Online Banking and Bill Payment Term Paper

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exchange of currency have proliferated the Internet marketing world. Customers have faster and easier access to methods of exchange, deposits and payments, than ever before and the changes have come rapidly as more and more Internet commerce demands more and more ease of exchange. A global economy requires global economic infrastructure solutions to exchange of funds and to a large degree the Internet market has answered the call for change and availability of services. Yet, the substantial growth of Internet sales has also, arguably caused the growth of subsystems and infrastructural shifts that might not have been implemented with full knowledge of the implications of such actions. With security at risk and issues of currency exchange rates, not to mention global monetary regulations consumers must be aware of the type of services they are using and the way it might affect the efficacy of their transaction.

Internet Marketing not only plays a substantial role in the exchange of goods and services but now more than ever the exchange of money has become a marketable aspect of this new and growing market. Three methods of exchange are of peaked interest to this research and also to consumers and marketing professionals. This work will address PayPal, the RBC (Royal Bank) and also will take a broader look at the alternative exchange systems of credit card transaction processing. In these three methods there are clear indications of change in both demand and reliability.

PayPal, though recently taking some flack from consumers and the legal system alike has been the number one site of its kind for many years. Users who have had recent concern with PayPal and their policies and procedures are quick to point out that PayPal is not a financial institution and is not federally insured, as such. Yet, it goes without saying that such issues are hardly important to consumers unless a problem occurs. The availability of PayPal, for those who understand how it works has made other less modern forms of currency exchange, such as money wiring or Western Union, high fee though insured money transfers a thing of the past.

A Web payment processing service acquired by eBay in late 2002. PayPal, Mountain View, CA ( operates as an independent brand. It is used to shop at PayPal-enabled retail sites as well as to send or request money from anyone with an e-mail address. Both personal and business services are offered, and it is widely used as a payment system for online auctions. PayPal offers a complete shopping cart service that can be added to a Web site.

Its association with eBay, its proprietor, may have a great deal to do with its growth and success. As eBay grows so does the PayPal user base, yet in a marketing sense name recognition and general ease of use reported by most users is the key to the successful growth over the last few years.

In 2002, the company went international, allowing its customers to accept payments in euros and pounds. At the end of 2002, PayPal had 20 million members and more than three million businesses registered.

PayPal boasts a user base growth of more than 150% in slightly less than a year.

(Late 2003) PayPal has quickly become a global leader in online payment solutions with 50 million account members worldwide. Available in 45 countries around the world, buyers and sellers on eBay, online retailers, online businesses, as well as traditional offline businesses are transacting with PayPal.

Though it is difficult to prove such claims as the PayPal system is notoriously secretive about the demographics of members and information such as how often each of these members access, use and by default pay the fees associated with a transaction on PayPal is not readily accessible Hoover's Online, a credible financial information site states that PayPal has a transactions average a of about $50 and that the company processes nearly 630,000 transactions per day. Hoover's notes that in additional to the role of PayPal as a subsidiary of EBay it is also in alliance with Wells Fargo Bank, a company that clearly markets online services at a rate, above almost all others.

It would not be surprising to find through conjecture that the alliance with PayPal and therefore EBay coincides with the change in Wells Fargo Bank's marketing strategy.

Information associated with member use and even number is conjecture, outside of the PayPal world. The growth is nonetheless, even at 100% a substantial calling card for the marketability and success of the site.

Financial Overview





Annual Sales ($ mil.)


The availability of the PayPal service and others like it benefits the consumer in a multitude of ways, most notably the fact that the rapid availability of a relatively inexpensive payment method was obviously a needed niche in the new internet economy. The small and even large retailer can use this service in place of other more costly independently procured credit card processing systems, which require much technology and cost significantly more than the fees on PayPal. The retailer absorbs the cost of such, relatively small fees as it is free to send money but the recipient is charged against the funds for the service, the reverse of the Western Union style money wiring service and others like it.

The multi-step process of independently providing credit card transaction services does not often immediately meet the needs of small retailers, such as one would find on an independent auction site. Detailed below the service can be complicated and comes with a variety of additional fees that are not feasible for a low investment start up, almost regardless of its size.

Getting a merchant account

This is the process of being able to actually take credit cards and have transactions moved into your checking account. This involves signing up with a bank credit application for Visa/Mastercard and getting set up to have funds transferred into your account. To sign up with other cards like American Express Discover you need to separately sign up with them - once you have a merchant account this can usually be accomplished with a phone call, but still it's extra work...

Setting up Internet Transaction Processing

Once you have a merchant account you need a mechanism to process transactions. Traditionally you used to either swipe a card in the store, key the card in a Zon device or you used payment processing software like ICVerify for physical or mail order processing. Internet payment processing involves transaction processing over an open Internet connection, so the transaction can be performed online, potentially even on the Web server itself. Internet transaction services typically provide an API, an HTML type input terminal for manual entry and full online reports of transactions and batches. Transaction processors are separate from the banks that provide a merchant account, although some providers provide a single transaction statement seemingly providing a single service.

Integrating the Transaction Processing into your site

Once the logistics are set up and you can actually take credit cards and process them over the Web, you need to integrate the software into your application. Most providers have an API that allows code access to processing functions. Most of these APIs are in C. And require writing a wrapper DLL. API architecture also varies from client server pieces and pure server pieces. Client server pieces are more difficult to set up as the client side needs to be configured with secure keys and requires the server to be configured to match. Pure server side APIs typically require no client setup and are more flexible as you can use HTTP tools of your choice.

Hardware and software must be purchased and significant fees must be paid, just as are paid by brick and mortar retailers. Additionally, from the perspective of the customer, there may be a need to transmit personal information with every transaction, leaving the consumer at risk for fraudulent use of their information. Loss of sales can be seen in the event that a consumer is uncomfortable with the transmission of their account information, either via unsecured email or voice and enabling internet transaction processing with these services often costs a great deal more. Additionally, PayPal can act as an intermediary for the customer so they may use their existing checking account, rather than a credit or debit card to process their transaction through PayPal.

This brings us forward to the next phase of this work, assessing the RBC (Royal Bank) and its use of the internet to serve many more customers than they could have served with branch only service. RBC has recently gone through a significant overhaul and online services have been streamlined to better meet the needs of its customers.

On July 28, 1972, during the dawn of electronic banking, headlines in Toronto newspapers read: "Tomorrow morning at 9 a.m. The Royal Bank will open and never close again." The story referred to the launching of RBC Royal Bank's automated teller machine…[continue]

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