Due to the rapid growth of e-commerce, the physical boundaries between parties in business transaction have been eliminated by the fast and convenient network connection. Nevertheless, most payment still has to be carried out offline by conventional methods. Over the last decade, a large number of online payment solutions have been developed, but many are still remained at the trial stage; while others are competing with each other; some even failed to reach a customer acceptance stage before developers quit the business. Reasons of slow acceptance are technological, but more importantly, societal. Developers are struggling in pushing increasingly secure and convenient technological solutions to the public. On the other side, users are seeking the balance between benefits and the risks of using online e-payment, which prolongs the process of wider acceptance. This article offers a brief introduction to typical online e-payment instruments and classifications of existing payment systems. It intends to provide researchers and developers with a clearer view on e-payment by comparing various existing systems. The article also attempts to shed light on the issue of social acceptance and adoption of online e-payment.
Online e-payment refers to the process of finance or payment mainly using Internet as a medium. Making payment electronically is not new. Long before online e-payment has been introduced, financial institutions had established Automated Clearing House (ACH) to clear money transfers electronically. The electronic financial infrastructure has promoted introduction of various Electronic Fund Transfer (EFT) solutions. In a broader sense, electronic payment includes those based on private networks, such as ATM, credit card payment, POS (point-of-sale) and other payment over proprietary networks. The rapid development of B2B, B2C and C2C e-commerce gave rise to the development of new payment solutions over the open network. Thanks to the rapid development of ICTs and e-commerce, a vast number of online e-payment solutions have been introduced. Conventional payment methods and concepts like credit card and cheque have been extended and modified to incorporate online transactions. New schemes of payment like electronic currency and smart cards have been introduced for online payment. Many e-payment systems share similar characteristics or developed upon similar protocols or payment infrastructures. Despite numerous attempts aimed at offering innovative alternatives, credit and debit cards payment based on the existing payment network and procedures remains the main payment instrument for online transactions. For instance, a report showed that in the UK some 90% of online purchases are made by credit card and debit card, although the amount only represents 3% of all card payments (Allen, 2003).
Many have realized that the limited acceptance of online e-payment is by and large a chicken and egg problem. Diffusion of online e-payment is limited by the unavailability of payment solutions accepted by wide range of transactions. Moreover, the lack of market-wide diffusion limited development of more integrated online payment solution (Allen, 2003). The phenomenon has attracted attention of researchers to investigate the factors hinder the wider acceptance of online e-payment (Abrazhevich, 2001b; He, Duan, Fu, & Li, 2006). To have a better understanding of the issue of acceptance, the characteristics of different online payment systems, and technological and social issues associated with their implementation need to be clarified.Top
Emerging Online E-Payment Technologies
In response to the rapid development of e-commerce and the security requirements of the online e-payment, research groups, financial institutions and commercial firms have developed a number of online e-payment solutions since the last decade. Table 1 provides a list of some typical online e-payment methods with examples.
Key Terms in this Chapter
Smart Card: A plastic card with an integrated circus chip securely embedded in the card. It can store 100 times more information than traditional magnetic cards in a form that cannot be copied.
Electronic Currency: Prepaid product resembles the conventional cash, in which a record of the funds or value is stored on an electronic device in the consumer’s possession.
Online E-Payment: Electronic payment technologies which allow money to be transferred over the open network, such as the Internet.
Secured Electronic Transaction (SET): A set of technology protocols based on digital certificates, which identifies the parties involved in the payment transaction and protects the dialogue between parties.
Electronic Cheque: Cheque like electronic payment technologies using digital signature and certification technology to authorize and endorse the payment.
Public-Key Cryptography: An asymmetric encryption technology designed to secure communication between individual entities. The sender encrypts the message using public-key of the intended receiver, and the receiver then decrypts the message using its secret key.
Secure Socket Layer (SSL): An encryption technology based on public-key and private-key cryptography, which ensures secured dialogue between payer and merchant over the Internet.