chapter 2 analysis stage online bill payment system ver 2.0

8/2/2019 Chapter 2 Analysis Stage Online Bill Payment System Ver 2.0

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BOTSWANA ACCOUNTANCY COLLEGE

Computingand Information Systems

Bsc In Applied Business Computing Year 3Individual Project 3 (IPROJ3)

ONLINE BILL PAYMENT SYSTEMANALYSIS

ABC Group 41. Tumelo Maripe CIS09-2272. Mmoloki Kaisara CIS10-1893. Itumeleng Mooki CIS10-216


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Table of Contents

ContentsChapter 2 .............. ............. ........... .............. ............ ............ .............. ........... ............. .............. .............. ......... 3

Online Bill Payment System .......................................................................................................................... 3

Analysis Stage................................................................................................................................................ 3

2.1 Introduction ............. .............. ........... .............. ............ ............ .............. ........... ............. .............. .. 3

2.1 Current Systems ............................................................................................................................ 4

2.1.1 Cash Payments ............ ............. ............ ............. ............. ............ ............. ........... .............. ..... 4

2.1.2 Cell phone Banking................................................................................................................ 5

2.1.3 Online Banking Systems ........................................................................................................ 6

2.1.4 Use of Debit Cards and Credit Cards ..................................................................................... 8

2.1.5 Mobile Telephony Payment Services .................................................................................... 9

2.1.6 Manual Cheques ............. .............. ........... .............. ............ ............ ............. ............ ............. . 9

2.2 Literature Review ........................................................................................................................ 10

2.3 Proposed System ......................................................................................................................... 12

2.3.1 Strengths of the Proposed System ...................................................................................... 13

2.3.2 Weaknesses of the Proposed System ................................................................................. 14

2.4 Critical Analysis of the Proposed System .................................................................................... 15

2.5 Requirements Analysis ................................................................................................................ 16

2.5.1 Functional Requirements .................................................................................................... 16

2.5.2 Non Functional Requirements ............................................................................................ 16

2.6 Findings and Recommendations ..................................................................................................... 17

References .................................................................................................................................................. 18


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Chapter 2

Online Bill Payment SystemAnalysis Stage

2.1 Introduction

The current systems regarding bill payments currently is done in such a way that utilities

companies or servicer providers send invoices to their customers through the traditional mail.

After the customer receives the invoices or bill, he or she visits the utili ties branches to effect or

make payments over the counter through revenue collectors. The utilities companies do have

their own billing systems that store customers details and bill details. After payment the billing

system at the utilities company are updated and the customer will be given a receipt as proof of

payment. The customers are highly mobile people who change their addresses more often and

the bills posted to customers may often not arrive to customers on time. The service providers

have embraced information technology to help customers to pay their bills at their own

convenience. In the current scenario, customers will only be able to pay their bill during

working hours only. The current IT trends that customers use to pay their bill at their own

convenience are:

Cell phone Banking Online Banking

These systems are currently doing well but they force service providers and utilities companiesto open multiple accounts at various banks so that they can cater for wide variety of clientelethat uses various banks. Other banks have not yet embraced online banking and cell phonebanking. Payment for goods and services in world (Botswana included) is characterized by longqueues, long distance and time wasting that negatively affects business activities, profit marginsand ultimately economic development. According to Alexander Appiah and Fred Agyemang,Cash still remains the most popular retailpayment instrument, despite the increase in theintroduction of electronic payment systems. According to the report by Asif Ahmed Anic(Department of Information Technology, University of Tokyo) and Al-Mukaddim Khan Pattan(Department of Computer Science and Technology, Islamic University of Technology) in theirpaper titled A framework for managing cost effective and easy electronic payment system indeveloping companies argue that customers or people do not need physical goods or servicesand currency in order to conduct business transactions. They also argue that electroniccommerce is the most recent step in the evolution of business transactions.

The customers in Botswana now have many electronic options at their disposal. Customers nowuse online banking systems, cell phone banking systems, Electronic Wallet, Mobile Telephonypayment systems (eg Orange Money and Mascoms MyZaka) as well as the traditional manualway of making payments such as the use cheques and cash payments.

