Processing: E-cheques are processed faster than traditional paper checks.
 Reduced Costs: They can be more cost-effective than other payment methods.
 Enhanced Security: E-cheques often have enhanced security features, such as
authentication and encryption.
 Convenience: They provide a convenient way for customers to make online
payments.
 Recurring Payments: E-cheques are suitable for recurring payments, such as
subscriptions or memberships.
 Audit Trail: E-cheques create an electronic record of transactions, which can be
helpful for auditing and record-keeping.

Working of E-Cheque:

1. Consumer (or buyer) has to visit the website of seller or supplier and has to
select the goods to be purchased of his choice.
2. Then the buyer gets invoices, details and the bill from the seller.
3. Buyer then sends the cheque to the supplier after filling and signing it.
4. The seller deposits the cheque with his bank.
5. The seller’s bank sends the cheque to buyer’s bank to confirm its validity
and for updating the record of buyer’s account.
6. After getting validity confirmation, the seller’s bank informs the seller about
its genuineness.
7. The seller now supplies the goods and receives acknowledgement from
buyer for its receipt
8. Buyer requests his bank for clearance of cheque(s) for making payment to
seller’s bank. The bank debits from the accounts of buyer and credits the
amount to seller’s bank.
9. Seller’s bank informs the seller that payment has been received against E-
Cheque and his account has been credit.
 Prospects of Electronic Payment System:
The future of electronic payment systems (e-payments) is promising, with
increasing adoption driven by convenience, speed, security, and cost-
effectiveness, leading to a shift towards digital and cashless transactions.
Here's a breakdown of the prospects:
 Increased Adoption and Growth:
Electronic payments are becoming increasingly prevalent, with digital
transactions expected to continue growing significantly.
 Convenience and Speed:
E-payments offer users the ease of conducting transactions anytime, anywhere,
and at a faster pace than traditional methods.
 Enhanced Security:
Robust encryption and authentication mechanisms protect financial data,
reducing the risk of fraud and unauthorized access.
 Cost-Effectiveness:
Electronic payments often entail lower processing fees than traditional payment
methods, leading to cost savings for businesses and consumers.
 Global Accessibility:
E-payment systems transcend geographical boundaries, enabling seamless
international transactions and fostering expansion into new markets.
 Record-Keeping Simplified:
E-payment systems automate record-keeping processes, providing businesses
with accurate and easily accessible transaction data.
 Technological Advancements:
Continued innovation in areas like mobile payments, digital wallets, and
blockchain technology will further shape the future of e-payments.
 Challenges:
Despite the promising prospects, challenges such as security risks, the digital
divide, and the need for interoperability must be addressed.

Examples of Trends:
 Mobile Payments: Mobile wallets and mobile payment apps are becoming
increasingly popular.
 Open Banking: Open banking, or pay-by-bank, is another trend to watch.
 Real-Time Payments (RTP): RTP is expected to become even more prevalent,
offering faster and more convenient payment options, with a projected 27% share
of all electronic payments globally by 2028.
 Mobile and Digital Wallets: Mobile and digital wallets will continue to dominate the
payment landscape, facilitating seamless transactions and enhancing the user
experience.
 Buy Now, Pay Later (BNPL): BNPL services will continue to gain traction, offering
consumers flexibility and convenience in managing their purchases.
 Account-to-Account (A2A) Payments: A2A payments, which involve direct transfers
between bank accounts, are expected to grow significantly, offering a faster and
more cost-effective alternative to traditional payment methods.
 Central Bank Digital Currencies (CBDCs): The development and implementation of
CBDCs are expected to reshape the payments landscape, potentially leading to more
efficient and secure payment systems.
 Biometric Authentication: Biometric authentication, such as fingerprint or facial
recognition, will become more integrated into payment systems, enhancing security
and convenience.
 Embedded Payments: Payments will increasingly be embedded within other
applications and platforms, creating a more seamless and integrated user
experience.
 Cross-Border Payments: Innovations in cross-border payments will make
international transactions faster, cheaper, and more transparent, catering to the
needs of a globalized economy.
 Managerial Issues in Electronic Payment System:
Managerial challenges in electronic payment systems include security concerns,
fraud prevention, regulatory compliance, technical issues, and managing
customer trust, all of which require proactive measures and continuous
adaptation.
 Data Breaches and Cyber Threats:
Electronic payment systems are vulnerable to cyberattacks, data breaches, and
identity theft, requiring robust security measures and encryption protocols.
 Fraudulent Transactions:
The risk of fraudulent transactions is high, necessitating advanced fraud
detection and prevention techniques.
 Combating Phishing and Identity Theft:
Protecting users from phishing attempts and identity theft is crucial, requiring
strong authentication methods and user awareness campaigns.