Unit - III-Electronic Payment Systems: E-Cash, e-cheque, credit cards, debit cards, smart cards, E-Banking, Manufacturing information systems: Financial information systems; Human resource information system
E-Commerce - Payment Systems
E-commerce sites use electronic
payment, where electronic payment refers to paperless monetary transactions.
Electronic payment has revolutionized the business processing by reducing the
paperwork, transaction costs, and labor cost. Being user friendly and less
time-consuming than manual processing, it helps business organization to expand
its market reach/expansion.
What Is an E-payment System?
An e-payment system is a way of making
transactions or paying for goods and services through an electronic medium,
without the use of checks or cash. It’s also called an electronic payment
system or online payment system.
The electronic payment system has
grown increasingly over the last Decades due to the growing spread of
internet-based banking and shopping. As the world advances more with technology
development, we can see the rise of electronic payment systems and payment
processing devices. As this increase, improve, and provide ever more secure
online payment transactions the percentage of cheque and cash transactions will
decrease.
One of the most popular payment forms
online is credit and debit cards. Besides them, there are also alternative
payment methods, such as bank transfers, electronic wallets, smart cards or bit
coin wallet (bit coin is the most popular crypto currency).
E-payment
systems are made to facilitate the acceptance of electronic payments for online
transactions. With the growing popularity of online
shopping, e-payment systems became a must for online consumers — to make
shopping and banking more convenient.
It comes with many benefits, such
as:
1.
Reaching more clients from
all over the world, which results in more sales?
2.
More effective and efficient
transactions — It’s because transactions are made in seconds (with one-click),
3.
Without wasting customer’s time. It
comes with speed and simplicity.
4.
Convenience.
5.
Customers can pay for items on an
e-commerce website at anytime and anywhere.
6.
They just need an internet connected
device. As simple as that!
7.
Lower transaction cost and
decreased technology costs.
8.
Expenses control for customers, as
they can always check their virtual account where they can find the transaction
history.
9.
Today it’s easy to add payments
to a website, so even a non-technical person may implement it in minutes and
start processing online payments.
10.
Payment gateways and payment providers
offer highly effective security and anti-fraud tools to make
transactions reliable.
E-payment
methods could be classified into two areas, credit payment systems and cash
payment systems.
1. Credit Payment System
Credit Card — A form of the e-payment system which
requires the use of the card issued by a financial institute to the cardholder
for making payments online or through an electronic device, without the use of
cash.
E-wallet — A form of prepaid account that stores
user’s financial data, like debit and credit card information to make an online
transaction easier.
Smart card — A plastic card with a microprocessor
that can be loaded with funds to make transactions; also known as a chip card.
2. Cash Payment System
Direct debit — A financial transaction in which the account holder
instructs the bank to collect a specific amount of money from his account
electronically to pay for goods or services.
E-cheque — A digital version of an old paper
check. It’s an electronic transfer of money from a bank account, usually
checking account, without the use of the paper check.
E-cash - E-cash is a form of an electronic payment system,
where a certain amount of money is stored on a client’s device and made
accessible for online transactions.
Stored-value card — A card with a certain amount of money
that can be used to perform the transaction in the issuer store. A typical example of
stored-value cards are gift cards.
LISTED BELOW ARE SOME OF THE MODES
OF ELECTRONIC PAYMENTS
Electronic Cash (E-Cash)
Electronic Cheque (E- Cheque)
Credit Card
Debit Card
Smart Card
Electronic Money (E-Money)
Electronic Fund Transfer (EFT)
1 Electronic Cash
Credit cards today dominate the online
payment systems, but electronic cash is the way of the future. Electronic cash
(also called e-cash or digital cash) is any value storage and exchange system
created by a private (non-governmental) entity that does not use paper
documents or coins and that can serve as a substitute for government-issued
physical currency. Since e-cash is issued by many private companies, we need
common standards for all e-cash issuers so that they are accepted by each
other. Until now those common standards were not met. Every issuer has its own
standards and e-cash is not universally accepted compared to government-issued
physical currency.
Concerns about electronic payment
methods include privacy and security, independence, portability, and
convenience. Privacy and security issues are probably the most important
issues.
E-cash has its unique security
problems. E-cash must have two important characteristics in common with
physical currency. It must be spent only once and it must be anonymous (in a way that prevents a person from
being identified by name).
E-cash is independent and portable.
E-cash is independent, if it is not related to any network or storage device.
It is portable, if it can be freely transferable between any two parties.
Credit and debit cards are not portable. In a credit card transaction, the
credit card recipient must have an account established with a bank unlike the
case in e-cash. The most important characteristic of cash is convenience. If
e-cash requires special hardware or software, it will not be convenient for
people to use.
To establish e-cash, a consumer opens
an account with an e-cash issuer and presents proof of identity. The consumer
can then withdraw e-cash by accessing the issuer’s web site and presenting
proof of identity, such as a digital certificate. After the issuer verifies the
consumer’s identity, it gives the consumer a specific amount of e-cash and
deducts it from the consumer account. In addition, the issuer might charge a
small processing fee. The consumer can store the e-cash in an electronic wallet
on his or her computer. In addition, the consumer can authorize the issuer to
make payments to third parties from the e-cash account.
One of the major problems of e-cash is
double spending. The main deterrent to double spending is the threat of
prosecution. Cryptography algorithms can help in this area to create e-cash
that can be traced back to its origins.
