Plastic Money

INTRODUCTION Nothing has come to represent cash the

way plastic cards have. The idea of using a card to make purchases was first drawn by EDWARD BELLEMY in 1887.The US was the first country to launch it in the early 1990s .It was Diners Club International ,the first independent credit card company in the world and the American Express which have changed the way cards were used. They developed it into tangible business phenomenon. In India, the concept of plastic money caught on in the late1980s only after private sector banking came into practice.

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Debit cards are upgraded atm cards branded with Visa, Mastercard,or other familiar credit cards company logo. They look exactly like credit cards except directly tap your checking account every time when you make a purchase or withdrawl.

They are easier, more convenient ,less burdensome and offer greater access to your money than do checks ,ATMs, or credit cards. They are descendents of ATM cards that came in early 1980.

Debit cardDebit card

Debit cards can be used almost everywhere –retail stores, gasoline stores, restaurants etc in the either of the following ways:

Today banks are pushing hard to replace the ATM card with a debit card without asking customers if they want one. There are more customers with debit card readers than PIN based readers. Banks also make more money through off line debit cards in percentage fees or discount from the merchants.

CREDIT CARDS

A credit card is part of a system of payments named after the small plastic card issued to users of the system. It is a card entitling its holder to buy goods and services based on the holders promise to pay for these goods and services.The issuer of the card 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.

Credit accounts are a pre-approved line of unsecured credit offered to the holder.

STEPS FOLLOWED IN CREDIT CARD TRANSACTION:

Authorization For Internet Merchants, the shopping cart is connected to or

integrated with a Payment Gateway. For Retail Merchants, the card is swiped through a magnetic reader on the Point of Sale (POS) Terminal. The authorization is transmitted to the appropriate Card Issuer (Amex, Discover, Diners, JCB) for approval. The Issuing Bank or Card Issuer authenticates the Cardholder and approves or declines the transaction amount.

It is important to note that no money changes hands during the Authorization. Merchants must re-present the transaction to receive payment.

Merchant Balancing This is also known as Batching Out. Most POS Terminals and all

Payment Gateways perform an auto close function at the end of the day and batch out automatically.

Capture The Front-End Processor matches the

Authorization data to the settlement data and transmits the card capture file to a Back-End Processor for V/MC transactions or to the appropriate Card Issuer for other card types.

Clearing During this stage the Back-End Processor

performs compliance checks and risk management procedures and transmits the transaction to V/MC or to the appropriate Card Issuer for other card types.

Interchange (VS/MC Only) During this stage the V/MC Associations sort the transactions by

Issuing Bank and transmit them to the appropriate Issuing Banks for settlement.

Settlement During this stage the Issuing Bank calculates fees and deductions

(i.e., chargebacks) and routs the net funds to the appropriate Card Issuer which determines the daily deposit for the merchant.

Merchant ACH During this stage the Acquiring Bank or Card Issuer transmits the

merchant deposit to the merchant’s checking account.

Advantages of credit cards:

Compact Safe to carry Convenient Easy loan Attractive Schemes Universality

Limitations of credit cards:

Security Identifiable Expensive Verification phase

Credit Card LaunderingCredit card laundering is also referred to as “factoring”.

Company A(no merchant account)

Company B(has merchant account)

customer Credit card company

Order goods and makes payment

Tieup for commission

Payment is made to the CC Company through Company B

Tie up for providing CC facility

Payment is made to Company B who sends it to Co. A for a commission

Smart Card

Meaning Smart Card is a plastic card the size of a

credit card with an integrated circuit built into it. This integrated circuit may consist only of EEPROM in the case of a memory card, or it may also contain ROM, RAM and even a CPU.

Smart cards contain an operating system just like personal computers.

Smart cards can store and process information and are fully interactive.

Advanced smart cards also contain a file structure with secret keys and encryption algorithms. Due to the encrypted file system, data can be stored in separated files with full security.

uses The uses of smart cards are as versatile as any mini-

computer. At a hospital emergency room, for example, the card could identify the person's health-insurance carrier and transfer all necessary information from the microchip to an admittance sheet. Tests, treatment, billing and prescriptions could be processed more quickly using the card. Major clinical findings could be added to the medical information section within the microchip.

Technological Difference Betweem Smart Card and Dr and Cr Card

The technological difference between the Credit Card and Smart card is, that the latter contains a computer chip that actually processes information and has the potential to store identification information including driving license, citizenship, and emergency contact information, whereas magnetic chip on the Credit or Debit Card is simply electronic encoding of the name, number and expiration date already embossed on the card.

