BOTSWANA ACCOUNTANCY COLLEGE

Computing and Information Systems

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

ONLINE BILL PAYMENT SYSTEM

ANALYSIS

ABC Group 4 1. Tumelo Maripe CIS09-227 2. Mmoloki Kaisara CIS10-189 3. Itumeleng Mooki CIS10-216
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Table of Contents

Contents
Chapter 2....................................................................................................................................................... 3 Online Bill Payment System .......................................................................................................................... 3 Analysis Stage................................................................................................................................................ 3 2.1 2.1 Introduction .................................................................................................................................. 3 Current Systems ............................................................................................................................ 4 Cash Payments ...................................................................................................................... 4 Cell phone Banking................................................................................................................ 5 Online Banking Systems ........................................................................................................ 6 Use of Debit Cards and Credit Cards ..................................................................................... 8 Mobile Telephony Payment Services .................................................................................... 9 Manual Cheques ................................................................................................................... 9

2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 2.1.6 2.2 2.3

Literature Review ........................................................................................................................ 10 Proposed System ......................................................................................................................... 12 Strengths of the Proposed System...................................................................................... 13 Weaknesses of the Proposed System ................................................................................. 14

2.3.1 2.3.2 2.4 2.5

Critical Analysis of the Proposed System .................................................................................... 15 Requirements Analysis ................................................................................................................ 16 Functional Requirements .................................................................................................... 16 Non Functional Requirements ............................................................................................ 16

2.5.1 2.5.2 2.6

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

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

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Chapter 2 Online Bill Payment System Analysis 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 utilities 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 companies to open multiple accounts at various banks so that they can cater for wide variety of clientele that uses various banks. Other banks have not yet embraced online banking and cell phone banking. Payment for goods and services in world (Botswana included) is characterized by long queues, long distance and time wasting that negatively affects business activities, profit margins and ultimately economic development. According to Alexander Appiah and Fred Agyemang, Cash still remains the most popular retail payment instrument, despite the increase in the introduction 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 their paper titled A framework for managing cost effective and easy electronic payment system in developing companies argue that customers or people do not need physical goods or services and currency in order to conduct business transactions. They also argue that electronic commerce is the most recent step in the evolution of business transactions. The customers in Botswana now have many electronic options at their disposal. Customers now use online banking systems, cell phone banking systems, Electronic Wallet, Mobile Telephony payment systems (eg Orange Money and Mascoms MyZaka) as well as the traditional manual way 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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Service Provider

Electronic Bill Data

Paper Bill Mailed

Bill Publisher

Customer Mail Box

Electronic or Paper funds transfer

Postal Service

Bills retrieved from Mail Box

BANK

Lock Box
Paper Checks Produced Remittance Delivered Remittance

Customer Pays

Figure 2.0

2.1

Current Systems
The 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.

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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 other words 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. 2.1.2 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

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. Strengths This 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. Weaknesses The 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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CELL PHONE BANKING SYSTEM

Login

Balance Enquiry

Statement Requests
CUSTOMER

Payments

Ewallet

Electronic Funds tranfer

Figure 2.1

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

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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 bank account. It is more secure for both the customer and service provider in the way that money cannot be lost in transit to the bank. Weakness Customer 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

SYSTEM

CUSTOMER
Create an account

Operate an account

Pay Bills

Manage Accounts

CUSTOMER

Manage Customers

SYSTEM

Manage Transactions

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2.1.4

Use of Debit Cards and Credit Cards Credit Card

This is a plastic card that assures a seller that the person using it has a satisfactory credit rating and that the issuer will see to it that the seller receives payment for the goods or items delivered. This represents the automated capture of data about purchases against a revolving credit account. Debit Card These are a new form of value-transfer, where the card holder after keying of a PIN, uses a terminal and network to authorize the transfer of value from their account to that of a merchant. Introduced more recently, debit together 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 credit card details to the involving service provider and the credit card organization handles this payment like any other electronic transaction. When a payment is made through a debit card, the funds are immediately withdrawn from the purchaser's bank account. The advantage is that the buyer has the funds to make the purchase and paid for right away, so there's no credit card shock when the statement arrives in the mail. Strengths The use of debit and credit is more secure since you do not carry out cash. Weaknesses Susceptible to fraud . It is important to note, however, that without some form of customer registration with a payment service or substantial proofs of 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 of the 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 were introduced as a mode of sending and receiving money. This payment option is currently 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 electronic payment systems. The only advantage is that you not carry around large amounts of cash. The disadvantages to this mode of payment is that cheques take some days to be cleared. A customer can write out a cheque with full knowledge that it will not be honored.