Creating anonymous e-cash requires a
bank to issue e-cash with embedded serial numbers such that the bank can sign
the coins and then remove any association of the coins with any particular
customer.
Every protocol consists of at least
three types of transactions:
Withdrawal: transfers coins to the customer.
Payment: transfers coins to the merchant.
Deposit: transfers coins to real currency.
Some protocols have an additional
procedure, opening procedure, similar to opening an account with a bank. This
procedure usually enables the bank to give the user a password to identify him
self to the bank.
There are two types of electronic
cash schemes:
On-line: validity of the transaction is checked while
it is occurring. The coin is sent back to the bank or similar authority during
the transaction to verify authenticity of coin and that it was not spent
before. The advantage is that the bank can check and prevent illegal operations
as they are happening unlike the case in off-line systems.
Off-line: validity of the transaction is checked after
the transaction has occurred. The merchant or bank can conduct a series of
calculation to reveal the customer’s identity when a security breach has
occurred.
In general off-line schemes are more
efficient than on-line ones. The two fundamental issues with any off-line
electronic cash scheme have been the detection of double spending and provision
of anonymity. Cut-and-Choose technology was one of the firs9t techniques that
were introduced to address the issue of double spending in an off-line scheme.
However, it is not very efficient. Subsequently, other techniques had been
proposed to achieve both problems without the Cut-and-Choose method.
Cash transactions are faster,
convenient, and save a lot of time. Online payments done via credit cards,
debit cards, or smart cards are examples of e-cash transactions.
an amount of money that is computerized, stored, and used
as cash for e-commerce transactions.
The
advantages of electronic cash
1) it is very flexible.
You can store electronic cash online
whereby you are a billionaire but you do not even have a single cent on you,
and at the same time, you could withdraw it or store it any other place
offline.
2) It is
portable.
You can send the cash to any place on the planet that has on
internet connections.
3) It allows the
purchase of items that have very low prices.
When you are buying things at the supermarket here in Kenya, the
person whom you pay does not always have change for you. Also, the cheapest
items at the supermarket are either only one shilling or if they are priced at
fifty cents, the total of these items must be an even number. However, when it
comes to electronic cash, you can even buy an item valued at Kshs.0.000012.
Also, you do not have to worry about change.
4. Speed of transactions
For both the seller and the
customer, online payments save a lot of time. People don’t have to wait in
lines, take time to write checks, or wait for paper bills
5. Convenience
People can pay for goods and
services at any time of the day from any part of the world. It is easier to
click a feature on your smartphone than to collect the correct amount of cash
for your purchase
6. Reaching global audience
One of the biggest advantages
of having online payment gateways is that businesses can operate globally and
have a customer base irrespective of geographical limitations.
7. Low transaction costs
In a traditional payment
setup, businesses have to hire front-desk employees or cashiers to manage sales
and payments. But with online payments, transactions take place in an automated
environment
8. Quick and easy setup
Instead of spending time on
setting up a whole payment process that involves certain equipment and some
extra employees, you can easily and quickly integrate online payment gateways
for your business.
9. Variety of payment choices
With online payment features,
you can offer your customers a wide variety of payment options to choose from.
People have their own preferences, and if they can find that option while
purchasing from you, there are obviously more chances of them actually getting
through with the transaction.
10. Easy management
Online payments make it
easier to manage and store your money and other financial data. For both
vendors and customers, there are a lot of tools available on the internet that
will help you with transactions.
11. Better customer
experience
If customers feel it is
convenient to purchase from you while also being able to save money and time,
then that automatically translates to a positive customer experience.
12. Transferring e-cash on the
internet costs less than processing credit card transactions because
conventional money exchange systems require banks, bank branches, clerks,
automated teller machines, and an electronic transaction system to manage,
transfer, and dispense cash.
13. E-cash transfers occur on an
existing infrastructure, the internet, and existing computer systems with no
additional costs.
14. E-cash does not require
authorization of payments, unlike credit card transactions.
Disadvantages of electronic cash:
1. Necessity of certain
infrastructure. To use electronic money, the availability of certain
infrastructure is necessary. ...
2. Possible security
breaches/hacks. The internet always comes with the inevitability of possible
security breaches and hacks. ...
3. Online scams.
4. Technical problems
Online payments are subject
to technical failures or downtime, just like any other software that is
dependent on technology. Though tech maintenance operations are announced in
advance and usually take place during the night, sometimes, it can cause
frustration among online shoppers.
5. Password threats
If you are a registered user
with a website who uses online payments pretty often, there are high chances
that the online portal can have access to your personal information or bank
account details. Though most transactions use OTPs (one-time passwords), the
need for password protection arises in such situations.
6. Cost of fraud
Just as more and more people are
shifting to online payments and preferring them over other traditional forms of
payment, so are cybercriminals. ID thefts, phishing attacks, and database
exploits are becoming more common.
7. Security Concerns
using online payments come
with a lot of security risks. Without proper security measures, fraudsters can
easily hack important financial information and data. And since there aren’t
any verification systems like facial recognition or biometrics, criminals can
easily get away without getting caught.
8. Technological illiteracy
One of the main disadvantages
of online payments is the technological illiteracy among many people,
especially the older generation. Since they don’t have enough knowledge on how
to go about using technology or smartphones, they refrain from using online
payment methods. A lot of them also fear the complexities of it and continue to
use traditional methods of payment. This is a huge drawback in developing
countries like India.
