What is an Online Transaction?
Business transactions conducted through the internet are called online transactions. It is a payment method that aims to settle money transfers or funds settlements via electronic mode. It also requires security and protection using basic methods like password protection and OTP verification to safeguard the transactions better. It is an increasingly popular method and is the backbone of e-commerce. Basically, online transactions permit buyers and sellers to meet online, trade as needed, and exchange goods or services for money, and give a wider reach.
Stages of Online Transactions
There are 3 stages of online transactions.
1. Pre-purchase/Sale Stage: During this stage, advertisements are posted, and social media is engaged to entice the target audience to be customers.
2. Purchase/Sale Stage: This stage consists of steps like price negotiation, closing of purchase and sales deals and payment, etc.
3. Delivery Stage: This stage includes steps related to the delivery of products to the customers.
Steps Involved in Online Transactions
For ease of understanding, we can divide a typical online transaction into three parts.
1. Registration: In the first step, the customer has to register on that specific e-commerce platform by filling in the details required by that online vendor. By register, we mean that one must have an account with the online vendor. The account is usually password-protected for security reasons. It also includes some sensitive information about the person, such as name, email ID, contact details, bank details, etc. Hence, protecting the account is also of significant importance.
2. Placing an Order: After registration with the vendor, the next step is to add products or services, which you want to buy to the cart. This method of adding items to the cart is quite similar to physical stores, as, in physical stores, we put items in the cart. The order is first saved in a ‘shopping cart’, so as to give the option to the customer to order everything they need in one go. After placing all the items, customers can ‘checkout’ and choose the payment method.
3. Payment: The buyer usually has a wide variety of payment options to choose from. This payment page is usually highly encrypted, protected, and secured to protect financial information from being leaked out. As this is the most sensitive information, data is avoided to be collected, and leakage of data on this page could be disastrous for everyone involved, as a malicious hacker could gain access to the buyer’s bank account.
There are various payment options allowed in online transactions.
1. Cash on Delivery: As the order is delivered, the cash is handed over simultaneously to finish the trade on both ends. In this case, as the cash is handed, the goods are also delivered from the other end, or services are given simultaneously on the realization of delivery of goods or services.
2. Cheque: In this mode of payment, a cheque is written from buyer to seller. The seller then takes the cheque, and hands it over to the bank. Goods or services are usually delivered only after the realization of the cheque to avoid bouncing of the cheque.
3. Net Banking: Money is transferred from the buyer to the seller electronically through the internet from bank. After the payment is received by the seller, goods are dispatched or services are provided.
4. Credit or Debit Card: This is one of the most popular methods of online transactions, and these cards are referred to as ‘plastic money’. A credit card allows the customers to make a purchase on credit whereas a debit card allows the customers to purchase products to the extent of the amount in the bank account. The buyer sends his credit or debit card details to the seller, allowing the deduction of a set amount from his/her account. As the seller receives the money, they provide the goods and services for which they have been paid.
5. Digital Cash: Digital cash is a piece of electronic media stored in cyberspace that does not exist physically, but can be traded like real cash. Here, the money is saved on a code in a hard drive, USB or cloud that when shared, can be used to trade money from one account to the other. As the buyer uses digital cash to pay for the goods and services, the seller upon receiving the money, provides the products or services.
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