CHAPTER 12

PAYMENT GATEWAYS AND ETHICAL AND LEGAL FRAMEWORK

Learning Objectives:

After studying this unit, you should be able to understand:

• The concept of a payment gateway

• Functions of a payment gateway

• How do they work

• Benefits of payment gateways

• Cash on delivery (COD)- popular payment option

• Reasons for the growth of cash on delivery

• Problems for marketers and suppliers

• Efforts to bring down cash transactions

• Pay-per-click (PPC) advertising

• Managing pay per click advertising

• Beware of fake clicks

• Ethical framework in e- marketing

• Privacy policy in e-marketing

• Key considerations in privacy policy

• Challenges of protecting privacy

• Guiding principles for privacy policy

• Legal framework

• Consumer protection act, 1986

We are living in a world where every single person wishes to minimize efforts and maximize

satisfaction at the same time. This could be the reason why e-commerce is becoming popular

nowadays. Most people prefer buying almost everything online. But when it comes to making an

online payment, one must ensure that it is safe and secure. In such a situation, Payment

Gateways prove to be a big help in enabling easy online payments. It is an application that

enables online credit card transactions to take place in the real time with utmost safety and

security. In sense, it acts as a link between the web server and the bank with which it is

associated.

Payment Gateways play an integral role in facilitating e-commerce. Earlier, it was difficult to

conduct non face-to-face (impersonal) business transaction without the creation of a secure

method for sharing sensitive or confidential data, like the details of credit card, at a time when

there was no definite measure to prevent cyber crimes. But now the situation has changed. Today

one can see a number of payment gateways serving up diverse solutions and facilitating online

credit card transactions. But before 1996 there was no such option until Jeff Knowles, a software

engineer at WordPerfect, invented the concept of Payment Gateway. He conducted extensive

research and wanted to find out a process for payment transactions as a service for clients, which

could save their huge expenditure of buying some outdated terminal equipment. It was believed

that the term “payment gateway” at that time was new to the industry.

Presently, payment gateways have become the essence of e-commerce. They act as an interface

between customers and e-commerce. For a merchant, it acts as the means to collect the payments

from the customers through an online platform. At present, there are a number of payment

gateways serving in India. Such payment gateways are beneficial for paying money easily

without much trouble. Examples of some of them can be: E-Billing Solutions (EBS),

CCAvenue, paypal, pay you, payTm etc.

Functions of Payment Gateways

Payment gateways provide a wide range of processing services which may include authorization

only, authorization and capture, refunds and voids. Every major gateway offers a virtual terminal

option which helps merchants to enter the payment information in a browser as they are and

complete transaction over the phone or receive a payment over the mail through a message of

successful payments.

Moreover, the virtual terminal also allows you to create and save customer profiles within the

gateway itself, which you can access later for a much faster processing of payment. Additionally,

it also allows setting up installment or recurring payment plans, as well as process deferred

payments.

How a Payment Gateways Works?

When a customer has placed an order and decides to make the payment with credit/debit card, he

provides all the details required on the website, the web server forwards all the transaction

information to the payment gateway and through it the bank receives the information for

verification. Verification is done by establishing a contact with the bank which has issued the

credit/debit card. The bank may respond in either way, accept or decline the authenticity of the

transaction. Once the transaction is approved, the bank directs it to payment gateway and through

it is sent to the web server showing the message- “your payment is successfully made.”

However the actual procedure is much more complex which is explained as follows-

1. The customer/cardholder fills out a payment information form available on the website to

pay for the purchase made.

2. The gateway collects the payment information and encrypts it for security purposes. Then

the encrypted information is sent to the processing bank (merchant’s bank)

for verification.

3. The processing bank sends a request, through Visa’s or MasterCard’s payment networks,

to the card issuer (bank which has issued the credit/debit card).

4. The card issuer approves or declines the transaction and sends its response, through Visa

or MasterCard, to the processing bank.

5. The processing bank forwards the response, through the gateway, to the merchant who

completes the transaction accordingly.

6. In the case of an approved transaction, the merchant requests for payment by depositing

the receipt with its processing bank.