9. Limitations on amount and
time
Some banks limit the number
of transactions you can do in a day or the maximum amount you can transfer in a
day. Most online transactions also have a time limit under which you need to
complete the process (like receiving and accepting OTPs). All these limitations
can prove to be pretty inconvenient to some users.
10. Service fees and other
additional costs
While implementing online
payment gateways, some services may demand setup costs or even processing fees
for customers using those facilities. Setting up online payment options
obviously requires access to the internet and other services that come along
with it. This easily leads to incurring extra costs and both the sellers and
customers can find it tiresome.
11. Operating this conventional money
exchange system is expensive.
12. With e-cash transferring money to
next door or to the other side of the world costs the same, while distance and
cost are proportional when we move physical cash and checks.
13. E-cash does have disadvantages
just like real cash, money laundering, it is not traceable. Also it can be forged.
14. E-cash has to be successful; a
standard must be developed for e-cash disbursement and acceptance.
2 What Is an Electronic Cheque?
An electronic check, also referred to
as an e-check, is a form of payment made via the Internet, or another data
network, designed to perform the same function as a conventional paper check.
Since the check is in an electronic format, it can be processed in fewer steps.
Additionally, it has more security
features than standard paper checks including authentication, public key cryptography,
digital signatures, and encryption, among others.
How an Electronic Cheque Works
An electronic check is part of the larger
electronic banking field and part of a subset of transactions referred to as
electronic fund transfers (EFTs). This includes not only electronic checks but
also other computerized banking functions such as ATM withdrawals and deposits,
debit card transactions and remote check depositing features. The transactions
require the use of various computer and networking technologies to gain access
to the relevant account data to perform the requested actions.
Electronic checks were developed in
response to the transactions that arose in the world of electronic
commerce. Electronic checks can be used to make a payment for any transaction
that a paper check can cover, and are governed by the same laws that apply to
paper checks. This was the first form of Internet-based payment used by the
U.S. Treasury for making large online payments.
The Benefits of Electronic Cheque
Generally, the costs associated with
issuing an electronic Cheque are notably lower than those associated with paper
checks.
Not only is there no requirement for a
physical Cheque, which costs money to produce, but also electronic checks do
not require physical postage in cases of payments being made to entities
outside the direct reach of the entity issuing the funds.
It is estimated that while a
traditional Cheque may cost as much as $1 to issue, an electronic Cheque costs
closer to $0.10.
[Important: Electronic Cheque also
come with a lower risk of the associated funds being stolen, as there is no
tangible item to intercept.]
Further, there are multiple levels of
authentication to help ensure funds are routed properly.
Key
Takeaways
An electronic Cheque is a form of
payment made via the internet that is designed to perform the same function as
a conventional paper Cheque.
One of the more frequently used
versions of the electronic Cheque is the direct deposit system offered by many
employers.
Generally, the costs associated with
issuing an electronic Cheque are notably lower than those associated with paper
Cheque.
An electronic Cheque has more security
features than standard paper checks.
3 Credit Card
Small
plastic card with a unique number attached with an account issued by banks and financial institutions allowing
the user to make purchases and pay for various services by borrowing money from
them. It has also a magnetic strip embedded in it which is used to read
credit card via card readers. When a customer purchases a product via credit
card, credit card issuer bank pays on behalf of the customer and customer has a
certain time period after which he/she can pay the credit card bill. It is
usually credit card monthly payment cycle.
Credit cards Apart from
providing the much needed alternative to cash, credit cards
also offer you benefits in the form of rewards, cash backs, interest-free
period and much more.
Credit cards require you to swipe the magnetic strip and sign. The
magnetic strip is easily read, written, duplicated or altered, which can result
in theft and security breaches
Debit cards look like credit cards. But they do not work the same way. Credit cards
use money that you borrow. Debit
cards use money that is already in your checking account.
Following are the actors in the
credit card system.
The
card holder − Customer
The
merchant − seller of product who can accept credit card payments.
The
card issuer bank − card holder's bank
The acquirer bank − the
merchant's bank
The card brand − for example,
visa or MasterCard.
Credit Card Payment Process
|
Step |
Description |
|
Step 1 |
Bank issues and activates a credit
card to the customer on his/her request. |
|
Step 2 |
The customer presents the credit
card information to the merchant site or to the merchant from whom he/she
wants to purchase a product/service. |
|
Step 3 |
Merchant validates the customer's
identity by asking for approval from the card brand company. |
|
Step 4 |
Card brand company authenticates the
credit card and pays the transaction by credit. Merchant keeps the sales
slip. |
|
Step 5 |
Merchant submits the sales slip to
acquirer banks and gets the service charges paid to him/her. |
|
Step 6 |
Acquirer bank requests the card
brand company to clear the credit amount and gets the payment. |
|
Step 6 |
Now the card brand company asks to
clear the amount from the issuer bank and the amount gets transferred to the
card brand company. |
How credit cards work
1. A credit card
is a revolving line of credit that allows you to make charges at any time up to
the amount of a specific credit limit.
2. When you
swipe your credit card, your bank loans you the money to make that purchase.
Unlike a loan, which has a fixed end date and regular monthly payments, with a
credit card, you choose how much to repay each month—a minimum payment, a
partial payment or your entire balance. With few exceptions, responsible credit
card users always pay their balances in full every month.
3. After you
make a purchase with your credit card, the bank gives you a grace
period—typically between 20 and 30 days—during which you can pay off that
purchase before interest begins to accrue.
