Strategic Market Perspective - Electronic Payment Methodologies Electronic Commerce Program

142 Pages·1997·9 MB·English

MARCH
1997
Payment
Electronic
Methodologies
INPUT
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ELECTRONIC PAYMENT METHODOLOGIES INPUT
Abstract
This report, part of INPUT’S Electronic Commerce Program, analyzes market
trends for electronic payment methods. It provides insights into how
payment processes will change as a result of the Internet. Representatives of
50 corporate users, 10 payment processing services, 8 bankers and 3
financial regulators were interviewed to capture data and commentary about
the potential opportunities available in this market.
Electronic Payment Methodologies identifies the payment methodologies that
are most likely to be widely adopted. It also discusses trends, issues, and
future technology directions.
The report contains 125 pages and 50 exhibits.
EEA6 1997by INPUT. Reproduction Prohibited.
ELECTRONIC PAYMENT METHODOLOGIES INPUT
Published by
INPUT
1881 Landings Drive
Mountain View, CA 94043-0848
United States of America
Electronic Commerce Program
Electronic Payment Methodologies
©
Copyright 1997 by INPUT. All rights reserved. Printed in
the United States of America. No part of the publication may
be reproduced or distributed in any form, or by any means,
or stored in a database or retrieval system, without the prior
written permission of the publisher.
The information provided in this report shall be used only by
the employees of and within the current corporate structure
of INPUT’S clients, and will not be disclosed to any other
organization or person, including parent, subsidiary, or
affiliated organization, without prior written consent of
INPUT.
INPUT exercises its best efforts in preparation of the
information provided in this report and believes the
information contained herein to be accurate. However,
INPUT shall have no liability for any loss or expense that
may result from incompleteness or inaccuracy of the
information provided.
EEA6»1997
EEA6 © 1997 byINPUT. Reproduction Prohibited.
ELECTRONIC PAYMENT METHODOLOGIES INPUT
Table of Contents
Introduction 1
I
A. Purpose 1
B. Scope 1
C. Methodology 2
D. Report Organization 2
E. Intended Audience 3
F. Related Reports 3
Executive Overview 5
II
A. Summary 5
B. Key Trends and Issues 6
C. Which Payment Systems Will Win? 7
Outlook 7
1.
Five-Year Outlook 10
2.
Payment Methodology Positioning 11
3.
D. Conclusions 12
Recommendations 12
E.
1. Recommendations for Merchants 12
2. Recommendations for Non-storefront Businesses 13
3. Recommendations for Banks 13
4. Recommendations for Payment Product and Services Vendors 13
Established Payment Methods 15
III
A. Current Payment Methods 15
Cash 17
B.
Background 17
1.
2. Benefits 17
17
3. Pitfalls
4. State of the Art 18
EEA6 ©1997byINPUT. Reproduction Prohibited. i
ELECTRONIC PAYMENT METHODOLOGIES INPUT
C. Checks 18
Background 18
1.
2. Benefits 18
3. Pitfalls 19
4. State of the Art 19
EFT ACH
D. or Transfers 20
Background 20
1.
2. Benefits 21
3. Pitfalls 21
4. State of the Art 21
E. Consumer Automatic Teller Machines 22
Background 22
1.
2. Benefits 22
3. Pitfalls 22
4. State of the Art 23
F. Credit, Debit, and Cash Cards 23
Background 23
1.
2. Benefits 24
3. Pitfalls 25
4. State of the Art 25
G. Trade Credit 25
Background 25
1.
2. Benefits 26
3. Pitfalls 26
4. State of the Art 26
H. Outsourcing Data Capture and Data Aggregation 27
IV Emerging Payment Methods and Vendors 29
A. Why Are New Payment Methods Needed? 29
Data Capture 29
1.
Data Aggregation 30
2.
B. CyberCash-Cards and Coins 30
Process 30
1.
2. Typical Merchant 31
Advantages 32
3.
Disadvantages 32
4.
5. Security 33
Market Acceptance 33
6.
INPUT Assessment 34
7.
C. DigiCash ECash 36
Process 36
1.
Advantages 37
2.
Disadvantages 37
3.
© 1997 by INPUT. Reproduction Prohibited. EEA6
ELECTRONIC PAYMENT METHODOLOGIES INPUT
4. Security 38
5. Market Acceptance 38
6. INPUT Assessment 38
D. Financial Services Technology Consortium-E-Check 39
1. Process 39
2. Typical Customer 41
3. Security 41
4. Advantages 41
5. Disadvantages 42
6. Market Acceptance 43
INPUT Assessment 43
7.
E. First Virtual-Off-the-Internet Security 44
1. Process 44
2. Typical Merchant 45
Advantages 45
3.
4. Disadvantages 46
5. Security 46
Market Acceptance 46
6.
INPUT Assessment 46
7.
F. Micropayment Systems, including Visa 47
Process 47
1.
2. Security 48
Market Acceptance 49
3.
4. INPUT Assessment 50
G. Mondex-Cash Card 50
Process 50
1.
2. Typical Users 52
Advantages 52
3.
4. Disadvantages 52
5. Security 52
6. Market Acceptance 53
INPUT Assessment 53
7.
H. Netscape and Others-Credit Cards Using SSL 54
Process 54
1.
2. Typical Merchant 57
3. Advantages 57
Disadvantages 57
4.
5. Security 58
Market Acceptance 58
6.
INPUT
Assessment 58
7.
Visa/MasterCard-SET 60
I.
Process 60
1.
2. Typical Merchant 64
Advantages 64
3.
Disadvantages 64
4.
EEA6 © 1997byINPUT. Reproduction Prohibited.
ELECTRONIC PAYMENT METHODOLOGIES INPUT
5. Security 64
6. Market Acceptance 65
7. INPUT Assessment 65
J. Checklist for Payment Methods 67
V
User Awareness 73
A. What Users Want fFrom a Payment System 73
1. What Do Businesses Prefer in a Payment System? 73
What Business Thinks Consumers Want 74
2.
3. Which Payment Systems Will Businesses Prefer? 74
4. Desirable Consumer Services 76
5. How Will New Purchasing Methods Affect Payment Timing? 76
B. Purchasing Cards 77
Are Purchasing Cards Prevalent? 77
1.
2. Purchasing Card Transaction Amounts 80
3. Purchasing Cards for Maintenance, Repair, and
Office Transactions 81
4. Purchasing Card Use for Capital Expenditures 82
5. Purchasing Card Use by Size of Business 83
6. Barriers to Using Purchasing Cards 84
C. Use of the Internet and World Wide Web 85
1. Pros and Cons of Internet-based Payments 85
2. Use of the World Wide Web 89
3. How Will Users Purchase on the Web? 90
4. Will EDI Systems Be Affected by the Internet? 90
WWW
5. Use of Credit Cards for Purchases 91
WWW
6. Use of Purchase Orders for Purchases 92
D. Electronic Checks and On-line Coins 93
Who Are E-Checks Good For? 93
1.
2. Competition for Electronic Checks 94
3. Obstacles to Adopting Electronic Checks 95
4. On-line Coin Outlook 96
E. Cash Cards 96
Market Timing 96
1.
2. Disposable versus Reloadable Cash Cards 97
VI Issues 103
A. Issues for Payment System Providers 103
B. Issues for Merchants 104
C. Issues for Purchasers 105
iv © 1997 byINPUT. Reproduction Prohibited EEA6