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Learning Objectives
Understand the crucial factors determining
the success of e-payment methods
Describe the key elements in securing an
e-payment
Discuss the players and processes involved
in using credit cards online
Describe the uses and benefits of purchase
cards
Prentice Hall, 2003
LensDoc (cont.)
Solutions:
Process credit card purchases by hand
Require:
Home address
Shipping address
LensDoc (cont.)
The Results
Investigating alternative methods of
payment
Cash cards
Special card-swiping peripherals
Credit card processing services
Electronic Payments
Paying with credit cards online
Until recently consumers were extremely
reluctant to use their credit card numbers on
the Web
This is changing because:
Many of people who will be on the
Internet in 2004 have not even had their
first Web experience today
85% of the transactions that occur on the
Web are B2B rather than B2C (credit cards
are rarely used in B2B transactions)
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Customer/payer/buyer
Merchant/payee/seller
Regulator
Prentice Hall, 2003
Characteristics of
successful epayment methods
Independence
Interoperability
and portability
Security
Anonymity
Divisibility
Ease of use
Transaction fees
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Exhibit 10.1
Private Key Encryption
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Exhibit 10.2
Key Sizes & Time to Try All Possible Keys
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Exhibit 10.3
Digital Signatures
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Name : Richard
key-Exchange Key :
Signature Key :
Serial # : 29483756
Other Data : 10236283025273
Expires : 6/18/04
Signed : CAs Signature
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The Players
Cardholder
Merchant (seller)
Issuer (your bank)
Acquirer (merchants financial institution,
acquires the sales slips)
Card association (VISA, MasterCard)
Third-party processors (outsourcers
performing same duties formerly provided by
issuers, etc.) Prentice Hall, 2003
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Exhibit 10.4
Online Credit Card Processing
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Purchasing cardsspecial-purpose
payment cards issued to a companys
employees to be used solely for purchasing
nonstrategic materials and services up to a
preset dollar limit
Instrument of choice for B2B purchasing
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E-Cards (cont.)
Benefits of using purchasing cards
Productivity gains
Bill consolidation
Payment reconciliation
Preferred pricing
Management reports
Control
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Exhibit 10.5
Participants & Process of Using a Purchasing Card
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Smart Cards
Smart cardan electronic card containing an
embedded microchip that enables predefined
operations or the addition, deletion, or
manipulation of information on the card
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E-Cash and
Innovative Payment Methods
E-cashthe digital equivalent of
paper currency and coins, which
enables secure and anonymous
purchase of low-priced items
Micropaymentssmall payments,
usually under $10
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E-Coin.net
System consists of three participants:
User
Opens an account with eCoin.com
Downloads a special e-wallet to their desktop PC
Purchases some eCoins with a credit card
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E-Cash and
Payment Card Alternatives (cont.)
Wireless payments
Vodafone m-pay bill system that enables
wireless subscribers to use their mobile
phones to make micropayments
Qpass (qpass.com)
Charges to qpass account, are charged to a
specified credit card on a monthly basis
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Stored-Value Cards
Stores cash downloaded from bank or
credit card account
Visa casha stored-value card designed
to handle small purchases or
micropayments; sponsored by Visa
Mondexa stored-value card designed
to handle small purchases or
micropayments; sponsored by Mondex, a
subsidiary of MasterCard
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Internetcash
Teenage marketprimary reason for
going online
Communicating with friends via email
and chat rooms
homework
Researching information
Playing games
Downloading music or videos
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Internetcash (cont.)
Why they do not shop online
Parents will not let them children their
(the parents) credit cards online
They cannot touch the products
It is difficult to return items purchased
on the Web
They do not have the money
Transaction may be insecure
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Internetcash (cont.)
InternetCash offers prepaid storedvalue cards sold in amounts of $10,
$20, $50, and $100
Must be activated to work
Gives the user shopping privileges at online
stores that carry an InternetCash icon
Purchases are automatically deducted from
the value of the card
InternetCashs transactions are anonymous
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Internetcash (cont.)
