Page 385 - Introduction to Electronic Commerce and Social Commerce

372 11 Electronic Commerce Payment Systems and Order Fulfillment

SUMMARY worldwide will have to support alternative methods of
payment including cash on delivery and cash transfers.
In this chapter, you learned about the following EC issues as Finally, although payment by smartphones is growing
they relate to the chapter’s learning objectives. substantially faster than payments by other devices,
overall purchases made by PCs swamp the number of
1. Cross-Border EC. Many B2C companies are looking purchases made by smartphones. This suggests that for
to grow their businesses by increasing sales to interna- the near term, most EC retailers will have to provide
tional customers. These sales are part of what is called interfaces that support different devices including smart-
cross- border EC. The problem is that most B2C compa- phones, tablets, and PCs.
nies are ill-prepared to engage in cross-border com- The various dilemmas facing e-tailers indicate that
merce. As demonstrated by B2C companies that already the models on which EC was originally built are under-
have strong international sales, those companies that going rapid transformation. This has given rise to a liter-
want to successfully engage in cross-border EC will ally hundreds of new payment initiatives, especially in
have to “think local,” meaning that they need to treat the areas of closed-loop cards and mobile payments,
international customers as if they were domestic. More digital wallets, mobile money of all sorts, and virtual
specifically, their online sites will need to: (1) provide currencies. Unfortunately, the vast majority will suffer
support for multiple languages, currencies, payment the same fate as most of the predecessors—death from
systems, and input devices (especially mobile); (2) cus- failure to reach a critical mass of buyers and sellers who
tomize Web pages based on country (e.g., handle inter- are willing to adopt the new schemes and technologies.
national addresses and phone numbers); (3) simplify 3. Using payment cards online. The processing of
checkouts by eliminating the need for detailed user pro- online card payments is essentially the same as it is for
files; and (4) offer free shipping and rewards to encour- brick- and- mortar stores and involves essentially the
age repeat traffic. Because this is such a daunting task same players and the same systems—banks, card asso-
for most companies, they usually rely on third-party ciations, payment-processing services, and the like.
partners who have successfully done this to assist with This is one of the reasons why payment cards are pre-
the transition. For example, this was what Costco did a dominant in the online world. Even so, this doesn’t
couple of years back when they decided to start selling mean that EC card payments don’t present challenges
online to Chinese consumers. Instead of establishing to online merchants who accept them. First, the dis-
their own in-country operation, they partnered with count rate and interchange fees charged with each card
Alibaba’s Tmall Global EC marketplace which pro- transaction are substantial. This is one of the reasons
vided access to a substantial percentage China’s online merchants are always looking for ways to reduce these
consumers, immensely simplified the handling of pay- fees (like using third-party digital gateways such as
ments from these consumers, and eliminated many of PayPal). Second, online merchants experience more
the logistical issues that confront businesses trying to card fraud than off-line merchants. Surveys, such as
deliver orders originating from outside the country to those conducted annually by CyberSource, indicate
Chinese consumers. Besides removing many of the bar- that over the past few years, merchants have adopted a
riers to cross-border EC, working with a partner enables wide variety of methods including card verification
a business to more easily test an international market services, address verification, customer order history,
and experiment with its product offerings without hav- negative lists, and postal address verifications.
ing to make very large up-front investments and incur- 4. Smart cards. A smart card is a plastic payment card that
ring substantial card usage fees and logistical costs. contains data in an embedded microchip. Some cards
2. Changing retail landscape. In the rapidly changing have memory chips for read/write data. Smart cards can
retail landscape, retailers are faced with a series of be rechargeable. Applications include telecom SIM cards,
conundrums. First, while EC retail sales are growing contactless financial payments and services, paying for
much faster than in-store sales, the overwhelming major- mass transit, identifying cardholders for government ser-
ity of sales are not online. This means that those retailers vices, verifying eligibility for healthcare. There are two
who support multiple sales channels will have to deter- types of smart cards—contact and contactless. With both
mine how to best combine the channels so that custom- types smart card readers are critical and a key element in
ers are provided with a seamless omni-channel determining the cost of a smart card application.
experience. Second, cards continue to be the payment Stored-value cards are a particular type of smart card
method used in most EC transactions. Yet, cash is still where a monetary value is prepaid and can be loaded on
used in the vast majority of retail sales, and in some the card once or several times. They can be used like a
regions of the world other forms of EC payment pre- credit or debit card to make purchases online or off.
dominate. The implication is EC retailers who sell They come in two forms—closed-loop and open-loop.