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Micro-Payment Systems – The Route to a Cashless Society essay

Nowadays, the development of information technologies provides ample opportunities for the development of new business as well as it also changes traditional commerce. In actuality, the latter is gradually replaced by e-commerce. In such a situation, it is obvious that traditional system of payments become outmoded and practically useless in the highly technological world. As a result, such a shift in systems of payments stimulates the development of micro-payment systems which do not need any cash to be used in the process of purchasing. In spite the fact that the micro-payment system are relatively new and do not have a long history of being used, their effectiveness is considered to be extremely high as they can make purchases substantially faster and easier to customers as well as to companies that sale products or supply services. Such progress justifies thinking about micro-payment systems’ potential impact on the post-crisis evolution of e-commerce. To the extent that the future success of the internet as an engine of economic growth depends on its restructuring from an open-access medium of communication into a restricted-access supplier of paid services, online money would surely help that transformation along while at the same time also completing the transition to electronic money. This means that micro-payment system will be simply essential to e-commerce and, thus, their role will grow more and more important in the future that naturally poses new demands to these systems. To put it more precisely, it will be necessary to develop smart cards that can be inserted into the access tools of the Internet. Electronic fund transfers will move beyond wholesale (B2B) transactions to retail (B2C and P2P) transactions and so become the primary mechanism for moving money around. Net-based payments systems, using digital cash, will become part of sophisticated online shopping protocols which in turn will facilitate the rapid growth of E-commerce. Banking will increasingly move online, as will the trading of securities in financial markets. The internet might evolve gradually into the primary locus of money creation and credit extension, whereby it pushes its impact on our economy beyond commerce to production and finance. We have arrived at the threshold of a new era in which online money reshapes the modus operandi of our 21st-century economy. Even, at the present moment the new systems of payment are widely implemented. In this respect, it should be said that the newly implemented systems of micro-payment basically target at the improvement of security of transactions and their reliability. For instance, it is worthy of mention that chip and pin gradually replaces traditional credit cards due to its higher security and reliability and this is not the only system that has been recently implemented targeting at the improvement of micro-payment systems (Dorn, 1997). Obviously this trend will grow stronger in the future in order to meet the demands of the rapidly changing business environment. At the same time, such a trend is basically motivated by the threats that e-commerce and micro-payment systems face even at the present moment. The cases of breaches of IS of companies, banks, and even state institutions are not rare nowadays. For instance, in 2006 the UK bank system has suffered about 20 attacks on its IS (Whitely, 2007).  In such a situation, it seems to be quite natural that micro-payment system is a major target of such attacks since it provides opportunities for offenders to get access to financial resources of ordinary users as well as companies. Consequently, the necessity of the further development of more secure and reliable micro-payment system is practically unarguable.


The necessity to improve security and reliability of transactions in micro-payment systems


Micro-Payments system had been widely used in making international transaction. Internet had been a useful gateway in making transactional easy and convenient in most the consumers. Yet there are a lot of issues bothering such system of transactions. Especially in terms of reliability and security of the individuals doing such transactions in the openness of the Internet. Internet and web transactions have their own advantages and disadvantages. This advantages and disadvantages present the benefits and limitations of such transactions being entered through the Internet. Such limitations had been viewed in the context of security, reliability and privacy of the users and the transacting parties. It should be noted that the transaction methods or techniques should be improved or developed in fairness of the both parties to ensure their security and the reliability of the system.


Research Question


Taking into consideration the current situation in e-commerce and micro-payment systems the question of the reliability and security of these systems naturally arises. To put it more precisely, it is necessary to define the extent to which the threat of breaches may be dangerous to e-business, i.e. whether it is really destructive or probably its effects are insignificant and cannot deteriorate the position of the company or its customers using micro-payment systems. At the same time, it is another question concerns the ways of the possible solution of the existing problem, including the necessity of the improvement of IS, customers’ private information protection, development of new micro-payments systems.


Micro-Payment System


Micro-Payment System is known and common to all who do most of their transaction through wires. Dot-com companies and businesses commonly use this kind of payment system. Yet its inconveniency is a problem in some sort that its transaction via credit card or other micro payments are insufficient for very small or for purchases from individuals or small companies that may not have a merchant agreement in place with a credit card company. This kind of system has its benefits on most businesses mostly to those that have made their way of serving their customers and patrons through online.

Context, Scope and Limitation


Analysis on the micro-payments system will be viewed in the sight of an organization that serves their customer’s through online. The most common online business is the travel agency and airline companies. Such organizations are more conveniently access by their customers online and reservations and transactions are usually easy for both of the parties involved. The study will only discuss on the payment transaction system of the business or company. It will not discuss further about the way the business serve its customers through their online services. The study will include the security and reliability of the payment system used by the organization in making reservations and transactions though their sites.