7. The processor then credits the merchant’s account with the amount and submits the

transaction to Visa or MasterCard for settlement purpose.

8. Visa or MasterCard then pays the processing bank, while simultaneously debiting the

card issuer’s account.

9. The card issuer then posts the transaction to the cardholder’s account and requests

payment with a monthly statement.

Benefits of Payment Gateways

Having a payment gateway is not only beneficial for the merchant but also to the consumer in

many ways. The transaction is a real time transaction. It means the credit card transaction is

processed at the time of purchase only. It immediately transfers the amount to the merchant’s

account. Thus it saves time and at the same time reduces administration work. The customer

experiences the most convenient and safe buying experience. He/ She just needs to stay on the

website and provide information. In other cases it would be tedious if the customer is redirected

to another website to make payment. This may also create a sense of distrust in customer’s mind.

Hence payment gateway makes steps of making payment easy and convenient for the customer.

In today’s scenario, a payment gateway is the easiest yet popular means to make payment. It

reduces the customer’s efforts and ensures effective transaction by facilitating the transfer of the

accurate amount to the merchant’s account in the real time. In a matter of a few seconds, a

successful payment takes place and facilitates the customer. Here are some of the benefits

provided by payment gateways depicted in Figure 12.1 and explained as under:

Figure 12.1: Benefits of Payment Gateways

➢ Secure transactions- payment gateway service ensures secure transactions sent over the

Internet. It means that merchants will no longer worry about credit card scams and other

fraudulent transactions which were quite popular earlier. Payment gateway utilizes strong, 128

bit, SSL, industry-standard encryption system that effectively encrypts and protects sensitive

data such as details of credit cards. In sense, it is virtually hack-free.

➢ Comes bundled with benefits of e-shopping - payment gateway service often comes

along with shopping cart software–a must-have program for all online merchants. This allows the

customers to select products on an online platform by clicking them and placing them on a

virtual shopping cart. At the time of check-out, the shopping cart will calculate the total costs of

all the selected items plus tax and shipping charges. It does the computing even though the

merchant is not physically present at the time of transactions.

➢ Wider customer base- with payment gateway service, shoppers all over the globe will

be encouraged to access the merchant’s online store, thus making it available to a wider customer

base and global reach.

➢ Error-free and faster transaction processing time- payment gateway service performs

transactions much faster than manual processing. It therefore assures error-free computations and

a much faster processing time. For customers, it means that they no longer have to bear long

lines at the counter. They can complete the entire transaction process with a few clicks of a

mouse.

➢ Comfortable- no longer will customers deal with traffic jams, parking space and

crowded store shelves to do their shopping. They can perform purchase transactions with an

Internet-connected computer within the comforts of their home.

➢ Easy- shoppers can purchase items with just a few mouse clicks. Even a child, with the

supervision of a mature adult, can perform online shopping and enjoy the experience.

➢ Convenient- unlike brick-and-mortar stores that have limited shopping hours, a

merchant’s website remains open 24/7. Thus, customers can do their shopping even at odd hours

or at their convenience.

➢ Safty- credit card scam and fraud is prevalent in the Internet. But with online payment

gateway, customers are assured of safe transactions. They know that their personal data

information remains confidential. They can shop online without any fear of hacking, phishing,

identity theft, or other similar related fraud so rampant in the Internet.

Cash on Delivery (COD)- Popular Payment Option

With the emergence of E-Commerce in India, there was an early nervousness of making payments

online. Even though there has been a significant rise in online payments over the last few years

still cash on Delivery (COD) continues to remain the most preferred mode of payment for

consumers in India. According to Wikipedia (2004), "cash on delivery (COD), is the sale of

goods by mail order where payment is made on delivery rather than in advance."

According to Nielsen’s Global Connected Commerce Survey (2017) about 83 percent consumers

in India preferred using cash on delivery as a mode of payment for online purchases. Consumers

are not comfortable using credit cards due to online fraud risks. A report highlights that majority

mode of payment made by consumers for online sites like Flipkart, is COD, 72 percent from

major cities and 90 percent from smaller towns.

