Introduction to Security & Payment - E-Commerce | E-Commerce - B Com PDF Download

INTRODUCTION

Electronic payment systems are central to on-line business process as companies look for ways to serve customers faster and at lower cost. Emerging innovations in the payment for goods and services in electronic commerce promise to offer a wide range of new business opportunities.
Electronic payment systems and e-commerce are highly linked given that on-line consumers must pay for products and services. Clearly, payment is an integral part of the mercantile process and prompt payment is crucial. If the claims and debits of the various participants (consumers, companies and banks) are not balanced because of payment delay, then the entire business chain is disrupted. Hence an important aspect of ecommerce is prompt and secure payment, clearing, and settlement of credit or debit 
claims.
The current state of on-line electronic payments is in many ways reminiscent of the medieval ages. The merchants of Asia and Europe faced a similar problem while trying to unlock the commercial potential of the expanding marketplace. Those ancient traders faced a number of obstacles (e.g., conflicting local laws and customs regarding commercial practices and incompatible and nonconvertible currencies) that restricted trade. To circumvent some of these problems, traders invented various forms of payment instruments. The merchants also developed commercial law surrounding the use of  these instruments that proved to be one of the turning points in the history of trade and commerce. We are on the verge of a similar sort of development today, but one that is unlikely to take anywhere near the centuries it took for the traditional payment system to 
evolve.

Everyone agrees that the payment and settlement process is a potential bottleneck in the fast-moving electronic commerce environment if we rely on conventional payment methods such as cash, checks, bank drafts, or bills of exchange. Electronic replicas of these conventional instruments are not well suited for the speed required in e-commerce purchase processing. For instance, payments of small denominations (micropayments) must be made and accepted by vendors in real time for snippets of information. Conventional instruments are too slow for micropayments and the high transaction costs involved in processing them add greatly to the overhead. Therefore new methods of payment are needed to meet the emerging demands of e-commerce. These neo-payment instruments must be secure, have a low processing cost, and be accepted widely as global currency tender.

Electronic Payment Systems : Electronic payment systems are becoming central to on-line business transactions nowadays as companies look for various methods to serve customers faster and more cost effectively. Electronic commerce brings a wide range of new worldwide business opportunities. There is no doubt that electronic payment systems are becoming more and more common and will play an important role in the business world. Electronic payment always involves a payer and a payee who exchange money for goods or services. At least one financial institution like a bank will act as the issuer (used by the payer) and the acquirer (used by the payee).

Awareness of risks Electronic Payment Systems : Security, legal certainty and trust are important elements, influencing the acceptance of commerce by both individuals and businesses. Furthermore, sociological and cost factors play a significant role.

Several reports on awareness of risks are related to the non-transparent legal background for both companies and consumers. In this context, e-commerce reluctance appears to be more pronounced in firms than in customers. The main reason for firms to be reluctant may be insecurity caused by the lack of legal rules determining when a transaction is legally binding. For customers, in addition to this, the security of on-line payment methods may be decisive. An important issue is credit card acceptance by retailers in Europe. The credit cards were offered to merchants originally on the grounds, that authorized transactions would be honoured. Now the system is established, banks in some countries charge traders for fraudulent transactions, which causes tensions. Some large retailers still refuse to take credit cards because of the terms of business. The result has been a move towards debit cards - which use the same infrastructure but have different contractual terms.

In general, there seems to be no consensus on whether companies and customers clearly distinguish between secured and unsecured methods of payment and whether they would not accept the latter because of the risks involved. Some parties believe that companies and customers clearly distinguish between secured and unsecured methods. However, others maintain that only companies clearly distinguish between secured and unsecured methods. Customers’ awareness of risks on the other hand is most probably based on perception rather than on facts, and is therefore less analytical. If both partners in ecommerce (banks and merchants) are reliable and offer convenient payment schemes, customers will make use of them.

The general public remains unaware of the risk issue. The main concern of the average consumer seems to be confidentiality about credit card numbers exchanged on the Internet. Some experts share the view that the perceived lack of security in on-line electronic payments is largely exaggerated and not justified at all by the actual threat. The average consumer does not yet realize that the risk of compromising his card number is far greater in conventional face-to-face transactions than on the Internet. This is partly the result  of  ignorance and unfamiliarity,  as  well  as a  mistaken  belief  in  the  security  of traditional payment systems. In this respect, the difficulty of generalizing about the security aspects of all systems should be stressed. There is a wide variety of payment systems with different security features and thus with varying security level.

Many other issues affect the security of electronic payments perhaps even more importantly: e.g. the physical, procedural and personnel security procedures operated at the ends of any telecommunications link (whether via a PC, smart card or mobile phone). It is also fairly well known that most security failures are caused by “insider” threats rather than by external hackers (or crackers).

Confidence in the reliable operation of the terminal equipment(s) is essential.