Explain any two systems of payments that can be implemented on e-commerce websites? List their advantages and issues.
E-commerce sites use electronic payment, where electronic payment refers to paperless monetary transactions. Electronic payment has revolutionized the business processing by reducing the paperwork, transaction costs, and labor cost. Being user friendly and less time-consuming than manual processing, it helps business organization to expand its market reach/expansion. Listed below are some of the modes of electronic payments −
- Credit Card
- Debit Card
- Smart Card
- E-Money
- Electronic Fund Transfer (EFT)
Credit Card
Payment using credit card is one of most common mode of electronic payment. 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. It is usually credit card monthly payment cycle. 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.
Credit Card Payment Proces
StepDescription
Step 1 Bank issues and activates a credit card to the customer on his/her request.
Step 2 The customer presents the credit card information to the merchant site or to the merchant from whom he/she wants to purchase a product/service.
Step 3 Merchant validates the customer's identity by asking for approval from the card brand company.
Step 4Card brand company authenticates the credit card and pays the transaction by credit. Merchant keeps the sales slip.
Step 5 Merchant submits the sales slip to acquirer banks and gets the service charges paid to him/her.
Step 6 Acquirer bank requests the card brand company to clear the credit amount
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