While mobile wallets and net-banking transactions are on the rise, when it comes to making

online purchases, most of the buyers still prefer cash-on-delivery payment model. Payment

options like Net-Banking, Credit and Debit Cards and e-wallets combined contribute to only

about 30 percent of all online purchases, as compared to cash on delivery (COD).

Flipkart, which was launched in 2007, was the first E-Commerce player after Indiaplaza to launch

COD service back in 2010. It was the cash on delivery service that made Flipkart exceptionally

popular and made online shopping a tempo among the masses. Suddenly every person, from a

young college student who didn’t even have a bank account, to a person from a small town who

didn’t possess a debit card, were able to buy things with just a click.

Reasons for the Growth of Cash on Delivery

There are loads of advantages of cash on delivery (COD) for the consumers. As it is highly

convenient for them and their confidence level increases with cash transactions. They need not

own a credit/debit card to make online purchases. Impulse purchases may increase as payment is

not due at the time of ordering. People are generally scared of making online payments due to

security threats. But in case of COD, they can trust the company because they are paying after

they receive the product at their doorstep.

Problems for Marketers and Suppliers

Whether it was the anxiety of commitment or the joy of ordering anything without the immediate

need of money, COD set up prompts acceptance. However, the same service creates problems for

marketers and suppliers:

1. Restricted cash flow: COD is convenient for buyers but extremely inconvenient for retailers

and vendors. It hinders cash flow as such orders take longer to close. It often takes months for the

money to reach the seller, that too if there’s no refund/return request. This makes it difficult for

them to gauge or maintain daily operations.

2. Additional cost: the courier companies charge extra for delivering COD orders above the

regular charges. The cost rises even further in case of returns as marketplaces/logistic companies

deduct courier fees.

3. High returns: cash on delivery and no-questions-asked return policy is a deadly combination.

People make imprudent and impulsive purchases and return it without any fear. Sellers believe

that COD orders lead to high returns and buyers give insane reasons as opposed to non-COD

orders

Efforts to Bring Down Cash Transactions

Government of India along with financial institutions have been trying their best to reduce cash

transactions and boost digital payments to improve economy. Right from offering tax

incentives on electronic payments, executing restrictions, to simplifying the digital payment

process, the government is trying to move away from cash-intensive economy. Similarly E-

Commerce companies are also taking steps to reduce the reliance on COD by offering:

• Payment through card upon delivery

• Improving payment gateways and expanding options

• Encouraging digital wallets through exclusive offers

• Offering incentives on online payments

• Instant refund mechanism facility

• Tying up with banks for special cash-back and discount offers when paid using card

• Initiating mobile transactions

• Charging extra for COD orders

• Putting a cap on acceptable COD order value, quantity and product type

• Altering return policy to remove absurd reasons for return

• Allowing sellers to decide the payment and shipment policy

To conclude, in a country like India, where people are comfortable and accustomed to cash

transactions, getting rid of COD and creating a cashless economy still seems like a far-fetched

dream

Pay-Per-Click (PPC) Advertising

Pay per click advertising is a new form of advertising online. In this case, a relevant text ad with

a link to a company page is displayed when the user to search engine types in a specific phrase.

A series of text ads usually labeled as 'sponsored links' are displayed on the right-hand side of the

search engine, pages. Unlike conventional advertising, the advertisers doesn't pay when the ad

is displayed, they only pay when the ad is clicked on which then leads them to a visit to the

advertiser's website- that is why this is called` 'pay per click'. Most clicks result in a visit to the

site, although there may be a small attrition, that cannot be controlled but marketers have to be

aware of it.

The relative ranking of these paid performance placements is typically based on the highest

bided cost per click (CPC) value for each keyword phrase. The company that is prepared to pay

the most per click goes top shot. Google also takes the relative click through rates of the ads into

account while ranking the sponsored links, so ads that do not appear relevant, because fewer

people are clicking on them will drop down or may even disappear of the listing. In this

competitive world, it is very important for all the organisations to be visible on all search

engines, paid search listings, or sponsored links.