4 Debit Card
A Debit Card
on the other hand, is a card plastic (Chip or earlier magnetic stripe version)
with a PAN number that provides access to the funds in your current/checking or
savings account.
Debit card, like credit card, is a small
plastic card with a unique (PAN)
number that provides access to the funds in your current/checking or savings
account number.
( Primary account numbers are unique identifiers for different
payment cards like credit and debit cards, providing information about the cardholder such as the
name, balance, credit limit. PANs may also be used to identify other types of
cards that store value such as a gift or prepaid card.)
It is required to have a bank account
before getting a debit card from the bank. The major difference between a debit
card and a credit card is that in case of payment through debit card, the
amount gets deducted from the card's bank account immediately and there should
be sufficient balance in the bank account for the transaction to get completed;
whereas in case of a credit card transaction, there is no such compulsion.
Debit cards free the customer to carry
cash and cheques. Even merchants accept a debit card readily. Having a
restriction on the amount that can be withdrawn in a day using a debit card
helps the customer to keep a check on his/her spending
Debit cards let you get cash
quickly. You can use your debit card at an automated teller
machine, or ATM, to get money from your checking account. You also can get cash
back when you use a debit card to buy something at a
store.
A debit card
is a payment card that deducts money directly from a consumer's checking
account to pay for a purchase. We can only spend it up to available bank
balance. Generally smart cards are prepaid card and we may use up to the limit
which we have recharged it.
5 Smart Card
A
smart card is a device with the dimensions of a credit card that contains a
special embedded microprocessor, which is a computer processor or a microchip.
These are more secure than debit cards. We can store sensitive or personal data,
emergency medical information, driver's license number, phone calling cards and
even applications safely by using smart cards.
It is
able to process financial transactions. Therefore, a Chip based Debit Card is a
smart card. So is a Credit Card, or a Prepaid Card. Smart cards are also used to store money and
the amount gets deducted after every transaction.
Smart cards can only be accessed using
a PIN that every customer is assigned with. Smart cards are secure, as they
store information in encrypted format and are less expensive/provide faster
processing. Mondex and Visa Cash cards
are examples of smart cards.
Mondex is a smart card electronic cash system,
implemented as a stored-value card. Mondex was
conceived by Tim Jones and Graham Higgins of the National Westminster Bank in
the United Kingdom.
Smart Card is
a technology, while Debit Card is a financial instrument.
The Following Are Five Of The Most Popular Current Applications For
Smart Cards:
1) Banking & Retail. Some of the most
common uses for smart cards are ATM cards,
credit cards and debit cards.
2) Healthcare. ...
3) ID Verification & Access Control. ...
4) Mobile Communications. ...
5) Computer & Network Security.
1) Banking & Retail
Some of the
most common uses for smart cards are ATM cards, credit cards and debit cards.
Many of these cards are “chip and PIN” cards that require the customer to
supply a four- to six-digit PIN number, while others are known as “chip and
signature” cards, needing only a signature for verification.
Other
financial and retail uses for smart cards include fuel cards and public
transit/public phone payment cards. They can also be used as “electronic
wallets” or “purses” when the chip is loaded with funds to pay for small
purchases such as groceries, laundry services, food and taxi rides.
Cryptographic (the science or study of the techniques of
secret writing) protocols
protect the exchange of money between the smart card and the machine, so no
connection to a bank is needed.
2) Healthcare
With health
care data rapidly increasing, smart cards assist with maintaining the
efficiency of patient care and privacy safeguards. The cards allow medical
facilities to safely store information for a patient’s medical history,
instantly access the information and update it if needed and reduce health care
fraud. Instant patient verification provides for immediate insurance
processing. In addition, smart cards enable compliance with government
initiatives, such as organ donation programs.
3) ID Verification & Access Control
Smart cards
can also be used to verify identity in places like business offices and
universities. Multifunction, microprocessor-based smart ID cards can
incorporate identity with access privileges. For companies with higher security
needs, a smart card can be a tamper-proof device to store information, such as
a user’s picture or fingerprints. All U.S. government facilities and many
corporations have incorporated contactless readers as an access point to their
facilities, and some have included a biometric component. Expect the use of
smart ID cards to grow in the future.
4) Mobile Communications
For digital
mobile phones, smart cards can also be used as identification devices. These
cards are known as Subscriber Identity Molecules (SIM) cards. Each SIM card has
a unique identifier that manages the rights and privileges of each subscriber
and makes it easy to properly identify and bill them.
5) Computer & Network Security
Microsoft
Windows, new versions of Linux and Sun Microsystems have begun using smart
cards as a replacement for user names and passwords. Understanding that Public
Key Infrastructure (PKI)-enhanced security is needed, a smart card badge is
becoming the new standard. Using smart cards, users can be authenticated and
authorized to have access to specific information based on preset privileges.
6 E-Money
E-Money transactions refer to
situation where payment is done over the network and the amount gets
transferred from one financial body to another financial body without any
involvement of a middleman. E-money transactions are faster, convenient, and
saves a lot of time.
Online payments done via credit cards,
debit cards, or smart cards are examples of emoney transactions. Another
popular example is e-cash. In case of e-cash, both customer and merchant have
to sign up with the bank or company issuing e-cash.
In broad
terms, electronic money (e-money) is a secure way to store monetary value on
hardware devices, such as computers and smartphones. E-money is used to make
and accept payments to and from persons and organizations other than the
e-money issuers.
