| Booklet:
Retail
Payment Systems Section: Payment Instruments, Clearing, and Settlement Subsection: Other Electronic Payments |
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Other electronic payments include P2P payments, electronic cash, and electronic benefits transfer (EBT). These payment instruments are usually associated with an established consumer deposit account and facilitate consumer access to recurring and one-time debit and credit transactions and a variety of federal, state, and local government benefit programs.
On-line
P2P Payments and Electronic Cash
On-line P2P payments, or e-mail payments, use existing retail payment
networks to provide an electronically initiated transfer of value. An
individual can send a payment to another individual by entering the desired
amount and the recipient’s e-mail address. Though these payments
are named for their ability to send funds among individuals on-line, the
majority of P2P payments are Internet purchases at on-line auctions or
small businesses. In most cases, P2P transfers use existing retail payment
systems to add and withdraw funds from accounts. The transfer of value
between individuals occurs using proprietary networks as “on-us”
transactions.
Most P2P services charge the receiver of the funds a variable fee depending upon various factors, including payment method and the sender’s credit history. Payments made with funds that originated from an ACH transaction are less expensive than transactions made with funds originated from credit cards. P2P systems may offer the receiver an opportunity to obtain funds through a check for an additional fee.
| Figure
6: On-Line P2P Payments and Electronic Cash |
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On-line P2P payments typically occur using the process described in figure 6. The sender of the funds must have an account with the P2P service provider (step 1). Depending upon the service, the funds may come from an existing credit card or transaction account, or be drawn from a previous balance with the on-line P2P payment provider (steps 2 and 3). The sender can then designate the e-mail address of the intended funds recipient (step 4). The P2P network then transfers the funds to the receiver’s account as an “on-us” transaction. Once the funds reach the receiver’s account, notice of the transaction is sent through e-mail to the receiver (step 5). The receiver of the funds must join the service if it does not already have an account (step 6). The on-line P2P payment service can disburse the funds from the receiver’s P2P account through an ACH payment, a check payment, an EFT credit, or a credit to a credit card account (step 7).
Electronic
Cash
Financial institutions and retailers are also developing electronic cash
payment instruments. Similar to P2P payments, individuals can transfer
electronic cash value to other individuals or businesses. Most electronic
cash applications exist on the Internet. Consumers can use the cash payment
instruments for purchases at retailers’ Web sites or they can transfer
cash to other individuals through e-mail. Prefunded accounts consumers
may use for on-line auction payments or with participating retailers are
among the most recent applications. Individuals use a credit card or signature-based
debit card number to prefund the Web certificate or electronic account,
and recipients redeem the value with the issuer. There are few existing
markets for electronic cash payment instruments, and merchant acceptance
and consumer use is generally low.
Electronic Benefits Transfer (EBT)
EBT systems allow government benefits recipients to authorize transfers
from their benefits accounts to health care providers and retailers. The
federal government and several states routinely use these accounts to
issue food stamps and other benefits. The government distributes nearly
80 percent of all food stamp benefits using this technology, and while
the average transaction value is low, total transaction volumes are significant.
The institution holding the account authenticates transactions using PIN
technology.