An e-commerce payment system (or an electronic payment system) facilitates the acceptance of electronic

payment A payment is the voluntary tender of money or its equivalent or of things of value by one party (such as a person or company) to another in exchange for goods, or services provided by them, or to fulfill a legal obligation. The party making the p ...

for offline transfer, also known as a subcomponent of electronic data interchange (EDI), e-commerce payment systems have become increasingly popular due to the widespread use of the internet-based shopping and banking.

Credit card A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the o ...

s remain the most common forms of payment for e-commerce transactions. As of 2008, in North America, almost 90% of online retail transactions were made with this payment type.Turban, E. King, D. McKay, J. Marshall, P. Lee, J & Vielhand, D. (2008). Electronic Commerce 2008: A Managerial Perspective. London: Pearson Education Ltd. p.550 It is difficult for an online retailer to operate without supporting credit and debit cards due to their widespread use. Online merchants must comply with stringent rules stipulated by the credit and debit card issuers (e.g.

Visa Visa most commonly refers to: *Visa Inc., a US multinational financial and payment cards company ** Visa Debit card issued by the above company ** Visa Electron, a debit card ** Visa Plus, an interbank network *Travel visa, a document that allows ...

and Mastercard) in accordance with a

bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...

and

financial regulation Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the stability and integrity of the financial system. This may be handled ...

in the countries where the debit/credit service conducts business. E-commerce payment system often use B2B mode. The security of customer information, business information, and payment information base is a concern during the payment process of transactions under the conventional

B2B e-commerce B2B e-commerce, short for business-to-business electronic commerce, is the sale of goods or services between businesses via an online sales portal. In general, it is used to improve the efficiency and effectiveness of a company's sales efforts. I ...

model. For the vast majority of payment systems accessible on the public Internet, baseline

authentication Authentication (from ''authentikos'', "real, genuine", from αὐθέντης ''authentes'', "author") is the act of proving an assertion, such as the identity of a computer system user. In contrast with identification, the act of indicati ...

(of the financial institution on the receiving end),

data integrity Data integrity is the maintenance of, and the assurance of, data accuracy and consistency over its entire Information Lifecycle Management, life-cycle and is a critical aspect to the design, implementation, and usage of any system that stores, proc ...

, and

confidentiality Confidentiality involves a set of rules or a promise usually executed through confidentiality agreements that limits the access or places restrictions on certain types of information. Legal confidentiality By law, lawyers are often required ...

of the electronic information exchanged over the public network involves obtaining a certificate from an authorized

certificate authority In cryptography, a certificate authority or certification authority (CA) is an entity that stores, signs, and issues digital certificates. A digital certificate certifies the ownership of a public key by the named subject of the certificate. This ...

(CA) who provides

public-key infrastructure A public key infrastructure (PKI) is a set of roles, policies, hardware, software and procedures needed to create, manage, distribute, use, store and revoke digital certificates and manage public-key encryption. The purpose of a PKI is to facilit ...

(PKI). Even with

transport layer security Transport Layer Security (TLS) is a cryptographic protocol designed to provide communications security over a computer network. The protocol is widely used in applications such as email, instant messaging, and voice over IP, but its use in securi ...

(TLS) in place to safeguard the portion of the transaction conducted over public networks—especially with payment systems—the customer-facing website itself must be coded with great care, so as not to

leak A leak is a way (usually an opening) for fluid to escape a container or fluid-containing system, such as a tank or a ship's hull, through which the contents of the container can escape or outside matter can enter the container. Leaks are usuall ...

credentials and expose customers to subsequent

identity theft Identity theft occurs when someone uses another person's personal identifying information, like their name, identifying number, or credit card number, without their permission, to commit fraud or other crimes. The term ''identity theft'' was co ...

. Despite widespread use in North America, there are still many countries such as China and India that have some problems to overcome in regard to credit card security. Increased security measures include use of the card verification number (CVN) which detects fraud by comparing the verification number printed on the signature strip on the back of the card with the information on file with the cardholder's issuing bank. There are companies that specialize in financial transaction over the Internet, such as Stripe for credit cards processing, Smartpay for direct online bank payments and

PayPal PayPal Holdings, Inc. is an American multinational financial technology company operating an online payments system in the majority of countries that support online money transfers, and serves as an electronic alternative to traditional paper ...

for alternative payment methods at checkout. Many of the mediaries permit consumers to establish an account quickly, and to transfer funds between their on-line accounts and traditional

bank account A bank account is a financial account maintained by a bank or other financial institution in which the financial transactions between the bank and a customer are recorded. Each financial institution sets the terms and conditions for each type o ...

s, typically via

automated clearing house An automated clearing house (ACH) is a computer-based electronic network for processing transactions, usually domestic low value payments, between participating financial institutions. It may support both credit transfers and direct debits. The ...

(ACH) transactions. The speed and simplicity with which cyber-mediary accounts can be established and used have contributed to their widespread use, despite the risk of theft, abuse, and the typically arduous process of seeking recourse when things go wrong. The inherent

information asymmetry In contract theory and economics, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. Information asymmetry creates an imbalance of power in transactions, which ca ...

of large financial institutions maintaining information safeguards provides the end-user with little insight into the system when the system mishandles funds, leaving disgruntled users frequently accusing the mediaries of sloppy or wrongful behavior;

trust Trust often refers to: * Trust (social science), confidence in or dependence on a person or quality It may also refer to: Business and law * Trust law, a body of law under which one person holds property for the benefit of another * Trust (bus ...

between the public and the banking corporations is not improved when large financial institutions are revealed to have taken flagrant advantage of their asymmetric power, such as the 2016

Wells Fargo account fraud scandal The Wells Fargo cross-selling scandal is a controversy brought about by the creation of millions of fraudulent savings and checking accounts on behalf of Wells Fargo clients without their consent. News of the fraud became widely known in late 20 ...

Methods of online payment

There are varied types of electronic payment methods such as online credit card transactions, e-wallets, e-cash and wireless payment system. Credit cards constitute a popular method of online payment but can be expensive for the merchant to accept because of transaction fees primarily. Debit cards constitute an excellent alternative with similar security but usually much cheaper charges. Besides card-based payments, alternative payment methods have emerged and sometimes even claimed market leadership.

Bank payments

This is a system that does not involve any sort of physical card. It is used by customers who have accounts enabled with

Internet banking Online banking, also known as internet banking, web banking or home banking, is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial inst ...

. Instead of entering card details on the purchaser's site, in this system the payment gateway allows one to specify which bank they wish to pay from. Then the user is redirected to the bank's website, where one can authenticate oneself and then approve the payment. Typically there will also be some form of

two-factor authentication Multi-factor authentication (MFA; encompassing two-factor authentication, or 2FA, along with similar terms) is an electronic authentication method in which a user is granted access to a website or application only after successfully presenting ...

. It is typically seen as being safer than using credit cards, as it is much more difficult for hackers to gain login credentials compared to credit card numbers. For many eCommerce merchants, offering an option for customers to pay with the cash in their bank account reduces cart abandonment as it enables a way to complete a transaction without credit cards.

Mobile money wallets

In some developing countries, many people do not have access to banking facilities, especially in tier II and tier III cities. Taking the example of India, there are more mobile phone users than there are people with active bank accounts. Telecom operators, in such locations, have started offering mobile money wallets which allow adding funds easily through their existing mobile subscription number, by visiting physical recharge points close to their homes and offices and converting their cash into mobile wallet currency. This can be used for online transaction and eCommerce purchases.

Methods of online payment

Bank payments

Mobile money wallets

See also

References

Further reading