Pay per click advertising is an excellent alternative for companies who have the financial

resources and can make an investment in order to bring targeted traffic to their websites. Like

SEO traffic, Google AdWords is considered targeted because people are actually typing in

keyword phrases that are relevant to the products and services they are searching for before

clicking on their advertisement. This can bring a flood of traffic to the online business very

quickly, and this is an excellent choice as long as marketers are able to turn it into profit.

Managing Pay Per Click Advertising

In order to go ahead with pay per click, clients or their agencies commonly use PPC ad networks

or brokers to place and report on pay per click ads on different search engines. Two of the most

important PPC ad networks are Overtune (www.overtune.com) owned by Yahoo and Google

adwords (http://adwords.google.com). Different advertisers bid on particular keywords through a

web-based PPC management interface provided by network to achieve the listing that they want.

Though everyone wants to be on the top, or to be in the top three or five sponsored ad links, it

depends on the money which they are ready to spend.

Advertisers decide on the maximum cost per click (CPC), they are prepared to pay. If this is

more than the current position, the cost per click will be reduced so that it is still sufficient for

them to be on the top. If their bid is less than the current cost per click of the top position,

advertisers will be placed according to the relative ranking of their bid. Some marketers spend

millions of rupees annually on search marketing for a wide range of key phrases.

With PPC as for any other media, media buyers carefully evaluate the advertising costs in

relation to the initial purchase value or lifetime value they feel they will achieve from the

average customer. Besides considering the CPC, the marketers also need to think about the rate

of converting the visitors on site. An ad might become successful in generating click-through or

traffic, but more important is to generate a lead or result in an online sale. It is often more cost-

effective if targeted micro-sites or landing pages are created specifically for certain key phrases

to convert users to make an enquiry or sale. These can be part of the site structure, so clicking on

a 'car insurance' ad will take the visitor through to the car insurance page rather than a homepage.

This is not a form of advertising to use unless the effectiveness of the website in converting

visitors to buyers is known. The cost per acquisition (CPA) can be calculated as follows:

The cost per acquisition = (100/Conversion rate%) * Cost per click

Beware of Fake Clicks

The PPC ad network detects multiple clicks from the same computer (IP address) and can filter

them out. However, there are techniques to mimic multiple clicks from the locations such as

software tools to fake clicks and even services where you can pay a team of people across the

world to click on these links. It has been estimated that in competitive markets, one in five of the

clicks may be fake. This can ultimately destroy PPC advertising. It will be wiser, in the long-

term, if PPC will move to something similar to an affiliate model when marketers only pay when

a sale or some other outcome on the site occurs.

Ethical Framework in E- Marketing

As discussed in all the previous chapters that e-marketing has helped businesses to

connect with the right customers at the right time. It has helped to bring in enormous

transparency in business thereby promoting healthy competition. Cost of marketing has

also gone down with the use of digital marketing. E-marketing has encouraged innovation

and has allowed even small firms to expand beyond imagination. Hence, these benefits

have led to a rapid rise in the use of the digital medium for marketing. With this,

firms have also been tempted to adopt unethical means to top their digital game. We may

borrow the famous quote from Spiderman, “With great power comes great responsibility”. So it

becomes the responsibility of the Internet marketers, online businesses, digital strategists and the

other inhabitants of the online space to keep a few things in mind while marketing on the

digital platform. Some of the common ethical concerns for e-marketers are shown in

Figure 12.2 and explained as under:

❖ Data privacy and security: with the growth of digitisation, a large amount of

user data is generated continuously. This data includes their identities, passwords,

profiles, income, account details, spending patterns etc. While e-marketers have

standard privacy policies in place to protect user data, it is often noticed that

they are not effective. There have been instances where a lot of user data has been

leaked out due to poor data security measures. E-marketers must put strong

systems and controls in place to prevent such things. Employees must

be educated to protect user data. Such actions will go a long way in building

customer confidence.

