Moreover, financial institutions are not adequately automated to enable e-banking and e-payment Kumaga, Electronic payments are financial transactions made without the use of paper documents such as cheques. Electronic payments include credit card, debit card, smart card, electronic-wallet, electronic-cash, e-cheques among others.
E-payment systems have received different level of acceptance world over; some methods of electronic payments are highly accepted while others are quite low. The spread of electronic-payment usage vary unequally between countries partly due to differences in factors such as quality of regulatory framework and readiness of telecommunication groundwork. New payment services based on the Internet and mobile phones flourish in the advanced economies.
The use of electronic payments in the marketplace for retail payments, including the Electronic Fund Transfer at Point-of-Sale EFTPOS , E-banking, telephone banking, Internet banking, E-debit, and E-money, has become a common and well conventional practice in the advanced countries that have extensive and well developed telecommunication network and infrastructure. On the other hand, in the some of the developing economies the rate of development of e-payments appear to be less clear.
Mobile money is the services that allow electronic money transactions over a mobile phone. Young, It is also referred to as mobile financial services, mobile wallet and mobile payment. In this research mobile money is defined as a broader term that includes all types of monetary transactions executed via mobile phones.
A wide range of mobile money applications have developed throughout the years. Some major groupings include: Mobile banking which is the use of a mobile phone to remotely access a bank account, primarily for account balance checkup and bill payment services Mobile money transfer remittance is a peer-to-peer application making use of a mobile phone to send money to relatives and friends, primarily across international borders Mobile commerce payment is the use of a mobile phone to make financial transactions for either purchases or sales, remotely or on-site, retrieve promotion information or coupons, and deliver gift items.
Mobile financial services and mobile commerce are not new concepts in the telecom industry. Mobile network operators started exploring the concept of mobile payments in with little success. Recent advances in handset functionality, chip and mobile network know-hows, and upgrades to point-of-sale infrastructure have however dramatically improved the environment for mobile money solutions, bringing together different industry groups, such as banks and operators.
Young, According to an analysis by Ernest and young , there are five key enablers to successful delivery of mobile money and e payment adoption for that matter as shown by Figure 1 Key enablers driving the delivery of mobile money.
Key enablers driving the delivery of mobile money Ernest and Young identifies the delisted as the main enabler for successful delivery of money: Technology, market , regulation, risk and infrastructure 2. The identified challenges as revealed by previous research works are infrastructure, security, regulatory and legal issues and socio-cultural challenges.
Information security is the practices, procedures as well as technology put in place which ensure that information is protected from alteration or accidental change integrity , unauthorized access confidentiality , and is readily available availability to authorized users on request.
An unsecured e-payment system may not get trust from its users. Trust is very important to ensure acceptance from users. According to Worku, , e-payment and e-banking applications represent a security challenge as they highly depend on critical ICT systems that create susceptibilities in financial institutions, businesses and potentially harm clients. It is vital for banks to understand and address security concerns in order to leverage the potential of ICTs in delivering e-banking applications Worku, A secure electronic financial transaction has to meet the following requirements: In other words integrity of payment systems means that no money is taken from a user unless he authorizes a payment.
In addition, users might require not receiving any payment without their explicit consent; this is desirable when users want to avoid uncalled-for bribery.
Asokan et al, 2. Some parties involved may wish confidentiality of transactions. Confidentiality as far as this research is concerned is the restriction of the knowledge about various pieces of information related to a deal; the identity of persons involved, content of items bought, monetary value etc. Mostly, parties to transactions want to ensure that communications are private Asokan et al, Where parties wants to ensure that the transaction so taken is anonymous or untraceable, the requirement may be to limit this knowledge to certain subsets of the members only Asokan et al, The information so retrieved should also be very reliable to aid in making of decision.
Availability demonstrate as the percentage of time that an information system can be used for productive work. Reliability on the one hand is the decision usefulness of the information.
