A Review Of Online Payment Systems

CHAPTER 1

INTRODUCTION

In this Oligocene world, electronic ecommerce has grown explosively. According to Hof (2003), on 1994 with 6 million to 2003 which have approximately 40 million households in the United States alone made at least one consumer purchase from the internet, the advancements in computer technology and deregulation of financial markets especially in the payment system which for transfer money. Traditional payment systems are flexible instruments such as drafts, checks, credit card, debit cards, and documentary credit. Some payment systems had substantially a different appearance of payment that includes the credit mechanisms.

Nowadays most of the users usually make the payment through electronic payment system. As we know Electronic Payment is a division of an e-commerce transaction offered through the internet for buying and selling goods or services and non-credit-card online payment systems.

The appearance of e-commerce has created new financial needs that in many cases. Some of them using a way to fraud such as credit card fraud and subjected to more digital attacks. The awareness and knowledge about the electronic payment system are needed to prevent fraud to develop. An electronic payment system is needed for expiation for some information, goods and services, this information provided through the internet as a convenient form of payment for external goods and services on consumption of system resources, access to copyrighted materials and database searches (Clifford neuman,1999).

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Broadly electronic payment systems can be classified into two categories such as Online Payment Cards System and Electronic Banking Payment System. Each payment system has its advantages and disadvantages for the customers and merchants. These payment systems have numbers of requirements, example security, acceptability, convenience, cost, anonymity, control, and traceability (Sumanjeet, S., 2009).

Electronic payment systems may be more expedient for international online business due to vary in credit card customer protection laws in different countries. The picture of e-banking in the United States is one of a wide variety of services used by a disparate number of consumers. Approximately 91 percent of United States households have a bank account and, of these, 93 percent have one or more Electronic Funds Transfer (EFT) features associated with their accounts. In 2003, the number of Automated Teller Machines (ATM) transactions stood at 902 million per month, up slightly from 2002 (EFT Data Book, 2003). In addition, by 2003, the number of point-of-sale debit transactions stood at 495 million per month, up 21 percent from 2002, and the volume of electronic payments in the United States in 2003 exceeded that of checks for the first time (Jane M. Kolodinsky, 2004). While consumers may be willing to adopt e-banking technologies, they also want assurance that problems will be resolved and that some transactions will remain personal (Goldfarb, 2001; Financial Technology Bulletin, 2000).

Nowadays the e-banking system also very common on internet, it works by their retail, credit union, and virtual bank by secure the website to carry out the financial transaction by customers. Some e-banking goods and services are still infancy and going innovations build through the internet growing rapidly as a marketplace for the exchange of both tangible and information goods and services. Besides online marketing and internet usage are growing to be more advanced. Paying is not definitely paper currency on the transaction, because the transaction going substituent with the electronic payment system or the card. Multitudinous payment mechanisms suitable for use in this marketplace are in several stages of development. This research project’s scope is limited to electronic payment systems which focused on the needs of consumers.

As in usually the case with payment innovations, the success of the smart card will depend on market circumstances and cooperation among the banks. The proper timing of the introduction may depend on consumer readiness to use the new system, which will itself be largely due to prior experience and innovativeness (Andreasen, 1991). The Numerous Payment Systems have been pervasion on the marketplace, the new system prepared to accept by better consumers. To the level that consumers have experience with previous systems, the responsiveness and information of a new payment system will be facilitated.

Lastly , this research project is a key of understanding of consumer behaviour and their payment choices, and also the factors that influence the consumer choose to use e-payment. Moreover, this research project oration the usage of the electronic payment system provided a brief literature review on electronic payment and purpose to explain the determinants which affect the usage of users towards electronic payment system.

1.2 History of Electronic Payment System

In late 1970s technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT) to promote e-commerce transactions, authorized to operate in order to promote, such as purchase orders or invoices for electronic business documents. In 1979, Michael Aldrich contrived a technique as e-commerce; the technique was about online shopping to allow consumers and business through online transaction processing to shop from home and to trade with other business. In 1980s the enlargement and receipt of credit cards, automated teller machines (ATM) and telephone.

The first ATM’s machines use of magnetically prearranged plastic, the money could not automatically withdraw from users’ accounts were off-line machines. So the customer would perhaps be apprehensively to let a machine handle their money. But the cards used an encoded magnetic strip, making them safe and reusable. Consequently, just the only customers with good credit history were able to use ATMs. Therefore nowadays the ATM industry Association states that there will 1 billion of users using this transaction in ATMs. Almost 80 percent belong to the private sectors (Commercial Union ATM, 2000).