Benefits of Smart Card Smart cards can be used for

identification, authentication, and data storage.

Smart cards provide a means of effecting business transactions in a flexible, secure, standard way with minimal human intervention.

Smart card can provide strong authentication for single sign-on or enterprise single sign-on to computers, laptops, data with encryption, enterprise resource planning platforms such as SAP, etc.

Problem of Smart Card

Another problem of smart cards may be the failure rate. The plastic card in which the chip is embedded is fairly flexible, and the larger the chip, the higher the probability of breaking. Smart cards are often carried in wallets or pockets — a fairly harsh environment for a chip. However, for large banking systems, the failure-management cost can be more than offset by the fraud reduction.

Potential of Smart Card Today, there are fewer than one billion smart

cards in use. Smart card activities are growing at 30 percent a year, predominately outside the U.S. Over the next five years, the industry will experience steady growth, particularly in cards and devices to conduct electronic commerce and to enable secure access to computer networks. Within the same time frame, smart cards are expected to be used in 95 percent of the digital wireless phone services offered worldwide. Asia, Latin America and North America are areas believed to be of greatest potential in the next three years. Globally, the uses that have emerged so far are for payphones, wireless telephony, Internet access, banking, healthcare and pay TV. (Smart Card Forum, 12/98)

ELEECTRONIC FUNDS ELEECTRONIC FUNDS TRANSFER(EFT)TRANSFER(EFT)

Electronic funds transfer is a generic term describing any transfer of funds between parties or financial institutions via electronic data systems.

ELECTRONICELECTRONIC CHEQUESCHEQUES

The ‘cheque’ is a messsage that

contains all of the information that is found on the ordinary cheque,but is signed digitally:or endorsed.

The best known method of electronic funds transfer.

STEPS IN A COMPLETE STEPS IN A COMPLETE ELECTRONIC ELECTRONIC

CHEQUE TRANSACTIONCHEQUE TRANSACTION

Phase I : Purchasing GoodsPhase I : Purchasing Goods

Phase II: Depositing Phase II: Depositing Cheques At The Merchant’s Cheques At The Merchant’s

BankBank

WHAT IS ACH?

• ACH = Automated Clearing House

• Electronic Network for financial transactions

• Governed by NACHA

COMMON APPLICATIONS

• Direct Deposit

• Direct Debit Payment

• Business to Business (B2B) Payments

• E- Commerce Payments

• Tax Payment

How do Clients Benefit?

• Less Expensive

• Reduces Cheque Fraud

• Efficient method of moving funds• Improves Cash Flow

• Speeds up collection of Returned Items

HOW ARE ACH PAYMENTS USED?

• Point-of-Purchase Entries (POP)

• Prearranged Payments and Deposits (PDP)

• Internet-Initiated Entries (WEB)

• Telephone-Initiated Entries (TEL)

04/08/23 36

BuyByText Next generation sales & marketing

technology

STEP 1TEXT TO 82540

Thank you for ordering Jukebox Hits. Register your details and complete your purchase by visiting the below URL from your mobile by clicking on the link or selecting ‘Go To’ in your Message Menu.

https://secure.purchase

STEP 2 RECEIVE INBOUND TEXT

A SIMPLE 4-STEP PROCESS

STEP 3 SECURE REGISTRATIONPAGE SENT TO MOBILEPHONE TO OPEN AN ACCOUNT & COMPLETETHE ORDER.

“PLEASE CONTINUE YOUR ORDER BY ACTIVATING YOUR E-WALLET. THIS SECURE PAGE REQUIRES YOUR ONCE-OFF REGISTRATION AND WILL TAKE 1-2 MINUTES.

FOR YOUR FUTURE SECURITY AND CONVENIENCE, YOUR LIVE E-WALLET WILL ENABLE YOU TO INSTANTLY PURCHASE OTHER GOODS AND SERVICES VIA TEXT OR EMAIL, SIMPLY BY KEYING IN YOUR

4-DIGIT PIN NO.”

Thankyou for ordering Jukebox Hits. Your order and payment has been processed and goods will be dispatched today.

Your Jukebox e-wallet enables you to make future purchases securely by simply keying your 4-digit pin into our marketing texts, emails or website. You can also close, amend or opt-out at www.jbbiz.co.uk.

STEP 4ORDER COMPLETION TEXT

That is just the start of the E-Wallet potential…

REACTIVE TRADITIONAL MARKETINGVERSUS

PROACTIVE E-WALLET