UNIT III

Mercantile Process Model

Mercantile process is an interaction model between consumer and
merchants for online commerce.
 This is necessary to buy and sell goods, a buyer, a seller, and other parties
should follow some standard business processes.
 The establishment of common merchant process( or set of processes) is
must to increase the convenience for customers.
 A well established standard process using processing credit cards
purchases contributed more for the E_Commerce.

There are two types of Mercantile models.

 Mercantile models from the consumer’s perspective.
 Mercantile models from the merchant’s perspective.

Mercantile process model from the consumers

perspective.
The online consumer expects quality, convenience, value, low price
and control. To meet these expectations, the business process model from
consumer’s perspective grouped seven activities into 3 phases.

They are,
1. Pre-purchase determination.
2. Purchase consumption
3. Post purchase interaction phase.
Steps taken by customer in purchasing:

Product / service search

Pre-
product selection purchase
determinati

Negotiation of terms

Placement of order

Authorization of Payment Purchase

consumptio
n
Receipt of Product

Post
Customer service and support
purchase
interaction
PRE-PURCHASE DETERMINATION:-

It includes search and discovery for a set of products in the large

information space capable of meeting customer requirement and product
selection from the smaller set of products based on attribute
(characteristics) comparison.
Consumers have to watch for a new or existing information regarding
variables that are important for the purchase decision process.
Customers are of 3 types.
1) Impulsive buyers: Who purchase products quickly.
2) Patient buyer : Who purchase products after making comparison.
3) Analytical buyer : Who do substantial research before making the
decision to purchase products or services.

Marketing researchers have isolated several types of purchasing.

1. Specifically planned purchase: The need was recognized on entering
the store and the shopper brought the exact item planned.
2. Generally planned purchases: The need was recognized, but the
shopper decided in store on the actual manufacture of the item to satisfy
the need.
3. Reminder purchases: The shopper was reminded of the need by some
store influence. This shopper is influenced by in-store advertisements and
can substitute products readily.
4. Entirely unplanned purchases: The need was not recognized entering
the store.

PURCHASE CONSUMPTION:-
 After identifying the products to be purchased, the buyer and seller must
interact to carryout mercantile transaction.
 A mercantile transaction is defined as the exchange of information
between buyer and seller followed by the payment.
 Depending on the payment model mutually agreed on, they may interact
by E-Cash, or transferring authorization for credit billing authorization.
 Mercantile process using digital cash or E-Cash.
 Mercantile process using credit cards.
 Basic mercantile process model for any transaction online business.

POST PURCHASE INTERACTION:

This includes customer service and support to address customer
complaints, product returns and product defects.
1. Inventory Issues: To serve a customer properly a company should
inform a customer right from when an item is ordered to it is sold out,
otherwise the company will have a disappointed customer.
2. database Access and Compatibility Issues: unless the customer can
instantly access all the computers of all the direct response vendors likely to
advertise on the information superhighway on a real time basis, with
compatible software to have an instant access to the merchants inventory
and database.
3. Customer service issues: Customers often have questions about the
product such as color, size, shipment etc. and other things in mind can
resolved only by talking to an order entry operator.

Mercantile process model from the Merchant’s

perspective.

The Order to delivery cycle from the Merchant’s perspective has been
managed with an standardization & cost.
To fully realize and maintain a competitive advantage in the on-line
environment, a company must build a robust vision of “order-to-delivery”
cycle. This lads to a another cycle “Order Management Cycle” (OMC)

OMC includes eight distinct activities.

  Order planning & Order generation.
 Cost estimation & Pricing.
 Order Receipt & Entry.
 Order selection & prioritization.
 Order scheduling.
 Order fulfillment & Delivery
 Order billing & A/C Payment Management
 Order Service & Support

Order Planning & Order Generation:

• The Business process begins with an actual order of placed by the
customers.
• Order planning leads to the order generation order generated in sending
personalized e-mail to customer.
Cost estimation & pricing:
 Pricing is the bridge between customers’ needs and company capabilities.
 Pricing at the individual order level depends on an understanding the
value to the customers that is generated by each orders.
 Evaluating the cost of filling each order.
Order Receipt & Entry:
After acceptable price, the customers enter the order receipt and entry
phase of OMC.
These orders are taken by customer service representatives, who are in
constant contract with customers.
Order Selection & Prioritization:
Customer service representatives are responsible for choosing which
orders to accept and which to decline.
* Not all customer orders are created equal.
*The desirable orders are those that fit the company’s capabilities and
gives good profit.
*Companies can make gains by the way they handle order prioritization- i.e
decide which orders to execute faster.

Order scheduling:
During the order scheduling phase the prioritization orders get slotted
into an actual production or operation sequence.
This task is will become difficult because of the different departments
having conflating goals.
Order fulfillment and Delivery:
* During this phase the actual product or service is delivered.
* Order fulfillment involves multiple function & Locations.
* In some business, fulfillment includes third party vendors.
Order Billing and Account Payment:
After the order has been fulfilled and delivers billing is typically
handled by the finance department. This department gets the bill out
effectively efficiently and close collect very quickly.
Customer Service & Support:
Customer service involves installation of a product, repair maintenance.
This service gives customer satisfaction company profitable year.

