A to Z of e-money and payment gateways

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What is E-Money?

Since early times when barter system declined in usage, money has been used for trading to purchase goods and services. Therefore, ‘money’ is used to denote a store of value that is indispensable to business activities. IN the digital age, new forms of money or in other words, electronic money perform the function of traditional money or in other words, electronic money performs the function of traditional money which is used for making e-commerce transactions. This electronic money is known through various names including electronic cash, e-currency, digital cash which in short means money exchanged through and electronic medium. E-money includes prepaid online account, smart cards, E-wallets amongst other e-payment mechanisms.

 

Computers and internet are used to transfer or pay the money through online system. The EFT(electronic fund transfer), SWIFT and Direct Deposits are few examples of effecting online payments. Although electronic money means reduced cost, greater efficiency and variety of choice in payment methods, it poses challenges of security and requires robust technological tools to ensure accuracy in operations. Therefore, electronic money is usually implemented by use of cryptography. In Hong Kong, octopus card system is in place. In Canada, the Canada’s Interac network became successful payment method. In Singapore, FELICA was used for public transportation system. Electronic money is used to pay for cross border transactions and with very easy currency conversion, it facilitates e-commerce activity. Historically, coin based money was used, followed by notational money such as cheques. The notational money means when a notation is attached to the value stored at some other place. Subsequently, credit based payment system evolved. It is beneficial for low value transactions where money can be transferred quickly without much expense.

 

Current forms of E-payment Systems

Mondex

Mondex initially applied to the offline world and slowly shifted its base to online transactions. It is a chip card base system that applies to card to card transfers of money and invalidates spoofing requests to transfer money. However this system does not require validation, verification or central clearing by an authorizing bank.

 Auripay

This system uses a unique number which is deactivated on single use. Consumer often uses this system method for online shopping. The advantage of this system is that the number can be customized based on the number of times it can be used, the value stored on the card, card holder’s name and address and the validity period. Chances of misuse are quiet rare and system denies access or any tempering by an imposter. A customer who receives the numbers may charge the proceeds to their credit cards.

 Latest Smart Card Systems

Smart cards which are quite commonly used offer added security as compared to magnetic strip technology and electronic wallet is an apt example. It is like a smart card that stores in a purchasing power of the consumer which he can make use of. The deposit is debited whenever there is a purchase made irrespective of the bank used for transaction. This model is only acceptable for a micro system.

System is internet friendly and is akin to France telecom Tele-carte. This facility can also be used with mobile phones. In Belgium, Proton introduced by Banksys in 1998 has been a successful model. In Germany, the Geld-karte is a popular E-wallet system. It uses DES cryptography and is technically compatible for operations within France, Germany and Luxemburg. In France, the Moneo, another form of E-wallet was created in 1999. This is used either with a credit card or can be used separately. Due to its instant payment process, low charges and seamless interoperability electronic wallets such as Proton from Belgium and Octopus from Hong Kong have flourished in E-Commerce market. Moneo in France has almost diminished due to security concerns and high costs of usage. However, it has been found through some studies that card holders are fairly satisfied with performance and it is likely to be adopted as a successful model with greater marketing efforts.

 

Cyber Cash

It is a payment method that makes use of encryption technology in transferring credit card information. It use unique programmes called as a ‘Cyber Cash Wallet Software Programme’.

A customer would register with cyber cash and be allotted a wallet ID and a password connected with one credit card. E-merchant sets up an account with the bank that accepts a payment option using above mentioned form and the bank approves or denies a transaction in an encrypted form to the merchant. The merchant account gets credited fairly quickly. Its success depends upon the bank’s acceptability of the cyber cash system and installation of the required software and its security parameters.

 

Online Payment Gateways

One of the currently popular e-payment systems is PayPal. PayPal was introduced around 1990 and undertakes its business activity of online payment services in more than 30 countries. PayPal offers certain services free to its customers while certain services are Fee based. A registered user who is the seller in a transaction receives the money through PayPal if buyer is also a registered user who inputs payment information and the seller’s email address and the amount which is then deducted from the buyer’s account with PayPal or the buyer can charge the payment to a credit card or authorize Automated Clearing House (ACH) transfer from a ‘checking account’. In the case the buyer is not a registered user of PayPal, the seller is able to get ask the buyer to log on to PayPal for onetime payment. This payment gets credited to the seller’s account with PayPal charging an appropriate service fees. The money received by the seller is in his PayPal account can be maintained or he can ask PayPal to transfer the same into his bank account. In this manner the seller and the buyer does not need to disclose the sensitive information about their credit, debit cards or their identities. Another example similar to PayPal is that of BillPOINT. In Billpoint, the buyers pay through credit cards or the ACH transfer, and payments after deduction of the service fees are credited to the seller’s bank account. In case of credit card payments this is instantaneous. But in case of ACH transfer, it takes more than three business days. A seller requires registration with billpoint to receive the payments. In case the buyer is not a registered user, he provides credit card information or bank account details when he intends to make the payment. Another payment system is that of Propay. Propay does not act as intermediary to a payment transaction and enables sellers to establish its individual credit card account so that when buyer pays through credit card it gets credited to the seller’s account. Propay does not charge registration or maintenance fees, but charges higher fees for every transaction processed. CC Avenue now is also an online payment system which acts as a retailer in auction sales. Its role is to purchase the products from the original seller and re-sell them to the buyer made through a credit card and pays to the seller after charging its commission. CCAvenue.com also provides quick and cost effective payment delivery in the online world. The ICICI e-payments limited has incorporated Visa International Global Authentication Payment System which is a 3D secure protocol that uses a unique PIN number of credit card and a unique login ID and password for authentication. This company is also providing payment gateways services to CC Avenue. Verisign offers payment security services and allows the users to make payments through credit cards online in a secure manner.