Make no
mistake: e-money is money! However, e-money is money that only exists in the
computer systems of financial institutions. Only a small fraction of the money
in circulation around the world is in physical form. Additionally, the actual
e-money-bearing devices act as prepaid digital financial instruments that do
not necessarily involve bank accounts in transactions.
Advantages and disadvantages of
electronic payment systems
In the Age of High
Technology cash strives to endure the competition with electronic money,
because more and more people prefer to have virtual wallets. We already
provided you with the information on particular payment systems, in this article we will describe the
general advantages of electronic payment system and its
disadvantages.
It is clear, electronic payment systems have a
range of pros in comparison to traditional banking services:
E-money, or electronic money, is money that
you exchange electronically, as opposed to actual currency notes or coins.
Generally, you conduct e-money or e-currency transactions over the Internet, or
with smart cards that are linked to a bank account. More and more people are
also using mobile phones to make such transactions.
Time savings
Money transfer between virtual accounts usually takes a few
minutes, while a wire transfer or a postal one may take several days. Also, you
will not waste your time waiting in lines at a bank or post office.
Even if someone is eager to bring his disbursements under
control, it is necessary to be patient enough to write down all the petty
expenses, which often takes a large part of the total amount of disbursements.
The virtual account contains the history of all transactions indicating the
store and the amount you spent. And you can check it anytime you want. This
advantage of electronic payment system is pretty important in this case.
You cannot forget your virtual wallet somewhere and it can
not be taken away by robbers. Although in cyberspace there are many scammers,
in one of the previous articles we described in detail how to make your e-currency
account secure.
If you pay for internet service provider or a mobile account
replenishment through the UPT (unattended payment terminal), you will encounter
high fees. As for the electronic payment system: a fee of this kind of
operations consists of 1% of the total amount, and this is a considerable
advantage.
Usually every service is designed to reach the widest
possible audience, so it has the intuitively understandable user interface. In
addition, there is always the opportunity to submit a question to a support
team, which often works 24/7. Anyway you can always get an answer using the
forums on the subject.
All the transfers can be performed at any time, anywhere. It's enough to
have an access to the Internet.
Having specified the well-known advantages of
electronic payment system, it is necessary to mention its drawbacks:
Anonymity (the situation where a person’s name
is not known)
With e-money, there is
anonymity. It is not the same case with liquid cash or credit and debit cards.
E-money transactions mostly happen on the Internet through an online gateway
where the identity of the payer is secured and behind the screens. The person
on the other side receives the payment from the payer but does not necessarily
know the identity of the person behind the money paid.
Anytime, Anywhere
E-money can be used
anytime and anywhere. It is probably the best form of money to use for
international transactions, as there are no hassles of currency exchange. It is
reliable, faster than paper checks and drafts, and has low costs of
transaction. Today, with e-money becoming more popular, banks are competing to
reduce transfer costs and provide accountholders with good deals. If you send
someone a check, it will take a few days to clear. But with an online money
transaction, the money reaches the other person’s account almost instantly.
These transactions can be made after the bank has closed, and even on holidays.
Safety
When you carry a large
amount of money, there is always a chance of it being lost or stolen. E-money
is safer than currency in this regard. Every transaction requires you to provide
a personal identification number (PIN) for the payment to be completed.
Electronic funds transfers can be more secure than cash or check transactions.
All you have to do is take some simple precautions to make sure that your card
or online account is not misused.
Record of Transactions
Each and every
transaction made with electronic money is recorded in the bank’s and the user’s
online records. These records have all the essential information about the
transaction: the name of the payer, the name of the receiver, the date, place
and time it took place. This makes it more dependable, and users can access
their record of transactions at any time of the day.
Disadvantages
Restrictions
Each payment system has its limits regarding the maximum
amount in the account, the number of transactions per day and the amount of
output.
If you follow the seсurity rules the threat is minimal, it
can be compared to the risk of something like a robbery. The worse situation
when the system of processing company has been broken, because it leads to the
leak of personal data on cards and its owners. Even if the electronic payment
system does not launch plastic cards, it can be involved in scandals regarding
the Identity theft.
Usually the majority of electronic payment systems do not
cooperate with each other. In this case, you have to use the services of
e-currency exchange, and it can be time-consuming if you still do not have a
trusted service for this purpose. Our article on how to choose the best
e-currency exchanger greatly
facilitates the search process.
The information about all the transactions, including the
amount, time and recipient are stored in the database of the payment system.
And it means the intelligence agency has an access to this information. You
should decide whether it's bad or good.
If Internet connection fails, you can not get to your online
account.
7 Electronic
Fund Transfer (EFT)
It is a very popular electronic
payment method to transfer money from one bank account to another bank account.
Accounts can be in the same bank or different banks. Fund transfer can be done
using ATM (Automated Teller Machine) or using a computer.
Nowadays, internet-based EFT is
getting popular. In this case, a customer uses the website provided by the
bank, logs in to the bank's website and registers another bank account. He/she
then places a request to transfer certain amount to that account. Customer's
bank transfers the amount to other account if it is in the same bank, otherwise
the transfer request is forwarded to an ACH (Automated Clearing House) to
transfer the amount to other account and the amount is deducted from the
customer's account. Once the amount is transferred to other account, the
customer is notified of the fund transfer by the bank
Electronic Funds Transfer (EFT)
Electronic
Funds Transfer (EFT) is a system of transferring money from one bank account
directly to another without any paper money changing hands. One of the most
widely-used EFT programs is direct deposit, through which payroll is deposited
straight into an employee's bank account. However, EFT refers to any transfer
of funds initiated through an electronic terminal, including credit card, ATM,
Fedwire and point-of-sale (POS) transactions. It is used for both
credit transfers, such as payroll payments, and for debit transfers, such as
mortgage payments.
