Page 359 - Introduction to Electronic Commerce and Social Commerce

346 11 Electronic Commerce Payment Systems and Order Fulfillment

The world of micropayments has been billed as $13 bil- In the past, Boram used to pay for the subway by using a
lion opportunity being driven by the rapid growth in digital Seoul MRT Card, which is a stored-value card. The card is
content (news, music, videos, etc.), mobile apps, and the issued by the city-owned Seoul MRT Corporation and could
social network and online gaming communities (LPT Team be recharged only at MRT stations. To ride a bus, she had to
2014). In spite of this opportunity, the micropayment arena use a Seoul Bus Card that is another stored-value card issued
continues to be a graveyard filled with the remains of compa- by the private Seoul Bus Transport Association (SBTA). The
nies who expired in their infancy. Some companies and pay- Seoul Bus Card was introduced in 1996 as the first RF-type
ments options that support micropayments and seem to have bus card in the world. Thus, she had to recharge both cards
some staying power are: Amazon Payments, PayPal individually because they could not be used interchangeably.
Micropayments, and the mobile payment companies Boku Other cities have similar governance structures. Therefore, to
(boku.com) and Fortumo (fortumo.com). Prior to their take the subway in another city, Boram had to buy one- time
acquisition by PayPal, Zong was a relatively successful subway tickets at the subway station.
mobile payment company that specialized in micropayments Credit cards, as described in this chapter, are not cost-
for online gaming and social networking. effective enough to be used for the micropayment of trans-
Except for a handful of situations, all of these options still portation because the card company could not justify its
cost the merchants and consumers money depending on service fee. Therefore, as described earlier, Boram needed to
nature of the purchases and on how the customer backs the carry at least one credit card and two transportation cards in
payment (by credit cards, bank accounts, mobile accounts, her wallet.
etc.). So, the long-term answer to the issues with micropay- Large cities in Asia such as Seoul, Hong Kong, and
ments may ultimately rest with the credit card associations. Singapore have adopted similar types of stored-value trans-
In some cases the solution might be for the card associations portation cards. As such, credit cards and stored-value cards
to adjust their fees, which Visa and MasterCard have done coexist as two major card services. The two types of card
for some vendors with high transaction volumes. In other issuers compete to expand their application territory. The
cases it may require changes in the way that the cards are transportation card company wants to extend the card’s
traditionally processed by the vendors. A good example of application so users can pay for parking fees, various toll
this is found in Case 11.1 which discusses the use of credit fees, and at restaurants and stores. However, the users have
cards for real-time payment of transit fares in South Korea. to load the cards for prepayment.
At the same time, for credit cards issuers to expand their
application to include payments for transportation, they need
CASE 11.1: EC APPLICATION to simplify the authorization process and reduce the service
INNOVATIVE CREDIT CARD fee for the participating transporters. The question is: which
MICROPAYMENTS FOR THE KOREAN business model will eventually win? In Seoul, it is the credit
METROPOLITAN UNIFIED FARE SYSTEM card issuer that includes payments for transportation.

In many Asian countries, daily commuters often use a com-
bination of public trains and buses to travel to and from The Solution
work, necessitating the use of a combination of stored-value
or regular credit cards for each mode. This was the situation In order to pay transportation fares quickly, credit card pay-
facing commuters in Seoul, Korea, a few years ago. As the ments for subways and buses must be processed without the
details of this case explain, the eventual solution was the cre- full authorization procedure. This risk is tolerable because
ation of a unified transportation smart card. the frequency and amount of micropayment abuse is low in
Korea. Therefore, the transportation ticket gate merely auto-
matically checks whether the card is valid and not on a
The Problem “blacklist.” The gate displays not only the fare, but also
the charges incurred during the current month as shown in
Boram, a banker in Seoul, Korea, commutes by MRT and Figure 11.4. The first credit-based MRT card was adopted by
public buses. She uses a credit card that allows her to pay for Kookmin Bank in 1998. Today, several issuers support this
both MRT and buses, not only in Seoul, but also in other type of card.
major Korean cities without having to recharge the card. The The credit-based transportation card has revolutionized
accumulated monthly charges are automatically paid by the the recharge service process. In the early stage, both MRT
bank. Boram recalls the days when she had to carry two dif- cards and bus cards had to be recharged at manned booths.
ferent transportation cards in addition to credit cards. To reduce the expense of the recharge service, unmanned