ELECTRONIC PAYMENT

In the world of e-commerce, electronic payment most commonly refers to the use of a credit or debit card by a consumer to purchase a product or service online. For online merchants to accept credit or debit card numbers as payment, they must use online credit card processing technology that processes payments via online platforms such as the World Wide Web. To alleviate consumer concerns regarding the risk involved in using credit and debit cards online, most online sites use secure electronic transaction specifications that help to protect personal information like credit card numbers.

Like traditional merchants, online businesses also must work in conjunction with an acquiring bank in order to process transactions and obtain cash from credit card purchases. For example, once a consumer at a music e-tailer like CDNOW.com inputs his or her credit card information as payment, the online merchant uses real-time online processing software to send the information to the acquiring bank. Once the acquiring bank receives the request, it seeks credit card authorization from an acquiring processor, which handles credit card processing, billing, reporting, and settlement services. The acquiring processor transmits the request to the card-issuing bank—the bank that issued the credit card to the consumer—which either responds with an approval or denial code. The acquiring processor then sends the code to the merchant. Despite its complexity, this entire process typically is completed in less than 15 seconds.

During the late 1990s, a phenomenon known as electronic bill presentment and payment (EBPP) began to grow in popularity. EBPP is a process that allows businesses to bill clients and secure payment via the Internet. Invoices typically are transmitted by an e-mail message that includes a link to an online payment service provider's Web page, which houses more detailed billing information and allows payees to make an electronic payment with a single click. The most popular online payment service provider is CheckFree Corp., which makes money by charging transaction fees to the billing companies. International Data Corp. predicted that by 2004, EBPP will produce revenues in excess of $1 billion as consumers become more comfortable with security issues and as business-to-business enterprises increase their use of such technology.

FURTHER READING:

"EBPP." In Ecommerce Webopedia. Darien, CT: Internet.com, 2001. Available from e-comm.webopedia.com.

"EBPP." In Techencyclopedia. Point Pleasant, PA: Computer Language Co., 2001. Available from www.techweb.com/encyclopedia.

Greenberg, Paul A. "One Year Ago: CheckFree Acquires TransPoint for $1B+." E-Commerce Times. February 14, 2001. Available from www.ecommercetimes.com.

Hillebrand, Mary. "Report: Online Bill Payment to Reach $1B by 2004." E-Commerce Times. March 28, 2000. Available from www.ecommercetimes.com.

SEE ALSO: Acquiring Bank; Authorizaton and Authorization Code; Card-Issuing Bank; Charge-back; Interchange and Interchange Fee; Online Payment Options and Services; Recurring Payment Transactions; Secure Electronic Transactions (SEC)