The process of conventional payment system and settlement involves a buyer-to-seller transfer of cash or payment information such as cheque and credit card. The actual settlement of payment takes place in the financial processing network. A cash payment requires a buyer’s withdrawals form his or her bank account, a transfer of cash to the seller, and the seller’s deposit of payment to his or her account. Non-cash payment mechanisms are settled by adjustment such as crediting and debiting the appropriate accounts between banks based on the payment information conveyed via cheque or credit cards. Non-cash payment requires three separate elements. The buyer must have an agreed means of payment authorization and restructuring its bank to affect a transfer of funds. The seller’s bank and buyer’s bank need an agreed method of exchange payment instructions. This is referred to as payment clearing (Singh Sumanjeet, 2009).

The process of electronic payment systems have been in operations since 1960s and have been expanding rapidly as well as growing in complexity. After the development of conventional payment system, Electronic Fund Transfer (EFT) based payment system came into existence. It was first electronic based payment system, which does not depend on a central processing intermediary. An electronic fund transfer is a financial application of Electronic Data Interchange (EDI), which sends credit card numbers or electronic cheques via secured private networks between banks and major corporations. To use EFT to clear payments and settle accounts, an online payment service will need to add capabilities to process orders, accounts and receipts. But a landmark came in this direction with the development of digital currency. The nature of digital currency or electronic money mirrors that of paper money as a means of payment. As such, digital currency payment systems have the same advantages as paper currency payment, namely anonymity and convenience.

1.3 Problem of Statement

Despite the rapid development of electronic payment systems, innovative services, but still faces some challenges. Business e-markets as herald fundamental changes in the source and the computer-assisted alternative to existing market arrangements for trading in practice (Malone et al., 1989). Areas of impact include online catalogues, multimedia mail, electronic payment, brokering services and collaborative engineering. Initial implementations of electronic commerce have focused on the provision of telecommunications-based infrastructure in support of Internet-oriented services and electronic payment systems (Kohala Coast, HI 2009).

Electronic payment systems should offer at least as much confidentiality as traditional payment systems currently do. The goal of this requirement is that payment data should not be exploitable in order to obtain more precise or more comprehensive information about involved entities example payer profiles. Thus, confidentiality properties of electronic payment systems can be distinguished regarding which information they reveal to which parties. Confidentiality of payment information against other parties can be achieved by encrypting communication which is no specific property of payment systems. Note that confidentiality in electronic payment systems cannot prevent information flows which may happen outside an electronic payment system among involved parties for example by observing communication networks, or revealing data in further commercial interactions (Fiat, Naor 1990).

Security are keys for the successful implementation of the payment system, electronic payment security has missed out on a lot of technical innovation improvements seen in other industries. But as levels of fraud continue to increase, so too will the cost to the consumer. If this problem is not addressed, credit cards and electronic payments may become an unviable option for consumers (Benjamin Graham, 2003).

(Please add research questions before research objectives)

1.4 Research Objectives

Basically, there are several objectives for this study. This research project carries the objectives are as the following:

To determine the awareness level of electronic payment systems

To identify the factor that influences the usage of e-payment systems.

To determine the current usage level among usage and the application of the electronic payment system.

1.5 Significance of the Study

The significance of the study is to study about the awareness of electronic payment system for university private student which is Multimedia University in Melaka. In this research will study on various independent variables affecting the awareness of electronic payment system for student which are personal factors, demographic factors and type of benefit whether can affect Melaka private university student on their awareness of usage of electronic payment system. Many people do not aware of the importance of electronic payment system to more easy complete on their financial transaction. Nowadays the computer enables us to access all the money in the world, even we carry a credit card we could around the world. Using the electronic payment system could let us enjoy much better life. Lastly, the significance of this study would definitely be in accordance with the objectives mentioned earlier.

1.6 Scope of the Study

This research will focus on the awareness and usage of electronic payment system among Multimedia University students in Melaka campus. The assumption that can be made by survey conducted using random sample to obtain the primary data. Survey instrument is in questionnaires form. In order to achieve the objective of the study, the questionnaires question will be set based on research objective and hypotheses statement. It is to ensure that the data that had been collect are useful and can be analyzed.

1.7 Organisation of Research Project

This study is divides into five chapters as follow:

Chapter 1, ‘Introduction’, introduces general information of electronic payment system. It also covers the history of electronic payment system, problem statement, research objective, significance of the study, scope of the study and limitations of study.

Chapter 2, ‘Literature Review’, presents the state of electronic payment instruments and type of credit card, debit card, electronic purse card and electronic banking. This chapter reviews how the previous researchers summarized the relationship between usage of electronic payment system with behavior and perception of users towards the electronic payment system.

Chapter 3, ‘Methodology’ is telling the method of investigation. This chapter describes the conceptual framework that as the basis for designing a questionnaire to conduct an empirical study.

Chapter 4, ‘Result and Discussion’, after the survey is done, a discussion is conducted to verify the result obtained.

Chapter 5, ‘Conclusion and Recommendation’, summarizes the main result and provides the contributions of the study. Recommendations and limitation are being provided.