Payment Systems

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May 18, 2014 by Ozgur Ozden

Payment process is probably one of the most crucial part of any ecommerce system. They require strict security, alignments with laws & regulations, and require high level of human computer interaction (HCI). It is important because after displaying your product catalogue to your customers and backing up with your strong proposition values, this is the last step before selling your product.
Many people do not feel comfortable using credit cards online.First security and then trust are the main concerns at this stage from both customer and merchant point of view. Many security systems such as Public Key Infrastructure (PKI) as described by Laudon & Traver (2013 pg.276), various algorithms, Secure Socket Layers (SSL), digital signatures etc… developed to enhance the security of online purchasing.
HCI has a big portion in the online payment process. Customers want to purchase items in a simple payment structure without entering many details such as card number, name, expiry date,CVV code. This in one of the reasons PayPal developed in 1998 and similar systems developed many years after such as Google Wallet and Amazon. Let us briefly take a look at these payment systems.

Paypal: Founded by Levchin and Theil in  1998 to transfer money between accounts/peers and delivering online payments. It is purchased by eBay in 2003 and continued with the same name and brand. System directs customers to its payment page where customers can login their pre-existed PayPal account and confirm the payment. They do not need to enter credit card details because  your credit card details are saved and secured by Paypal as explained by Rouse (2005).

Paypal known as well secured and trusted company in many years. They also use the advantage of being first in the business.

Paypal is active in 193 markets with total number active users around 144 Million. They accepted transactions in 26 different currencies according to PayPal (n.d.). PayPal applies commision for sending money and using its system depending on your monthly overall sale amount. They have different rates for different usage. Paypal has the following transaction rates in South Africa.

 

South Africa Fee
$0.00 USD – $3,000.00 USD 3.9% + $0.30 USD
$3,000.01 USD – $10,000.00 USD 3.4% + $0.30 USD
$10,000.01 USD – $100,000.00 USD 3.2% + $0.30 USD
> $100,000.00 USD 2.9% + $0.30 USD

 

Google Wallet: is “digital wallet” produced and developed by Google for online shopping, money transfer and more according to Google faq (n.d.) in 2011. Bank account information, Credit card, debit card, gift cards, loyalty programs, coupons, event your tickets can be stored in your digital wallet just like wallets in our pocket. information is securely saved either on cloud or device that you are using. This is a major enhancement in HCI.
System is  NFC ( Near Field Communication) enabled so you can use it for shopping with suitable android based cell phone or withdraw money from ATM machines. In addition to these you can use Google Wallet in Google Play Store to purchase games and items. You need to download Google Wallet app from Google to use these features. Google Wallet has a commision of 2.9% for each transaction if you send money from your credit card or debit card.
Amazon Payments: is a system that customers can join their Amazon accounts and purchase goods and services using their pre-recorded credit card information. according to Amazon Getting Started Page (n.d.). In order to increase Human Computer Interaction (HCI) Amazon implemented one click payment system where users purchase items with a single click without entering the credit card information and shipping address. They also have a system called Amazon WebPay which is a service to send and receive money. Amazon also has a service fee of 2.9% + $0.30 for each transaction above of $10 or more.

Payment systems in South Africa
In order to implement the above mentioned payment systems in the region, we need to look at the acceptability and percentage of use of these systems in the area considering the customers payment habits in mind as a first priority, then our business rules.
For our group project we are designing a mobile phone retailer store in South Africa. Ecommerce market in africa is still developing and payments are mostly done by cash according to innopay Report (2012) and also mobile payments by SMS are also on high demand. Very limited access to financial services and low credit card usage are the barriers to enter the market. South Africa has the highest mobile phone population on the planet following Asia and as a result mobile payment systems are very common, M-Pesa and MobiPay are some examples from Kenya. There are many electronic payment options present in Africa, PayGate, PayFast EBucks, Npay, and SID are some examples.
PayPal entered to African market partnering with First National Bank in 2010 but customers need to open a bank account in FNB and all transactions must be completed in Dollars. Because of these reasons especially last criteria users did not like the idea of using PayPal in their transactions as explained by innopay Report (2012). Amazon and Google wallet also have very little presence in the market.

As a conclusion, when we analyze all these payment systems PayPal looks more suitable for our ePhone ecommerce site compare to Amazon and Google Wallet. Because they are already present in the market and partnered with FNB. But the use of PayPal is very limited and restrictive so reaching to large number of customers will be a problem.

Quite frankly, Besides PayPal I would develop and implement a mobile payment system in this region because of the payment habits. Local e-payment systems like PayGate, PayFast EBucks, Npay, and SID should be considered strongly in addition to Paypal and obvious credit card payment systems.

 

References

comScore report (2012),Online Credit Card Report, (online) Available at: http://tinyurl.com/pxg5fwv [Accessed at:20.3.2014]

Laudon, K.C, Traver, G.C.,  (2013, p322), E-Commerce 2013 Business.technology.society., Newyork, 9th edition,
Paypal (n.d.),Financials ,(online), Available at: https://www.paypal-media.com/about [Accessed at:20.3.2014]

Rouse, M., (2005), What is PayPal,(Online),Available at: http://searchsoa.techtarget.com/definition/PayPal [Accessed at:20.3.2014]

Google(nd), About Google Wallet, (Online), Available at:http://www.google.com.tr/wallet/faq.html [Accessed at:20.3.2014]

Amazon (n.d), Getting Started, (Online), Available at: https://payments.amazon.com/help/Personal-Accounts/Getting-Started [Accessed at:20.3.2014]

innopay Report (2013),Online payments 2012, (Online), Available at: http://tinyurl.com/oljf5nh, [Accessed at: 21.3.2014]

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