Electronic Payment System:

Electronic payment is a financial exchange that takes place online

between buyers and sellers. The content of this exchange is usually as
encrypted credit card numbers, electronic cheques or cash.

Categories of Electronic Funds Transfer (or) Types of

Electronic Payment System:
Electronic payment systems are mainly used in banking, retail, health –
care, online markets, etc., Electronic payment system also called as
Electronic Funds Transfer (EFT).
EFT (Electronic Funds Transfer) can be categorized in to three
types.
1) Banking & Financial payments.
2) Retailing payments.
3) Online electronic payments.
1) Banking & Financial payments:
 Large-scale or wholesale payments: Bank-to-bank transfer
is a good example for this kind of payment where the funds flow from
one bank to another instantaneously.
 Small-Scale Payments: ATM’s and cash dispensers are
examples for this kind of payment, a customer can withdraw money
from anywhere at any time.
 Home Banking: Home banking service can be classified into three
types.
 Basic Services
 Intermediate Services
 Advanced Services
2) Retailing payments:
 Credit Cards(e.g., VISA, Master card): If a customer purchased any
product or service using credit card, Customer’s tranfers their card
details to the service provider and the credit card company processes
that transaction.
 Private label credit / debit cards(e.g., J. C. Penny card): Here customer
pay in advance for enjoying the privileges of information to be
retrieved.
 Charge Cards(e.g., American Express): This type of payment is a way
of getting a short-term loan for purchase. It is similar to credit card,
expect that the customer make an agreement with financial institution
that he will pay some fixed charges to it each month.
3) Online electronic payments:
Token-Based Payment Systems:
 Electronic Cash(e.g., Digicash):Electronic money (also known as
electronic cash, electronic currency, digital money, digital cash or
 digital currency) refers to money or scrip which is exchanged only
electronically.
 Smart Cards or Debit Cards(e.g., Mondex Electronic Currency Card):
Smart cards are credit and debit cards and other card products
enhanced with microprocessors capable of holding more information
than the traditional magnetic stripe.

Advantages and Risks in Electronic Payment

System

Electronic Payment System: Electronic payment is a financial exchange

that takes place online between buyers and sellers. The content of this
exchange is usually as encrypted credit card numbers, electronic cheques or
cash.

Advantages of Electronic Payment Systems:

1. Privacy.
2. Integrity.
3. Compatibility.
4. Good transaction efficiency.
5. Acceptability.
6. Convenience.
7. Mobility.
8. Low financial risk.
9. Anonymity.

1) The greatest advantage of e-payments is the convenience. I.e. customer

can pay on one from any locations 24 hours day, 7 days a week.
2) E-payments have reduced the amount of time spent on bill management
or payment by about 60%.
3) Compared to the cost of postage, check writing has any online payment
can save the money.
4) E-payments are secure.
Risks in Electronic payment systems:
There are three major risks in the operation of the payment system,
they are
1) Fraud or mistake.
2) Privacy issues.
3) Credit Risk.
1)Fraud or Mistake: All electronic payment systems need some ability to
keep automatic records. Once information has been captured
electronically, it is easy and inexpensive to maintain. The need for record
keeping for purpose of risk management like fraud or any sort of mistake.
2) Privacy Issues:
The electronic payment system must ensure and maintain privacy. The
privacy customers should be protected as much as possible privacy must
be maintained against unauthorized persons. For any type of transaction
trusted third-parties will be needed for all tenacity and good faith.
3) Managing Credit Risk:
Credit or systematic risk is a major concern in net settlement systems
because a bank’s failure to settle its net position could lead to a chain
reaction of bank failures.

Electronic Cash ( E-cash)

E-cash is a new concept in on-line payment system because it
combines computerized convenience with security and privacy. E-cash
presents some interesting characteristics that should make it an attractive
alternative for payment over the internet.
Properties of E-cash:

There are four properties of E-cash.

They are,
 Monetary Value
 Interoperability
 Retrievability
 Security
Smart Cards

A Smart card is a plastic card with a microprocessor and

memory embedded in it. These cards are available in various sizes, and
are of different types. They can be as as big as a credit card or as small
as SIM cards. Some cards have only non-programmable memory in them.
These cards are read-only, and the information on them cannot changed
or manipulated. The ones with a microprocessor in them have various
functionalities.

The microprocessor on the smart card is there for security.

Smarts cards may have up to 8 kilobytes of RAM, 346 kilobytes of ROM,
256 kilobytes of programmable ROM, and a 16-bit microprocessor.
Smart Cards are basically two types.
1. Relationship-based smart cards.
2. Electronic Purses.
LONG QUESTIONS

1) Explain about the Mercantile Process Model from

Merchant’s Perspective.
2) Explain about the Mercantile Process Model from
Consumer’s Perspective.
3) Discuss in detail about E_Payment
System(EPS)/Electronic Fund Transfer(EFT)
4) What are the advantages and risks in
Electronic Payment System?

SHORT QUESTIONS
1) E_Cash
2) Smart Cards
3) Electronic Fund Transfer(EFT)