Download Challenges & Characteristics of Payment Systems in E-commerce: Agents & Digital Payments and more Study notes Computer Science in PDF only on Docsity! Software Agents and Electronic Commerce CS486-22 Payment and Exchange Chris Brooks Department of Computer Science University of San Francisco 22-0: Introduction Payment and exchange is the third aspect of an e-commerce transaction You’ve found what you want (discovery) and agreed to prices and terms (negotiation) Now how to transfer everything? 22-3: Brick-and-mortar payment methods Checks Less universal, relatively easy and secure Some float - can take several days for a check to clear Require a third party Money orders, cashiers checks, travelers’ checks reduce risk Upfront payment guaranteed by check issuer Work like cash, without anonymity 22-4: Brick-and-mortar payment methods Credit Cards Third party guarantees payment to seller Very secure, authorization needed,hard to use in P2P Merchants must pay a fee Consumers can refute transactions 22-5: Brick-and-mortar payment methods Debit Cards a form of stored value system Unlike credit cards, deducts from a bank account Can be tied into a credit card Similiar issues to credit cards, less universal Fewer fraud protections 22-8: Desirable Characteristics for Payment Systems Hardware independent No special-purpose equipment needed for buyer or seller Storable Can be retrieved remotely, accrue interest, add stability Accounts needed? Can limit universal access Network effects Widely available and adopted Chicken-and-egg problem here 22-9: Other potential characteristics of Payment Systems Anonymity Efficency Fast transaction processing Low-cost processing Transparent to user Interest (float) - who gets it? 22-10: Current Systems: Credit cards Currently very popular: $1.7 trillion per year 95% of online transactions ($47 billion) in US Less popular elsewhere (50% outside of US) Merchant pays a transaction fee. This is a percentage of the sale Split between merchant’s bank, cardholder association (Visa) and transaction processing agencies. Typically between 1.5% and 3.5% Rate depends on volume, risk, number of chargebacks 22-13: Current Systems: Credit cards Are they a good payment mechanism for e-commerce? Sometimes. Work fine for relatively large B2C purchases. Merchant expected to assume risk, both for payment and fraud. Issues with setup time, anonymity, fungibility Not everyone has a credit card (especially juveniles) 22-14: Current Systems: Smart cards User has a card that either encodes an amount on it or identifies them to a larger system. Card is tied to a store of currency Example: Dons dollars, American Express Cards can be contact or contactless Contact: Requires physical contact with a card reader. Smart cards, gift cards. Contactless: A remote reader can process the card. EZPass. 22-15: Current Systems: Smart cards Advantages: easy, (mostly) secure, fast Can be integrated into credit card systems (AmEx Blue) Disadvantages: Specialized equipment needed, typically cannot be reconverted into cash or other payment systems. 22-18: Current Systems: RocketCash Like PayPal, Rocketcash allows you to store value in an account. This can then be used for online purchases. Aimed at teens without credit cards A subsidiary of Coca-cola Rocketcash given away with Coke, Sprite, Nestle, etc. Can be used to buy items from online vendors. 22-19: Current Systems: Yahoo! PayDirect Users can route money from their personal checking account, or from a PayDirect account. Professional users can accept credit cards, for a fee. Users can have funds transferred into their account by other parties. Similiar to PayPal. 22-20: Concepts: Digital Wallets The idea of a digital wallet is a hot e-commerce topic Provides a wrapper for your credit card and other personal information. You register your information with a single provider. This provider then handles: Authentication and privacy Payment processing Bill management Loyalty programs Micropayment aggregation 22-23: Escrow services What if the buyer isn’t happy? Buyer returns merchandise Buyer’s money returned Escrow service may also help negotiate disputes, for example over shipping charges 22-24: State of the Art in Payment Many systems have been proposed, but few adopted. What are some of the challenges? Network effects Viable business models Assignment/assumption of risk Transaction costs and speed Technological issues
