Online Paymet Systems

Electronic Payment Systems
Types of Electronic Payment

Systems
Macro On-line Payments Systems 1
Micro On-line Payments Systems 2

Micro On-line Payments Systems
 Micro On-line payment systems support frequent

transfers of very small amounts as small as a
fraction of dollar [even less than a cent].
 Because of the small amounts involved, higher

efficiency can be achieved by slightly relaxing the
security mechanism.
 Micro on-line payment methods aim at providing a

reasonable level of security with more economical
usage of computer resources and time.
Macro On-line Payments Systems
 Macro On-line payment systems, support payments

approximately ranging from one dollar to several thousand
dollars.
 These payment methods involve minimum transaction

overheads imposed by issuing banks or companies.
 These payment systems assure authenticity and privacy to

the users.
 The security requirements are more rigorous in these

payment systems because of huge money transactions.
Macro On-line Payment Systems
Card Based Payment Systems 1
Electronic Check and Account Transfer 2

Payment Systems
3
Electronic Cash Payment Systems
Mobile Payment Systems 4

1.Card Based Payment Systems
 Credit Card Based Payment Systems
 Debit Card Based Payment Systems
 Stored Value Card Based Payment Systems

Credit Card Based Payment Systems
Credit card based payment systems have payments set

again a special-purpose account associated with some
form of installment-based repayment scheme or a
revolving line of credit.
Credit cards typically have a spending limit set by the

card issuer, and the interest rate levied on unpaid
balance is typically many times the base lending rate
Parties in Credit card
Card Holder
Merchant
Issuing Bank
Acquiring Bank
Credit Card Network

Functionality of Credit card
Step1: The Payer [Consumer] pays a Payee
[Merchant] with a credit card at the POS [point of
sale].
Step2& Step3: The Payee [Merchant] transmits the
data at POS through the bankcard association’s
network to the card issuer for authorization.
Step4 & Step5& Step6: If the issuer authorizes, then

the merchant receives the authorization to capture
funds and the card holder accepts liability by signing
the credit voucher.
Step7& Step8: The merchant receives the payments

by submitting the captured credit card transactions to
its financial institution in batches or at the end of the
day.
Step9& Step10: The merchant's bank [Acquire

Bank] forwards the sales draft to the bankcard
Association, which in turn forwards the data to the
card issuer.
Step11: The bankcard association determines each

financial institution’s net debit position and the
association’s settlement financial institution
coordinates issuing and acquiring settlement
positions. The settlement process takes place using
a separate payment network.
Step12: The card issuer presents the transactions

on the card holder’s next monthly statement.
On line processing of credit card
Debit Card Based Payment Systems
 Debit-card payment systems are linked to a

checking or saving account at a financial
institution.
 Debit cards look like credit cards or
Automated Teller Machine [ATM] cards but
this type of payments can be considered as a
paperless check.
 While credit card is a way to “pay later”, a
debit card is a way to “pay now”
Functionality of Debit Card
Step1: The Payer [Consumer] enters a
PIN to authorize the transaction.
Step2& Step3: The Payee’s
[Merchant’s], financial institution requests
authorization from the Consumer’s
financial institution through the EFT
network.
Step4: The consumer’s financial
institution verifies funds and debits of the
consumer.
Step5: The EFT network authorizes the
purchase.
Step6: The EFT, determines the net
debit and credit positions of the
participating financial institutions and
settle their positions using the ACH
[account clearing house].
 Step7: The merchant receives the
transaction amount, net of applicable
fees and other expenses assessed by
the acquiring financial institutions and
other intermediaries to the transaction.
 Step8: At the end of the business day.
The issuing and acquiring financial
institutions establish a net settlement of
all the transfers between them using
ACH [account clearing house].
Stored Value Card Payment Systems
Stored value cards are cards with magnetic

stripes or computer chips that are charged
with fixed values that can be spent or
transferred to individuals or merchants in a
manner that is similar to spending paper
money.
Process Step1:& Step2: The consumer
purchases a stored value card.
Step3:&Step4:& Step5: When
the consumer pays for the
goods or services with the
stored value card, electronic
notations or tokens transfer
form the card to the
merchant’s cash register.
Step6: The merchant contacts
the computer network of the
financial institution that Issues
the stored value card and
presents the tokens for
payment.
Step7: The network notifies
the consumer’s financial
institution to pay the
appropriate sum to the
merchant’s financial institution
and net settlement occurs at
the end of the business day.
2.Electronic Check and Account
Transfer Payment Systems
Step1: The payer sends an
Electronic Check with all the
information required and
cryptographic signature.
Step2: The Payee sends back an
invoice after receiving the Electronic
check.
Step3: The payee verifies the
payer's signature and sends it to the
payee's bank in the form of Secure
Envelope which is having the check
details.
Step4: The Payee's bank verifies
the payer's and payee's signatures
and sends electronic check for the
ACH check clearing. It credits the
payee's account.
Step5: The payer's bank verifies the
payer's signature and debits the
payer's account and sends an E-
mail statement to the payer
Electronic Account Transfer Payment
Systems
 It is an alternative payment method to
electronic checks and Card-based payment
systems.
 In this payment method, the payer authorizes
funds to be transferred from one account to
another, most of the time at the same
network banks
Process
 Step1: Select account

payment system.
 Step2: Redirect to payment
system with transaction
details.
 Step3: Payment
authorization over SSL.
 Step4: Redirect to
merchant with payment
indications.
 Step5: Payment indication
from the payment system.
 Step6: Purchased goods or
services.
Electronic Cash Payment Systems
Mobile Payment Systems
Mobile payment as wireless transaction of a

monetary value form one party to another
using a mobile device [Mobile phone, PDA,
laptop] regardless of their geographical
location
Parties of mobile Payment system
 The consumer
 The content provider or Merchant
 Payment service provider
 Trusted third party
1.The consumer
2.The content provider
orMerchant
3.Payment service
provider
4.Trusted third party

Online Paymet Systems

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Electronic Payment Systems

Types of Electronic Payment

Macro On-line Payments Systems 1

Micro On-line Payments Systems 2

 Micro On-line payment systems support frequent

 Because of the small amounts involved, higher

 Micro on-line payment methods aim at providing a

 Macro On-line payment systems, support payments

 These payment methods involve minimum transaction

 These payment systems assure authenticity and privacy to

 The security requirements are more rigorous in these

Card Based Payment Systems 1

Electronic Check and Account Transfer 2

Mobile Payment Systems 4

 Credit Card Based Payment Systems

 Debit Card Based Payment Systems

 Stored Value Card Based Payment Systems

Credit card based payment systems have payments set

Credit cards typically have a spending limit set by the

Credit Card Network

Step4 & Step5& Step6: If the issuer authorizes, then

Step7& Step8: The merchant receives the payments

Step9& Step10: The merchant's bank [Acquire

Step11: The bankcard association determines each

Step12: The card issuer presents the transactions

 Debit-card payment systems are linked to a

Stored value cards are cards with magnetic

 Step1: Select account

Mobile payment as wireless transaction of a

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