In this literature reappraisal, we will depict several facets of e-payment system. The literature reappraisal will get down by the definitions followed by theories. Following, it would go on by some dimensions of e-payment system which include the types and uses of e-payment system, processes, usage tendencies, benefits and hazards and direction of e-payment system. Finally, the literature reappraisal will reason by the decision.
From on-line encyclopaedia TriasWiki ( 2010 ) , e-payment or Electronic payment is any digital fiscal payment dealing affecting currency transportation between two or more parties.
Velmurgan, R.J. and Senthil, M. ( 2008 ) defined that an electronic payment is a payment services that utilize information and communications engineerings including integrated circuit ( IC ) card, cryptanalysis, and telecommunications webs. From the Velmurgan, R.J. and Senthil, M. ( 2008 ) , the electronic payment consists of users who can in bend be subdivided into retail merchants and consumers depending on the dealing theoretical account adopted, issuers which included Bankss and other fiscal establishments that are supplying the existent mechanisms or the agencies to incorporate the mechanism into other fiscal systems, and regulators who are concerned with issues runing from guaranting the unity of the mechanism and its operators, to the possible impact on the wider economic system.
Harmonizing to Nochex.com ( 2010 ) , e-payment is defined as an electronic payment is a payment services that utilize information and communications engineerings including integrated circuit ( IC ) card, cryptanalysis, and telecommunications webs.
Based on Hartmann, M.E. ( 2006 ) , in rule, e-payments may be defined as all payments that are initiated, processed and received electronically. One can separate between e-commerce retail payments ( business-to-consumer or B2C payments ) and e-payments amongst consumers ( Private-to-Private or P2P payments ) , every bit good as electronic acceptances of “ traditional ” banking services ( electronic minutess between a bank and its clients. For illustration, e-payments included paying for an article with a chink of your mouse ; settling an auction purchase via your e-mail history ; purchasing an electronic ticket utilizing your nomadic phone.
Acoording to Odlyzko ( 2003 ) , e-payment is a subset of an e-commerce dealing to include electronic payment for purchasing and selling goods or services offered through the Internet. Generally, electronic payments referred to online minutess on the cyberspace.
Nordea Bank Finland ( 2005 ) explained that e-payment is an electronic payment method in which a purchaser selects purchases and pays them within a individual Internet session. The payment can be transferred to the marketer instantly or on a ulterior day of the month.
Harmonizing to Basir, A.A. ( 2009 ) , the e-payment use among the consumers and its usage tendencies show the credence degree of the e-payment system. The additions in the non-cash retail minutess reflect the additions credence of e-payment system among consumers in Malaysia. Therefore, from the Basir, A.A. ( 2009 ) , it shows the relationship between the use among consumers and credence degree of the e-payment systems. The use and the credence degree of e-payment systems have a additive relationship, which means that when the use of e-payments among consumers increase, the credence degree of e-payment systems will besides increase. In other words, the higher the use of e-payment system among consumers, the higher the credence degree of e-payment systems among consumers.
Basir, A.A. ( 2009 ) stated that the payment systems in Malaysia have been undergoing alterations in recent old ages. Among the noteworthy alterations is the outgrowth of electronic-based payment systems. Both value and volume of minutess per capita usage of e-payment instruments had increased in recent old ages. Following, we will get down the literature reappraisal from the types and uses of e-payment systems.
4.1 Types and uses of e-payment systems
There have appeared different types of electronic payment system in the last few old ages. At least tonss of electronic payment systems proposed or already in pattern are found ( Murthy, 2002 ) . Murthy ( 2002 ) explained six types of electronic payment systems: PC-Banking, recognition cards, electronic checks ( i-cheques ) , micro payment, smart cards and E-Cash. Maurer, B ( 2007 ) identified 4 types of electronic payment systems: debit and recognition card, interne-based payments, nomadic payments, nomadic billfold, e-purses and payment through a 3rd party. Thus, electronic payment system can be loosely classified into 5 types:
Online Credit Card Payment System
Singh Sumanjeet ( 2009 ) stated that this type of electronic payment system has been widely accepted by people in the universe, and it is the most popular method of e-payment particularly in the retail markets. This type of system is widely accepted by public, because it offers convenience for both the client and the marketer. This signifier of payment system has several advantages, which were ne’er available through the traditional payment systems. Some of the most indispensable elements are privateness, unity, compatibility, good dealing efficiency, acceptableness, convenience, mobility, low fiscal hazard and namelessness ( Singh Sumanjeet, 2009 ) . The procedure of online recognition card payment system is really simple. If consumers want to buy a merchandise or service, they can direct their recognition card inside informations to the service supplier involved so they will manage this payment like any other ( Singh Sumanjeet, 2009 ) .
