AN OVERVIEW OF E-PAYMENT AS A METHOD.
E-payment is a subset of an e-commerce transaction to include electronic payment for buying and selling goods or services offered through the internet. Generally we think of electronic payments as referring to online transactions on the internet, there are actually many forms of electronic payments. As technology is developing, the range of devices and processes to transact electronically continues to increase while the percentage of cash and check transactions continues to decrease. In the US, for example, checks have declined from 85% of non-cash payments in 1979 to 59% in 2002, and electronic payments have grown to 41%. The internet has the potential to become the most active trade intermediary within a decade. Also, internet shopping may revolutionize retailing by allowing consumers to sit in their homes and buy an enormous variety of products and services from all over the worlds. Many businesses and consumers are still wary of conducting extensive business electronically.
Below is a diagrammic presentation of how e-payment is processed.
History of Electronic Payments
In 1918, electric money was born when Federal Reserve Banks first moved currency via telegraph. However it was not until the automated-clearing-house (ACH) was setup by the US Federal Reserve in 1972 that electronic currency became widespread. This provided the US Treasury and commercial banks with an electronic alternative to processing cheques. In 1939, a serial inventor by the name Luther George Simjian created the Bankmatic automatic teller machine. He filed 20 patents and asked the company now know as Cititcorp to trial it. After six months the bank had reported that there was no demand for such a product. However in 1968, Don Wetzel, Tom Barnes (mechanical engineer) and George Chastin (electrical engineer) conceptualized what is now known as the modern ATM. In 1969 and five million dollars later, the first prototype of the modern ATM was made and patents were then issued in 1973.
The first working ATM was installed into the Chemical Bank based in New York City. The first ATMs were off line machines, meaning that the money was not automatically withdrawn from users accounts. Therefore only exclusive customers with good credit history were able to use ATMs. Today, almost everyone has access to the use of these devices and at last count there were over 352,000 ATMs in the US alone. These ATMs now perform over 1.1 billion transactions per month or 26,000 transactions a minute. Charge cards date back to as early as 1914 when Western Union provided metal cards, allowing deferred payment privileges to preferred customers. These cards were colloquially known as metal money by 1924, General Petroleum Corporation was allowing customers to use metal money to buy fuel. In the late 1930s, American Telephone and Telegraph (AT&T) introduced the Bell System Card. and before long, railroads and airlines had introduced similar cards.
In 1950, Diners Club issued the first .plastic money charge card and in 1951 it issued the first credit card to 200 customers who could use it at 27 different restaurants in New York. Bank of America issued the BankAmericard (now Visa) – the first bank credit card – later in 1958. This was first promoted to traveling salesmen (more common in that era) for use on the road. By the early 1960s, more companies offered credit cards, advertising them as a time-saving device rather than a form of credit. But it was not until the establishment of standards for the magnetic strip in 1970 that the credit card became part of the information age. This saw companies such as American Express and MasterCard became huge successes overnight, which prompted moves by Congress to begin regulation of the credit card industry by banning practices such as the mass mailing of active cards to those who had not requested them.
In 1983, RSA encryption algorithm was invented by Ronald Rivest, Adi Shamir and Len Adelman, (hence the name RSA) at MITs Laboratory for Computer Science. The breakthrough was that it allowed for encryption in a multi-user environment, that is, no active participation was necessary between the sender and the receiver of data at the other end. Unfortunately credit card security has not seen substantial growth during this time. Although some security improvements have been made, the actual process of reading numbers off a magnetic strip and possibly a signature to verify the user is realistically as far as the industry has progressed. Compared to the advances of almost any other industry over the last 30 years, it is no wonder credit card issuers are finding it hard to quell consumer concerns over security.