ESSENTIALS OF E-COMMERCE (UNIT-2) PROCESS OF ELECTRONIC TRANSACTIONS AND THE INDIAN PAYMENT MODEL

Transcription

1 ESSENTIALS OF E-COMMERCE (UNIT-2) PROCESS OF ELECTRONIC TRANSACTIONS AND THE INDIAN PAYMENT MODEL 1. INTRODUCTION Hello students, today we are going to study the subject E-commerce. The second unit covers basically the process of electronic transactions and the Indian payment models. 2. ELECTRONIC PAYMENT SYSTEM In this lecture let s see first the definition of electronic payment system. Here we have shown you a diagram, electronic payment is a financial exchange that takes place between buyers and sellers through internet. Here is a customer and a virtual businessman. Virtual businessmen is on the website, he has products and services and than the exchange of products and the services will take through payments. This slide is explaining you the exchange which takes place through the internet and the website. The payment is electronic because you cannot exchange cash in this transaction. Now the main objectives of electronic payment system basically involve increase and efficiency, improve security and enhance customer convenience and ease of use. So why do we use EPS i.e. the electronic transactions or payment system because this is a kind of secure process and here the efficiency and the security of the system is increased by the convenience and the comfort of the customer to involve in virtual shopping. The advantages of EPS i.e. electronic payment system relate to the following points. One is decreasing technologic cost, second is increased online commerce or business happening in the world, it is easy administration, it saves time, it reduces paper work and the banks work round the clock through software s by giving convenience to the customers. So the advantages of EPS are many where the customer is benefited by the crossing the barriers of time. He can exchange money; he can buy products online at any time, at any place through any vender through any buyer and come into a settlement process with any person he 1

2 wants in the global world, the sectors using EPS. The sectors i.e. The industries which are impacted by the electronic payment systems are one is the online reservation system, the online bill payment system, the online order placing and online ticket booking. And now these are one basic core industry areas which impact the total economy. Online reservation is the airline ticketing booking and the railway ticketing booking. This process basically fastens and gives you comparative prices of all the tickets available with the various carriers and with the various railway systems which are operating in the global and in the local world. The online bill payment involves like we can pay the electricity bill, we can pay our internet bills or mobile bill through this transaction. The online order processing is that you can buy services, consultancies, goods and other things from online websites by placing your order through s. Online ticket booking is involved with the airlines and the other sectors of the industry or it is also involving booking through the railways and the other sectors. And now lets study the traditional system of online transaction which was much difficult and EPS has made it simple because previously internet was not used. The traditional system basically involved transaction through cash, through check and the credit cards. So they are difficult systems, they are time consuming and here may be security is high because the cash and the checks are the important aspects of the business and here the fraud is less but if you talk about security the kind of the things which are involved in secured transaction payments are little difficult. So the tradition system was secured and was easy but still it was not convenient because it was time consuming. Now we have better system of EPS which involve the customer and the banks and the other vender s the total process to exchange electronically. Lets study the electronic system in detail, This involves the electronic funds transfer i.e. EFT, it has payment cards, you have credit card, you have smart cards, electronic money, you have online payment systems the micro payment systems and the electronic gifts, so all these components of EPS work virtually through the websites and the internet connections. Here you have the certification authority, the banks, the financial institutions and the client as the cardholder, using this information in form of card, debit card or in form of electronic money which is transferred to the data bank through the passwords and electronic bids of information. 2

3 3. ELECTRONIC PAYMENT & TRADITIONAL SYSTEM OF TRANSACTION Types of electronic transaction system i.e. ETS involves ECASH, EWALLET, SMART CARD and CREDIT CARD. Now let s study each aspect in details. First is E-cash, what is e-cash? E-cash usually operates on a smart card which includes an embedded microprocessor chip. The microprocessor chip stores cash value and the security features that make electronic transaction secure. This is similar to regular cash; e-cash enables transactions between customer without the need of banks or other third party or agents involved. So what is e-cash, this is a form of transaction through the websites where customers virtually connect to the vender or to the manufacturers through the electronic money and when payments happen through passwords and smart cards, we involve in a exchange process. E-cash processing, consumer buy e-cash from bank, bank sends e-cash bids to customer, after charging a little amount or it is amount + fees. Customer sends e cash to the merchant, merchant checks with the bank that e-cash is valid. That is check against forgery or fraud, bank verifies that e-cash is valid. So what is the processing of e-cash, here is the simple processes that you buy cash from bank that is after payment with certain charges, this cash is sent to you in form of bids through passwords given to the bank which goes to the vender s that is its transfer to his account. Let s study e-wallet; e-wallet is the electronic wallet being very useful for frequent online shoppers which are commercially available for pocket size, palm size, hand held and desk of pc. This is store on a pc. They offer a secure, convenient and a portable tool for online shopping and they store personal and financial information such as credit cards, passwords, pins and much more. So e-wallets are electronically stored in your laptops and in your mobiles where you have secure and convenient way of transacting your cash through pins and passwords. Now let s study payment gateway, payment gateway protects credit card's details encrypting sensitive information, such as credit card numbers to ensure that information passes securely between the customer and the merchant. Now the payment gateway is a protocol authority which generally curtails and high seen information of the vender s and also of the card holder. The information is not given to both the parties but the settlement is done by a third agent which is a sanction authority like a bank, so payment getaways hold sensitive settlements. The secure EPS i.e. electronic transaction system is jointly designed by master card visa with the backing of MICROSOFT, NETESCAPE, IBM, GTE, 3