How
EFT works
Transactions
are processed by the bank through the Automated Clearing House (ACH) network, the secure transfer system that connects all U.S. financial
institutions. For payments, funds are transferred electronically from one bank
account to the billing company's bank, usually less than a day after the
scheduled payment date.
The ACH
Network operates as a batch processing system. Financial institutions
accumulate ACH transactions throughout the day, which are handled via batch
processing later on. According to NACHA, which creates payment and financial
messaging rules and standards, the ACH Network handles 24 billion EFTs each
year, accounting for more than $41 trillion transferred. The ACH Network is one
of the largest and most reliable payment systems in the world, according to the
association.
To complete an EFT, the receiving party must provide the following
information:
·
The
name of the bank receiving funds
·
The
type of account receiving funds (e.g., checking or savings)
·
The
bank’s ABA routing number
·
The
recipient’s account number
The growing
popularity of EFT for online bill payment is paving the way for paperless
transactions where checks, stamps, envelopes and paper bills are obsolete. The
benefits of EFT include reduced administrative costs, increased efficiency,
simplified bookkeeping, and greater security. However, the number of companies
who send and receive bills through the Internet is still relatively small.
Types of EFTs
The most
common types of EFTs include:
·
Direct deposit: Enables
businesses to pay employees. During the employee on boarding process, new
employees typically specify the financial
institution to receive the direct deposit payments.
·
Wire transfers: Used for
non-regular payments, such as the down payment on a house.
·
Automated Teller Machines (ATMs): Allows cash
withdrawals and deposits, fund transfers and checking of
account balances at multiple locations, such
as branch locations, retail stores, shopping malls and airports.
·
Debit cards: Allows
users to pay for transactions and have those funds deducted from the account
linked to the
card
·
Pay-by-phone systems: Allows
users to pay bills or transfer money over the phone.
·
Online banking: Available
via personal computer, tablet or smartphone. Using online banking, users can
access
accounts to make payments, transfer funds and
check balances.
Regulations
The U.S.
Government monitors EFT compliance through Regulation E of the Federal Reserve
Board, which implements the Electronic Funds Transfer Act (EFTA). The EFTA was
passed by the U.S. Congress in 1978 to protect consumers engaging in EFTs.
Regulation E governs financial transactions with electronic payment services,
specifically with regard to disclosure of information, consumer liability,
error resolution, record retention and receipts at electronic terminals.
Consumers can
sue (to go to a
court of law and ask for money from somebody because he/she has done something
bad to you, or said something bad about you) for damages in court if financial
institutions break laws established by the EFTA. For example, if ATM card is
reported as stolen and the financial institution failed to prevent a transfer,
the card’s owner is entitled to the money lost.
Users can’t
be forced to use EFTs to make or to receive a payment, except for overdraft
checking fees. When a checking account is overdrawn, the financial institution
can use EFTs to deduct overdraft fees from the consumer’s account. With a few
exceptions, employers can require that employees are paid by EFT. Employees can
choose the financial institution to receive the funds.
If an ATM or
debit card is lost or stolen and reported to the financial institution before
any transactions take place, the card’s owner is not held responsible for any
subsequent transactions. Depending on when the card is reported stolen or lost,
the card’s owner could be liable for between $50 and an unlimited amount of
charges.
EFTs usually
settle on the next business day, but can take longer during bank holidays.
International transactions (IATs) and high-value transactions above $25,000 are
not eligible for same-day processing.
Advantages of Electronic Fund
Transfer
It is the
vastness of the benefits one gets from EFT that it has become so popular. Let’s
see these benefits.
·
Paperless: EFT saves a lot of money for
some who would have otherwise had to send money through cheques. Another
benefit goes to the environment as there is no use of papers.
·
Highly convenient: That time is gone when you had
to travel so much, stand in queues to pay bills and face the weather
conditions. Sitting at your homes, you can complete your tasks in just a few
clicks.
·
Time limit: EFT method can be used at any
time of the day. So no time bondage is there.
·
Safe and secure: It lets you do the transactions
in the safest way as you do not have to carry bags full of money or papers from
one place to another. You can be free from the fear of destruction or robbery.
·
Saves time and effort: It is quick. It does not require
much effort from you. You save a lot of time.
·
Saves
time by simplifying the payment process.
·
Convenience:
Can be done sitting comfortably at home
·
Saves
money through cash back & discount
·
Safe
& secure
·
Works
24/7
·
Cash
flow management
·
Paperless
·
Faster
·
User-friendly
·
Anytime,
anywhere banking
·
Helps
in customer loyalty & retention
·
Efficient
·
No
fear of loss or destruction
·
Widely
accepted by all
·
Makes
traditional Branch Banking redundant
Disadvantages of Electronic Fund
Transfer
EFT does carry some drawbacks as well. Following are some of
them.
·
Not for all: Only those can use the EFT who know how to
work on mobiles or computers well enough, otherwise mistakes too can happen.
·
A need for an online network:
Without an internet connection, EFT is of no use.
