Secure electronic funds transfer (EFT) is crucial to e-commerce. Credit-card payments, digital cash and e-wallets, smart cards, micropayments and electronic bill presentment and payment are methods for conducting online transactions. Many companies offer products, software and services that enable monetary transactions on the Web.
1. Credit-Card Payment
Although credit cards are a popular form of online payment, many people resist online credit-card transactions because of security concerns. Customers fear credit-card fraud by merchants and third parties. However, most credit cards, such as the Prodigy Internet® Mastercard® and American Express, have features that enable secure online and offline payments.
To accept credit-card payments, a merchant must have a merchant account with a bank. Traditional merchant accounts accept only point-of-sale (POS) transactions, or those that occur when customers present credit cards at stores. However, the growth of e-com-merce has resulted in the establishment of specialized Internet merchant accounts that handle online credit-card transactions. These consist of card-not-present (CNP) transac-tions. For example, when users make credit-card purchases through the Internet, they can provide the card numbers and expiration dates, but the merchant does not see the actual cards involved in the transactions. A merchant account can be established through either a bank or a third-party service.
2. Digital Cash and e-Wallets
Digital cash is one example of digital currency. It is stored electronically and can be used to make online electronic payments. Digital-cash accounts are similar to traditional bank accounts; consumers deposit money into digital-cash accounts for use in digital transac-tions. Often, digital cash is used in conjunction with other payment technologies, such as digital wallets. In addition to providing a payment alternative for customers with security concerns regarding online credit-card transactions, digital cash allows people who do not have credit cards to shop online.
To facilitate the credit-card order process, many companies are introducing electronic wallet services. E-wallets keep track of billing and shipping information so that it can be entered with one click at participating merchants’ sites. E-wallets also store e-checks, e-cash and credit-card information for multiple cards.
Merchants are required to pay a fee for each credit-card transaction that they process, which becomes costly when customers purchase inexpensive items. Sometimes, the cost of an item is actually lower than the standard transaction fee, causing the merchant to incur loss-es. Micropayment (payments that generally do not exceed $10) enables ways for nominally priced products and services (such as music, pictures, texts or videos) to be sold profitably over the Web. For instance, a phone bill is essentially an aggregation of micropayments that are charged periodically at set intervals to justify the transaction fee. To offer micropay ment processing, some companies have formed strategic partnerships with telephone carri-ers and utility companies.
4. Smart Cards
Because they contain embedded computer chips, smart cards are able to hold more infor-mation than can ordinary credit cards with magnetic strips. Smart cards enable the conve-nient storage of information regarding such topics as health-care, personal identification, retail and banking.
Smart cards can require users to enter passwords, thus offering a higher level of secu-rity than credit cards. Information maintained on smart cards can be designated as “read only” or as “no access.” The cards can also be enhanced with additional security features, such as encryption and photo identification.
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