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E Commerce Fraud Essay

2118 words - 8 pages

As internet use develops, both businesses and consumers are utilizing this opportunity to achieve their goals. Some of these goals include expanding into greater markets for businesses and shopping online for consumers. These online transactions now encompass much more than the traditional online banking. They represent the billions of merchants and consumers whom take part in online transactions twenty-four hours a day. With this, credit cards and online transactions are quickly becoming an important legal issue. The different areas include: types of payment methods and their components, legislation, and online security such as encryption software. All parties must understand this complex scenario to successfully navigate and participate in any online transactions.
With consumers, businesses, and governments transacting business on the internet more than ever, various electronic payment methods have arose. The most widely used payment method is credit cards, which account for eighty percent to ninety percent of internet payments . Debit cards are also another major medium of payment. Variations such as electronic money or e-money and stored value cards have added features beyond the normal credit card and debit card. The goal of these variations of electronic payments has been to make purchasing simpler by allowing the transfer of cash value to a card . Unlike the debit card that deducts money from an account, the card itself represents the account. For example, retailers are replacing the traditional gift certificates for these stored value cards because they allow more purchasing options. They can be used either online or offline. Some stored value cards can be recharged with cash while others are disposable. An example of a popular value card is the American Express Gift card which can be used to make any purchases at vendors which accept American Express.
Some of the newer internet-based payment systems have e-wallets where value is transmitted through computers. E-wallets allow the holder to make small purchases both online and offline such as a meal. The payment is deducted from the cardholder’s online account immediately. E-wallets are typically set up in conjunction with a credit card or a debit card. When they contain an embedded computer chip, they are known as smart cards . One percent of the smart cards issued were in the U.S., while eighty-five percent issued were in the E.U . The two major electronic payment systems between businesses are wire transfers and letters of credit.
The main benefits of these electronic payments systems are efficiency and cost savings. “Estimates are that processing payments electronically saves $1 per transaction over processing paper checks” (Hiller 244). Consumers are also taking advantage of online banking and bill payments as this has seen increases in use .
The credit card processing system is “based on trust and is designed to protect everyone involved:” merchant, issuing bank, and cardholder. AA...

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