The application of these technologies however reduces speed and efficiency which is the hall mark of e-payment system in relation to the manual system of payment. In this regard a compromise will have to be made between efficiency and security. Under listed are some of the technological means to secure e-payments: This is an open standard developed by Master Card and Visa to provide a solution to security problems for online credit card payment system Ullah, This is achieved by providing digital certificate for both customer and merchant.
The 3D does not require certificate to authenticate Ullah, Proper policies, procedures and suitable Government laws must also be put in place to warrant technologies provide maximum security. For security to work in the E-payment environment support from Government is very essential.
Proper groundwork for electronic payments is a challenge. Electronic payments communication groundwork includes computer network such as the internet and mobile network used for mobile phone. Additionally, banking activities and processes need to be automated.
A network that links banks and other financial institutions for clearing and payment confirmation is a key requirement for electronic payment systems. In Africa, however, mobile networks and internet are not easily available. According to Worku, low level of internet permeation and poorly developed telecommunication infrastructure obstruct smooth improvement and developments in electronic commerce in Ethiopia.
In emerging countries many of the rural areas are unbanked and lack access to critical infrastructure that drives electronic payments. According to Microfinance Policy Framework for Nigeria, , some of the debit cards technologies like Automated Teller Machines ATMs are still seen by many as unreliable for financial transactions as stories told by people suggested that they could lose their money through fraudulent deductions, debits and other lapses for which the technology had been associated with by many over the last few years.
In a related work, by Mishra, in Nepal, Telecommunication and electricity are not available throughout the country, which adversely impact on the development of electronic-payments. Mishra further reiterated that the development of information and communication technology is a major challenge for e-payments development. Since ICT is in its infant stages in most developing countries, the country faces difficulty endorsing e-payment development.
Some of the major elements include rules on money laundering, supervision of commercial banks and electronic money institutions by supervisory bodies, payment system oversight by central banks, data and consumer protection, cooperation and competition issues.
A legal and regulatory structure that builds trust and confidence supporting technical efforts is an important issue to be addressed in implementing e-payments. As indicated by Worku, , absence of appropriate legal and regulatory framework for e-payment in Ethiopia, an African country is a challenge. According to Worku, Ethiopian current laws do not accept electronic contracts and e-signatures.
Ethiopia has not yet enacted legislation that deals e-payments and e-commerce concerns including enforceability of the legitimacy of electronic contracts, digital signatures and intellectual copyright and restrict the use of encryption technologies.
In a related work, Mishra argues that no laws and regulations have been propagated to cover the legal status and issues of e-payments. New technologies will not dominate the market until customers are confident that their privacy will be protected and adequate assurance of security is guaranteed. New technologies also requires the test of time in order to earn the confidence of the people, even if it is easier to use and cheaper than older methods.
For example credit card payments through a website are not easiest way to pay as this system requires large amount of personal data and contact details in web form. Customers have to provide credit card and payment account details and other personal information online.
Providing these details by mail or over the telephone also entails security risks Guttman, , Laudon and Traver, 2. Another problem is that when we makes payment by using e-cash, the client and the salesman have accounts in the same bank which issue e-cash.
The payment is not valid in other banks. Potential customers often mention this risk as the key reason why they do not trust a payment services and therefore do not make internet purchases Lietaer, 2. People usually have to open bank account outside the continent in order to get a credit card. The fact that African Society is cash-based, people are accustomed to using cash for most of their transactions. African banks are very unadventurous; they use very few innovative products and marketing techniques.
Security issue is one of the major challenges in the development of e-payments in Africa. In a related study by Worku , under listed are some of the challenges Ethiopia faces in implementing electronic payments and electronic banking: Political fluxes certainly disturb smooth operations of business and free flow of goods and services. Lower literacy rate is a serious obstacle to adoption of e-payments as it hinders the accessibility of banking services.
