Over the years, payment systems have evolved to adapt to changes brought about by technological advances. The internet provided one such opportunity for the payment systems through e-commerce. Customers are increasingly demanding for easy to manage payment systems. E-commerce has driven the need for virtual payment that is dynamic, allowing customers to carry out transactions anywhere, anytime. There is so much competition that businesses can no longer rely on inertia to retain customers. This prompted the payment service providers to come up with a customer-oriented payment systems strategy in order to retain and gain more customers.
It makes use of technology to organize, automate and synchronize payments through different platforms. With reference to the payment services sector, there are several payment systems available current for customers across the globe. The most notable commerce payment systems are credit cards, net banking, PayPal, and Google wallet. These systems are technologically oriented and have been customized to serve the interests of each client, irrespective of location or type of product to buy. This paper will discuss these commerce payment systems in terms of their use, benefits, and sustainability as commercial payment platforms.
Commercial payment systems are platforms through which payments are made or received by customers. These systems are dynamic and have a global appeal as payments methods become more complex. Despite operating in different platforms, the payment systems are very secure and faster than the traditional systems since they are operated on a virtual platform. The systems are ideal for those in the dynamic virtual environment who want quick ways of transferring and making payments across the globe. This analytical treatise will attempt to review these payment systems in terms of their usability, benefits, and how they operate when transferring or making payments.
Commerce Payment Systems
Basically, a “credit card is a payment card issued to users as a system of payment. It allows the cardholder to pay for goods and services based on the holder’s promise to pay for them” (Simkovic 2009, p.16). This card allows the owner to purchase different items even when he or she does not have money on one. When the card is loaded, any overdraft is deducted in addition to the interest accrued (Al-Samdi 2012). Before using a new credit card, “the issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user” (Simkovic 2009, p. 31).
How the credit cards work
The company that issues credit cards may sign a pact with business people to accept the cards. These businesses often decide on the cards that are accepted as means of payment for different items. Whenever the card holder purchases different items, the merchants accept this form of payment with the assumption that the holder will eventually remit payment to the card issuing company (Liu 2007). In this case, “the cardholder indicates consent to pay by signing a receipt with a record of the card details and indicating the amount to be paid or by entering a personal identification number (PIN)” (Simkovic, 2009, p.31).
Within seconds, a merchant is able to verify the authenticity of the credit cards through different electronic verification systems installed through the system called the point-of-sale (POS) that forms the link between the business and the company issuing the cards. Data with information on the card holder is compressed in a slim chip attached on the card (Janus 2008).
Benefits of Credit Card to Card Holder
Since credit card can be used in any location, it guarantees maximum convenience to the card holder. Besides, “a credit card allows small short-term loans to be quickly made to a cardholder who need not calculate a balance remaining before every transaction, provided the total charges do not exceed the maximum credit line for the card” (Simkovic, 2009, p.32). In most cases, use of credit card guarantees security of the user as compared to carrying cash. Since these cards have secret pin, the user can minimize cases of losing cash on transit. Moreover, there are several rewards and discounts that a card holder may enjoy such as “enhanced product warranties at no cost, free loss/damage coverage on new purchases, various insurance protections, for example, rental car insurance, common carrier accident protection, and travel medical insurance” (Simkovic, 2009, p.38).
Strategically, credit card companies in approach to CRM (customer Relationship Management) in terms of service quality along with value added or customized product or services. Alternatively, electronic forms of customised services like Internet service or online service, ATM facilities and service delivery via phone are modern forms of consumer satisfying approaches in the credit card industry and hence, these forms of strategic service approaches have significant role on effective CRM as well as building consumer loyalty. Several researches on credit card companies reported that common tendency of the companies are preferred SERVQUAL model in delivering most modern strategic services to their valued consumer (Liu 2007). In defining CRM status, it has assessed that gradual improvement in service quality enhanced consumer loyalty and dimensions of service quality that get scope playing impressive role through three forms, though existing credit card consumers are still now passed through numerous complexity.
Net-banking refers to the banking process in which customers can connect to their banking website using their personal computers or browsers. In this system, banks operate with the help of a web supported central database. The physical identity of the bank’s branches is taken away once they are linked through satellite links and lead to limitless entity allowing banking at anytime, everywhere in the world and in several manners. Therefore, “net-bank is the electronic bank that provides the financial service for the individual client by means of Internet” (Kumar & Kanchu 2012, p.9).
Functions of net-banking
The primary functions of net-banking services are enquiry about the details of account information including balance in the account, detailed chronological credentials, card accounts transfer in the same city, and fund transfer between personal bank saving account and personal capital account in the securities company. Besides, net-banking is important in dealing of foreign exchange and enquiry, B2C communication regarding the payment feedback, and services like modification in the login password, particulars of the Credit Card and client’s information, closing or remove certain cards. In addition, net-banking allows customers to report of losses like Credit Card or passbook in the local area (Liu 2007).