·
Limits on transactions:
There are certain limits out of which no transactions can be made. A limited
amount of money can be transferred.
·
Hacking and loss of privacy:
Hackers can lead to the loss of money as well as the privacy of the details.
·
Highly
technical. Not for everyone
·
Fear
of account being hacked
·
Enhanced
privacy breach risk
·
Limit
on daily transactions
·
Limit
on the maximum amount to be withdrawn daily
·
Chances
of identity theft by unscrupulous elements
·
Needs
a computer terminal or access to the internet at all times
·
Crimes
like phishing, credit cards theft have increased
·
Leads
to impulse buying behavior
·
Not
for illiterates
·
Fraudulent
bank websites are on the rise
·
Dependency
on the power supply
·
Some
might prefer paper money to “virtual currency”
·
Decreased
human interactions
·
Over-reliance
on technology
8 Manufacturing information systems;
What is Manufacturing Information Systems?
A
management information system designed specifically for use in a manufacturing environment.
The role of manufacturing information systems is to
support manufacturing operations by providing relevant and
timely information for decision making at different levels of the
company hierarchy. It also automates and secures the sequencing
of manufacturing and business processes.
Top 10 Best Manufacturing
Information Systems
Manufacturing Information Systems
assist companies in creating artificial intelligence that simply cannot be
acquired through other methods. These multi-use systems are integral to many
industries, including fashion, manufacturing, printing, packaging, hotel and
hospitality, construction, transportation, and more. Let’s review the basics of
MIS and then discuss the top 10 software products on the market.
What is MIS?
Manufacturing Information Systems are
powerful software platforms capable of tracking the progress of raw materials
into finished goods. An integrated MIS enables the control of multiple
variables—from inputs to support services, to machines, and personnel—in real
time so that management both on the ground and in head offices can optimize
production and eliminate inefficiencies. These systems do the essential work of
providing key decision makers the information they need to facilitate the smooth
functioning of operations and to enhance productivity. So how can MIS help your
company?
The Benefits of MIS
The number of ways in which MIS can
assist your company is virtually unlimited. These information management
systems are highly adaptable to industry and user needs, so the ways in which
MIS may serve your particular industry are varied.
Benefits of MIS implementation might
include:
1.
Streamlined product production
2.
Reduced costs, waste, and re-work
3.
Increased efficiency in set-up times
4.
Assessment of correct order priority
5.
Assignment and reassignment of
inventory as necessary
6.
Evaluation of optimal times to turn
machines on and off
7.
Scheduling and rescheduling equipment
8.
Embedding best practices
9.
Improving reaction time within the
supply change management process
10.
Making and measuring parts
11.
Assigning personnel
12.
Moving inventory from one workstation
to another
13.
Managing suppliers
14.
Embedding lean and six sigma thinking
into your manufacturing process
15.
Improving efficiency
16.
Increasing transparency in record-keeping
processes
17.
Audit preparation
18.
Increasing total output
9 Financial information systems;
Financial information system term for
a system that accumulates and analyzes financial data in order to make good
financial management decisions in running the business. The basic objective of
the financial information system is to meet the firm’s financial obligations as
they come due, using the minimal amount of financial resources consistent with
an established margin of safety. Outputs generated by the system include
accounting reports, operating and capital budgets, working capital reports,
cash flow forecast, and various what-if
analysis reports.
The evaluation of financial data may
be performed through ratio analysis, trend evaluation, and financial planning
modeling. Financial planning and forecasting are facilitated if used in
conjunction with a Decision Support
System (DSS). A financial information
system is an organized approach to collecting and
interpreting information, which is usually computerized. A
well-run financial information system is essential to a business,
since managers need the resulting information to make decisions about
how to run the organization.
Financial information system
A financial information
system is an organized approach to collecting and interpreting information,
which is usually computerized. A well-run financial information system is
essential to a business, since managers need the resulting information to make
decisions about how to run the organization. This system can be used in many
ways, including the following:
·
Ensure that there
are sufficient funds on hand to pay for obligations as they come due for
payment
·
Put excess funds
to use in appropriate and reasonably liquid investments
·
Determine which
customers, products, product lines and subsidiaries are the most and
least profitable
·
Locate the bottleneck areas
within the business
·
Determine the
maximum amount of funds that can safely be distributed to investors in the form
of dividends
·
Determine the
maximum debt load that the organization can sustain
There are a number of
ways in which to extract information from a financial information system,
including structured reports that are run on a regular basis, ratio
analyses, cash forecasts, and what-if analyses.
What Are the
Benefits of Financial Information Systems?
Objectives of Accounting Information Systems
A financial information system (FIS) is
charged with monitoring finances within an organization or business. It takes
complex data and processes it into specialized reports, saving time and effort
in dealing with business accounting. While financial information systems have
many benefits, it should be noted that having an FIS in place can be costly and
usually requires training for those people operating the system.
Accounting
The center of
a financial information system will be found in accounting. This area looks at
the overall financial picture of a project, business or individual,
incorporating both accounts payable and accounts receivable. The larger the
project, the more beneficial a financial information system becomes. While an
advanced system might not be necessary for an individual financial account, an
organization’s finances can be tracked through a financial information system.
