MBA Thesis by Chandra Paladugula

1. Payment Industry
&
its Innovations
Chandrashekar Paladugula
for
CSU Stanislaus,
EMBA - 2016, Tracy Cohort

2. Problem Statement
Research - Payment Industry & its Innovations
This research also talks about the
challenges, risks, and benefits in the industry.
What other industries are linked with the Payment Industry
Impacts of this industry on the global economy.
The purpose of this research project is to understand
how Payment Industry is evolving,
how it is advancing with the latest technologies along with innovations
through the internet and smart devices.

3. What is a payment?
 Payment is a method of paying money from one entity to another
entity, and the entity can be a person or business.
 Available money sources are cash, bank (check), cards, digital
currency-like bitcoin.
Sender Receiver
Funding Source Settlement
Initiates

4. Introduction
 Earlier, the payments made with cash, paid directly to retailer.
 Payment industry separated as the customer wanted a
 choice on the payment methods and
 selection of their desired money source to that payment method.

5. Disruption Causes
 Traditional Banks
 processing times
 fee on each and every activity
 service fee, transfer fee, settlement fee, account maintenance fee, ATM fee, check bounce fee, overdraft fee, etc.
 Millennial behavioral impact
 Technological innovations disrupted the Industry
 Internet and Smart devices
 e-commerce business integration with the payments

6. Payment Systems, Closed Loop
 Transfer of money between two
entities with the same payment
processing company like PayPal,
Western Union, etc.
 Money transfer happens instantly,
as identity has already verified.
 Closed Loop system is safe, secure,
fast and seamless.
End User End User
Closed Loop
Systems

7. Payment Systems, Open Loop
 Entity A issues a check to another entity B, and entity B deposits the
check in a bank where they have an account. It could be the same or
different bank.
 Customer has the flexibility to work with their own bank.
 Processing and settling funds take days.
End User End User
Open Loop Systems
(Bank Transfer
System)
Bank Bank

8. Payment Methods
 Banks – Money Transfers, Bill Pay
 Closed Loop Systems like PayPal, Western Union
 Digital Wallets – Apple Pay, Android Pay
 Money Grams
 Cashier Checks
 Wire Transfers
 Blockchain

9. Money Sources
 Cash
 Check
 Cards
 Credit, Charge, Debit, Gift, Prepaid, Corporate, Purchase,
Promotional, Store
 Digital Money
 Bitcoin, Altcoin

11.  Most prominent card available in the market.
 Credit Cards issued based on their credit
rating, and on their payment ability. Also, the
credit revolves as they pay.
 Credit Card issuers offer a specific amount of
cash as a credit to the customers (based on the
credit worth), where they can spend it on their
current and future needs.
 Banks or Issuers charge an interest on
borrowed money.

12. Card types and Payment authorization flow
Card Types
o Credit Card (Based on credit worth)
o Charge Card (Like Credit Card)
o Debit Card (Bank cards)
o Gift Card / Prepaid Card
o Corporate Card (Businessmen Travel)
o Purchase Card (Admins for office)
o Promotional Card (Airlines, Vacation)
o Store Card (iTunes, Macy’s)
Online Transaction Processing of a payment

13. Card’s Economics
Money Moved, Commission Charges
Cardholder gets charge of $100.00
Issuer: Holds $1.14, transfers $98.86 to Acquirer
Acquirer: Holds $.0.45, transfers $98.41 to Merchant
Merchant gets after settlement: $98.41.

15. Payment Methods & Checkout Options
 Checkout from e-commerce websites using Cards, Closed Loop Systems like
PayPal, Visa Checkout, Chase Pay etc.
 Bluetooth – Beacon Technology
 Short URL like PayPal.me
 VR Pay – Nodding head
 Contactless (NFC) – Apple Pay, Android Pay
 QR Code – Pay through image
 Mini Card Readers: Square, PayPal Here
 Hands free payments - PayPal in Home Depot

16. Risks and Threats
 Carding (Stolen card information and retrying for a good card)
 DoS (/DDoS) Attacks
 Card Not Present (Online, Recurring Transactions)
 Counterfeit Cards (Stolen CC data to produce card)
 Stand-In Transaction (Network Availability)

17. Secure Data Transmission
 Data Encryption
 P2PE Solution
 Tokenization
 EMV Chip & PIN, Chip & Signature
Compliance
 Government Regulations
 PCI Standards
 Regional Restrictions

18. Fraud Types
 Stolen Cards – Bad Merchant Account
 Fake Cards – Generation from Carding/ZDA
 Chargebacks – Request for refund, New Merchant
 Buyer Fraud – Refund Game to make extra set of money
 Buyer Fraud – Refund Game to keep goods

19. Fraud Prevention and Detection
Tools and Procedures
 Card Verification Method (CVV2, CVC)
 Address Verification System (AVS)
 3D Secure (Visa & MC)
 Max Mind – Min Fraud
 IP Blocking at Load Balancer

20. Payments Connected
Customers forgetting ‘how to make the payment, now?’
when using services like
 Cab applications - Uber and Lyft
 Vacation planning applications like Expedia, Airbnb
 Carpool applications like Scoop, Waze Ride etc.
 Social apps like Facebook, Instagram etc.
 Gaming apps to buy points, related goodies etc.
and many other apps does various other innovative things for customers
 Order products ahead using Smart Apps like PayPal

21. Payments Connected – Smart Devices

22. Payments Connected – IoT (INTERNET OF THINGS)

23. Conclusion
 Industry evolved from traditional pain points.
 Card evolution is start of the change.
 Seamless experiences – Contactless, Hands free, Head Nodding etc.
 Millennials behavior on getting things done, right away.
 Latest innovations in Technology invented Smart devices like Smart phone.
 Internet helping to stay connected wherever, whenever to make secure payments to
anyone in the world through email, phone number, and smart applications.
 Payments connected with various payment methods, and several money sources.
 Frauds, Risks and Threats are included.

24. Thank you!

25. References
https://sparkbusinessiq.com/wp-content/uploads/2014/10/InforgraphicEvolutionCreditCard.jpg
http://ecommerce-platforms.com/ecommerce-selling-advice/choose-payment-gateway-ecommerce-store
http://crime.phillipmartin.info/crime_fraud3.gif
http://images.google.com