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Person-to-Person Payments
Person-to-person (P2P) paymentse-payment
schemes (such as paypal.com) that enable the
transfer of funds between two individuals
Repaying money borrowed
Paying for an item purchased at online
auction
Sending money to students at college
Sending a gift to a family member
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TradeCard Payments
TradeCard allows businesses to effectively and
efficiently complete B2B transactions whether
large or small, domestic or cross-border, or in
multiple currencies
Buyers and sellers interact with each other via
the TradeCard system
System
Checks purchase orders for both parties
Awaits confirmation from a logistics company
that deliveries have been made and received
Authorizes payment completing financial
transaction between the buyer and seller
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E-Checking
E-checkthe electronic version or
representation of a paper check
Eliminate need for expensive process
reengineering and takes advantage of the
competency of the banking industry
eCheck Secure (from vantaguard.com) and
checkfree.com provide software that enables
the purchase of goods and services with echecks
Used mainly in B2B
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Overview of Logistics
Logisticsthe operations involved in the
efficient and effective flow and storage of
goods, services, and related information
from point of origin to point of
consumption
Delivery of materials or services
Right time
Right place
Right cost
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Exhibit 10.9
Order Fulfillment and Logistics Systems
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In-stock availability
Arranging shipments
Insurance
Production (planning,
execution)
6. Plant services
7. Purchasing and
warehousing
8. Customer contacts
9. Returns (Reverse
logisticsmovement
of returns from
customers to
vendors)
10. Demand forecast
11. Accounting, billing
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Solutions to
Order Fulfillment Problems
Improvements to order taking process
Order taking can be done on EDI,
EDI/Internet, or an extranet, and it may be
fully automated.
In B2B, orders are generated and transmitted
automatically to suppliers when inventory
levels fall below certain levels.
Result is a fast, inexpensive, and a more
accurate process
Web-based ordering using electronic forms
expedites the process
Makes it more accurate
Reduces the processing cost for sellers
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Solutions to
Order Fulfillment Problems (cont.)
Implementing linkages between ordertaking and payment systems can also
be helpful in improving order fulfillment
Electronic payments can expedite order
fulfillment cycle and payment delivery
period
Payment processing significantly less
expensive
Fraud can be controlled better
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Inventory Management
Improvements
Inventories can be minimized by:
Introducing a make-to-order (pull)
production process
Providing fast and accurate demand
information to suppliers
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Automated Warehouses
B2C order fulfillmentsend small
quantities to a large number of
individuals
Step 1: retailers contract Fingerhut to stock
products and deliver Web orders
Step 2: merchandise stored SKU warehouse
Step 3: orders arrive
Step 4: computer program consolidates
orders from all vendors into pick waves
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Same Day,
Even Same Hour Delivery
Role of FedEx and similar shippers
From a delivery to all-logistics
Many services
Complete inventory control
Packaging, warehousing, reordering, etc.
Tracking services to customers
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Same Day,
Even Same Hour Delivery (cont.)
Supermarket deliveries
Transport of fresh food to people who are
in homes only at specific hours
Distribution systems are critical
Fresh food may be spoiled
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Partnering Efforts
Collaborative commerce among
members of the supply chain results
in:
Shorter cycle times
Minimal delays and work interruptions
Lower inventories
Less administrative cost
Minimize bullwhip effect problem
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Vertical emarketplaces
Transportation
e-marketplaces
Logistics software
application vendors
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Handling Returns
Necessary for maintaining customer
trust and loyalty using:
Return item to place it was purchased
Separate logistics of returns from
logistics of delivery
Completely outsource returns
Allow customer to physically drop
returned items at collection stations
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Downloadable tools
Proof of delivery
Optimal routing features
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Managerial Issues
What B2C payment methods should we use?
What B2B payment methods should we use?
Should we use an in-house payment
mechanism or outsource it?
How secure are e-payments?
Have we planned for order fulfillment?
How should we handle returns?
Do we want alliances in order fulfillment?
What EC logistics applications would be useful?
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Summary
Crucial factors determining the success of
an e-payment method
Key elements in securing an e-payment
Online credit card players and processes
The uses and benefits of purchasing cards
Categories and potential uses of smart
cards
Online alternatives to credit card payments
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Summary (cont.)
E-check processes and involved
parties
The role of order fulfillment and backoffice operations in EC
The order fulfillment process
Problems in order fulfillment
Solutions to order fulfillment
problems
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