Figure 12.2: Ethical Concerns for E-marketers

❖ Online reviews: e- marketers can use positive reviews as effective marketing

tools to motivate consumers to purchase their goods or services. However, digital

marketers should not resort to fake and manipulative reviews. At the same

time, enticing customers through payments, discounts in exchange for positive

reviews must be avoided. Unethical websites which offer to remove negative

reviews from their websites in exchange for payments must be

discouraged. Genuine negative reviews must be treated as feedback for

improvement and proper corrective actions must be taken.

❖ E-Mail marketing: in e- marketing, use of e-mails is the easiest way to reach the

customers. Hence, it is often overused. Moreover, e-mail automation has led

to huge increase in volume of such mails. This creates a lot of clutter and most of

these mails go unnoticed. Hence, this form of marketing must be used

judiciously. Companies must ensure customers’ opt-in to receive communication.

Buying mailing lists from unknown sources is highly unethical and must be

avoided. Instead, a mailing list must be generated using its own resources. This

would make it more authentic and relevant. Customers must also be given an

option to “Opt-out” from receiving such e-mails.

❖ Online Advertisements: advertisements are definitely an important source of

information for consumers, and therefore it is expected that brands indulge in honest and

ethical advertising. Unfortunately, this is not always the case. The display ads used by

Orbitz (way back in 2002) got them a lot of flak, as these ads would direct a user to

another site merely when the cursor was moved over them. Similarly, the concept of

contextual link ads, wherein hyperlinks are concealed within editorial content are also

considered unethical. The issue here is not just of ethics but also of user experience.

❖ Search engine optimization (SEO): today, consumers turn to Google to find

out about any new product or brand. Hence, it becomes compelling for the e-

marketers to figure out a way to top the search results. Companies employ search

engine optimization(SEO) techniques to meet this end. However, it is very

important that the search engine’s rules are kept in mind while optimizing. E-

marketers must not resort to techniques to figure in the top search results by

bypassing these rules. A lot of websites which have employed such techniques

have been blacklisted by Google in the past for some period such as BMW,

Washington post etc.

❖ Ethical product/service representation : it is very easy to overstate and

exaggerate about product/service features and benefits on digital medium. E-

marketers must ensure that the products/service representations are genuine. This

will help to build customer trust and design better products/services.

❖ Marketing to children: children are a vulnerable group as they may not realise

that their every mouse click may be monitored. Evaluating the accuracy of

information they view may be a challenge for them. They may also be unable to

understand the nature of the information they provide to advertisers. To ensure the

safety of children and ultimately avoid consumer backlash, companies should

involve the parents.

❖ Misuse of social media platforms: businesses are also leveraging the power of social

networking platforms and using them as grounds for “viral” advertising. At times the

excessive focus levied on them also goes against the interest of consumers.

There is a lot that can be labeled as unethical and misleading in the business of Internet selling

and advertising. And even with the constant pull and push from the regulatory authorities,

advertisers keep finding new ways to con the crawlers and visitors

Privacy Policy in E-Marketing

Privacy helps reinforce user's trust of online services, yet online privacy is under constant

pressure of being undermined. Promoting strong, technology-neutral data-privacy laws, privacy-

by-design principles, and ethical data-collection and handling principles is a key approach to

protecting and fostering online privacy. Privacy is an important right and an essential enabler of

an individual’s autonomy, dignity, and freedom of expression. Yet, there is no universally agreed

definition of privacy. In the online context, however, a common understanding of privacy is the

right to determine when, how, and to what extent personal data can be shared with others. In

today’s digital age, information gathering is fast, easy, and less expensive than ever. Progress on

a variety of technological fronts contributed to this new world.

Personal data has become a profitable commodity. Every day, users are sharing more personal

data online, often unknowingly. This can create privacy challenges on a greater scale than ever

before. With this in mind, it is important to encourage the development and application of

privacy frameworks that apply an ethical approach to data collection and handling. Frameworks

that incorporate, among other things, the concepts of fairness, transparency, participation,

accountability, and legitimacy.

Key Considerations in Privacy Policy

Although there is no universal privacy or data protection law that applies across the Internet, a

number of international and national privacy frameworks have largely converged to form a set of

core, baseline privacy principles. The following principles are derived from the Organisation for

Economic Co-operation and Development (OECD) (2013) Privacy Guidelines, and are widely

recognised as providing a good foundation for developing online privacy policies and practices.

