Page 361 - Introduction to Electronic Commerce and Social Commerce

348 11 Electronic Commerce Payment Systems and Order Fulfillment

Questions eBay consumers and merchants to use their systems. PayPal
1. How can credit cards be processed as quickly as stored- was simply more successful at it than Billpoint.
value cards at the ticket gate? Because of their ongoing success and the percentage of
2. What is the major benefit of owning a credit-based trans- their non-eBay business, PayPal was spun off from eBay in
portation card for commuters? July 2015. According to their 2015 annual report, PayPal
3. What is the major benefit of credit-based transportation operates in 203 global markets and has 184 million active
cards to the city government? user accounts. PayPal supports payments in 26 currencies.
4. How can the Metropolitan Unified Fare System enable As a standalone company, their 2015 revenue was about $9.2
the restructuring of public transportation infrastructure? billion up 15% from the prior year. Part of this growth comes
from the acquisition of a number of key payment companies
focused on the future of digital payments including:
SECTION 11.4 REVIEW QUESTIONS
• Braintree—payment gateway with key customers in the
sharing economy space (e.g., Airbnb and Uber)
1. What is a micropayment? • Venmo—mobile P2P company that was part of Braintree
2. List some of the circumstances where micropayments can
(see Section 11.6 for details of mobile P2P)
be used. • Xoom—international remittance (the closing case in this
3. Besides credit or debit cards, what are some alternate
chapter discusses and illustrates new approaches to digital
ways that an online merchant can process micropayments?
remittance)
• Padiant—technology for creating branded (private-label)
mobile e-wallets for retail chains
11.5 PAYPAL AND OTHER THIRD-PARTY
PAYMENT GATEWAYS While PayPal provides a number of services, at their core
they are a full-service third-party payment gateway (discussed
While credit and debit cards dominate e-commerce pay- earlier in Section 11.2). Basically, they eliminate the need for
ments, one alternative that has succeeded is PayPal (and its a merchant to deal with the intricacies and complexities of
clones). PayPal was formed in the late 1990s from the authorization and settlement in online payment. They also
merger of two small start-up companies, Confinity and eliminate the need for merchants to handle card information
X.com. Their initial success came from providing a pay- and for customers to provide their financial information with
ment system that was used for eBay transactions (PayPal is every transaction. The way it works is that in a given purchase
now an eBay company). How did the system work? transaction the customer is presented with a payment web-
Essentially, eBay sellers and buyers opened up PayPal page containing PayPal as an option. If the customer selects
accounts that were secured by a bank or credit card account. this option, they are directed to a Web page on PayPal’s site.
At the completion of an auction, the payment transactions If the customer has a PayPal account, they simply confirm the
were conducted via the seller’s and buyer’s PayPal accounts. purchase and payment instrument (e.g., card). If not, they pro-
In this way, the bank or credit card accounts remained con- vide information about their card, and PayPal takes it from
fidential. It is important to remember that in those days, there. In both cases, the customer is returned to the merchant
buyers were often wary of revealing their credit card num- site along with approval of the payment. At this point, PayPal
bers online. For the seller, it also eliminated the transaction transfers the settlement payment to the merchant’s bank.
fees charged by the credit card companies, although PayPal Domestically, PayPal is the leading third-party payment
eventually began charging similar, though somewhat lower, gateway. In recent years, Amazon, the leading online retailer,
transaction fees. has started to make forays into this third-party payment arena
Even though eBay had a payment system called Billpoint, with their Amazon Payments system (payments.amazon.
PayPal became so successful that eBay eventually decided to com). It is a comprehensive set of online payment tools and
close Billpoint and acquired PayPal in October 2002. Why APIs that enable businesses and developers to offer Amazon’s
did eBay select PayPal over Billpoint? This is a tough ques- payment capabilities as an alternative to paying with credit
tion that has generated a multitude of answers. PayPal had a or debit cards or Paypal. Like PayPal this alternative is sur-
better user interface, better marketing, and a better mix of faced by incorporating a “Pay with Amazon” button on the
services. Regardless, neither Billpoint nor PayPal had to find merchant’s checkout Web page or mobile app. If a customer
the market of potential buyers and sellers; eBay had already clicks the button, they are taken to Amazon’s familiar “Login
done this. What Billpoint and PayPal had to do was convince and Pay” screen. If he or she already has an account with