1. What is Online Payment
Online payment is when the customer or buyer makes his payment transactions for the goods or services purchasing with the use of the Internet. “This type of payment lowers the costs for businesses as the more payments
made electronically the less they spend for paper and postage. Also, it helps on improving customer retention as he is more likely to return to the same e-commerce site where his or her information has already been entered and stored.” With online payment, it is not necessary for the payer to be in a long queue as payment is made in just a click of a mouse.
2. Online Payment Methods
For the purchases done online most likely he will also make his payments online. you can find some different methods on making online payments.
Virtual Credit Cards. This virtual credit card is an innovation in online credit cards. Credit card issuer provides a special number that can be used in place of the regular credit card number to make online purchases.
Smart Cards. This card looks like any plastic payment card but it has a microchip embedded on its face. This can hold more information than ordinary credit cards with magnetic strips.
e-Checks. An e-Check is an electronic version or representation of a paper check. It contains the same information as a paper check and based on the same legal framework. It works the same as the paper check however they are faster, cheaper and more secure .
Digital Cash. Digital cash is an example of a digital currency, where it allows people who do not have credit card to shop online. It is similar to a traditional bank account: consumers deposit money into their digital cash accounts to be used in the purchase online. This is often used with other technology such as digital wallets .
e-Wallets. An e-wallet is a software component that a user downloads to their desktop and in which the user stores credit card numbers and other personal information. When a user shops at a merchant who accepts e-wallet, the user clicks the e-wallet and the forms are automatically filled in with all the necessary information in just one click.
3. Security in Online Payment
Security is vital when doing business online or offline. If I compare the traditional transaction using a credit card, what the merchant need is the signature of the cardholder and sometimes the photo on the credit card is also use to verify the identity of the customer. In the virtual world, information needed are the credit card number, the verification code and the billing address to verify the identity of the cardholder and fraudulent transactions are always around. Common challenges that the merchants have to face are Internet fraud, product returns, non-delivery claims, disputes that leads to chargebacks and etc.
Secure Socket Layer (SSL) and Secure Electronic Transaction (SET) are the standard security protocols that protect the integrity of these online transactions. SSL was a nonproprietary protocol used to secure
communication in the Internet and the Web. SSL uses public-key technology and digital certificates to authenticate the server in a transaction and to protect the private information and transmit the date over the Internet with integrity . SET is a cryptographic protocol which was designed specifically to protect and handle the complete online transactions both for the customers and the merchants. SET uses the digital certificates to authenticate each party in a transaction. Additionally, it requires special SET software to process transactions. With this protocol, the merchant never sees the customer’s
information like the credit card information as it is not stored on his server which reduces the risk of fraud.
4. Online Payment in China and the world
There are some online payment enablers commonly used by merchants to enable the acceptance of payments online particularly for the online credit card transactions. There are a lot more of them but I will only discuss a few of them. These companies established business relationships with the financial institutions to accept online credit card payment for their merchant clients.
1. PayPal. “Arising from the popularity of eBay online auctions, PayPal has quickly become dominant in online transaction processing” according to Pan-Western E-Business Team. Many people still think of PayPal primarily as the service to use to pay for items they buy on eBay.
PayPal originally started as a peer-to-peer money transfer system for eBay auctions, but has also expanded as a third payment processor for any website. Two of their main gateway products that they offer are Payflow Pro and Payflow.
2. Google Checkout. Google has an online payment processing service particularly for credit card transactions. The difference between PayPal is that the scope of Google Checkout is focused on enabling one-time payments to be made from a purchaser to a merchant
3. Authorize.Net. Like any other payment gateways Authorize.Net handles online payment transactions for credit card and electronic payment processing between the merchants and financial processing networks.
These three vendors are almost the same in a way that they connect the merchants’ website to the back end processing systems of the credit card issuer. Only they differ in the charging policy such as monthly fee and transactions fee that has been regulated differently.
In China, Alipay is leading independent third-party online payment platform. Alipay is an affiliate of Alibaba Group, a leading international e-commerce service provider; Alipay is dedicated toward providing its members and merchants with a "simple, secure and speedy" online payment solution.
Alipay is an online payment services provider. Founded by the Alibaba
group, it allows individuals and businesses to execute payments online in a secure manner. Alipay’s users are primarily buyers and sellers engaging in
e-commerce transactions. With a registered user base of approximately 43.5 million as of June 2007, Alipay is an accepted online payment method for many online retail websites and service providers in China. Clearly, it is also the main payment online payment on sister site Taobao.
Alipay has partnered with some leading Chinese banks including Bank of China, China Construction Bank, Agricultural Bank of China, and the Industrial and Commercial Bank of China; it also has a valuable partnership with Visa.
5. Online Payment in the future
In my opinion, online payment in the future should be secure、simple、
efficient and convenient, the development direction of it is mobile payment. It is an alternative payment method. Instead of paying with cash, cheque or credit cards, a consumer can use a mobile phone to pay for a wide range of services and digital or hard goods such as: music, videos, ringtones, online game subscription or items, wallpapers and other digital goods, transportation fare (bus, subway or train), parking meters and other services, books, magazines, tickets and other hard goods.
Mobile payment has been well adopted in many parts of Europe and Asia.Combined market for all types of mobile payments is expected to reach more than $600B globally by 2013, which will be the double of the current figure, while mobile payment market for goods and services, excluding contactless NFC transactions and money transfers, is expected to exceed $300B globally by 2013.
Some mobile payment solutions are also used in developing countries for micropayments.