Electronic Cheque Payment System
Presents, 1000000s of concerns use electronic check payment system, which replace the traditional paper checks with the other sellers, consumers and authorities ( Singh Sumanjeet, 2009 ) . It functions utilizing the same mechanisms as paper check, but in an electronic format. E-cheque minutess take topographic point in the ways that the consumer “ writes ” the eCheque and “ gives ” the eCheque to the marketer electronically. Then the marketer “ sedimentations ” the eCheque, receives recognition, and the marketer ‘s bank “ clears ” the eCheque to the paying bank. Finally, the paying bank validates the eCheque and so “ charges ” the cheque author ‘s history for the check. E-cheque payment system offers legion advantages like safe bank minutess on the Internet, limitless information transporting capacity, reduced fraud hazard, and automatic confirmation of content and cogency. But, this type of payment besides has several disadvantages. These include their comparatively high fixed costs, their limited usage merely in practical universe and the fact that they can protect the users ‘ namelessness ( Singh Sumanjeet, 2009 ) . Therefore, it is non appropriate system for the usage by consumers, although it ‘s utile for the authorities and B2B operations because the latter minutess do non necessitate namelessness, and the sum of minutess is by and large big plenty to cover fixed treating cost.
Electronic Cash Payment System
Electronic hard currency ( e-cash ) is a new construct in electronic payment system because it combines computerized convenience with security and privateness that improve on paper hard currency ( Singh Sumanjeet, 2009 ) . The primary map of e-cash is to ease minutess on the Internet. Many of these minutess may be little in size and would non be cost efficient through other payment mediums such as recognition cards. While it appears superior to other signifiers, E-cash will non wholly replace paper currency. Use of E-cash will necessitate particular hardware, and while most people will hold entree, but non all will. Singh Sumanjeet identified some advantages for this electronic payment system like authorization, privateness, good acceptableness, low minutess cost, convenience and good namelessness. However, e-cash besides has many restrictions like hapless mobility, hapless dealing efficiency and high fiscal hazard, as people are entirely responsible for the doomed or stolen ( 2009 ) .
Smart Card games
A smart card is similar to a magnetic band card but contains a microprocessor bit. The first smart cards that created were prepaid telephone cards. Owing to their considerable flexibleness, they have moved on for a broad scope of maps like main road toll payment, pupil cards, electronic bags and besides our individuality cards: MyKad. Smart cards are basically recognition card sized fictile cards with the memory french friess in them so as to function as storage devices for much greater information than recognition cards ( Singh Sumanjeet, 2009 ) . With the outgrowth of e-commerce, smart cards had become a peculiarly appropriate method to put to death on-line payment system and it has greater degree of security than recognition cards. Singh Sumanjeet besides states that smart cards are better protected from abuse than recognition cards because the smart card information is encrypted by enter a personal designation figure ( PIN ) codification ( 2009 ) . The advantages of smart cards are about same as electronic hard currency payment system, its included good namelessness, reassign payment between single parties, and low transactional handling cost. Most of the developing states rely more on smart cards based electronic payment system although recognition card is the most popular in the universe.
Payment through a Third Party
Third party payments are individual to individual minutess. This type of payment is really convenient as money can be transferred without unwrap any personal or fiscal information. All minutess happen in existent clip so Sellerss can see payments reflected in their histories at one time. When a client intends to pay through a 3rd party, the 3rd party will reassign money from the history of the purchaser to the marketer. All this is done for a certain fee.
