Monday, March 31, 2008

Chapter 11 Class notes

What you should know
· B2C versus B2B
· Payment Methods
o Cash
o Cheque
o Debit card
o Credit card
· Online payments
o Bank EFT
o Credit Card
§ Over 85% worldwide use credit card, US-95%, only 5% of all credit card transactions (in all methods) are done online, accounts for 50% of all credit card fraud
o Scrip (fake money, etc. – ex: Canada Tire Money, Air Miles – can’t exchange it for cash but I can use it to buy merchandise online)
§ Flooz
§ beenz
· Consumer concerns
o Privacy and security
o Independence (don’t want the merchant dictating what form of payment you must use-ex: we only take visa not M/C)
o Portability-want to be able to take it from place to place (ex: not just on my own desktop-buy on different computers)
o Convenience
o Phishing – bank or trusted authority that gives you money – and you have a 3rd party that is trying to portray themselves as that authority and emailing you or contacting you telling you that you must fix something on your bank account, etc – but the link doesn’t actually take you to your bank – gets your info

Payment Cards
· Types of cards
o Credit cards – open loop processing – whenever you perform a transaction, there is always a third party involved (Visa and M/C – another bank, clearing house, etc)
o Charge cards-Amex – closed loop processing (no other authority) – have to pay your bill off at the end of the month
o Debit cards
o Single use card – changes the number each transaction
· Advantages *****
o Consumer protection from fraud
o Worldwide acceptance
o Currency conversion handled
o Merchant protection (authorization/verification)
o Merchant assurance from issuing companies – bank covers for merchants if the person buying can’t pay – guaranteed you are going to get paid
· Disadvantages *****
o Costs to merchants: per transaction and monthly fees
o Costs to consumers: annual fee
· Payment processing
o EMV Standard – standard system where data is transferred
o 30 day shipping requirements (if you bill the credit card – you have to ship in within 30 days) – often now see that they do not bill credit card until the product is shipped
o Merchant accounts required to accept credit cards
o General payment service providers– IcVerify – authorizes transactions-3rd party
o Online payment service providers – internet secure, payment online, paypal merchants, Reg.net for FRM
o Figure 11.3

Electronic Cash (in the PayPal account – not in a bank)
· Advantages
o Good for micro payment (<$1) and small payment (<$10) transactions
o Readily exchanged for real cash (unlike Scrip)
o Useful for those who cannot get credit cards
o No need for authorizations, as required by payment cards
o Independence: unrelated to any proprietary network or storage device
o Portability: freely transferable between two parties (across borders)
o Convenience: doesn’t require any special hardware/software
· Disadvantages
o Not standardized or universally accepted
o No audit trail, due to independence and privacy
o Security issues: potential for “double spending” and “money laundering”
o Security issues: susceptible to forgery

o Online systems
§ Authorize.net
§ Checkfree
§ Clickshare
§ Echarge
§ Pay pal
§ Vallista
§ worldpay

Electronic Wallets (not only can it be used as a debit card or credit card but it also has all my medical and passport info, other important data)
o server side
o Billeo services
o Microsoft passport
o Yahoo Wallet
o client side
o llium ewallet
o sxipper for firefox
o smart cards-micro processor trip – stores all your info on one card, benefits over magnetic

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