The figure below shows an overview of the traditional way of payment.


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2.1 Current SystemsThe current systems in place that customers use to pay for bills and services have been

outlined in the introduction section. For clarity sake they are:

Use of Debit Cards and Credit Cards Online Banking Cell phone banking Mobile Telephony Payment Service (eg. Orange Money and Mascoms MyZaka) Manual Cheques Cash Payments

Most service providers do not have their online systems in which customers can log in

and pay their bills electronically. They are no integrated systems in which a customer

can log in and pay all service provides he or she wishes to pay at one site.

2.1.1 Cash Payments

This type of payment is where by the customer pay their bills by making cash

payments at services providers premises. This is the traditional way of making

payments. This form of payment is suited for payments of small amounts.

ServiceProvider BillPublisher

PostalService

CustomerMail Box

CustomerPaysLock BoxBANK

BillsretrievedfromMail Box

RemittanceRemittance

Delivered

Electronic or

Paper funds

transfer

Paper Checks

Produced

Electronic

Bill DataPaper Bill Mailed

Figure 2.0


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The disadvantage is that you will have to queue at the service providers offices

to make payments. You can be mugged by thieves before you pay or in otherwords carrying large amounts of cash is risky hence no security. According to

research by Alexander and Agyemang, the following problems are encountered

when making cash payments.

Long queues Bad attitudes of bank tellers Few bank branches Armed robberies Use of counterfeit notes Bulk nature of notes and coins Dishonored cheques Business Hours

2.1.2 Cell phone Banking

As the evolution of e-commerce becomes too hard to ignore, banks have joined

the band wagon and introduced mobile phone banking. Customers are able to

pay their bills at their convenience using their cell phones. Currently this

option is used by the current few customers who are technically (IT) literate to

pay their bills online.

StrengthsThis form of payment is suitable for everybody. Customers are able to pay bills

at their convenience and at their own spare time. It is even more convenient

than online internet banking since you do not need to have access to computers

and internet.

WeaknessesThe unbanked population (People without bank accounts) cannot use this

system as it requires one to have an account with bank (provided it has

introduced mobile banking). Illiteracy also hampers the use of cell phone

banking to make payments. Customer education can help. The figure below

shows an overview of the cell phone banking system.


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Payment of bills in the above use case is done in the payments Use Case. The

payment in cell phone banking involves paying for variety of services.

Electronic Transfer use case involves transferring funds between the customers

accounts in the same bank.

2.1.3 Online Banking Systems

Customers now have the option to pay their bills electronically or online. The

customer needs to have access to the internet and computer. Customer can pay

bill at their convenience and at their own spare time. The online Banking

Systems are secure in such you do not have to carry cash, so there is no risk of

losing your money to thieves or fraudulent means.

Strengths

CELL PHONE BANKING SYSTEM

Login

Balance

Enquiry

Statement

Requests

Payments

Ewallet

Electronic

Funds tranfer

Figure 2.1

CUSTOMER


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The customers are in control of their finances. There is no need to be carrying

around a lot of cash. The payments go straight to service providers bankaccount. It is more secure for both the customer and service provider in the

way that money cannot be lost in transit to the bank.

WeaknessCustomer should have access to the internet in order to use online banking.

Since online banking system are more secure there is no danger phishing from

scammers. The system cannot be used by unbanked population and illiterate

consumers and hence the traditional way of paying. (By cash).

Below figure shows a UML diagram of an Online Banking System

Register

Sign In

Open an

Account

Create an

account

Operate

an account

Manage

Accounts

Manage

Customers

Manage

Transactions

Pay Bills

CUSTOMER

SYSTEM

SYSTEM

CUSTOMER


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2.1.4 Use of Debit Cards and Credit CardsCredit CardThis is a plastic card that assures a seller that the person using it has asatisfactory credit rating and that the issuer will see to it that the sellerreceives payment for the goods or items delivered. This represents theautomated capture of data about purchases against a revolving creditaccount.

