EFT – Electronic funds transfer

EFT – Electronic funds transfer
• Refers to the payment for goods, where the
payment is made from one account to another i.e
– Credit and debit cards
– Payments made using an intermediary such as Paypal
– Payments through an electronic purse (pre-paid cards)
– Payments made between one bank account and another
using online banking
Advantages of electronic payments
Advantages from a customers
Advantages from a store’s
Faster receipt of goods or services – no
wait for post or cheques to clear
Payment is immediate and cash flow is
Quicker to enter credit card details rather
than send a cheque in the post
EFT can be integrated with accountancy
system, so fewer account staff are needed
thus reducing business costs
If a credit card is used for items costing
over £100, then the credit card company
will take up any complaints you have with
the store
No wasted time dealing with cheques that
bounce (i.e. When a customers account
doesn't have enough money and it
Faster delivery can be offered which can
improve turnover
Disadvantages of electronic payments
Disadvantages from a customers
Payments are easy, so a customer may
impulse buy and regret it
There may be a tendency to spend too
much on credit cards
Disadvantages from a store’s
Stores have to pay commission for
electronic payments to the company
being used to make the payment
There is danger in entering card details
that they will fall into the wrong hands
and be used fraudulently
Stolen credit cards may be used to pay for
products or services. It is the seller of
goods or services who has to bear the
cost of fraudulent transactions.
Not everyone has a computer or internet
There needs to be procedures in place to
ensure the security and privacy of
customer’s data i.e. Credit and debit card
Erosion of privacy as more companies
hold data about you and what you buy
It is quite expensive to set up a payment
E Commerce – online shopping
• Commerce involves
– Buying
– Distributing
– Marketing
– Selling
– Paying
• If some or all of these are performed using
electronic systems such as the internet it is
seen as e-commerce
E – Commerce involves...
On-line marketing
Just-in-time control systems
On-line transaction processing
Electronic data exchange
Automatic stock control systems
Automated data entry systems
Main Parts of an E-Commerce system
1. A catalogue of products that include a search facility
and also provide a link to the stock control system
2. A shopping basket – allows shoppers to browse, add
and remove items
3. Checkout – where shoppers enter their details and
pay for their goods
4. Payment – when card details are encrypted and
validated and the transaction is either accepted or
declined. If authorised a confirmation email is sent
to the customer.
Benefits of E-Commerce
• Always accessible – open 24/7
• Low start-up/running costs – relatively cheap to set up
an e-commerce as all you require is a computer
connected to the internet and something to sell
• Easily updated – No need for printed materials, websites
can be updated daily or even more so
• Search facilities – Goods can be found quickly on ecommerce sites using a search facility
Benefits of E-Commerce
• Low distribution costs – no use for other types of promotion,
websites aren’t labour intrusive
• Global marketplace – goods can be shipped worldwide
• Competitive edge – nearly always savings to be made online due
to low running costs
• Gathering customer info – via email, tracking cookies (items
• Alternative income sources – if your website has many hits you
can produce income through: banner adverts; links to other sites;
both of wish generate commission and promo for your website
Drawbacks of E-Commerce
• Unemployment – computers automate many
administrative tasks
• Lack of social interaction – between customers and
• Lack of exercise – walking around traditional shops is
good exercise
• Problems when things go wrong – i.e. When
returning items
Drawbacks of E-Commerce
• Lack of customer trust – fake websites, credit card
fraud, bad customer service
• Problems with international legislation – Goods
bought overseas seem cheaper but can be heavily
taxed by customs duty
• Goods from abroad mean profits abroad – high
street stores and country may suffer
• Security problems – many people are scared/weary
of entering details online
• What does EFT refer too and give 2 examples
of its usage. (4)
• Discuss the advantages and disadvantages of
electronic payments from a customer and
store perspective. (8)
• What are the four main components of an ECommerce system? (8)
• Discuss in detail three benefits and three
drawbacks of an E-Commerce system. (12)
EPOS – Electronic Point of sale
• POS terminals are placed in stores where