Benefits of net-banking
Like the other financial sectors, banks are also adapting to information technology to elevate their efficacy, service excellence and draw new customers. According to Liu (2007), customers prefer to use online banking since it is cheaper, does not require paper work, and is almost error free. Janus (2008) asserts that e- banking reduces transaction costs and provides a lucid course of processes. Net-banking has benefited the consumers by offering 24/7 hours accessibility.
Increased availability and accessibility to banking through e- banking has reduced the expenses on branch networking and staffing. Different options for channels of distribution will decrease the number of customers visiting banks and thus reducing the crowd in branches (Kumar & Kanchu 2012). A significant number of banks and utility companies have developed their web sites to introduce extensive range of services to their clients in the form of net-banking across the globe.
Challenges in utilizing net-banking
Kumar and Kanchu (2012) have recognized some common challenges that the developing countries come across while utilizing the e-banking services. These challenges include inadequate support infrastructure, inadequate skills in use of this platforms, and security concerns. These challenges pose a threat in achieving the utmost benefits of net-banking services in developing countries. It is essential for the developing countries to build adequate infrastructure and develop human capacity for the satisfactory implementation of a global technology such as net-banking. Further, insufficient working capital and lack of technical proficiency is a barrier in carrying out their migration plan related to internet in developing countries. Extensive use of net-banking system is not successful in many of the developing nations due to lack of trust on the part of the consumers (Liu 2007).
Regulatory and institutional framework
For impeding the progress of the net-banking services, it is necessary to establish regulatory frameworks, build trust, safety, and privacy standards. It is necessary to build high trade barriers, provide customer and investor protection for successful e-banking initiatives (Kumar & Kanchu 2012).
Electronic payment services adoption has grown among the global players. Although the electronic payment is ahead of its counterparts with regard to this parameter, PayPal is the leading electronic payment platform in the world. The need for great customer satisfaction necessitates more research into the area of PayPal payment services. According to studies carried out to find out about electronic payment services, PayPal is the ideal in making a link between information/data management and better customer experiences (Janus, 2008). Reflectively, “PayPal’s services allow people to make financial transactions online by granting the ability to transfer funds electronically between individuals and businesses” (Weinstein 2013, p. 22).
It is imperative that the major players using PayPal understand how they can take full advantage of the interactions with their clients and their inquiries. The products and services offered by the PayPal platform need to reflect these needs as well as exploiting their information technology systems fully. Proper implantation of PayPal payment services has the potential to change a customer’s relationship with an institution, thereby gaining customer loyalty. Therefore, “through PayPal, users can send or receive payments for online auctions on websites like eBay, purchase or sell goods and services, or donate money or receive donations” (Weinstein 2013, p. 24).
PayPal platform is one of the most important applications of e-commerce and is behind the success of institutions that implement it. As part of the electronic payment service, PayPal involves an enterprise-wide e-payment strategy, technology platform, and a relationship management. Great emphasis is placed on the importance of the integration of contact channels, processes, IT management, customer data management and enterprise wide management of the payment process (Liu 2007).
In any typical business environment, “PayPal Credit offers shoppers access an instant online revolving line of credit at thousands of vendors that accept PayPal, subject to credit approval” (Weinstein 2013, p. 26). The starting point of PayPal service is contacting customers through various media in order to provide services. An enterprise-wide database is then collected and integrated into the customer data from the office system. The enterprise uses the data from the database to make an analysis that translates into meaningful information for improving customer relationships.
PayPal contact channels can take the form of mobile services, and internet. There is need for the service provider to improve the security and convenience of contact channels since PayPal operates entirely via the internet. The more the consistency, the more the information that can be shared amongst various channels creating more business resources to be used in customer payment delivery (Janus 2008). A successful and profitable PayPal initiative always begins with a business strategy that serves to drive change, especially a customer-oriented culture within the service provider.
The PayPal Credit facility “allow consumers to shop at online in much the same way as they would with a traditional credit card” (Weinstein 2013, p. 23). The system should be integrated from the customer’s point of view. This approach helps move the payment service from a product-oriented to a customer-oriented institution (Liu 2007). A successful PayPal payment service strategy, in terms of enterprise-wide management, puts the benefits of the customer first. It highly values customer intimacy. From the enterprise-wide management, the service provider can set up business processes from the customer’s perspective as well as integrating the PayPal system and contact channel (Weinstein 2013).
The internet has made it possible for all services in PayPal to be managed by IT applications. A proper PayPal payment service strategy requires that the service provider invest in the most updated versions of IT infrastructure and software to enable in the recording, tracking and analysis of customer’s payment interactions (Liu, 2007). IT management is central in the implementation of contact channels, enterprise and customer data management. IT helps in the provision of an enterprise-wide view and customer value-focused payment system via PayPal.
