BCM 515: E-COMMERCE

UNIT – 4: OPERATIONS FOR E-COMMERCE

ELECTRONIC PAYMENT SYSTEM:

What is an e-payment system?
An e-payment or Electronic Payment system allows customers to pay for
the services via electronic methods.

They are also known as online payment systems. Normally e-payment is

done via debit, credit cards, direct bank deposits, and e-checks, other
alternative e-payment methods like e-wallets, bitcoin, cryptocurrencies,
bank transfers are also gaining popularity.

Types of e-payment system

E-payments can be done in the following ways,

Internet banking – In this case, the payment is done by digitally

transferring the funds over the internet from one bank account to
another.

Some popular modes of net banking are, NEFT, RTGS, IMPS.

Card payments – Card payments are done via cards e.g. credit cards,
debit cards, smart cards, stored valued cards, etc. In this mode, an
electronic payment accepting device initiates the online payment transfer
via card
Credit/ Debit card – An e payment method where the card is required for
making payments through an electronic device.

Smart card – Also known as a chip card, a smart card, a card with a
microprocessor chip is needed to transfer payments.
Stored value card – These types of cards have some amount of money
stored beforehand and are needed to make funds transfer. These are
prepaid cards like gift cards, etc.

Direct debit – Direct debit transfers funds from a customer’s account

with the help of a third party

E-cash – It is a form where the money is stored in the customer’s device

which is used for making transfers.

E-check – This is a digital version of a paper check used to transfer

funds within accounts.

Alternate payment methods – As technology is evolving, e-payment

methods kept evolving with it (are still evolving..) These innovative
alternate e-payment methods became widely popular very quickly
thanks to their convenience.

E-wallet – Very popular among customers, an E-wallet is a form of

prepaid account, where customer’s account information like credit/ debit
card information is stored allowing quick, seamless, and smooth flow of
the transaction.

Mobile wallet – An evolved form of e-wallet, mobile wallet is

extensively used by lots of customers.

It is a virtual wallet, in the form of an app that sits on a mobile device.

Mobile wallet stores card information on a mobile device.

The user-friendly nature of mobile wallets makes them easier to use. It

offers a seamless payment experience making customers less dependent
on cash.
QR payments – QR code-enabled payments have become immensely
popular. QR code stands for ‘Quick Response’ code, a code that contains
a pixel pattern of barcodes or squares arranged in a square grid.

Each part of the code contains information. This information can be

merchant’s details, transaction details, etc. To make payments, one has
to scan the QR code with a mobile device.

Contactless payments – Contactless payments are becoming popular

for quite some time. The customer needs to tap or hover the payment
device or a card near the payment terminal, earning it a name, ‘tap and
go’.

Biometric payments – Biometric payments are done via using/scanning

various parts of the body, e.g. fingerprint scanning, eye scanning, facial
recognition, etc. These payments are replacing the need to enter the PIN
for making transactions making these payments more accessible and
easy to use.

ONLINE PAYMENT MECHANISM:

Working of e-payments can be explained in the following three steps,

Payment initiation – Customer finalizes the product/service and

chooses the payment method to initiate the transaction.

Depending on the payment method, the customer enters the required

information like card number, CVV, personal details, expiration date,
PIN, etc.

The chosen payment method either redirects the customer to an external

payment page or a bank’s payment page to continue the payment
process.
Payment authentication – The information submitted by the customer
along with other details like payment information, customer’s account
information is authenticated by the operator.

The operator can be a payment gateway or any other solution involved.

If everything gets authenticated positively, the operator reports a
successful transaction.

On the contrary, if there is any problem with any of the authentication

checks, the transaction fails.

After the successful transaction, the customer gets a payment

confirmation.

Payment settlement – After the successful authentication process,

payment from the customer’s bank gets transferred into the merchant’s
account by the online payment service provider.

