Electronic payment Methods:

1
Electronic payment Methods

• Defined It is alternative payment mechanism for
  electronic transactions instead of traditional
  payment methods like cheque,cash, credit card and
  debit card etc
• 1. Magnetic stripe cards defined
• A magnetic stripe is a plastic card that has
  magnetically encoded stripe on its exterior.
• Magnetic stripe card applications
• Bank debit cards and credit cards
• Telephone cards
• Employee identification cards
• Building and machine access privileges cards
• Types of magnetic stripe card
• Online stripe cards
• Off line stripe cards
• Smart card hybrid

2

• Online stripe card
• This card is used to read customer information
  from the stripe then this information is used to
  access the information about the card holder from
  the central computer.
• e.g. debit, credit cards, library cards etc.
• Offline magnetic stripe cards
• These cards store information that can be
  interpreted by the card reader and can be
  altered.
• Smart cards
• Def A smart card is a plastic card similar to
  credit card but it contains the microprocessor
  and storage unit.
• Features
• More expensive to issue
• Stored info is not physically damaging
• Not damaged from magnetic field
• More data can be stored as compared to magnetic
  stripe.
• Types of smart cards
• Memory smart cards
• Intelligent smart cards

3

• Memory smart
• These cards are used to record the monetary value
  or unit value which a card holder can spend. It
  contains the less information and processing
  capabilities than intelligent smart cards.
• Intelligent smart cards
• Intelligent smart cards have more processing and
  information storage capabilities than memory
  smart card.
• Electronic purse
• The monetary value which is loaded into smart
  cards microprocessor that can be used by
  consumers for purchases. Smart card reader is
  used to read the smart cards and smart card
  reader is compatible with magnetic reader
• Smart cards in telephones
• When smart cards are introduced in cellular and
  line phones they cab be used for the following
  purpose
• Pay for items purchased over the phones
• Down load money from bank account
• Transfer balance between accounts
• Check bank account balance

4

• Uses of smart cards other than the processing
  information
• National identification codes
• Driving license
• Immigration detail
• Health details

5

• Electronic checks
• Electronic checks are internet payment mechanism
  with which the payor (business or individual)
  instructs its financial institution to pay a
  specific amount to payee.
• Facilities provided by electronic check on web
  site
• Present the bill to payor
• Allow the payor to initiate payment of invoice
• Provide remittance information
• Allow the payor to initiate automatic payment
  authorization for pre specified amount or range
  of amount
• Interface with the financial management software
  and transaction processing software
• Allow payments to be made to new businesses with
  which the payor has never transacted before

6

• FSTC Financial service technology consortium is
  a group of service providers, industrial
  partners, Govt. agencies, universities working
  for the enhancement of financial service
  industry.
• FSTCs electronics check service
• This service uses the e-mail the entire payment
  process is shortened the payment cycle from one
  week for paper checks to two days. Electronic
  check service use temper resistant signature
  smart card and public key cryptography for
  digital signature.
• Electronic cash
• It is term used to refer the prepaid stored value
  the can used for electronic purchases in lieu of
  cash. Magnetic stripe cards, smart cards and
  electronic checks can be classified as electronic
  cash.

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• 1. Audit implication
• Verification of cash, accounts receivables, sales
  and cash disbursement accounts are important
  component of a financial audit. When all business
  activities and payment activities are performed
  electronically then electronic audit is required
  which is performed by accounting professionals by
  the use of CAATs.
• 2. Electronic bill presentment and payment
  systems
• Accounting professional have great potential in
  providing services for electronic bill
  presentment and payment systems by the use of
  proprietary software solutions for such systems.

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• Electronic funds Transfer (EFT)
• EFT is a system in which computer user transfers
  his funds for making payments to supplier or for
  paying salaries to employees bank account or
  transfer funds from one account to another
  account by issuing electronic instruction to his
  bank.
• EFT Systems
• SWIFT (The Society of World Wide Interbank
  Financial Telecommunications) Ltd.
• It a UK based EFT system operated for transfer of
  funds internationally between the banks. E.g in
  UK all banks are members of SWIFT and all banks
  of other countries also have their corresponding
  accounts with EFT systems in their countries.
  These accounts are used to settle payments but
  authorization to transfer is given by SWIFT.
• CHAPS (Clearing Houses Automated Payments)
• It is also EFT system used for interbank funds
  transfer by using BACS (Bankers Automated
  Clearing Service).
• Many companies pay the salaries by using BACS
  service by providing data to their banks.

9

• Electronic point of sales (EPOS)
• Def the system in which computers are used for
  immediate recording of retail sales transaction
  and stock information after the completion of
  transaction in retail shop.
• This method is commonly used in retailing

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Advantages of EPOS

• It automatically provides information relating to
  
• sales transactions
• activity level
• utilization of floor space
• reorder requirement
• Cost of financing the business can be lowered
• Automatically producing daily sales summary
• Stock movement
• Prices for charged and margins obtained
• Change in demand for a products
• Profit maximization for each product can be
  determined
• Price comparison of all products in shop to align
  the prices
• Changes of demands for different qualities can be
  identified

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• EFTPOS
• The system used by banking organizations for the
  transfer of funds between accounts and the
  provision of (point-of-sale) services to
  customers.