Project Strategic IT Value and Intention


Several alternatives sprang up in the late 1990s to provide alternative forms of currency, such as beenz, but these failed because consumers did not require alternative currencies, simply ways of exchanging the dollars, pounds or euros they had in their pockets and bank accounts. As a result, systems such as PayPal (www.paypal.com) and a smaller, UK version, Nochex (www.nochex.com), have developed as means of transferring money online. The seeds for ecommerce were sown in 1991, when the NSF allowed companies to use the Internet for business, but this lifting of restrictions did not result in a sudden flurry of activity. While cyberspace was slowly moving from being an academic to a commercial medium, its primary participants were still likely to be researchers, students and engineers.


Aim and Objective


Basically, the study aims at the assessment of the problem, i.e. it is necessary to find out information, statistical data concerning the problem of security of micro-payment systems. To put it more precisely, it is necessary to find out the amount of breaches that companies operating in various industries suffer from. In this respect, banking industry should be the primary concern since it is directly linked to the problem of reliability of micro-payment systems and it is the major subject of hackers’ attacks. Furthermore, it is necessary to develop effective methods of struggle against the threats micro-payments system is currently facing and will face in the future. This means that it is necessary to focus on the development of new IS which could be more reliable and more secured compared to the existing one. At the same time, it is also necessary to provide customers with ample information about the existing problem of micro-payments system and make them conscious of the potential threat of frauds and breaches. In such a way, it will make them more concerned on the problem of the security of transactions since often it is not because of the weakness of IS but rather because of customers’ ignorance or carelessness breaches may occur. This means that it is necessary to develop a kind of promotional campaign that will make users more conscious customers while they use micro-payment systems.


Research Design


First of all, it is necessary to clearly define the problem. In the current research it is possible to define the problem as the lack of reliability and security of micro-payments system. At the same time, this will need the review of the literature dedicated to the research of this problem. The study will be able to present such facts and information about micro payment system through gathering articles and references about micro payments system. By observing through surveys on organization that use online payments will help the study in progress. Gathering primary academic articles from books and journals will also help the study in discussing about the micro payments system used online by existing dot-com businesses. It should also be taken into account that such study of dot-com business will also assist the study in making its information good about the topic given.

Literature review of academic materials will also be use in attaining such necessary information about the micro payments system. The descriptive research method is used for this study. This is to gather information in order to describe a particular condition, phenomena or event (Creswell, 2002). Thus, this method is appropriate for the study and its problem. The purpose of employing this method is to describe the nature of a situation, as it exists at the time of the study and to explore the cause/s of particular phenomena. The researcher opted to use this kind of research considering the desire of the researcher to obtain first hand data from the respondents so as to formulate rational and sound conclusions and recommendations for the study (Saunders, 2003).


Secondly, it is necessary to set the major aims and objectives of the research. In this respect, it is possible to briefly define the major goal as to find plausible solution of the defined problem. This means that it is necessary to assess the extent of the problem and develop effective methods that could prevent the breaches of IS and increase reliability and security of micro-payments system.

Thirdly, it is necessary to focus on the methodology that could be applied in the research. To put it more precisely, in addition to the literature review, it will be necessary to gather statistical information concerning the average amount of cyber crimes related to micro-payments system in different industry, with a particular concern on banking. Also, it will be quite effective to develop questionnaires which could be distributed on-line to ordinary customers in order to reveal whether this problem is really important to them as well as to IT specialists which could express their own opinion on the problem of security and reliability of micro-payment system. In this respect, it is also possible to take interviews with IT specialists in order to better understand the essence of the problem and find effective ways of improvement of the existing IS as well as informing customers about threats they may face while using micro-payments system without paying attention to security.

On gathering information, it is necessary to carefully analyze it and present the results of the research in which the defined problem could be analyzed in depth and its solutions offered. In this respect, the recommendations given above may be quite helpful. At the same time, while analyzing the information gathered, it is necessary to take into consideration data and resource requirements since the statistical data, for instance, should be taken from reliable sources, such as state websites, for instance, while resources, such as articles, should be academic resources. Also, it is necessary to take into consideration subjectivity of data collected, for instance, the opinion of IT specialists may differ and it will not be always objective.




Thus, taking into account all above mentioned, it is possible to conclude that the current development of new technologies at large and micro-payment systems in particular is accompanied not only by numerous benefits but also poses certain threats to users. To put it more precisely, there exist problems of reliability and security of such systems leading to the misuse of users’ private information and numerous frauds. This is why it is necessary to carefully research this problem and develop effective ways of its solution as it has been suggested above. The methods and research design offered in terms of this paper can be really helpful since they provide opportunity to gather a wide scope of information and analyze it in depth taking into consideration the view and position of specialists working in the domain of micro-payment systems and IT. In such a way, it will be possible to conduct a profound research of the problem of micro-payments system.

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