E-Commerce Notebook, Electronic Payment, the assessment and selection of payment methods

Journal 5, E-Commerce Notebook

Date: December 13, 2020.

Title: Electronic Payment 1. the assessment and selection of payment methods

Money makes the world go round. Money plays a basic role in the economic cycle which involved deliver products or services, get money for them, offer money to get a product or service, and spend the money for the delivered product or service. But, how can we transfer “real” money into the economic area “Web”? So, here comes the payment challenges.

The categories of money are Money in cash, Book money, and E-money. Primary payment methods are Cash payment, Bank transfer, Debit note, and Wallet payment. Furthermore, there are Derivative payment methods such as Debt collection and billing, Check-based methods, Mobile phone based methods, Credit card based methods, E-Mail based methods, and Prepaid charge card based methods.

Then, Let's get to the assessment and selection of payment methods.

From a supplier’s point of view, it should be accepted by its customer, a shortfall in payment must be protected and avoided, and its costs must be as lower as possible.

Technical

The technical parameters for the selection of appropriate payment methods after satisfying the supplier's needs, 

are periodicity, subscriptions, internationality, privacy, payment guarantees.

The Cost Structure

Payment amounts and cost structure also determine the selection of payment methods. The invoiced amount, the costs per transaction, independent costs (setup and adjustment costs, periodic costs like basic charges for services and software, and rental fees for hardware).

Security requirements

The security requirements for selecting a payment method are control & monitoring, secure confirmation, and liability.

Date: December 14, 2020.

Title: Electronic Payment 2. Payment procedures

Now, integrate into the sales process after fulfilled these requirements through the whole procedures in detail.

i. Payment Per Invoice

The basic steps are order, delivery, sending an invoice, payment, and confirmation. The procedures of this payment method is not an integral part of E-Commerce and the risk is totally carried by the supplier.

Sounds very easy, but there are potential problems. For example, delivery without an invoice, invoice without delivery, deviations, frauds, or delayed payment.

ii. Cash in Advance

The actions are similar. Order, Invoicing, Payment, and Delivery. Let's talk about GiroPay provided by GiroPay GmbH. 

From getting the statement of a Bank identifier code (BIC), Log-in with account number and password by the customer, Pre-filled money transfer, Confirmation. 

However, you may notice that the procedures take a lot of time to complete. And its requirements are also not friendly. The customers' accounts must have an allowance for it and must cooperate with GiroPay. All participants must have a bank account and have signed a contract with a GiroPay.

Honestly, I don't it is a good payment plan. The risk is also completely assigned to the customer which is really a bad idea. The trust will become weaker and weaker. Besides, it makes payers too busy and mad for someone like me.....

iii. Cash on Delivery

Customer orders with C.O.D. and appoint a specific delivery address, and the delivery is done with an invoice. After the cashing is done on delivery, the service provider transfers the money to the merchant’s bank. To complete the procedure, the customer must provide delivery and payment data and the delivery service provider has to take over the cashing function. This method is risk-neutral since the money transfer is not before or after the delivery.

However, the customer is not 100% sure free to get the package at the delivery address. Deviations between delivery and invoice are also problems that must consider. And, what is the return policy?

iv. Debit Note

From order to delivery, there are steps such as bank collection, clearance, and collections of the requested amount. Then, delivery to the customer and forwarding the invoice.

As we can see, there are many complex contracts with banks to deal with. The money collection may still burst and no delivery can possibly and accidentally happen. And again, a deviation is always possible.

This payment method highly relies on the trustee function of the bank. 

v. Credit Card

Those procedures we are very familiar with. We order, confirm the payment is accepted by credit card. Then, we get the delivery and invoice.

Ahead of these simple procedures, there are still full of complex contracts with banks and credit card companies. The customer must have a credit card contract with a bank to get a credit card. The merchant must have a credit card acceptance contract with a bank and must be technically linked to a Payment Service Provider.

As always, the potential problem top one is no delivery and deviations. In addition, payment dysfunctions may happen while the connection is bad.

However, payment is guaranteed by the credit card company. That's why we trust and widely use these payment methods.

vi. E-Payment

Finally, we here. E-payments have been developed especially for e-commerce and supplement the traditional payment methods. There are many methods we can pick such as PayPal, Smart card, cashing and billing methods, and mobile based methods.

E-Payment provider is a new service-based company for providing these kinds of services. E-Payment providers are the medium of the transactions. 

vi-1. Paypal

PayPal account owners are able to send and receive money, to and from any person who has also been a PayPal account owner. PayPal was one of the first organizations that try to fix problems with international payments. However, it's pretty similar to credit card companies who also charge fees from transactions.

PayPay is email based and be able to be connected with credit cards and bank accounts. I think, in the future, PayPay is trying to replace the traditional banks rather than credit card companies. 

 

vi-2 Smart Cards

This method is built to try to replace your wallet, but it still needs to connect with a bank. So, you use your balance in your bank account to fill up the smart card, and then, you can pay with it. 

Not a surprise, there are also contracts and connections with banks and security is still a potential issue since wallets are always the portable targets for thieving.

vi-3 ClickandBuy

This method is also built to replace traditional wallets. ClickandBuy manages customers' accounts associated with banking accounts and credit card data, and stores them in a server. So, customers only need to fill out their user names and passwords while shopping online. Banking account or credit card data do not transfer via the Web.