E-Payment

As payment is an integral part of mercantile process, electronic payment system is an integral part of e-commerce. The emergence of e-commerce has created new financial needs that in many cases cannot be effectively fulfilled by traditional payment systems. For instance, new types of purchasing relationships-such as auction between individuals onlinehave resulted in the need for peer-to-peer3 payment methods that allows individuals to e-mail payments to the other individual

DEBIT CARDS
It is a small plastic card with a unique number, which identifies the account. The debit card also has an expiration date and own identification number. While using debit card one must has account in that very bank. When one use debit card then the money immediately deducted from his/her account.

Most of the time ATM cards have a features of debit cards

Advantages of debit card

Easier approval Free from carrying cash Merchant accept debit cards more readily than check

SMART CARD
It has plastic body and micro processor chip embedded in it. A smart card chip has the capacity to store data. It helps in storing personal and work-related information etc. It also store a value of money, which decrease with use. Ex: Mondex and visa cash It can be accessed only with the unique PIN of an individual. These are secure because they are in encrypted form and user personally can encrypt or decrypt the data.

SMART CARD
Most smart cards have been designed with the look and feel of a credit or debit card, but can function on at least three levels (credit, debit and personal information). Smart cards include a micro chip as the central processing unit, random access memory (RAM) and data storage of around 10 MB. The smart card is an electronic recording device. Information in the microchip can instantaneously verify the cardholder's identity and any privileges to which the cardholder may be entitled. Information such as withdrawals, sales, and bills can be processed immediately and if/when necessary; those records can be transmitted to a central computer for file updating. It is an electronic recording device. Information in the microchip can instantaneously verify the card holder's identity and any privileges to which the cardholder may be entitled. Information such as withdrawals, sales and bills can be processed immediately and if/when necessary those can be transmitted to a central computer for file updating

Exhibit 12.2 Smart Card

Smart Card Applications

Ticketless travel Authentication, ID Medical records Ecash Store loyalty programs Personal profiles Government Licenses Mall parking

Advantages and Disadvantages of Smart Cards

Advantages: 1. Atomic, debt-free transactions 2. Feasible for very small transactions (information commerce) 3. (Potentially) anonymous 4. Security of physical storage 5. (Potentially) currency-neutral Disadvantages: 1. Low maximum transaction limit (not suitable for B2B or most B2C) 2. High Infrastructure costs (not suitable for C2C) 3. Single physical point of failure (the card) 4. Not (yet) widely used

Mondex Smart Card Processing

E-cash Concept
Merchant

5 4 Bank 3

2 1

1. Consumer buys e-cash from Bank 2. Bank sends e-cash bits to consumer (after charging that amount plus fee) 3. Consumer sends e-cash to merchant 4. Merchant checks with Bank that e-cash is valid (check for forgery or fraud) 5. Bank verifies that e-cash is valid 6. Parties complete transaction: e.g., merchant present e-cash to issuing back for deposit once goods or services are delivered

Consumer