 

The mobile payment guidelines were framed by RBI on the issue of interoperability, the guidelines recommend that banks may implement the message formats prepared by mobile payments forum of India (MPFI). ISO8583, which is already implemented by banks for switching of ATM transactions could be used for ‘communication between switches where the source and destination are credit/debit cards/pre-paid cards’. The guidelines further provide that till the time a seamless infrastructure for mobile payments is established across India, banks may enter into ‘multilateral arrangement and create ‘MobileSwitches/Inter-bank Payment Gateways’ with prior permissions from RBI. It also prescribes a customer complaint and reprisal mechanism. The guidelines envisage banks need to seek its board’s approval prior to launching any mobile payment scheme explaining the operational risks banks are assuming and the mitigation steps aligned for those risks, transactional velocity limit, fraud checks, AML checks, etc. the RBI further recommends that customer’s right with respect to credit card operations must be clearly maintained including right to privacy, clear description of rights and duties, safeguarding customer records.

 

Factors

 

Cost of a payment gateway.

Those points to set-up fee paid by the end user and may range from 500-50000 INR plus any transactional charge or TDR. In addition one has to pay an annual maintenance charge or AMC.

 

 

The service

Friendlier the user-interface and ease of action or getting things done in hassle free manner the better.

 

 

Payment Page

Verisign SSL 1128 bit SSL encryption coding to protect from phishing

 

 

 

 

 

CCAvenue

Plans starting from: 

Set-up fee: Rs. 0

TDR%: Credit Cards – 5.5% || Debit Cards – 1.25% || Net Banking – 4%

AMC: Rs. 1200

Can be negotiated up to:AMC – Rs. 1200

Service: 7/10

User-interface: 6/10

Basic things: 8/10

More: The biggest 3rd party player in India. Offers a little more payment options as compared to other players in the market. But then comes the arrogance with success. monopolistic attitude. Late responses for inquiries. Does not negotiate (at least with small players).

 

More:  The biggest 3rd party player in India. Offers a little more payment options as compared to other players in the market. But then comes the arrogance with success. Monopolistic attitude Late responses for inquiries. Does not negotiate (at least with small players).

 

EBS

Plans starting from: Set-up fee – Rs. 12000 || 5% TDR || AMC – Rs. 3600

Can be negotiated up to || Set-up fee – Rs. 4000 || 5% TDR || AMC – Rs. 2400

Service: 8/10

User-interface: 8/10

Basic things: 8/10

More: One of the good ones among the whole lot, as far as service is concerned. They are pretty accommodating & act reasonable. It has the good UI when compared to others. Competent rates. They are now my 2nd preference because lately their service levels have been falling

 

 

PayU

Plans starting from

Set-up fee: Rs. 6000

TDR%: Credit Cards – 4.9% || Debit Cards – 1.25% || Net Banking – 4.9%

AMC: Rs. 2400

Can be negotiated up to || Set-up fee- Rs. 4000 || AMC – Rs. 2400

Service: 8/10

User-interface: 8.5/10

Basic things: 9/10

More: Relatively new entrant in the market & have actually come up with some good features. Currently offering the lowest TDR in the market. Already being used by biggies like Jabong, SnapDeal, BookMyShow and Ferns and Petals. Seems to be more customer friendly than others They have definitely maintained their customer service levels, even as they have grown. The USP of this payment gateway is the good practices which they claim results in 12% better conversions.

Overall, with 1 % savings in the form of TDR + better conversion rates, at this moment I would pick PayU as a recommendation. After all, in e-commerce every % matters

 

Directpay

Plans starting from || Set-up fee- Rs. 7500 || 6.5% TDR || AMC-Rs. 2400

Can be negotiated up to || Set-up fee- Rs. 5000 || 6.5% TDR || AMC-Rs. 2400

Service: 7/10

User-interface: 7/10

Basic things: 8/10

More: A reliable company and a part of Times Group. Decent UI. Responsive. For me, they can be counted as an option after EBS

 

PayTm

Plans starting from || Set-up fee- Rs. 15000 || 4% TDR || AMC- Rs. 3000

Service: 7/10

User-interface: 8.5/10

Basic things: 7/10

More: It is a relatively new player in the market but is making doing good as far as their platform and services are concerned. They have one of the best user interfaces around, for a payment gateway. As of now, they are powering major online sites like Snapdeal, Homeshop18, ITC Hotels, Dishtv, PVR, Bagittoday.com. Considering the are still very new, the processing of all applications may take a few more days than usual.

 

 Authors:

20140904_200010

 

 

 

 

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7 Comments

  1. n rajashree kala says:

    Quite informative!

  2. Nitin says:

    I believe you left out PaisaPay.

  3. RUST hammeR says:

    Nice read.Bookmarked it 🙂

  4. Shobhita Mathur says:

    Well done!

  5. Saneet says:

    Very nice and an informative read!

  6. Kapil says:

    Great work.

  7. kamal Sharma says:

    Yes this look to be the perfection peoples are awaiting for good luk

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