Debit CardThese are a new form of value-transfer, where the card holder after keyingof a PIN, uses a terminal and network to authorize the transfer of valuefrom their account to that of a merchant. Introduced more recently, debittogether with credit cards represent the most rapidly growing method of

payments in several countries. (Pierce, 2001)

The consumers, who want to buy a product or service, simply send their creditcard details to the involving service provider and the credit card organizationhandles this payment like any other electronic transaction. When a payment ismade through a debit card, the funds are immediately withdrawn from thepurchaser's bank account. The advantage is that the buyer has the funds tomake the purchase and paid for right away, so there's no credit card shockwhen the statement arrives in the mail.StrengthsThe use of debit and credit is more secure since you do not carry out cash.

WeaknessesSusceptible to fraud . It is important to note, however, that without someform of customer registration with a payment service or substantial proofsof identity, credit cards can be very risky topay with and can be easily

abused.

Figure below shows the UML diagram of Credit Card Payment System.

Figure 2.2


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We would prefer not to go into details of this UML diagram as they are part ofthe payment systems that are being currently analyzed.

2.1.5 Mobile Telephony Payment Services

These payment option was introduced in Botswana in 2010. Initially they wereintroduced as a mode of sending and receiving money. This payment option iscurrently used by GSM Mobile phone operators to sell airtime and to pay for

goods at Choppies Supermarket.

2.1.6 Manual Cheques

This is becoming a obsolete payment option with the evolution of electronicpayment systems. The only advantage is that you not carry around largeamounts of cash. The disadvantages to this mode of payment is that chequestake some days to be cleared. A customer can write out a cheque with fullknowledge that it will not be honored.

The above payment options are all introduced by the banks for use by their customers whichalso include the service providers. There is no an integrated system that is not bank based thatcustomers can use to pay bills using the payment gateway. The figure below shows theclassification of the above online payment systems available now.

Formatted: Justified, Indent: Left: 0


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2.2 Literature ReviewThree factors that are stimulating the development of online payment systems are:

Reduced operational and payments costs Growing online commerce Decreasing costs of technology

(Kalakota & Whinston, 1997) Reduction of costs is one of the major reasons for

research and development of online bill payment systems.

But according to Asif Ahmed Anik and Al-Mukaddim Khan Pathan the following

should be considered , despite cost and efficiency gains.

Privacy should be assured as the users expect to trust a secure system.Electronic communication through the use of electronic payment system shouldbe as safe as a private medium like a telephone free of wiretaps and hackers.

Although no systems are yet fool-proof, electronic payment systems designersshould concentrate closely on security.

Online Payment

Instruments

Electronic

Currency Systems

AccountBased

Systems

Credit Cards

Debit Cards

Mediating Service

Mobile Payment andTelephone Account Systems

Smart Card Systems

Online Cash Systems

Online Banking

Figure 2.3Source: OESD

Proposed Online Bill Payment

System


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As the users value convenience more than anything, the payment interfaceshould be user friendly having intuitive outlook and must be as easy to use as atelephone.

Designing an EPS should handle the challenge to integrate the databases usedby each of the users, while keeping the data up-to-date and error free.

A network broker- someone to broker goods and services, settle conflicts andfacilitate financial transactions electronically- must be in place .

An EPS should resolve the issue of how to price payment system services. Thenecessity of using subsidies to price all service affordably should be recognizedand the potential waste of resources for using subsidies to encourage users toshift from one form of payment to another should be considered.

A common standard should be imposed and followed; since without standardsthe wielding of different payment users into different networks and differentsystems is impossible.

An Online Bill Payment system should be cheaper both for the buyers andsellers. Minimum cost should be associated with establishing an on-lineelectronic payment system.


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2.3 Proposed SystemThe proposed system will be web based system in which several services providers willbe setup and be paid from one integrated site. The users will be able to:

Register and Sign up into the system Add Service Providers / Suppliers / Merchants View bills View payments Add Payments Pay Online View Historical Payments

The figure below shows the overview of the proposed online bill payment system

Bill Payment System

LogIn

Register

ModifySuppliers

ModifyPayment

DeleteSupplier

DeletePayment

Add

Supplier

AddPaymentCustomer

ProcessPayments

Online Bankin System

GetSupplier

GetPayments

ShowSupplier

ShowPayments

The system will also allow the the companies or services providers to register so that the

customer will find them in the database of service providers.