Kannen, M. , Leischner, M. and Stein, T. ( 2003 ) have examined the figure of procedure oriented stage theoretical account for electronic payment. There are 5 stages in this theoretical account which are low-level formatting, deployment, dialogue, payment and station payment. By and large, the first 2 stages that initialization stage and deployment stage are merely function one time, whereas the remainder of stages have to be repeated during each payment dealing.
In low-level formatting stage, clients and merchandisers involve in choice of payment methods, see the contract understanding to obtain a recognition card, and taking payment graduated table for charge, or the colony of a mail order understanding harmonizing to their demands. This method makes the participants of the payment method in the legal sense. Before subscribing the contract, the participants have to see the commissariats of information for the assorted payment operations and every bit good as get single audience for the specializer.
In order to do e-payment system operational, clients and merchandisers integrate the payment methods into their existing environment technically and organizationally in deployment stage. An e-payment system supplier supply proficient demands, such as package or a smart card reader, help the participants in the system constellation through a phone hotline or on site constellation, integrate assorted interfaces in the merchandiser ‘s present IT substructure with of import payment informations.
During negotiation stage of an e-payment system, clients and merchandisers negotiate a precise payment dealing. They can negociate the types of payment methods based on the payment sum, hard currency price reduction, payment day of the month, portion payment options such as sedimentation and outstanding payment after a immaculate supply, the integrating of fillip systems, and the possibility of dividing the sum between assorted payees. This dialogue stage is trusting on trustingness between both parties, which lead to the successful of the dealing.
The existent payment takes portion in the payment stage. It undertakes the colony of the payment harmonizing to the understandings in the negotiating stage. First, the participants need to authorise and corroborate the payment dealing. After that, the payment informations will reassign to peculiar payment participants such as the recognition card company.
The last stage in the e-payment procedure is post payment stage that an assigned payment is processed and completed. The after payment services includes all services, which are necessary and preferred for the farther colony of payment minutess. As an e-payment supplier, it needs to verify the glade of the payment dealing, the recording of the payment dealing, which can be seen and tracked by the user, the currency rapprochement of the merchandiser, the glade of the clerking entry by the merchandiser, the certification of all minutess and the cancellation of dwelling payment minutess by the user.
Singh Sumanjeet ( 2009 ) examined that digital currency based payment system. The intermediary in this figure plays the function as an electronic bank. It converts outside money ( RM ) into inside money ( e hard currency ) , which is circulated within electronic markets. Intermediary Acts of the Apostless as a centralised commercialism enabler keeping rank and payment information for both Sellerss and purchasers. A purchaser need merely direct the marketer his designation figure assigned by the mediator.
Trust and security are of import in every phases of e-payment procedure. As an initial requirement, all participants should hold absolute trust in the procedure. This cardinal attitude must be underlined during each payment procedure once more and once more. The trust is indispensable and of import for the credence of electronic payment. The dealing security means that the secure and dependable payment in the handling of electronic media harmonizing to defined regulations. Therefore, by implementing these two elements, the successful of e-payment procedure can be achieved.
4.3 Usage tendencies of e-payment systems
Gerdes, G.R. ( 2008 ) conducted studies to gauge the figure and value of electronic payments originated in the United State in 2006 by agencies of normally used payment instruments. He sent the questionnaires to 73 well-established electronic payment webs, card issuers, and card processors. 89 per centum of established entities had responded with information and he found that the figure and value of payments processed by the non-respondents were likely really little. Therefore, most of the established entities were holding big figure and value of electronic payments. Since the use of electronic payments is high, the credence degree of electronic payments by the constituted entities is besides considered every bit high.
Besides, Gerdes, G.R. was besides sent the questionnaires to 33 emerging payments companies and the studies were returned by 16 companies. He got the consequences of the reported sums for emerging payments are lower bounds for the national sums. It means that the national in United States haven to the full accept the emerging payments such as the online measure payment minutess since the usage tendencies of emerging payments among them still low.