Funds
Another benefit
to having a financial information system in place is seen with funding. The FIS
examines where funds are coming in and where funds are going out. Unlike
accounting, however, FIS can make use of rigid budget controls. This enables a
user to quickly identify whether or not a financial situation is developing. If
funding has been designated for “Maintenance” for $200,000 and several servers
go down and require immediate repair in the amount of $215,000, the FIS program
will indicate that funding has gone over budget and will require changes to be
made to the budget.
Reporting
Reporting is
another benefit to having an FIS in place. By allowing users to examine reports
on any aspect of the financial data, it assists in keeping track of past
expenses, as well as projecting future expenses. In addition, it helps identify
different departments and divisions that consistently go over budget, as well
as which departments operate within their budget, and even which departments
actually come in under budget.
Specialization
Specialized
financial information systems are available, ranging from those designed for
stock brokers and traders to medical institutions. Financial information
systems used in stocks and bonds are designed to provide near-instant financial
market data, projecting trends, keeping track of stock sales, and generally
gathering and disseminating stock market data as quickly as possible. A medical
FIS would contain patient information as it relates to payment costs for
insurance purposes, as well as an extensive database of insurance claims,
insurance payouts and anything else related to a medical office’s finances.
10 Human resource information systems.
What is HRIS?
A HRIS, which is also known as a human
resource information system or human resource management system (HRMS), is
basically an intersection of human resources and information technology through
HR software. This allows HR activities and processes to occur electronically.
To put it another way, a HRIS may be
viewed as a way, through software, for businesses big and small to take care of
a number of activities, including those related to human resources, accounting,
management, and payroll. A HRIS allows a company to plan its HR costs more
effectively, as well as to manage them and control them without needing to
allocate too many resources toward them.
In most situations, a HRIS will also
lead to increases in efficiency when it comes to making decisions in HR. The
decisions made should also increase in quality—and as a result, the productivity
of both employees and managers should increase and become more effective.
What are the Benefits of a HRIS?
The human resources department within
any organization is considered to be highly critical for the entire
organization. Its many functions serve as a supportive background for the
company by providing everything from skilled and talented labor to management
training services, employee enrichment opportunities and more. Since labor is
the single largest expense for most organizations, human resources helps
companies derive the greatest value from this important asset.
In order to function optimally,
however, human resources departments must have the right tools and resources in
place. A HRIS can be utilized within the department to help human resources
employees and managers improve their productivity and the results of their
efforts.
There are many benefits that can be
enjoyed after implementing a HRIS into an organization, such as:
· Expedition of recurring tasks through
automation
· Improved ability to reach large candidate
pools regarding new position openings
· Ability to quickly apply higher selection
standards to a number of applications
· Speedy on boarding made possible by mobile accessibility
· Reduction of paper and related materials and storage –
often yields cost savings
· Ease in distributing up-to-date materials
concerning company policies and procedures
· Potential for greater employee engagement through self-service options
· Streamlining of open enrollment for benefits
· Empowerment of employees to change benefits
information directly as changes occur
· Improved collaboration throughout organization, even when there are multiple company
locations
· Improvements in training capabilities
through integration with
LMS and development tracking features
· Scheduling optimization with an emphasis on compliance and
immediate distribution to employees
· Reduction of errors within payroll systems and employee information databases
· Improved time and attendance tracking abilities
and accuracy
· Decrease in compliance woes aided by alerts and automatic reporting
options
· Ability to make more informed decisions in
real time by using analytics and integration of organizational data
Six Components of Human Resource
Information Systems (HRIS)
A human resource information
system (HRIS) is a software package developed to aid human resources
professionals in managing data. Human resource professionals utilize these
systems to facilitate work flow, improve efficiency and store and collect
information. Several companies offer HRIS packages to employers. HRIS packages
can be customized to the specific needs and requirements of the employer.
Various components of the HRIS.
1. Database
HRIS core offering includes a database
to store employee information. HR professionals can input all personnel data
into the system which can be accessed from anywhere, round the clock. Types of
data that HR professionals collect in the database include compensation
history, emergency contact information, and performance review. The core
database can also be viewed as an online backup for paper files.
2. Time and Labour Management
Activities like time and labour
management can highly time consuming. HRIS package allows employees to input
their own hours worked and allows managers to immediately verify vacation
requests, and the data is directly fed to the payroll. Time and labour
management also improves the HR department’s ability to track punctuality and
attendance.
3. Payroll Function
Payroll function is yet another major
component of a HRIS model. HR can easily download or unload employee hours, and
issue cheques or payroll deposits to employees. Salaried employees can also be
paid with substantially reduced risk of errors. The HRIS payroll software
usually improve tax compliance for locations with multiple tax levels.
4. Benefits
Some HRIS employers allow employers to
establish and maintain medical benefits and retirement investments through
their software. Such applications allow employers to have one-stop shopping
experience for all their human resources data management needs. Other HRIS
packages facilitate medical benefits and retirement investment deductions for
payroll but not the establishment of those benefits.
5. Employee Interface
Most HRIS packages allow for an
employee to have limited user access. Employee users access a part of the
database where they can update their personal information, review pay scales,
change retirement benefit programs, update direct deposit information or
download benefit election documents.
6. Recruitment and Retention
Finally, it can be said that recruitment
and retention are the most important components of HRIS. It goes without
saying that it is the anchor of all HR policies and systems. Finding new
talent, acquiring them, keeping them engaged and finally being able to retain
them are the major task of a HR person. HRs also have to ensure that employees
are not only able to do their work, but they are also provided with the
required training; receives proper compensation and benefits from the organization.
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