Term Paper, 2014
14 Pages, Grade: 07
2. Main Part
2.1 Classic payment systems
2.1.3 Cash on delivery
2.1.4 Pay by bill
2.1.5 Credit Card
2.2 Modern payment systems
2.2.1 Electronic wallet
220.127.116.11 Google Wallet
3. Influence on Society and Business
4. Analytical Part - The relevance and importance
4.1 Why are e-payment systems so important?
For this topic it is important to define and understand two important terms: E-payment, which basically is what this paper is about, and E-commerce, which can be described as the ground of were e-payment stands on.
E-payment or electronic payment. What is that?
Citation: "a means of making payments over an electronic network such as the internet". (businessdictionary.com, n.d.)
E-payment systems which were invented for the use in e-commerce only are included in definition. Customer and seller are registered on e-payment providers, which means all e-payment work on the same background. When the customer has placed its order online, he will automatically be transferred to the next page, where is asked to log himself in on his epayment provider. If is not registered, he can do it now. The next step is where the customer confirms that he placed the order, and the seller gets informed that the order and payment way placed. The amount will be transferred from the buyers account to the sellers account via the e-payment provider (eu-verbraucher.de, n.d.).
E-commerce or electronic commerce. What is that?
Citation: "The buying and selling of products and services by businesses and consumers through an electronic medium, without using any paper documents " (investorwords.com, n.d.).
As e-commerce any kind of online trading transaction or business-actions where the participants communicate with each other on a an electronic way, can be considered. Electronic commerce does consist out of three different parties: B2B Business to Business, B2C Business to Consumer - Amazon can be used as an example, and C2C Consumer to Consumer - Ebay can be used as an example.
During its more than 20 years of existence, the internet has become an essential "thing" in the society and daily life. The number of people worldwide using the internet has more than doubled from 2007 to 2013. While it was ca 1,3 billion people in 2009, it was ca 2,7 billion in 2013 (BitKom, 2013). Not only the access to internet got very easy, but also the demand for internet has increased a lot. Over the time as well e-payment systems has developed and are today a solid component of the Business-to-consumer sector.
They can be found in many different trends. Google, MasterCard, Ebay are all well known names who all made their part to bring e-payment to its present place.
But how do they function? How important are they? And furthermore, why should they be important since the world kept on spinning before there invention?
This paper will analyze the importance of e-payment systems in the daily life for individuals such as for the business sector. The main point and also the research question for this paper will be to find out "Why are e-payment systems important for us?". For a better overview and understanding firstly the classic and modern payment systems are shortly presented and later shortly compared. Followed by description of how e-payment does influence the daily life of individuals in the society, such as the business/political area. It continuous with the analytical part, where the research question is tried to be answered by analyzing the findings. It ends with the conclusion, where the findings of the analysis are finally presented.
Know a days the list of payment possibilities when purchasing goods online, seems endless. In Germany a customer can chose between thirty different payment systems online (bvdw.org, n.d.). In those thirty different possibilities of course classic payment systems can be found. Classic payment systems are known from the offline-world.
Credit card probably is the most known classic payment, but also pay by bill is well known, which has been "modified" for the online-world (bvdw.org, n.d.)
Increasing importance of e- and m-commerce, and high demand for smart-phones, all are important factors for the large range of e-payment systems on the market (ppi.de, n.d.). PayPal, digital-wallet systems and online-currencies like BitCoin, are getting more and more popular. But still compared to the classic payment systems in the offline-world, the onlineworld has not an e-payment system as "the standard"(e-commerce-magazin.de, n.d.). The following text will firstly present the classic payment systems, starting with prepaid-systems and end with the credit card.
Afterwards modern payment systems are presented. Systems like PayPal, Google Wallet - all systems invented by huge internet commerce companies.
Prepaid is one of the most common payment method in the internet. This method requires that the customer transfers money to the sellers bank account before he sends the ordered product. This method can be done even by filling out a formula at the bank, or via online banking. After placing an order and choosing prepayment, the customer often gets transferred to another page were he can login with his online banking data. Prepaid is all over more an advantage for the retailer, since he receives the money, before he is sending away the order (ecckoeln.de, n.d.)
When placing an order, the customer types in his bank account information on the internet page of the retailer. At the same time he allows the retailer's bank to debit the required amount from his account. Also this payment method is more safe for the retailer (ecommerceleitfaden.de, n.d.).
Cash on delivery means that the customer pays the amount cash to the delivery service at the door. The delivery service than transfers the amount to the retailer. Because the delivery service has some extra work with this method, cash on delivery does cost some extra. Only when the customer has the total amount in cash, he is able to receive his order (ecckoeln.de, n.d.)
The retailer sends the order together with a bill to the customer. The bill contains the claimed amount of money, which the customer needs to transfer to the retailers account. This can be done even by online banking, or by filling out the blue print of remittance slip, which often are added to the bill, and hand it in at the bank (ecommerce-leitfaden.de, n.d.)
Paying by credit card is largely spread in countries like the USA or Canada. After placing an order online, the customers transfers his credit card numbers to the page.
A credit-card-acquirer is a third-party company who is taking the role of transmitter. This kind of company takes the amount of money required from the customer and transfers it to the retailers account. Of course this action does cost some extra tariff fees, called disagio. Known credit card institutions are AMEX, MasterCard, VISA (ecckoeln.de, n.d.). The advantage for the seller is the minimized amount of stopped transactions, while the advantage for the customer is the simple global usage of this systems (ecckoeln.de, n.d.). The picture below shows the process of credit card payment:
University of Toronto - an electronic wallet is a: citation:"...device that allows as individual to make electronic commerce transaction." (University of Toronto, 2008-2011). Google and Ebay are two leading companies on the internet market which are working on to also overtake the market section of electronic wallets. While Google comes with a product called "Google Wallet", Ebay answers with their "PayPal" product.
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