4 SAIC and others. It is designed to provide security to the card payments as it travels on internet; It provides privacy, data integrity, user and merchant authentication. The total process which we involve in E- business through smart card and through E cash transaction involves a kind of source of revenue for the government, for the customer and for the bank; it gives benefits to the society also. Lets study the economics of the E-business, the sources of revenue are: first is the transaction fee, it is the information given to both the customer and the merchant. It is fee for services and commissions; it is advertising and listening fees. Ownership is customer relationship, customer data and customer transaction. Now we study the total economics which involves the in the exchange of money, we have sources of earning also, the bank is benefiting, the government is benefiting and even the other financial institution which are involved in financial transaction process have a kind of a source of earning from this process in form of transaction and charges which customer pay for the convenience and for the comfort and for maintaining security of his E-wallets and his credit cards. What is the ownership which is involved, it is only of data i.e. you own the data management in form of addresses, the passwords and the other relationships which you have with your special customers. So the customer transaction is done if you are owner of good information and of quality information and with quality segments of society gives you benefits in form of transactions. 4. TYPES OF ELECTRONIC TRANSACTION SYSTEM Let s study the electronic and traditional services which have been impacted by the E-cash and the E-services, these are the features we are going to study and impact where electronic and transaction industries have been facing or they are encountered. Let s study first the Encounter in electronic system we have screen to face encounter but in traditional it is only face to face. Availability of electronic medium is at any time of a day or at any place but traditional is only in the working hours i.e. if you have your office times. Access it from anywhere in the world but the tradition is you have to travel to specific local needs or to the local locations. Market area is worldwide but in traditional shopping you have to access to local aspects. Ambiance in electronic interface is only virtual through computers but traditional is physical environment impacts, payments through credit card and in traditional it is buy cash or by check. Then you have differentiation, differentiation i.e. the ease which you 4

5 have connect to the customer, it is established by the convenience and in traditional it is personalization or the personal attention which we give to the clients or to the wanders. Privacy here is anonymity i.e. no body is known to each other, only the bank is only the guiding authority. Privacy here the social interaction take place and you built up relation with the people. So in this total comparison we have generally compared what is the difference between traditional transaction and what is the difference between electronic transaction and we see that the advantages of electronic transaction are much higher because it saves your time and it basically enhances your accessibility and crosses the time barriers, you can connect to any person from anywhere all through the globe. Lets take the example of grocery shopping comparison, how do we do it by online shopping and traditional shopping, we'll just discuss the advantages and disadvantages, so that students can understand that how important it is to manage e-wallets, e-cash and smart cards. Now the advantage in online shopping is, it is convenient, it saves time, it is less impulsive but in traditional shopping you see new items, you have a memory trigger, you have product sampling and you have social interaction. What are the disadvantages of online shopping is, you forget items, you have less control, you need computer and you need delivery fees. Disadvantages of traditional shopping are time consuming, you have waiting lines, you have to carry grocery and impulse buying. We have discuss this slide, we have a comparison that how important it is to connect with the virtual world because here the kind of the advantages are more than the disadvantages. Though we have the control over information is not with us because most of the information given by companies is only a limited option to sense the products and see the products but still you have a option to conveniently connecting at any time. You save yourself from the problems of traffic and other barriers. So when you use e-cash you have better option to connecting to all the need of your life. Let s study adoption of new technology in services. Now the challenges of adopting the new technology is first is process is the product, the back office and the front office both are impacted. The change which you need is the need for standardization. Managing the new technology is the adoption process and the process which will concern for the employees and the customer. And now you adopt technology the best part is you have to go for the standardization, after the standardization is done through the websites, the website can only be standardized if your processes are generally nominal or your process are standard, they are without 5