Elements involved in online payment system:

The main elements involved in an online payment transaction are:

● The cardholder, payee, or buyer, who purchases a product or

avails a service online.
● The merchant or seller is the person, company, or institution that
sells the product or provides a service to the payee.
● The issuer is the bank or financial institution that provides the
payee with the medium of payment, usually a credit card or a debit
card.
 ● The merchant account provider or acquirer is the bank or
financial institution that opens an account for the merchant. The
acquirer authorizes the legitimacy of the payee’s account.
● The payment processor is the online payment company that
handles the online payment transaction between the payee and the
seller.
● The payment gateway processes the online payment transaction
and uses security measures and protocols or encryptions to prevent
fraudulent transactions.

PAYMENT GATEWAYS:
А payment gateway is the technology that captures and transfers
payment data from the customer to the acquirer. A payment gateway is
what keeps the payments ecosystem rolling smoothly, as it enables
online payments for consumers and businesses. 
A payment gateway validates the customer’s card details securely,
ensures the funds are available and eventually enables merchants to get
paid. It acts as an interface between a merchant’s website and its
acquirer. It encrypts sensitive credit card details, ensuring that
information is passed securely from the customer to the acquiring bank,
via the merchant.

In other words, the payment gateway works as the middleman between

your customer and the merchant, ensuring the transaction is carried out
securely and promptly. An online payment gateway can simplify how
merchants integrate the necessary software. As the middleman during
the payment processing, the gateway manages the customer’s sensitive
card details between the acquirer and the merchant.

Need of payment gateway:

The customer's card cannot be physically swiped on a POS terminal, as
you would normally do if you processed the payment in a brick-and-
mortar shop. Therefore, you can only rely on the card information that
the customer is entering on the payment page. But, how can you be sure
that the card the customer is using is their card? In card-not-present
transactions, the fraud risk is significantly higher, and this is where a
payment gateway does its magic.

What would happen if you take the payment gateway out of the online
payment flow? Fraudsters would have easier access to card data you
process, exposing your business to fraud and chargebacks. On top of
that, fraudsters would also find additional ways to initiate illegitimate
transactions, leaving you even more exposed to fraud and damaging
your brand reputation.

A payment gateway is the gatekeeper of your customer’s payment data.

For online merchants, a payment gateway relays the information from
you, the merchant, to the acquirer and the issuing bank using data
encryption to keep unwanted threats away from the sensitive card data.
Aside from fraud management, a payment gateway also protects
merchants from expired cards, insufficient funds, closed accounts or
exceeding credit limits.

How a payment gateway works throughout the payment journey?

1. The customer chooses the product or service they want to purchase

and proceeds to the payment page. Most payment gateways offer
you different options for your payment page. emerchantpay’s
payment gateway offers you the below options for your payment
page tailor-made for your business needs:

● Hosted payment page

A hosted payment page is an out-of-the-box payment page where

customers are redirected when they are ready to checkout. The
payment gateway securely receives the transaction data before it
 passes it to the acquirer. A hosted payment page reduces the PCI
burden for online merchants if you don’t collect and/ or store the
cardholder data on your server.

● Server-to-server integration

A server to server integration is also known as a direct integration

as it enables communication between two servers; the merchant’s
server with the payment gateway’s server.  By requesting the card
details on the payment page, a direct transaction can be initiated.
Customers can finalise a card payment without being redirected to
the payment page of the payment gateway, resulting in faster
checkout, more consistent user experience and more control over
the look and feel of the payment page from the merchant’s
perspective. A server-to-server integration is suitable if you collect
and/ or store the payment data before sending them to the payment
gateway for processing.

● Client-side encryption

Client-side encryption, also known as encryption-at-source refers

to encrypting sensitive on the client-side device before sending it
to the merchant’s server. This enables the merchant to simplify
your PCI compliance requirements. In a nutshell, it enables you to
accept payments on your website while encrypting card data in
your browser, using the payment gateway’s encryption library.

2. The customer enters their credit or debit card details on the

payment page. These details include the cardholder’s name, card
expiration date and CVV number (Card Verification Value). This
information is securely passed onto your payment gateway, based
on your integration (hosted payment page, server-to-server
integration or client-side encryption).
3. The payment gateway tokenises or encrypts the card details and
performs fraud checks before they send the card data to the
acquiring bank.