To fully enjoy the benefits of e-payments, citizens should not only know how to read and write but also have basic ICT literacy. High cost of Internet: The cost of Internet access in relation to per capita income is a critical factor. Compared to developed countries, there are higher costs of entry into the e-payments and e-commerce market. These include high start-up investments costs, high costs of computers and telecommunication and licensing requirements. Lack of awareness on the benefits of new technologies, Fear of risk, Lack of trained personnel in key organisations, tendency to be content with the existing structures and People may be resistant to new payment mechanism.
According to Microfinance Policy Framework for Nigeria, , urban dwellers are not receptive to the efforts of ICT investors to migrate payment system through substantial investments in crucial infrastructure like Point of Sale POS terminal in thousands of supermarkets, fuel stations, hotels, recreational centres and many others. For some scholars, electronic banking is an opportunity for countries with underdeveloped financial systems to launch into developmental stages Bassey, Consumers could purchase goods from the internet and send unencrypted credit card numbers across the network, which did not provide much security and privacy.
But a wide variety of new secure network payments schemes have been developed as consumers became more aware of their privacy and security. Digital Money is an electronic payment technology, which can provide anonymous flexible electronic payment, like paper cash, but with added security requirements needed for internet transactions.
In a related work by Lee, et. Al, , a secure electronic cash system can guarantee anonymity of legitimate users but also provides traceability about illegally issued cash or laundered money.
If illegal activity did take place, it can cancel anonymity of the digital cash in order to protect the bank Lee, et. Digital Money can also be used to deter illegal content copying and distribution by inserting tracing content factors into the digital cash payment scheme that prevents users from individual replication activity Lee, et.
By using this function, legal, anonymous purchasers can spread contents to other paying anonymous users while abiding by copyright laws. Using digital money in industries like digital entertainment can increase the demand for products through easier and safer dissemination channels.
Digital Money can trace who is illegally reproducing and distributing copyrighted intellectual material, therefore increasing security for authors and at the same time deterring lost revenue and sales for digital media entertainment companies Lee, et. By adopting such a method of payment and distribution, software and intellectual property piracy can be halted and eventually eliminated.
Digital Money can provide financial institutions with decentralized structures, faster transaction and decision making processes, and more cost effective ways of doing business. Electronic Payments as argued by Cobb, have a significant number of economic benefits apart from their convenience and safety. These benefits when maximized can go a long way in contributing immensely to economic development of a nation. According to Cobb, , efficient safe and convenient electronic payments carry with them a significant range of macro-economic benefits.
The impact of introducing electronic payments is akin to using the gears on a bicycle. Add an efficient electronic payments system to an economy, and you kick it into a higher gear. Add better-controlled consumer and business credit, and you notch up economic velocity even further. Cobb, While the high level of cash transactions creates an opportunity for the electronic payment industry, it also imposes a cost on local economies.
Cash has to be minted, securely transported, counted and reconciled, kept secure and maintained for re-use time and time again. The per-payment cost is high, and will always remain high whereas the costs of electronic system are fixed. Once the infrastructure has been built, the costs per-transaction is very low Cobb, When cardholders use their cards at the point of sale they are helping to keep money in the banking system. EPS can help displace shadow economies, bring hidden transactions into the banking system and increase transparency, confidence and participation in the financial system.
As also mentioned by Al Shaikh, , there is a correlation between increase in point of sales volumes and rise in demand deposits. Such payments draw cash out of circulation and into the bank accounts, providing low cost funds that can be used to support bank lending for investment a driver of overall economic activity.
In a similar narrative by Hord, electronic payment is very convenient for the consumer. In most cases, you only need to enter your account information — such as your credit card number and shipping address once.
When you come back to the Web site, you just log in with your username and password. According to Ackorlie, , Ghana has lagged way behind most of the world including many of its peers in Africa in the general quest to boost micro economic activity by reducing the role played by physical cash in daily transactions and by encouraging the creation of a cashless society. The obvious problem with off-line payments is how to prevent payers from spending more money than they actually possess.
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