E-commerce payment system

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An e-commerce payment system (or electronic payment system) facilitates the acceptance of electronic payment for online transactions. 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 cards 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.[1] It is difficult for an online retailer to operate without supporting credit and debit cards due to their widespread use.[1] Online merchants must comply with stringent rules stipulated by the credit and debit card issuers (e.g. Visa and MasterCard) in accordance with bank and financial regulation in the countries where the debit/credit service conducts business.[2][better source needed]

For the vast majority of payment systems accessible on the public Internet, baseline authentication (of the financial institution on the receiving end), data integrity, and confidentiality of the electronic information exchanged over the public network involves obtaining a certificate from an authorized certification authority (CA) who provides public-key infrastructure (PKI). Even with transport layer security (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 credentials and expose customers to subsequent identity theft.

Despite widespread use in North America, there are still a large number of 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.[3]

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 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 accounts, typically via Automated Clearing House (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 of large financial institutions maintaining information safeguards provides the end-user will little insight into the system when the system mishandles funds, leaving disgruntled users frequently accusing the mediaries of sloppy or wrongful behavior; trust 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.

Methods of online payment[edit]

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. Wallets like PayPal and Alipay are playing major roles in the ecosystem. Bitcoin payment processors are a cheaper alternative for accepting payments online which also offer better protection from fraud.{Accept Bitcoin |date=April 2019}}

Bank payments[edit]

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. 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. Some services, like Trustly and Smartpay, let merchants embed its iframe on their website so consumers can pay without being redirected away from the original site.

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.


PayPal is a global e-commerce business allowing payments and money transfers to be made through the Internet. Online money transfers serve as electronic alternatives to paying with traditional paper methods, such as cheques and money orders. It is subject to the US economic sanction list and other rules and interventions required by US laws or government. PayPal is an acquirer, a performing payment processing for online vendors, auction sites, and other commercial users, for which it charges a fee. It may also charge a fee for receiving money, proportional to the amount received. The fees depend on the currency used, the payment option used, the country of the sender, the country of the recipient, the amount sent and the recipient's account type. In addition, eBay purchases made by credit card through PayPal may incur extra fees if the buyer and seller use different currencies. On October 3, 2002, PayPal became a wholly owned subsidiary of eBay. Its corporate headquarters are in San Jose, California, United States at eBay's North First Street satellite office campus. The company also has significant operations in Omaha, Scottsdale, Charlotte and Austin in the United States; Chennai in India; Dublin in Ireland; Berlin in Germany; and Tel Aviv in Israel. From July 2007, PayPal has operated across the European Union as a Luxembourg-based bank.


Paytm is an Indian e-commerce payment system and digital wallet company, based out of NOIDA SEZ, India.

Paytm is available in 11 Indian languages and offers online use-cases like mobile recharges, utility bill payments, travel, movies, and events bookings as well as in-store payments at grocery stores, fruits and vegetable shops, restaurants, parking, tolls, pharmacies and education institutions with the Paytm QR code.


MovoCash is a digital payments company that offers a multi-featured e-wallet app.[4] MovoCoin enables customers to conduct a one-time purchase with a digital card number. MovoChain is a web-based service that allows bitcoin and Bitcoin Cash holders to convert their crypto-currency into a prepaid account.[5] MovoCash accounts are FDIC insured in the United States.[6]


PaymentWall, an e-commerce solutions providing company launched in 2010, offers a wide range of online payment methods that its clients can integrate on their website the seller integrates it on the website such that you will need use it to perform payment.[7]

Google Wallet[edit]

Google Wallet was launched in 2011, serving a similar function as PayPal to facilitate payments and transfer money online. It also features a security that has not been cracked to date[when?], and the ability to send payments as attachments via email.[8]

Mobile Money Wallets[edit]

In developing countries many people don't 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. Many payment options such as Zaad Services by Telecoms company in Somaliland (Independent State in Northern Somalia), Airtel Money and M-Pesa in Kenya and Tanzania, ATW are being accepted as alternate payment options on various eCommerce websites.


Braintree provides developers with SDKs (software development kits) and adjusted API interfaces in six programming languages as well as with ready-made solutions for baskets. PayPal's Commerce feature, that was launched recently, means that dealers can integrate Purchase buttons into such apps like Pinterest or Facebook Messenger. Stripe's Relay feature may look similar to it. Braintree also has a phone support that is available for all customers. PayPal purchased Braintree in 2013. One of the main problems with PayPal was in a redirection of the user from the seller's website to the PayPal server, and it required the user to be a registered service user. It was a reason for discontent from both parties, so the purchase of Braintree solved the problem.[citation needed]


Stripe supports more than one hundred currencies and it offers a few methods of online payment. Apart from debit and credit cards, Apple Pay, and Android Pay, Stripe support Bitcoin and American Express Checkout.In 2015, Stripe added a Relay product that allows developers to create a Purchase button in the third-party apps like Facebook, Pinterest, and Twitter.[9] Also, only Stripe allows users to receive payment via AliPay.


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See also[edit]


  1. ^ a b 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
  2. ^ Mastercard: Security Rules and Procedures-Merchant Edition (PDF). 2009. Retrieved: May 12, 2009
  3. ^ Turban, E. King, D. McKay, J. Marshall, P. Lee, J & Vielhand, D. (2008). Electronic Commerce 2008: A Managerial Perspective. London: Pearson Education Ltd. p.554
  4. ^ Scott-Briggs, Angela (2019-01-26). "Instant Money Transfer and Payments: Interview with MovoCash CEO and co-founder, Eric Solis". TechBullion. Retrieved 2019-04-15.
  5. ^ "MovoCash's MovoChain Means Rapid Mobile Payments with Cryptocurrency". Payment Week. 2018-05-16. Retrieved 2019-04-15.
  6. ^ "Next Gen Prepaid Cards are Here!". PaymentsJournal. 2018-09-12. Retrieved 2019-04-15.
  7. ^ "Are tours and activities the ugly ducklings of travel? | WIT". WIT. 2016-05-03. Retrieved 2017-08-28.
  8. ^ "Google Pay - A better way to pay". www.google.com.
  9. ^ "How Stripe is letting merchants turn their tweets into storefronts | WIT". WIT. 2015-09-04. Retrieved 2018-03-02.

Further reading[edit]