Non-Payment in ECommerce

A supplier has a few remedies available if a customer does not pay for a product however this greatly depends on the nature of the product (whether tangible or intangible) and the means by which it was initially obtained and/or paid for; these are usually set in their procedural policies and often required by them being a member of an electronic payment processing system such as their bank’s merchant system for processing card payments. Usual actions available are to demand the return of products in saleable condition or resort to some kind of legal action to gain payment and costs of obtaining payment. This latter action requires the existence of a contract, especially when the product is a service that has already been taken by the customer, as it is then not possible to return the product. This is also true of digital products if they are not properly secured.

For example, iTunes in 2007 made available music tracks without Digital Rights Management (DRM) security meaning that “users can download tracks… …without facing limitations on the number of computers, or type of music player, the songs can be played on” Telecomworldwire (2007); a consumer could therefore buy tracks on a credit card that could eventually not pay and still have access to the product, iTunes, given the nature of the transaction would have little recourse to action other than to accept a certain level of such losses and place trust in the protection of the electronic payment processing systems and with the additional bonus to aggregate purchases to avoid excessive credit charges according to Laudon & Traver (2010, p316).

In a traditional retail environment it is highly unlikely that a product can be obtained without the customer having paid or left an approved promise to pay (such as a debit or credit card), therefore unless physical theft or card fraud is involved there is a barrier to non-payment for products in that the buyer can supposedly be properly authenticated by the teller and by systems such as CCTV if eventually required. The remedy is usually remuneration via insurance if the supplier’s systems show losses from fraud or theft or if the culprit is caught and cannot pay and they are sufficiently covered for these risks.

In an e-commerce environment however “neither the merchant nor the consumer can be fully authenticated” Laudon & Traver (2010). Assuming that we are discussing a fully legitimate merchant then payment options can greatly alter these concerns by attempting to third-party authenticate the buyer and require an acceptable level of guarantee that the supplier will be paid. Therefore suppliers in an e-commerce environment must accept a certain level of cases where nothing can be done for electronic products and that they can pursue payment or return for physical products by using electronic payment processing in advance of shipping their products they can take reassurance from the third party authentication and payment in advance features of online systems.

References

Laudon & Traver (2010) E-Commerce: Business. Technology. Society. (6th Edition). Pearson Prentice Hall.

Telecomworldwire (2007) Apple introduces iTunes Plus DRM-free music tracks [Online]. Available from the Regional Business News database via EBSCO (Accessed 5 September 2010).