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Online Payment Mechanism

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INTRODUCTION
Barter system Use of coin and paper money Trading electronically over the internet

Electronic Transaction Payment of basic services Electricity bills Purchase of movie or travel tickets having gone online results in the need for development of advanced, convenient and safe online payment options.

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Different ways of online payment Credit and Debit card

Smart cards Paypal

Digital cash Electronic fund transfer

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Different ways of online payment

Credit Cards & Debit Cards Credit card transaction is preferred by the retail consumer Transaction takes place when the credit card holder orders the bank to make such a payment and the bank establishes a line of credit in the name of card holder As far as security is concerned, when using a credit card physically, one signs a charge slip and the matching of this signature is required for the transaction to be authenticated

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Debit cards largely similar to credit cards The only difference is that here the transaction is linked to the account of the consumer and there is a direct transfer of funds from the consumers to the payees account. There is no line of credit established when using a debit card physically, apart from the signature one needs to enter a secret pin to authenticate the transaction

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Smart Cards Another innovation that has come about in the online environment is that of smart cards Used by a certain group of people for money transactions between them. example smart cards issued by colleges the user makes use of recharge machines that use currency notes to load currency to his card. The card is then used to pay at cafeterias, book stores etc that the college handles. The card can also be used when paying tuition fees online. These cards are relatively safe as they cannot be misused too due to the limited acceptance within the college community.

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PayPal PayPal works as a third party settlement mechanism. The way PayPal works is . Consumer and vendor both open PayPal accounts. They use credit or debit card to fund his PayPal account and hence ends up sharing his details with PayPal only When a transaction is made, the consumer directs PayPal to pay a vendor, the vendor is given a cheque, bank transfer or PayPal account deposit depending on his convenience facilitate commerce between individuals who are in different countries or do not have compatible payment mechanisms

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Digital Cash An alternatives to constant credit card use over the internet is digital cash. Here the consumer buys currency online by using his credit card only once Such digital cash has monetary value, can be traded widely and works on the concept of digital signatures advantage There are certain websites where the consumer may not want to enter his credit card information. payment through digital cash would be a great alternative as the consumers credit card details would not be exposed

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Electronic Fund Transfer (EFT) Wholesale EFT: Useful when large sums of money need to be transferred across borders between businesses. International organizations like the New York Clearing House Interbank Payment System (CHIPS) take care of such transactions. Two banks need to be registered with the organization in order for such a payment. Retail EFT: The electronic fund transfer mechanism for smaller amounts from one account to another in the same bank. Invariably this is done when the transferor and transferee accounts are in the same bank

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In the case of transfer of funds from one bank to another, there is the National Electronic Funds Transfer Scheme Electronic funds transfer systems have the advantage of quick credit of money. The system is also relatively secure as a person needs his online banking id and password before such an instruction is given. The disadvantage however is that when applied in the commercial environment, the seller and the buyer may not have bank accounts in the same bank so as to afford instant transfer of funds

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Online payment mechanism of amazon

Online payment on amazon through Flexible Payments Service (FPS)
Every FPS transaction has a sender (party making payments), a recipient (party receiving payments), and a caller (party making the API calls to Amazon FPS). Payment Instructions include: Transaction amounts: Set a transaction minimum, maximum, range, specific amount, or some combination of these. Transaction Date: Configure a payment transaction to be executed at a specific time (e.g. specific day, weekly, monthly, or date range). Spending and usage limits: Control the maximum number, maximum amount and frequency of payments

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Recipient list: Allow or exclude a specific set of recipients in a given transaction Payment methods accepted: Credit cards, bank accounts or Amazon Payments balance, in any combination. Fee preference: Specify which party pays the Amazon FPS transaction fees. Amazon FPS provides Gatekeeper (GK) language that allows the parties to create Payment Instructions.

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Once developers define these Payment Instructions, they use an Install Payment Instruction API call to install these instructions and receive a token, a unique, secure handle to the Payment Instructions. Amazon FPS makes it easy for callers to obtain Payment Instructions from their users by providing a set of co-branded user interface pipelines. Callers send users to these user interface pipelines to show them a proposed set of Payment Instructions .By agreeing to those terms in the user interface, senders or recipients authorize these Payment Instructions and allow the caller to receive the corresponding token back.

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