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Collecting Payments on the Internet

There are two types of payment collection on the Internet: those that are initiated via the Internet and then cleared and settled through an 'external' payment system, and those that are made from a store of value that is kept on a server linked to the Internet.

Collecting via Payment Card Schemes
Payment card transactions represent the large majority of payments collected for purchases made on the Internet, as they do for purchases over the counter. Credit cards are used to take for the majority of payments, but over the last five years debit cards and PayPal have grown rapidly and in many markets now dominate. The nature of online purchases is changing, for example consumers who usually pay by debit card for groceries over the counter are also likely to use their debit cards when ordering their groceries on the Internet. Retailers selling goods and services over the Internet clearly have to accept payment by MasterCard and VISA cards as they dominate the card market. Whether cards from the smaller card schemes, American Express, Diners Club and JCB, are cost-effective for collecting payments on the Internet varies by retailer, but the growth and significant share of PayPal payments raises the question of whether more retailers would benefit from collecting payments via PayPal.

Collecting via ACHs
Collecting payments via ACHs has always been one of the most efficient methods of collecting payments and mostly far cheaper than the payment card schemes. There are a growing range of systems which provide secure online payments directly between bank accounts using the local ACH. As normal the online merchant offers a range of payment options including a 'Pay by Bank' (the systems vary as to what name is given to this button this option). Clicking on this button produces a drop-down list of banks, the customer selects his own bank's online banking environment and then simply authorises the pre-filled payment instruction.

There are now systems offering online intra-country payments direct between bank accounts in many countries in Europe and in several other countries around the world. The charges are mostly much lower than payment cards, and in some systems also offer guaranteed payments.

Collecting Cash and Cheque Payments on the Internet
There are three types of service that enable consumers to pay by cash and/or cheques on the Internet - the Pay Cash/Cheque services, Pre-paid Payment Cards and the e-Money Services.

Pay Cash/Cheque Services
On enabled web sites the customer fills up their shopping basket as normal and then on the payment page the customer clicks 'Pay Cash' or 'Pay by Cheque' service logo. A barcode is then generated confirming the transaction which the customer prints out and then takes the barcode number to the nearest 'Pay Cash/Cheque' outlet/agent where they pay for their goods in cash or by cheque. The 'Pay Cash/Cheque' system then pays the merchant and the goods are dispatched.

Pre-paid Payment Cards
Pre-paid payment cards have a separate card account into which the cardholder can deposit cash which can then be spent on the Internet.

Pre-paid e-Money Services
There are now a number of e-money schemes which store value for sending, and buying on the Internet. Consumers exchange cash for the vouchers or tokens which can then be used to spend or send money online. Essentially these are pre-paid schemes and some of the schemes have linked to MasterCard pre-paid card accounts. At present these schemes have relatively low usage, but already have significant country coverage - in over 160 countries where the vouchers/tokens can be bought and/or cashed into local currency. There are even exchange services between the different schemes.

Pre-paid cards and voucher/token schemes are important in ensuring that customers who do not have a bank or card account are still able to make purchases online.

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