Different Options of Payment Processing for online payment solution

Monetary policy in many countries aims to control inflation. E-business' potential for dramatic cost savings and greater competition can have considerable influence on the aggregate price level. The lower costs and prices associated with the growth of e-business online payment solution have lowered inflation, at least in the short-term. In addition, e-business allows firms to adjust prices more quickly to respond to economic shocks. Reductions in such "menu costs" can produce ongoing reductions in the welfare harms from inflation. E-payments may also have disciplined central banks in recent years, keeping inflation low.

ICT lowers the cost of transferring, storing, and processing information. Accordingly, firms have embraced B2B e-commerce to lower procurement costs. Cost reductions can be significant. Varian, et al. (2002) report cost savings over 1998-2001of $164 billion to US firms from adoption of e-business, and estimate that B2B e-commerce reduces input costs by 4-5 percent across all industry categories. Lower costs for firms result in lower prices for final goods and services. E-commerce also widens markets by removing geographical boundaries, bringing greater numbers of firms into competition with each other and lowering prices. The broadening of markets and the lowering of search costs for consumers forces both online and "brick and mortar" stores to lower prices.

On the other hand, inside money can prompt monetary authorities to re-evaluate their priorities. As buyers use less and less cash to transact, the smaller is the harm done by increases in inflation, because inside money typically bears interest and is relatively immune to the "inflation tax". If so, then as e-payments become ubiquitous, perhaps central banks should shift their attention away from price stability toward other objectives, such as managing unemployment or attenuating business cycles.

More than 80 percent of e-commerce worldwide and about 93 percent of e-commerce in the US is B2B. Firms have enthusiastically adopted B2B e-commerce because of its great potential to lower the costs of procurement. Cost savings come directly from freeing labor from the time-consuming process of non-electronic procurement methods, from the greater ease of finding suitable vendors and prices, and from the greater control that e-commerce lends to a firm's spending strategy. Estimate that processing a purchase order manually costs 8-18 times what online fee payment gateway procurement costs. By lowering search costs, B2B e-commerce strengthens a business' control over its spending by reducing the cost of going "off contract" to procure inputs not available from its approved suppliers. Claims that such maverick buying makes up 40 percent of procurement spending in the US, and that Internet-based automation of procurement should greatly reduce that amount.

Cost savings from B2B also come from a transformation of intermediation, as in B2C e-commerce. Brokers, content aggregators, auctioneers, dealers, and exchanges are able to link larger markets via e-commerce—and to do it more efficiently—than can catalog-based or other non-electronic systems. Thus, in markets in which information plays a key role intermediation becomes more important. In a study of a large sample of German firms, find that firms using a knowledge-intensive production process and engaged in international business are more likely to adopt B2B. The lower cost of effective intermediation can also change the structure of the firm through vertical disintegration, as it becomes more feasible to outsource some tasks of the firm that formerly were provided in-house).

In summary, B2B e-commerce can improve a firm's productivity in many ways, and empirical studies bear this out (although one must always be wary of publication bias). Find that investment in ICT improves labor productivity, but only for firms engaged in B2B e-commerce. We return to the impact of e-business more generally on productivity in a later section. The economic benefits of B2B adoption can be significant for firms. In terms of the bottom line, find that firms adopting buy-side B2B systems increased average return on assets by nearly three percentage points and the average profit margin by 2.7 percentage points, relative to a matched sample of non-adopting businesses.