Basir, A.A. ( 2009 ) examined the e-payment use tendencies in Malaysia. Harmonizing to Basir, A.A. ( 2009 ) , the e-payment system has seen increasing credence among consumers in Malaysia since the use and the usage tendencies of e-payments increased. He found that he volume of non-cash retail minutess per capita increased from 13.8 to 32.5 and the e-payment ‘s portion of the entire non-cash retain payments increased from 3 % to 7 % ( from 2003 to 2007 ) . There are several grounds caused the usage of e-payment instruments increasing such as cost economy, safety and the assurance conferred from security steps of e-payment instruments. Therefore, these benefits encourage more people to utilize the e-payment instruments and besides promote the credence degree of e-payments by consumers.
Based on the Basir, A.A. ( 2009 ) , the major e-payment instrument in usage in Malaysia are recognition cards, cyberspace banking and others. First, Basir, A.A. found that the usage tendency of recognition cards is high. Both the value and volume of minutess per capita have increased from RM1159 and 5.8 to RM2 047 and 8.7, severally ( from 2003 to 2007 ) . Credit card is the oldest e-payment instrument in Malaysia and the consumer demand for recognition made it has the high use degree. Therefore, the credence degree of recognition cards comparatively higher than other e-payment instruments.
From the research of Basir, A.A. ( 2009 ) , the usage tendency of cyberspace banking growing quickly. The value and volume of minutess per capita increased from RM403 and 0.3 to RM2,047 and 1.5 severally ( from 2003 to 2007 ) . In add-on, the usage of cyberspace banking among internet endorsers in Malaysia increased from 59 % to 85 % ( from 2003 to 2007 ) . Since there are increasing tendency in usage of cyberspace banking, therefore the credence degree besides increase among the consumers.
Charge cards, e-money and debit cards are besides included to the e-payment instruments. Harmonizing to Basir, A.A. ( 2009 ) , the value of minutess per capita for charge cards increased from RM74.9 to RM81.7 and RM22.4 to RM59.0 for e-money. The volume of minutess per capita for e-money increased from 7.6 to 22.3, but volume of minutess per capita for charge cards was level. Furthermore, the value of minutess per capita for debit cards showed a important addition from RM3.5 to RM42.9. However, the volume of dealing per capita remained inactive. Therefore, the use of these e-payment instruments showed increased, means that the usage tendencies are high. It showed that the credence degree of consumers is besides high. E-payments provided many benefits to consumers and it encourages them to utilize these e-payment instruments and caused the credence degree increased.
Harmonizing to Wilson, U. ( 2009 ) , electronic payments have grown quickly in several signifiers. The use of debit cards has exploded for 27 per centum of entire non-cash payments in 2006. He besides found that recognition cards and ACH minutess have besides grown dramatically. Therefore, it reflected the consumers ‘ credence degree towards e-payments systems have increasing.
In a nutshell, the usage tendencies of e-payments are increasing among the consumers due to assorted benefits provided by the e-payments instruments. It besides showed the credence degree of e-payment systems has followed increasing since the use and its usage tendencies of e-payment are increasing.
4.4 Benefits of e-payment systems
With the growing of the Internet, electronic payment has become a popular manner for consumers to pay measures and pull off their histories in place. Consumers are extinguishing the problem that frequently comes with registering paperwork and mailing checks, and these replacement by maintaining their records online through secure webs. Electronic payments services non merely increase efficiency of concerns, but besides wider picks, save cost, cut down late payments, consolidating bank relationship and supply a greener concern solution to clients.
Businesss and clients can take from a scope of payment instruments and channels such as recognition cards, debit card, e-cash and e-cheque. The addition in the assortment of electronic payment methods afford the SMEs more picks from which to take a channel or instrument that best suits that house ‘s market size and the degree of technological, capital and labour strength ( Basir, A.A. 2009 ) . Electronic payments besides allow concerns to direct bills electronically and accept payments through Internet. This is highly helpful for concerns that send out bills monthly and making a more efficient charge rhythm.
Basir, A.A. provinces that the constitution of electronic payments and other services by the authorities could cut down the cost of carry oning concern in Malaysia ( 2009 ) . Besides that, extinguishing paper charge wholly will cut down paper and mailing costs. The sum of nest eggs depends on each concern ‘s day-to-day modus operandis such as having incoming checks and doing sedimentations ( Wilson, U. 2009 ) . On the other manus, e-payments services besides cut down cost of the consumers. With the visual aspect of this service, consumers can cut down transit costs for trips to the bank.
