ELECTRONIC PAYMENT SYSTEM
Electronic Payments or e-payments refer to the technological breakthrough that enables us to perform financial transactions electronically. It can also be explain as a way of paying for a goods or services electronically, instead of using cash or a check, in person or by mail.
TYPES OF ELECTRONIC PAYMENT SYSTEM
Some of the types of electronic payments are the following;
• Credit Card
• Debit Card
• Smart Card
• Electronic Fund Transfer (EFT)
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 use to read credit card via card readers. When a customer ...view middle of the document...
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 debit card and credit card is that in case of payment through debit card, amount gets deducted from card's bank account immediately and there should be sufficient balance in bank account for the transaction to get completed. Whereas in case of credit card there is no such compulsion.
Debit cards free customer to carry cash, cheques and even merchants accepts debit card more readily. Having restriction on amount being in bank account also helps customer to keep a check on his/her spending.
Debit card payment process
1 Customer provides debit card information to merchant for purchase.
2 Merchant sends debit card information to payment processor for payment authorization.
3 Payment processor forwards relevant information to card issuer for authorization.
4 Card issuer debits amount from customers account.
5 Card issuer sends the full amount to payment processor
6 Payment processor makes deposit to merchant's account
Diagram for the payment processes of the debit and credit cards
Smart card is again similar to credit card and debit card in appearance but it has a small microprocessor chip embedded in it. It has the capacity to store customer work related/personal information. Smart card is also use to store money, which is reduced as per usage.
Smart card can be accessed only using a PIN of customer. Smart cards are secure as they stores information in encrypted format and are less expensive/provides faster processing. Mondex and Visa Cash cards are examples of smart cards.
E-Money transactions refer to situation where payment is done over the network and amount gets transferred from one financial body to another financial body without any involvement of a middleman. E-money transactions are faster, convenient and save a lot of time.
Online payments done via credit card, debit card or smart card are examples of e-money transactions. Another popular example is e-cash. In case of e-cash, both customer and merchant both have to sign up with the bank or company issuing e-cash.
ELECTRONIC FUND TRANSFER