Evaluation of internet-based debit payment models

Abstract

Debit payment is low cost and low risk relatively to the credit or pre-paid payment methods. But in global online commerce, it is not widely adopted. In Korea, there are Internet-based debit payment services - the Internet debit payment service. The debit payment is revitalized and shares about 30% of online commerce payment. But, there was no research on the analysis of Internet-based debit payment models or their evaluation. In this research, we analyzed Internet-based debit payment model and developed evaluation method in view point of online merchant. The reason of merchant view point is that a merchant decides the adoption of a payment service and is the only subject of payment cost. An Internet-based debit payment model is composed of an authorization protocol and a settlement protocol. Authorization protocols can be differentiated with service features of five factors. The differences arise from the topology and structure of the process. An online merchant can decide to adopt an authorization protocol that is mostly preferred. Settlement protocol is related with a merchant’s total payment cost. A merchant’s cost can be optimized by selecting settlement protocol and due. We analyzed three authorization protocols those are activated or have suggested - SSL/D, SDT, and SET/D. And we derived four settlement protocols from the processes. We surveyed Korean online merchants to investigate what authorization protocol is preferred and what settlement protocol optimizes the cost of merchants. SET/D is the least preferred process. The preferences of SSL/D and SDT are not different. But in the Korean market, unrelated with the preferences, SSL/D shares 85%. This situation comes from the payment service provider’s confidence and first mover effect. We found that most merchants can optimize their settlement process by adopting the Type II which aggregates the paid amount in the customer bank’s aggregate account and postpone the settlement for a certain days to ...