Electronic payment services have the reminders and presentments map for clients to pay their measure. A concern can put up hebdomadal or monthly reminders to their clients and clients to remind them when a measure is due. By this map that provide by e-payment service can cut down the sum of late payments that the company receive. Online payments besides allow for quicker minutess, extinguishing the waiting period required for a mail-clad cheque to get.
If an organisation dispersed its companies in different location, so the banking relationship will be complicated. Geographically spread companies frequently set up a bank history at each location, because this can supply convenience for their day-to-day banking modus operandis ( Wilson, U. 2009 ) . But an extra cost will incurred for company to keep histories in all its locations. Electronic payment system can take geographic boundaries. It so eliminates the excess cost of keeping separate histories at different locations.
Last but non least, electronic payment services are supplying a greener concern solution. By directing and having measures online, clients and concerns likewise are cut downing the sum of paper tossed and making their portion to assist salvage the environment.
Hazards and Risk Managements
E-payment system is presently continued to develop and spread out in the fiscal market of our state, but there are some hazards bing as the e-payment spread outing widely. A healthy development of the system will necessitate the cooperation by different function that include cardinal bank, bank and client to pull off the hazard and challenges.
E-payment system is presently continued to develop and spread out in the fiscal market of our state. A healthy development of the system will necessitate the cooperation by different function that include cardinal bank, bank and client to pull off the hazard and challenges.
Basir, A.A. ( 2009 ) studied how Cardinal bank promote the development of e-payment strategies. After adoptive liberalisation policy, the cardinal bank required migration to the Europay-MasterCard-Visa criterion for recognition cards as a important measure to cut down fraud. Although this can control the usage of cloned domestic recognition cards, nevertheless, it is less effectual against recognition card fraud originating from purchases made over the cyberspace or by telephone ( Bank Negara Malaysia 2007 ) . On the other manus, cardinal bank has issued a set of guidelines on pull offing fraud and hazards on recognition card operations to all Bankss. By and large, they are bettering the policy and the execution continuously in order to heighten public assurance towards the payment system.
Fraud is besides a hazard faced by cyberspace banking users. To extenuate it, the cardinal bank issued guidelines that outline the lower limit hazard direction demands for all signifiers of electronic banking. In add-on, authorities besides established the Internet Banking Task Force, consisting the taking banking establishments, cyber security bureau, constabularies and besides Internet service supplier company. Specific demands were besides issued to Bankss, such as the demand to implement two-factor hallmark for cyberspace banking minutess. Acknowledging that controls are needed to turn to hazards confronting the populace from utilizing e-money, the cardinal bank is explicating a regulative model for the electronic money concern. The cardinal bank besides extended its regulative inadvertence to cover nonbank remittal operators as remittals that sent abroad by foreign workers in the Malaysia is correspondingly high.
As portion of its attempts to extenuate systemic hazard in the payment system, MEPS conducts a catastrophe recovery exercising for three of its nucleus service webs: the shared ATM web, e-Debit, payment for goods or services through cashless methods such as recognition cards or online purchases, and Interbank GIRO ( IBG ) , a financess transfer payment system operated by MEPS that enables consumers to reassign financess through Bankss across Malaysia ( Bank Negara Malaysia 2007 ) . The unrecorded catastrophe recovery exercising is to serves to familiarise the MEPS catastrophe recovery squad, fiscal establishments and related service suppliers with the catastrophe recovery procedure. Assorted steps has been taken by Central Bank to do certain that the system can be maintained in a standard degree and can be follow by other Bankss in our state.
