Chapter 11 Key Concepts

CHAPTER 11

What you should know:
-B2C vs. B2C (this chapter focuses on B2C)
-Top 4 payment methods of all commerce
-Cash
-Cheque
-Debit Card
-Credit Card
-Online payments
-95% of ecommerce transactions in the US are with credit cards
-Scrip (fake money, like Canadian Tire $ or Air Miles, that cannot be exchanged for cash, but can be used to purchase merchandise on the Internet) “Flooz” and “Beenz”.
-Consumer security
-Privacy & security
-Independence (whatever form of payment I have, I should be able to use w/ that merchant)
-Portability
-Convenience (must be simple to use)
-Phishing (when a Bank or other trusted authority is giving you money, and a third party sends you a login page that is not actually yours, in order to get your login info)
-Payment cards (all plastic; debit or credit, charge cards, etc.)
-Credit cards (open-loop processing)
-Charge cards (closed-loop processing) must be paid at the end of the month. Safer than open-loop, as there are fewer parties involved – you deal directly with Amex, not the bank
-Single-use credit cards
Advantages of using plastic
-Consumer protection from fraud
-World-wide acceptance (for credit cards mostly)
-Currency conversion (foreign exchange transactions)
-Merchant protection (authorization/verification) – the vendor knows he is going to get paid
Disadvantages
-associated fees for transactions or monthly fees for the merchant
-minimum charge of $0.30 per transaction or 1-2% of the value of the transaction
-annual fees for the consumer
-Payment processing
-EMV standard (like EDI system)
-30 day shipping requirement (if your card is billed, they must ship the product within 30 days)
-merchant accounts required to accept credit cards
-general payment service providers- icVerify software- runs credit card numbers to verify that they are legit
-online payment service providers (such as Internet Secure, PayPal, etc.) that process online payments for the vendor
-Electronic Cash
Advantages
-works well for micro-payments and small-payments
-the exchange of digital information, not the bank account information
-readily exchange for cash, unlike Scrip
-Useful for those who cannot get credit cards (due to bad credit, or the country they reside in)
-no need for authorizations, like credit cards
-Independence: unrelated to any proprietary network or storage device
-Portability: freely transferable btw/ two parties (across borders)
-Convenience: does not require any special software/hardware
Disadvantages
-Not standardized or universally accepted
-no audit trail, due to independence and privacy
-potential for double spending and money laundering
-susceptible to forgery
Online systems
-PayPal, WorldPay, Authorize.net, etc.
-Electronic Wallets
-smart cards: websites where you store all your personal information, such as medical, passport, car servicing, debit and credit information
-server-side wallets: used to auto-fill fields. Information is with only one server
-client-side: all information is stored in your own computer, not someone else’s.