Since the entire platform of PayPal is based on the internet, the service provider has strict security laws regulating its operations in the global e-payment environment. The security system empowers customers to micro manage their security concerns when using the services through the Buyer Protection Policy. This policy is instrumental in tracking the complaints and addressing each concern in the shortest time possible. Reflectively, the “PayPal Buyer Protection Policy states that the customer may file a buyer complaint if he or she did not receive an item or if the item he or she purchased was significantly not as described” (Weinstein 2013, p. 29).
Basically, Google wallet is “a mobile payment system developed by Google that allows its users to store debit cards, credit cards, loyalty cards, and gift cards among other things, as well as redeeming sales promotions on their mobile phone” (Lee 2011, p. 46). This payment system is a secure means of transferring money through a simple technology of phone tapping. The service can be linked to any MasterCard as long as the card is compatible and integrated to Gmail.
Since the development of electronic commerce practitioners of e-commerce have strived to gain insight into payment via cyberspace since the Google wallet is very secure. This payment system targets to woe global consumers to make their purchases via their phones. Due to surge in the use of e-commerce, several security reasons have been identified by those who use Google wallet, especially in safety of financial information exchanged. The occurrence of some security threats has compromised the principles of authentication, privacy, and non-repudiation which is fundamental in protecting security breaches such as denial of service. The most common threats identified in using Google wallet include ICM Flood, Teardrop Attack, Plashing, Distributed Denial-of-Service Attacks, and Brute Force Attacks (Lee 2011).
Google wallet as a payment system targets customers who are occupied with mobile payment services. Hence, the service provider has developed a mobile strategy enabling them to have different options for paying with the smart phone such as making payments by text, through the browser, and the mobile app and at the time of sale.
The Google wallet as an electronic payment system has been effective in transforming the lives of consumers and changing their expectations. Their life has become easier in terms of dealing with payment services since this payment platform can be accessed from any location, as long as the customer has internet enabled mobile phone. The customers do not have to go the bank and wait in a queue. They can easily get money through their phones. Besides, the Google wallet has the facility of opening accounts online or on mobile and can easily send money from one place to another. They have up-to-date customer services (Lee 2011).
The cost transactions via the Google wallet are lower than traditional payment methods. However, there have been suggestions that the Google wallet needs to utilize a fundamentally innovative strategic approach to meet the distinguishing needs of the Gen Y consumers, who would want a more dynamic and more reliable payment method. The Gen Y is surpassing the older generation in terms of online banking convenience, confrontation with the conventional marketing and environment related considerations (Lee 2011). Hence, it is important to visualize their requirements in view of larger market benefits when modifying the current Google wallet platform.
Influencing factors for adopting these commercial payment systems
Technology is a significant aspect of economic development that brings innovative amalgamation of labour and capital. Developing countries do not experience widespread technological growth. The use of technology remains concentrated in urban areas of the country. The effectiveness of substitute delivery channels depends on the availability of options to clients. In case of inconvenience experienced in the bank branches, they may look for alternate delivery channels. The complexity of the financial system also affects the use of complementary delivery conduits. For instance, clients may look for online banking or mobile banking for basic payment services or simple fund transfer, whereas they may not rely on these for complex services like applying for mortgage or seeking life insurance and go for branch-based services in such cases.
Moreover, demographic features relating to financial and technical literacy also influence the clients’ approval to net-banking (Kinicki & Kreitner 2009).
Customer behaviour related to a particular market function affects product plan, deliverance and consumer support. With these commercial payment systems, clients may need orientation and a variety of customer service alternatives like call centres, ATM attendants at busy sites, and retail agents. Customer education is a significant pre-requisite for establishing successful commercial payment systems since they depend on technology.
It is important to adopt special measures like, trained attendants for ATMs and call centres with ample staff, while introducing such novel technologies in the areas where literacy levels are low (Kinicki & Kreitner 2009). These efforts would assist the clients in learning the procedures, provide encouraging preliminary experience, and instil faith in the innovative approach making them self-sufficient for upcoming commercial payment transaction.
Apposite national regulations and financial infrastructure is mandatory for the success of these commercial payment systems. International experiences may be useful while constituting national regulations. National authorities and private sectors should cautiously implement these regulations to safeguard customers from security fears. Apparently, these commercial payment systems surpass the national borders; hence, crucial issues related to international cooperation on standards, security, and monitoring require consideration (Kinicki & Kreitner 2009). Therefore, emerging problems like criminal abuse of pre-paid cards, risk of money laundering, and efficiency should be addressed when using these payment systems.
In summary, the commercial payment systems such as PayPal, Google wallet, credit cards, and net-banking have been successful due to the convenience, flexibility, and affordability in terms of transaction costs. These systems are also well secured and faster than the traditional payment systems.
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