The use case diagram in the figure above shows the main functions of the proposed

system. It also describes the behavioral aspect of the system. It further identified the

components of the system. As you can clearly see in the above Use Case online bankingsystem is an actor. It is an actor because the proposed system is Account-Based as

shown in figure 2.3. Customers will have options to pay with credit cards / debit cards

and from their checking accounts from their banks.

Figure 2.4


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Below is class diagram of the proposed system. It has not be refined to finest detail since

we are still at analysis stage.

CustomerNameAddressID NumberCredit Rating

PAYMENTAmountAuthorize()

CREDIT CARDNumberTypeExp DateAuthorize()

Figure 2.5Note that the payment options on the above diagram still include cash payments. Tradional cashpayment can not be phased by electronic commerce online payments because not all customershave bank accounts nor have credit cards.

2.3.1 Strengths of the Proposed System

The proposed system will enable users to pay service providers under one integrated

site. The Service providers will no longer have to open multiple accounts with various

banks so that they can serve wide range of clientele. The customer will be in control of

his or her bill payments.

The customers will no longer have to wait in queues in order to pay. The customers will

pay bills at the comfort of their homes or offices.( No longer restricted by operatingbusiness hours. ).

Bill InvoiceInvoice NoDate ReceivedNet PriceAmount DueCalc TotalCalc VatNet Total

CHECKING ACCOUNTBank NameAccount NumberAuthorize()

CASHAmount Tendered

Print Reciept()

If credit rating ispoor orUnbanked


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2.3.2 Weaknesses of the Proposed System

There are challenges to any system that can be developed. Botswana is a developingcountry and as such not all people have access to computers to internet. Besides that notall people are computer literate. The design of the proposed system will be merely tocomplement the existing online payments system. We tried to research on the use of theexisting online payment options in Botswana but could get such researches to get thestatistical information on the use of such. Not all people have bank accounts so in thiscase cash payment is the preferred method.

Figure 2.6 Proposed System Model

Online customer:A customer is an entity who will pay for services bymaking payments in timely manner.

Service Provider / Supplier:A Supplier is a seller who will receive paymentsmade by customer.

Banks:Two banks are involved.1. Customer bank2. Supplier bank

Online Customer

Connection and Transaction

Online Bill Payment

S stem

Supplier Billing Systems

Transaction

and

confirmance

Account

Updates

Send data and receive payment

Send Payment

Send data

Customers Bank

Suppliers Bank


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Customer bank:Customer bank holds clients bank account andvalidate customer during account registration.

Supplier bank:Sipplier bank holds supplier bank account. Itis responsible of management, fraud control etc

Online Bill Payment Systems:A payment gateway is connected to all customers, merchants and banks throughInternet and responsible for the speed and reliability and security of all transactionsthat take place.

2.4 Critical Analysis of the Proposed SystemWith the evolution of e-commerce several online payments systems the introduction of

the proposed online bill payments system will just add up or beef up the already

existing systems. It will also have its own shortcomings which will not be addressed at

this stage of system development. The proposed system will have to satisfy the following

charactersistics of online payments stipulated below according to Caroline Paunov and

Graham Vickery of OESD.

ApplicabilityAvailability

Easy to obtainEase / complexity of registration CostDistribution of costs between customers and service providers LiabilityLegislative Protection and provisions, coverage of potential losses AnonymityProtection of personal information, trade offs between anonymity

and traceability of payment support.The main actors in the proposed system are banks, credit card companies and

telecommunication providers (ISP Internet Service providers). Since the proposed

online bill payment system is account based, banks remain important players in the

system and have developed online banking services to take advantage of the wide

availability of ICT and internet to lower their costs and expand their reach .


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2.5 Requirements Analysis

2.5.1 Functional Requirements The customer must be first able to register on the system before he can

start interacting with the system. The customer details of the clienthave to be saved in the server.

