CHAPTER ONE

INTRODUTION

• Background of the study

Payment is a pulse of business, especially for business-to-consumer models. Money flow is considered as one of the critical success factors for e-commerce as well as information and product flow (Tsiakis et al., 2007). For an online transaction, among the payment tools available are credit card, charge card, check, debit card and e-wallet. However, the most common payment option for online transactions is the credit card (Hsieh; 2001, Paynter & Lim; 2001; Jan Wong, 2013). In fact, purchasing via e-commerce does not mean that buyers have to directly pay online during the transaction. Besides, they can also use automated teller machines (ATMs) to make payments and transfer the payment information digitally.

The application of IT tools such as e-payment is not merely grasped by businesses or profit oriented firms, but other non-profit organisations including government agencies and philanthropic institutions for various reasons such as improving service quality, money collection, performance and reputation. Interestingly, the application of IT tools in these organisations is not only fundamental in performing office and administrative tasks, but also in dealing with customers in terms of finance. Ee-payment can be basically explained as transferring money from the payer to the payee by an electronic medium. E-payment involves an exchange of funds initiated through an electronic communication channel (Shon & Swatman, 1998). As a prerequisite, the electronic signals must exist to enable a direct link to the depositor or creditor bank’s account (Gans & Scheeling, 1999). Normally, e-payment is performed during online purchase, where verification, validity and approval are present simultaneously, whereby most of the transactions apply internet/online banking and credit cards. However, e-payment is not restricted to credit cards, debit cards, e-money and internet banking only. Payment via ATM or bank counters is also considered e-payment, as long as the customer is using electronic mechanism to transfer their money.  Despite the many types of e-payment options available as mentioned above , credit cards have overwhelmed other instruments for online transactions all over the world besides for certain countries such as Germany and China. In Germany, people prefer to use direct debit and bank cards while in China, people prefer to use debit cards (Turban, et.al, 2011). In Nigeria, three common e-payment methods are digital cash, credit card and electronic fund transfer. However, a disparity exists between the usage and preference for payment, where more respondents used prepaid/debit cards even when they prefer direct payment to the sellers’ account due to fraud risk (Adeyeye, 2008).

In Ministry of finance, the payment system is growing rapidly with the encroachment of information technology and major retail e-payment systems such as Financial Process Exchange (FPX) and Interbank GIRO (IBG) (Mohammad, 2008). Basir (2009) claimed that the e-payment systems which are highly used by ministry are credit card, internet banking and interbank 10 GIRO (IBG) while charge card, debit cards and e-money are low in terms of usage level. This is supported by Abdullah et al. (2012) as he claimed that 90% of all e-commerce transactions were paid via credit card. Thus it can be said ministry of finance are more familiar with credit cards compared to the other methods even though there are other payment methods available.

An Electronic Payment System (EPS) is a form of inter-organizational information system (IOS) for monetary exchange, linking many organizations and individual users. This may require complex interactions between the stakeholders, the technology and the environment. The unique characteristics of EPS/IOS also differentiate it from traditional internal based information systems; it is more complex and multifaceted technologically, organizationally and relationally (Kumar and Crook, 2009), highlighting the importance of collaboration and the need to bring all the facets together. EPS transcends organizational boundaries, thus the collaboration of the stakeholders and sharing of resources and how it interacts and affect the elements of the payment system may also be key issues in the development of EPS (Briggs and Brooks, 2011).

Furthermore, EPS encompasses the total payment processes, which include all the mechanisms, technological systems, institutions, procedures, rules, laws etc. that come into play from the moment a payment instruction is issued by an end-user. Different kinds of rules, regulations, mechanisms, technology and arrangements have therefore been put in place by trading partners, markets and governments (stakeholders involved in EPS development) in all countries and throughout time to develop effective infrastructure of monetary exchange, commonly referred to as payments systems (Bossone and Massimo, 2001).

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