Norges Bank Report ( 2009 ) show that the new electronic payment services will affect drawn-out automated procedures between remunerators and payees. This increases complexness and involves a hazard of mistakes that may detain or forestall completion of payments. At the same clip, payment services are expected to be available at all times. Secure and stable IT operations have hence become a major challenge for participants in the E-payment system. Guaranting rightful entree to agencies of payment and forestalling counterfeiting and fraud has ever been demanding. New payment solutions pose new challenges, besides with respect to security. Payment services are provided via webs. The hazard for one participant is influenced by the other participants in the web, but the other participants may hold small motive for taking steps to cut down the hazard of events that do non impact them. A participant ‘s willingness and capacity to cut down payment fraud therefore mostly depends on the extent to which the participant bears the costs involved. When the participant best able to cut down fraud must besides cover the cost of the fraud, the willingness to put in steps to extenuate the hazard is likely strengthened. This is taken into consideration when make up one’s minding clients ‘ liability for compensation in connexion with card fraud. The less a loss can be blamed on the client, the larger the portion of the loss that must be covered by the bank. With better information refering the extent of fraud and how it occurs, appropriate steps to cut down fraud are more likely to be implemented. Financial Supervisory Authority in some state has tightened coverage demands for fiscal establishments refering incidents that occur in the payment system ( Norway- Finanstilsynet ) .
Pin codification and the contents of the card ‘s magnetic band are easy stolen from point-of-sale terminuss, and the information would so be used for deceitful backdown or goods purchases. To get the better of this issue, we can see that bit card and chip-enabled terminuss has been used globally in a enormously velocity because its posses a stronger security and maps. When such events are detected, the publishing Bankss block the cards concerned, reach the client and publish a new payment card. There has been a important addition in card informations larceny in many states. Losingss have been low, but incommodiousness to the clients and Bankss concerned has been significant. Operating incidents can besides give rise to jobs and losingss. For illustration, stores and other merchandisers will do fewer gross revenues if clients do non hold entree to major payment services. For illustration that was happened in Norway, on Saturday 24 October 2009, the BankAxept system was inoperative for 13 proceedingss. This affected all merchandisers and all cards utilizing BankAxept during a really busy period of trading. Inadequate control of history balances has besides given rise to jobs in connexion with card usage in point-of-sale terminuss and ATMs. Such events by and large merely affect certain types of cards, certain ATMs or certain merchandisers.
Online banking payment services are work under complex operating environments. Most of the clip, it will portion IT resources with other services. Any break that caused to the services will straight impact the processs of payment. Access to online banking requires users to place themselves and be authenticated before being able to do payments or carry out other operations. To vouch a more secure and smooth dealing, Bankss have to pass investing in engineering by supplying a stable and dependable service in web sites that available presently. One of the ways includes proficient betterment, which is necessitating clients to re-authenticate their individuality for each payment.
A figure of new payment methods with different channels have been introduced in recent old ages. One illustration is payment via nomadic telephones. Based on this construct, client hallmark can besides be made more unafraid by uniting usage of nomadic telephones and online banking. If an individuality codification is sent via the nomadic telephone web, a fraudster must obtain entree to data sent both via the nomadic telephone web and the Internet. However, this system will go more complex when payment services are provided via a figure of channels. Puting up understandings between bank and client is disputing as different providers are responsible for supplying different services to the same nomadic telephone. From the study, it was suggested that combination of new payment method is merely applicable by achieve understandings from bank, client and the provider.
We know that payment services are dependent on uninterrupted handiness of IT systems, telecommunications and power supply. Cash and assorted paper-based system will go basic point if the backup solutions fail when break occur. In that clip, Bankss must able to manage a sufficient figure of paper-based signifiers for payment intents in a crisis. If hard currency is used as a backup solution, each participant must include capacity and processs for increased supply of hard currency and hard currency handling in its eventuality programs. Banks are obliged to let clients to retreat their sedimentations when they so request or when clip deposits autumn due. This duty applies both in normal state of affairss and in crises. Therefore, a considerable program should be build on the footing that an increased supply of hard currency should be able to cover a big portion of purchases usually paid for by card. Besides, Central Bank must besides hold the capacity and handiness to run into an increased demand for hard currency from Bankss.
In decision, e-payment systems have provided assorted types of benefits to consumers and concerns. Although there are some hazards by utilizing the e-payments systems, but the hazards are controls by the hazard direction schemes. Therefore, the usage tendencies of e-payment systems are increasing among the consumers because it is a convenient and unafraid payment system to utilize by consumers.