Page 357 - Introduction to Electronic Commerce and Social Commerce

344 11 Electronic Commerce Payment Systems and Order Fulfillment

Originally, the 33 countries agreed to convert all their uptake of contactless payment cards in retail stores has been
magnetic strip cards to EMV smart cards by December 2010. relatively slow until recently. For example, according to data
None did. Today, European adoption varies by region. In from the Smart Payment Association (2016), 40% of the 1.5
Western Europe, 97% of all card transactions are EMV. For billion smart payments cards shipped in 2014 were contact-
Eastern Europe it’s around 65%. Outside of Europe, there less. That’s a 35% increase from the year before.
have also been high rates of adoption in the Middle East,
Africa, Canada, and Latin and South America. In these areas, Transit Fares
it is 85% or higher. In Asia Pacific, reception has been mod-
est with around 35% of the card transactions involving In the USA, several European countries, and large Japanese
EMV. Likewise, in the U.S. adoption has been very slow. cities, commuters need to drive to a parking lot near a train
In the USA, the major card associations had self-imposed station, board a train, and then change to one or more sub-
October 1, 2015 as the date for mandatory adoption of EMV ways or buses to arrive at work. The entire trip may require
cards. On that date, those merchants who had not adopted the several payments. Many major transit operators in the United
format would be held liable for any losses they incurred from States and Asia have introduced smart card fare-ticketing
credit card fraud. The date came and went. By the end of last systems to help these commuters. The transit systems in
year, the estimate was that less than 40% of the merchants Washington, DC, Seoul, Hong Kong, San Francisco Bay
had EMV terminals and around 40% of card holders have area, Singapore, and most other major cities all use smart
cards with EMV chips. While the USA has been slow to card payment systems. In addition to handling transit fares,
move, the rate of adoption has picked up substantially over the public transport smart cards and other e-payment sys-
the past year. The exception is gas stations which aren’t tems (e.g., smartphones) are being used for paying parking
expected to accept EMV cards until 2017. fees and even for purchasing certain goods. For an example,
The impetus for smart card versus standard usage is that see the Philadelphia Parking Authority (philapark.org).
they are more secure. Because they are often used to store Similarly, many of the major toll roads in the United States
more valuable or sensitive information (e.g., cash or medical and elsewhere accept electronic payments rendered by
records), smart cards often are secured against theft, fraud, or devices called transponders that operate much like contact-
misuse. In contrast, if someone steals a regular payment less smart cards but from a much larger distance. Singapore’s
card, he (she) can see the card’s number, the owner’s signa- ERP (Electronic Road Pricing) system, shown in Figure 11.3,
ture, and the security code. In many cases only the card num- monitors the roads in downtown Singapore to control traffic,
ber and the security code are required to make a purchase. especially during rush hour, by using remote transponders in
However, criminals can use the cards up to the authorized the car.
value, which is a loss to the bank and Visa or MasterCard.
On the other hand, if someone steals a smart card, the
thief is usually out of luck (with the major exception of con- SECTION 11.3 REVIEW QUESTIONS
tactless, or “wave and go,” cards used for retail purchases).
Before the smart card can be used, the holder may be required 1. What is a smart card? Contact card? Contactless card?
to enter a PIN. The other benefit of smart cards versus stan- 2. Describe some of the general where smartcards are used?
dard payment cards is that they can be widened to include 3. What is a stored-value card? Closed-loop card? Open-
other payment services. In the retail arena, many of these loop card?
services are aimed at those establishments where payments 4. What is the EMV standard?
are usually made in cash, and speed and convenience are 5. Why is a smartcard more secure than a regular credit card?
important. These include convenience stores, gas stations, 6. Describe the use of smart cards in metropolitan transpor-
fast food or quick-service restaurants, and cinemas. tation systems.
Contactless payments exemplify this sort of value-added
service.
A few years ago, card companies began piloting contact- 11.4 EC MICROPAYMENTS
less payment systems in retail operations where speed and
convenience are crucial. All these systems utilize the existing Micropayments or e-micropayments are small payments
POS and magnetic strip payment infrastructure used with made online, usually under $10. From the viewpoint of many
traditional credit and debit cards. The only difference is that vendors, credit cards are too expensive for processing small
a special contactless smart card reader is required. To make a payments. The same is true for debit cards, where the fixed
purchase, a cardholder simply waves his or her card near the transaction fees are greater, even though there are no percent-
terminal, and the terminal reads the financial information on age charges. These fees are relatively small (in percentage)
the card. Despite their convenience and speed, the overall only for card purchases over $10. Regardless of the vendor’s