Online Banking ePayments
Encyclopedia
Online Banking ePayments (OBeP) is a type of payments network, developed by the banking industry in conjunction with technology providers, specifically designed to address the unique requirements of payments made via the Internet.
Key aspects of OBeP which distinguish it from other online payments systems are:
In order to be positive that your identity, information and other personal features are truly secure, the following cautions should be taken:
Make sure a secure browser is being used.
Read all privacy policies provided. Many individuals simply skip over such important information that could spell out potential risks. If a risk seems unnecessary and odd, it would be safer to skip this payment rather than take the risk with one's hard earned money.
Keep all personal information private. If phone numbers, social security numbers or other private, important information is asked for one should be cautious. Banking information is important information as it is, asking for unnecessary personal information should be a red flag of suspicious behavior.
Selecting businesses that are trustworthy is key.
Most companies will email a customer with a transaction receipt upon payment. Keeping a record of these is important in order to have proof of purchase or payment.
Lastly, checking bank statements regularly is crucial in keeping up-to-date with transactions.
Because the merchant is not responsible for storing and protecting confidential consumer information, OBeP systems also reduce costs associated with mitigating fraud , fraud screening, and PCI audits.
Transaction fees on Online Banking ePayments vary by network, but are often fixed, and lower than the average 1.9% merchant fees associated with credit card transactions – especially for larger purchases.
1. Multi-Bank – requires that a merchant have a single connection to the OBeP network in order to accept payment from any participating financial institution.
2. Mono-Bank – requires that a merchant have a separate connection to each participating financial institution.
A third category, also known as “overlay payment solutions” provide a similar consumer experience to Online Banking ePayments, but violate a key tenet of the OBeP definition by requiring the consumer to share their online banking credentials with a third party. Examples include: DIRECTebanking.com, sofortüberweisung.de, UseMyServices and POLi
A fourth category requires that a merchant have a single connection to an alternative payment provider. This alternative payment provider then have connections to multiple online banks. This does not require the consumer to share their online banking credentials, but still offer the same advantages to the merchants as “overlay payment solutions”. Examples include: inpay.com and gluepay.
Key aspects of OBeP which distinguish it from other online payments systems are:
- The consumer is authenticated in real-time by the consumer financial institution’s online banking infrastructure.
- The availability of funds is validated in real-time by the consumer’s financial institution.
- The consumer’s financial institution provides guarantee of payment to the merchant.
- Payment is made as a credit transfer (push payment) from the consumer’s financial institution to the merchant, as opposed to a debit transfer (pull payment).
- Payment is made directly from the consumer’s account rather than through a third-party account.
Privacy & Security Features
OBeP systems protect consumer personal information by not requiring the disclosure of account numbers or other sensitive personal data to online merchants or other third parties. During the checkout process, the merchant redirects the consumer to their financial institution’s online banking site where they login and authorize charges. After charges are authorized, the financial institution redirects the consumer back to the merchant site. All network communications are protected using industry standard encryption. Additionally, communications with the OBeP network take place on a virtual private network, not over the public Internet.In order to be positive that your identity, information and other personal features are truly secure, the following cautions should be taken:
Make sure a secure browser is being used.
Read all privacy policies provided. Many individuals simply skip over such important information that could spell out potential risks. If a risk seems unnecessary and odd, it would be safer to skip this payment rather than take the risk with one's hard earned money.
Keep all personal information private. If phone numbers, social security numbers or other private, important information is asked for one should be cautious. Banking information is important information as it is, asking for unnecessary personal information should be a red flag of suspicious behavior.
Selecting businesses that are trustworthy is key.
Most companies will email a customer with a transaction receipt upon payment. Keeping a record of these is important in order to have proof of purchase or payment.
Lastly, checking bank statements regularly is crucial in keeping up-to-date with transactions.