4. The acquiring bank sends securely the information to the card

schemes (Visa, MasterCard).

5. The card schemes perform another layer of fraud check and then
send the payment data to the issuing bank.

6. The issuing bank, after performing fraud screening, authorizes the

transaction. The approved or declined payment message is
transferred back from the card schemes, then to the acquirer.

7. The acquiring bank sends the approval or decline message back to

the payment gateway who then transmits the message to the
merchant. If the payment is approved, the acquirer collects the
payment amount from the issuing bank and holds the fund into
your merchant account (more on that later on).

8. deposits the funds into the merchant's account, a process which is

known as the settlement; when the actual settlement will occur,
depends on the agreement the merchant has with their payment
gateway.

9. Based on the message, the merchant may either display a payment

confirmation page or ask the customer to provide another payment
method. Both merchants and customers benefit from a payment
gateway, although most of its activity happens in the background
of the transaction. All the steps mentioned above can happen in
near real time, or take approximately three seconds!
VISTIORS TO WEBSITE:
The people who visit an e-commerce website are known as the visitors
of the website.
Visits, or sessions, is a metric used to measure the total number of times
a user navigates to a website. Visits are an important digital marketing
metric that is used to analyze conversion rate to gauge the performance
of an online store.
How to interpret and measure visits
Visits are an important measurement of an ecommerce store's ability to
draw in users. But like any web metric, it cannot be viewed in a vacuum.
Visits are dependent on many external factors and internal marketing
strategies. Some important considerations:
● Where are visits coming from? One source may be improving,
while another decreases and drags down overall performance. By
segmenting traffic, you can see which channels do the best job of
bringing in visits — and where there's room for improvement.
● Is traffic converting? All the visits in the world don't mean
anything if they don't generate sales. Once traffic is segmented,
insights can be drawn based on conversion performance across
various channels.
● What other factors are contributing to spikes or decreases in
traffic? The natural flow of search traffic, known as "seasonality,"
is an important consideration when interpreting visits. Expect visits
to increase dramatically around Cyber Monday and fall
substantially on Thanksgiving, for example. Other influencers
include offline advertisements and third-party mentions. Online
businesses featured on Shark Tank have been known to see
exponential short-term traffic boosts.
The distinction between Visits and Unique Visits
In most analytics platforms, visits by the same user are counted towards
the overall tally. Unique visits, on the other hand, measure the number of
distinct individuals who go to the website. This metric is sometimes
perceived as more valuable than the aggregate number of visits because
the data cannot be skewed by power users.
Online businesses often measure and compare both the total and unique
visits made to their website. Unique visits are especially important
because they represent the number of individuals who visit the website
in a particular frame of time.
For example, John Smith visits a website five times while Jane Doe
visits the same site one time. The number of visits is six, while the
number of unique visits is only two. On a broader scale, this distinction
can significantly distort data when only total visits are considered.
Understanding the percentage of unique visits relative to the total is an
effective way for e-commerce businesses to evaluate their retention rates
and ability to bring back old customers.
Once a business quantifies its unique visitors, it should expand its efforts
to tabulate the number of repeat visitors. If the total number of repeat
visitors increases over time, it is an indication that people are connecting
with a brand. An ever-increasing rate of repeat visitors is an indication
that the website is compelling enough to become “sticky”.
Methods for improving repeat visitors include helpful blog content,
videos, and a fresh selection of products.

TOOLS FOR PROMOTING WEBSITES:

Having an online presence creates so many opportunities to reach out to
and engage with your target audience. Whether you run a start-up, or a
big business, ecommerce marketing tools can become an integral part of
your business’ day-to-day growth.
You need to decide which ecommerce tool is worth the investment, and
which offers you an advantage over your competitors. Combined with a
smart marketing strategy, the right ecommerce marketing tools can grow
your online store.
Following are some of the important tools for promoting your website:
● Email marketing

Email is the currency of the web, and for every ecommerce business, the

ultimate goal is to convert prospects into paying customers. When it
comes to conversions, email is a clear winner.  E-mail is easy to track.
One can have real-time access to reporting that shows campaign metrics,
including open rates, clicks, bounces, forwards, social shares and more.