6 mistakes or they are error free and than these can be flouted because the public generally screening your total processes. After standardization the adoption to that technology is important because the customers, who are using this technology, need that maturity and that education level assimilate technology in daily life. Now lets study the payment model system in Indian economy which is a new born system of ru-pay, ru-pay is the Indian domestic card scheme conceived and launched by the national payment corporation of India i.e. the N.P.C.I. It was created to fulfill the reserved bank of India s desire to have a domestic open loop and a multilateral system of payments in India. So India has destination also have grown up in terms of virtual connection, in terms of eager population to connect and in terms of eager merchant to sell their goods. But here the currency is difficult, so we have discovered or the bank has given you a new option which is totally designed by the Indian banking system i.e. the ru-pay. Ru-pay facilitates electronic payments at all Indian banks and financial institution and competes with master card and visa in India. The N.P.C.I maintains its ties with discover financial to enable the card scheme to get the international acceptance. Now ru-pay basically facilitates the exchange of goods and services for the value given to the vender and in terms it also has connection to the international bodies, so that the acceptance is there in the global markets also. 5. ELECTRONIC & TRADITIONAL SERVICES Now let s see the ever changing pace of the Indian e-cash market. The potential for ever increasing technology is changing fast even in the India. There is growing internet and mobile subscriber base in this economy. It is the rising consumer s confidence; it is convenient delivery and payment models. India is one of the fastest growing countries for payment cards in Asia pacific region. India currently has 130 million card both, debit card and other smart cards in circulation. So when we talk about the potential of Indian economy, we can see the impact of internet has increased over year which has enhanced the business and the transaction all over the economy. People now need e-cash and secure payment system to have exchange or a kind of basic process involved in total transaction of online shopping and bookings. The economy is growing and people ever want to get participated or to get involved in this process. And now let s study strategy and strategic moves. In this we are going to study strategy above the organization which is on internet. A strategy is a plan designed to 6

7 help an organization out perform its competitors. It is the best response counteracting to the competitors reactions. This can be study base plan, a guide or a course of action towards the goal to work into the future. It is as a pattern consistency in the behavior and decision over time. Now in this slide we basically studied about the strategy which is the business organization need to adopt one while performing on websites because the competition is intense and heavy. They have to compete with each other to build a right position and a competitive edge. To built a brands so that the customer attract and do the money transaction in an easy way. Here trust is important, here credibility is important and branding is important. The strategy and strategic moves involves a positioning strategy which determines the particular value proposition in a particular market segment. It is used as a perspective concept of shaping the business. It is also used as a ploy, it is specific manual intended to outwit an opponent. So when we adopt strategies to perform on internet shopping, it is important that we design the right positioning. Positioning is the placing your company with the specific products and designs so that the target customers are attracted. The strategy and the strategic moves generally is built by the strategic information systems. Now this is important because the information systems, they help to cease the opportunities, they can be developing from scratch or they can be evolved from existing information system i.e. the I.S. And now when we study the strategic moves on building information systems, it is important because these information systems i.e. the M.I.S. They are the connections or the networks which companies create to built up opportunities and design so that the target customers can be caught and they belong to your consistency in terms of attaching to your company brands. The strategy and strategic moves also involved the strategic advantage i.e. using the strategy to maximize the strength or it is to seek monopolistic rents to build s competitive advantage i.e. the use of a strategic advantage. When you use this advantage in your favor that advantage outperform you competitors. It is better products, it is services and it is after sale connection and relationship management that will manage to perform better than your competitors. Achieving a competitive advantage in market is difficult but it can increase your profits. Now let s see this slide which increases the profits through market share or by increasing profit margins. It is innovation results in advantage, it is strategies that no one has tried before or conducted more efficiently than others did. Example is Dell using the web to take 7

8 customer order quicker than its competitors. Now how do we built competitive advantage in market through the website is, this is either you enhance your product quality or your presentation on the website. If you try to adopt the system in a quicker and in an accurate way and in a secured way your products will out perform. Here the innovation in terms to increase your profits will manage the company strength will give you a better position in the market to perform better. The kind of the strategic advantage which is built in terms of website is initially based on information and strategies designed to combine the product feature, the attribute, the prices and the electronic options which you give to the customers. 6. SUMMARY Now let s study the summary of this lecture, in this lecture we have studied the electronic payment systems and the potential of electronic payment systems in India. We have also covered the strategies and moves, how people can build their products, so as to cash on their profits. It is essential that the companies designed the secure payment systems of for better options in terms the connection with the customers and try to built the processes and networks in such a way that payments have done in a easy way. The bank needs to be a basic issue while settling the payments. The banks have a have to worth and a kind of an identity or a brand, so that they can carry the trust of vender s and the buyers and both can meet in a trusted authority for verification, the strategy basically employees to built a kind of a competitive advantage in the market, where the quality, the information and the payments all are important. The electronic transaction and shopping s can fail if the systems are fraud and if the limitations generally impact the procedure. The customers, the vender s, the bank, all have to be honest, ethical and have to involve in a secure and trusted information base where your password are secured, so that everybody settles with a decent profit share and everybody gets competitive advantage in the market, thank you students. 8