customers pay for goods, they generally
– Touch screen displays
– Keyboards
– Magnetic Strip Readers (i.e. For credit cards etc)
– Bar code readers
Bar code recognition
• Involves a series of light and dark bars of
different widths to enter a code which is
usually printed underneath the bar code
• The system then finds the product in its
• Bar code applications include:
– Warehouse stock control systems
– Recording goods in the supermarket
Advantages and disadvantages of bar
code input
Faster – Scanners are
sophisticated and can read bar
codes at different angles
More accurate compared to
typing in long codes
Low printing costs – can be
printed on labels, software can
be purchased to print bar codes
using a ordinary printer
Can only be used for the input
of numbers
Expensive – the laser scanners
in supermarkets are expensive,
although handheld scanners
are cheaper
Other methods of data entry
• Handheld input devices – portable devices for stock taking;
use wireless communication to send data to the system
• Magnetic strip readers – can be seen on credit, debit and
loyalty cards; fewer errors as no keying in of data; added
security as details are held on strip which don’t appear on the
card; quick to scan; data can’t be read without required
• Chip and PIN reader – replaced magnetic strip readers; rather
than signing to verify you own the card you use a PIN to verify
Automatic stock control
• Shops need to control stock for the following:
– Keeping large quantities of stock is expensive, if the
quantity is decreased then the resources released can be
put into better use in the organisation
– If insufficient stock is kept, customer’s requirements may
not be met and shoppers may move elsewhere
– Many of the stock items are perishable – have a limited
shelf life
Automatic stock control costs
Cost of buying the stock
Cost of premises to house stock
Staffing costs to find and move stock
Higher wastage due to perishable goods
• Feedback systems are used in forms of stock
control to reduce the variation between the
stock kept and the stock required to satisfy
• This reduces higher than necessary stock
• Comparisons are constantly made between
set stock level and actual stock used
Main objectives of stock control
To maintain adequate stock levels
Automatically re order goods
Monitor and adjust stock levels
To produce stock evaluations for accountancy
To provide management with up-to-date and
accurate stock info
JIT - Just in time stock control
• Goods are delivered as fast as they are being sold
• Cuts stock held by a fifth and frees up staff
• Allows individual stores to respond to changed demand for
products throughout the day
• System ensures they don’t run out of items such as ice cream
on a sunny day
• Deliveries are spread to 4-5 times a day rather than one large
delivery in the morning
• Saving in human resources as staff can concentrate on
customer focused tasks
Advantages and disadvantages of JIT
Smaller stores can be used as
less stock is held
Store is able to change its
demand throughout the day
Expensive to introduce
Easier to cope with several
smaller deliveries
Ensures that they do not run
out of fast selling goods
Stores are more responsible for
their own ordering so more
admin is needed.
True stock may differ due to
• A database holds all of the item details
• The bar code of an item is linked to each item
• When the price is changed, the bar code links to
the new price
• The store then needs to print out a stock label for
the shelf
• Stores can pass on price increases from their
suppliers to the customers
• This increases profitability
Loyalty Cards
• Used as a mean of encouraging customers to shop at their
• Enables stores to gather information on customers
• Customers gather points which they can use in store
• The scheme works as follows:
The customer fills out an application
The customer gives a card that contains a magnetic strip
Each customer takes the card to the store when they shop
When making a purchase the loyalty card is linked
This then adds points to the loyalty cards
The store then allows customers to spend their points and offer vouchers
• What does a POS terminal typically include? (4)
• How does bar code recognition work, and give two advantages and two
disadvantages of using them (6)
• What could errors occur when scanning a barcode? (4)
• Other than bar code recognition describe in detail three examples of data
entry. (6)
• State two reasons why supermarkets use automatic stock control. (2)
• Describe the process of just in time stock control. (3)
• What are the advantages and disadvantages of using JIT stock control (4)
• How are loyalty cards used to entice customers to shop at a store? (2)