Costs
Costs associated with fraud, estimated at 1.2% of sales by online retailers in 2009, are reported to be dramatically reduced with OBeP, because the issuer bank is responsible for the authentication of the credit transaction and provides guaranteed funds to the merchant.Because the merchant is not responsible for storing and protecting confidential consumer information, OBeP systems also reduce costs associated with mitigating fraud , fraud screening, and PCI audits.
Transaction fees on Online Banking ePayments vary by network, but are often fixed, and lower than the average 1.9% merchant fees associated with credit card transactions – especially for larger purchases.
For Consumers
- use of cash-like payment encourages responsible consumerism
- does not require set-up or registration with a third-party payments entity
- presents familiar interface to facilitate online payment
- awareness of funds availability
For Merchants
- improved sales conversion / reduced abandoned carts
- real time authorization of guaranteed ACH payment (good funds)
- offering preferred payment methods may drive repeat transactions
For Financial Institutions
- recapture revenue being lost to alternative payment providers
- encourages consumers to move to online banking, replacing more costly branch and telephone alternatives
Potential Downfalls
The idea of online payments and transactions has led numerous individuals, corporations and groups to be hesitant. Sharing of personal information to such a vast entity, such as the internet, can lead to potential problems. Remaining cautious and careful with what information is shared and to whom it is shared with is key in remaining safe and secure when using ePayments.- identity theft is prevalent with online transactions
- no face-to-face interaction for help, questions, issues
- website issues can hinder the ability to make payments in a timely manner
- passwords - sometimes remembering a password can be difficult and with something as important as an ePayment website, it is crucial this information is not lost or forgotten
Types & Implementations
OBeP networks may be divided into two categories, based on the network architecture:1. Multi-Bank – requires that a merchant have a single connection to the OBeP network in order to accept payment from any participating financial institution.
- Examples include: EPS, IDEALIDEALiDEAL is an Internet payment method in the Netherlands, based on online banking. Introduced in 2005, this payment method allows customers to buy securely on the Internet using direct online transfers from their bank account. iDEAL processed 4,5 million transfers in 2006, 15 million transfers in...
, Interac Online, GiropayGiropayGiropay is an Internet payment System in Germany, based on online banking. Introduced in February 2006, this payment method allows customers to buy securely on the Internet using direct online transfers from their bank account...
, SafetyPay and Secure Vault Payments
2. Mono-Bank – requires that a merchant have a separate connection to each participating financial institution.
- Examples include: Nordea e-Payment
A third category, also known as “overlay payment solutions” provide a similar consumer experience to Online Banking ePayments, but violate a key tenet of the OBeP definition by requiring the consumer to share their online banking credentials with a third party. Examples include: DIRECTebanking.com, sofortüberweisung.de, UseMyServices and POLi
A fourth category requires that a merchant have a single connection to an alternative payment provider. This alternative payment provider then have connections to multiple online banks. This does not require the consumer to share their online banking credentials, but still offer the same advantages to the merchants as “overlay payment solutions”. Examples include: inpay.com and gluepay.
See Also
- Automated Clearing HouseAutomated Clearing HouseAutomated Clearing House is an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit payroll and vendor payments. ACH direct debit transfers include consumer payments...
- NACHA-The Electronic Payments AssociationNACHA-The Electronic Payments AssociationNACHA – The Electronic Payments Association manages the development, administration, and governance of the ACH Network, the backbone for the electronic movement of money and data in the United States. It is funded by the financial institutions it governs...
- E-commerce payment system
- Electronic funds transferElectronic funds transferElectronic funds transfer is the electronic exchange or transfer of money from one account to another, either within a single financial institution or across multiple institutions, through computer-based systems....
- Electronic moneyElectronic moneyElectronic money is money or scrip that is only exchanged electronically. Typically, this involves the use of computer networks, the internet and digital stored value systems...
- PCI DSSPCI DSSThe Payment Card Industry Data Security Standard is an information security standard for organizations that handle cardholder information for the major debit, credit, prepaid, e-purse, ATM, and POS cards....