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

Formatted: Justified, Indent: Left: 0.5"

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Credit Cards Account Based Systems Debit Cards Mediating Service Online Payment Instruments Mobile Payment and Telephone Account Systems Online Banking

Proposed Online Bill Payment System

Figure 2.3 Source: OESD

Electronic Currency Systems

Smart Card Systems

Online Cash Systems

2.2

Literature Review
Three 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 should be as safe as a private medium like a telephone free of wiretaps and hackers. Although no systems are yet fool-proof, electronic payment systems designers should concentrate closely on security. -10-

As the users value convenience more than anything, the payment interface should be user friendly having intuitive outlook and must be as easy to use as a telephone. Designing an EPS should handle the challenge to integrate the databases used by 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 and facilitate financial transactions electronically- must be in place . An EPS should resolve the issue of how to price payment system services. The necessity of using subsidies to price all service affordably should be recognized and the potential waste of resources for using subsidies to encourage users to shift from one form of payment to another should be considered. A common standard should be imposed and followed; since without standards the wielding of different payment users into different networks and different systems is impossible. An Online Bill Payment system should be cheaper both for the buyers and sellers. Minimum cost should be associated with establishing an on-line electronic payment system.

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2.3

Proposed System
The proposed system will be web based system in which several services providers will be 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 Process Payments Online Banking System Register <<extends>> Show Supplier <<uses>> Customer Get Supplier AddPayment Show Payments <<uses>> <<extends>> Modify Payment <<extends>> Delete Payment <<extends>> <<extends>> <<extends>> Modify Suppliers Add Supplier Delete Supplier

Figure 2.4

GetPayments

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 banking system 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.

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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. Bill Invoice Customer Invoice No Name Date Received Address Net Price ID Number Amount Due Credit Rating Calc Total Calc Vat Net Total

PAYMENT Amount Authorize()

CREDIT CARD Number Type Exp Date Authorize()

CHECKING ACCOUNT Bank Name Account Number Authorize()

CASH Amount Tendered Print Reciept() If credit rating is poor or Unbanked

Figure 2.5 Note that the payment options on the above diagram still include cash payments. Tradional cash payment can not be phased by electronic commerce online payments because not all customers have 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 operating business hours. ).

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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 developing country and as such not all people have access to computers to internet. Besides that not all people are computer literate. The design of the proposed system will be merely to complement the existing online payments system. We tried to research on the use of the existing online payment options in Botswana but could get such researches to get the statistical information on the use of such. Not all people have bank accounts so in this case cash payment is the preferred method.

Connection and Transaction Send data Online Customer Customers Bank

Send Payment

Online Bill Payment System Transaction and confirmance

Send data and receive payment

Account Updates

Supplier Billing Systems

Suppliers Bank

Figure 2.6 Proposed System Model

Online customer: A customer is an entity who will pay for services by making payments in timely manner. Service Provider / Supplier: A Supplier is a seller who will receive payments made by customer. Banks: Two banks are involved. 1. Customer bank 2. Supplier bank -14-

Customer bank: Customer bank holds clients bank account and validate customer during account registration. Supplier bank: Sipplier bank holds supplier bank account. It is responsible of management, fraud control etc Online Bill Payment Systems: A payment gateway is connected to all customers, merchants and banks through Internet and responsible for the speed and reliability and security of all transactions that take place.

2.4

Critical Analysis of the Proposed System

With 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. Applicability Availability Easy to obtain Ease / complexity of registration Cost Distribution of costs between customers and service providers Liability Legislative Protection and provisions, coverage of potential losses Anonymity Protection 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 client have to be saved in the server. Authentication The system will be a web based system, so there has to be mechanism to ensure security since customers will be providing their personal details over the internet. Banking details and personal details exchanged over the internet have to be protected from the unauthorized users. Only registered customers will be able to use the system. Once the customer has made their payments over the internet, the system must produce the reference number for that payment as proof of payment. The system must be able to react in real time such that when payment is made or when the details of the client are entered into the system it should 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) Non Functional Requirements These 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 the unexpected 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%.

2.5.2

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 to have 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 alternative payment 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 behavior requires comprehensive planning. 2. Appiah A, Agyemang F, Electronic Retail Payment Systems: User Acceptability and Payment Problems in Ghana. 3. Anik, A. A.,Pattan, A. M. K, A framework for managing cost effective and easy electronic payment system in developing countries. 4. Fowler, M(1997), UML Distilled, Applying the Standard Object Modelling Language Reading, MA, Addison- Wesley 5. Abor J.(2004). Technological innovation and banking in Ghana: An evaluation of customers 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-Commerce 9. Pierce, M(2001), Payment Mechanism designed for Internet(Online), Available: http://ganges.cs.tcd.ie/mepierce/project/oninternet.html

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