AuthenticationThe system will be a web based system, so there has tobe mechanism to ensure security since customers will be providingtheir personal details over the internet. Banking details and personaldetails exchanged over the internet have to be protected from theunauthorized users. Only registered customers will be able to use thesystem.

Once the customer has made their payments over the internet, thesystem must produce the reference number for that payment as proofof payment.

The system must be able to react in real time such that when payment ismade or when the details of the client are entered into the system itshould produce an output right away. There should be no delay

The system must be able to store a list of all service providers. The system should be able to give a print out of payment history. The system should be secured against phishers. (Educate the users to

ignore spam email from phishers)

2.5.2 Non Functional RequirementsThese would include estimates on database volumes, frequency, usage, rate of

growth and systems response time. All these requirements would target the

identified entities, attributes and software tools to be used;

Growth Rate

The database system is expected to have a steady growth because of theunexpected number of customers who will register into the system. The

number of users or customers who will register into the system is not

predetermined and hence expect a steady growth. Hence the database is

expected to have an average annual growth of about 10%.

Security

The system would also be secured enough, passwords and usernames would be

a form of access to the users. This would prevent unauthorized access and also

make it possible to be able to trace attendants at certain times.

Response


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For every data input, submitting data would be based on the capacity of the

database, for the meantime when the system is still growing it is expected tohave a response time of 5 seconds. As problems accumulate information would

be achieved to maintain the response time and for future retrieval.

Volume Analysis

The capacity of tables in a database would vary as other tables would be

updated frequently whereas others would hold a significant number of data.

Volume of database transactions and timing is estimated at fair updates per day,

this would be influenced by the fact that once customers are on-line they rarely

experience problems. Volume of database transactions and timing is estimated

at 10000 updates per day.

2.6 Findings and Recommendations

Payment systems are provided by the traditional market participants, banks and credit

card companies, and by telecommunications firms and new financial services providers.

These face an evolving merchant demand side ranging from increased internalisation of

payment service functions to their complete outsourcing. Further, governments,

regulatory agencies and industry associations are important factors in the market. The

two-sided platform market has positive network effects and significant infrastructure

investment costs. As a result there is a likelihood of lock-in to established dominant

networks. A number of market characteristics support lock-in although this is not the case

for all payment systems and mobile payments are emerging as a viable alternativepayment option. Banks retain an important position in the market, credit card companies

have a very high share of transactions and new actors are challenging banks in providing

services especially in those parts of the value chain directly related to consumer services.

The proposed online bill payment system will add on to the system already in the

market. It will increase the payment options for customers and beef up the ones already

existing online payment system. The online banking system and credit card companies

remain the core position in the development of new online payment systems.


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References

1. Pymouth K, Martin J(2009), Bill Payment Trend: Major Shift in Consumer behaviorrequires comprehensive planning.

2. Appiah A, Agyemang F, Electronic Retail Payment Systems: User Acceptability and PaymentProblems in Ghana.

3. Anik, A. A.,Pattan, A. M. K, A framework for managing cost effective and easy electronicpayment system in developing countries.

4. Fowler, M(1997), UML Distilled, Applying the Standard Object Modelling LanguageReading, MA, Addison- Wesley

5. Abor J.(2004). Technological innovation and banking in Ghana: An evaluation ofcustomers perceptions, American Academy of Financial Management.

6. Annon(1999). Survey of retail payment systems: Consumer payment options grow.ABI/INFORM Global, p. 4A-13A.

7. Chorafas, D. S. (1988). Implementing networks in banking and financial services.Macmillian, Houndmills, 242s

8. Paunov C, Vickery G,(2003), Online Payment Systems for E-Commerce9. Pierce, M(2001), Payment Mechanism designed for Internet(Online),

Available:http://ganges.cs.tcd.ie/mepierce/project/oninternet.html
http://ganges.cs.tcd.ie/mepierce/project/oninternet.htmlhttp://ganges.cs.tcd.ie/mepierce/project/oninternet.htmlhttp://ganges.cs.tcd.ie/mepierce/project/oninternet.htmlhttp://ganges.cs.tcd.ie/mepierce/project/oninternet.html

chapter 2 analysis stage online bill payment system ver 2.0

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