● Social advertising

Managing an online store is tough enough. Couple that with all the work
that goes into maintaining an active social media presence across
different platforms, and you have your hands full.

With the Facebook lead ads tool, you can create Facebook ads right
from Constant Contact, where the lead information is automatically
populated into your account using marketing automation so you can
market to target customers using email.

● Google Analytics

Analytics tools use data science to help you understand what your
customers want, why they came to your store in the first place, and how
you can attract more of them. Keeping an eye on these statistics is  a
necessity.
A free tool brimming with information, Google Analytics can help you
improve conversions on PPC ads; optimize your site and product
descriptions, and track visitor behavior on your store. Google
Analytics is a must-have for any ecommerce business. 

● SEO tools

SEO, or search engine optimization, means setting up

your ecommerce website and content to better show up in online search
results. While many digital marketing tactics rely on you reaching out to
your audience, SEO gives you the power to reach people as they actively
search the information related to your products and services on their
own.

SEO helps you improve your visibility within the organic search results,

which is the traffic that comes to your site naturally, rather than relying
on paid search results alone.

● Google Ads

To increase brand and product exposure, you can use Google

Ads (formerly Google Adwords) to create campaigns that drive more
loyal customers to your website. With Google Ads, you can target
specific audiences based on location or keywords, and you only pay for
actual results.

What makes Google Ads extra special is that you don’t have to create
the demand – you simply need to satisfy it. Your audience is already
looking for your products and keywords.

● Giveaways
Finally, giveaways are one of the best ways for your business to build a
rapport with your customers while promoting your website. While
giveaways can often be seen as a cheap trick for driving website traffic,
they’re a great way to get people interested in your products, generate
interest in your website, and even make other industry connections.

● Guest blogging
Guest blogging is an underutilized yet fantastic way of building links to
your new website. With this method, you write a guest post for an
authoritative blog in your industry (or an adjacent one) to showcase your
expertise. With each guest post linking back to your website at least
once, you’ll be able to direct traffic from a reputable source back to your
new website.

RISK MANAGEMENT OPTIONS FOR E-PAYMENT SYSTEMS:

Today, e-commerce has become a trend of modern economy.
Because it’s a new trend so online store owner cannot avoid risks in
transactions. The management of risk in e-commerce transactions is
considered the most important factor for the long term survival of
your business.
Following are the most important procedures for managing risk in e-
commerce transactions:
1. Understand the risks and train your staff
Your staff should know clearly what risks your e-commerce business
may have to deal with. Everyone in your business structure needs to
understand the types of risks inherent in online payments. Then,
establish a procedure on avoiding and solving risks, which is a must for
all staff to follow.
2. Ensure information security
Information here includes customer databases, buying requests, payment
process etc. Internet is easily hacked by hackers so you need to ensure
good security all the time to avoid data being changed or stolen. You
need to set up a secure and efficient process for submitting authorization
requests over the internet, before you can start accepting card payments
online.
3. Select the right acquiring bank and merchant services provider.
 The right acquiring bank and merchant services provider will provide
effective risk management support have a complete understanding of e-
commerce fraud risk and liability associated with online transactions.
You will also want to consider an adequate customer data protection
capability when making your selection.
4. Create and display effective policies
Your website must list your privacy, shipping, return and refund policies
on each page. Customers should not be forced to search for them. This
will also create satisfaction and convenience for customers to visit your
page more often.
5. Use collection efforts to minimize losses
You have control over most types of charge-backs and especially the
ones resulting from processing errors. A well-designed collection system
can help recover unwarranted chargeback losses.
So, all methods above are just some among a lot of methods to limit
risks in e-commerce transactions.