These are highlighted in Figure 12.3 and explained as under:

Figure 12.3: Key Considerations in Privacy Policy

• Collection limitation- there should be limits to the collection of personal data. Any such

data should be obtained by lawful and fair means and, where appropriate, with the knowledge or

consent of the concerned party.

• Data quality- personal data should be relevant to the purpose for which they are to be

used, and, to the extent necessary for those purposes, should be accurate, complete, and kept up-

to-date.

• Purpose specification- the purpose for which personal data is collected should be

specified.

• Use limitation- personal data should not be disclosed, made available, or used for other

purposes except with the consent of the individual or where authorised by law.

• Security safeguards- personal data should be protected by reasonable security

safeguards.

• Openness- there should be a general policy of openness about developments, practices,

and policies with respect to personal data.

• Individual participation- individuals should have the right to obtain information about

personal data held by others and to have it erased, rectified, completed, or amended, as

appropriate.

• Accountability- those who collect personal data should be accountable for complying

with the principles.

It should be noted that many of these principles imply transparency concerning who is collecting

data, and what it is being used for.

Challenges of Protecting Privacy

Policy developers must consider a number of key challenges when determining action related to

online privacy. Some widely recognised challenges include:

1 Determining what data needs to be protected. Typically, privacy and data protection laws

apply to personal data, also known as personal information in some jurisdictions. A common

definition for personal data is “any information relating to an identified or identifiable

individual”. It can be difficult to determine which specific types of data should be considered

personal information in a particular context.

2 Protecting privacy when data crosses borders. The Internet spans national borders, yet

privacy and data protection laws are based on national sovereignty. Therefore, special provisions

are needed to protect personal data that leaves one country and enters another in order to ensure

the continuity of data protection for users. Approaches vary, but tend to have regard to whether

the receiving country has “adequate” protection.

3 Real meaningful consent. Privacy and data protection laws typically permit some degree of

collection and use of personal data if the individual gives his or her consent. In theory, this

approach empowers Internet users to have some level of control or choice over the way their data

is collected and used by others. However, in practice, users of online services may not read or

may not understand what it is that they are agreeing to (e.g., because the terms of service are

lengthy and written in complex legal language). Even if they understand the terms, users may be

unable to negotiate them.

Guiding Principles for Privacy Policy

As personal data has monetary and strategic value to others, it is a challenge to ensure that it is

only collected and used appropriately. The following guiding principles promote achieving this

outcome:

❖ Global interoperability- encourage openly developed, globally interoperable privacy

standards (both technical and regulatory) that facilitate transborder data flows while protecting

privacy.

❖ Ethics- encourage privacy frameworks that apply an ethical approach to data collection

and handling. Ethical approaches incorporate, among other things, the concepts of fairness,

transparency, participation, accountability, and legitimacy in the collection and handling of data.

❖ Privacy impact- understand the privacy impact of personal data collection and use.

❖ Anonymity- individuals should have the ability to communicate confidentially and

anonymously on the Internet.

❖ Data minimisation- insist on selective data collection and use of only the necessary data

for only as long as it is needed.

❖ Choice- empower users to be able to negotiate fair data collection and handling terms on

an equal footing with data collectors, as well as be able to give meaningful consent.

❖ Legal environment- promote strong, technology-neutral laws, compliance, and effective

enforcement. These laws should focus on desired privacy outcomes, rather than specifying

particular technological means to direct privacy practices.

❖ Technical environment- encourage open environments that support the voluntary,

consensus-based development of protocols and standards that support privacy-enhancing

solutions.

❖ Business environment- encourage businesses to recognise that privacy respecting

approaches can provide competitive advantages and may lower their exposure to legal risk.

❖ Privacy-by-design principles- promote privacy-by-design throughout the development,

implementation and deployment cycle. Privacy-by-design principles should also be applied to the

development of standards, applications, services, and business processes.

❖ Tools- promote the development of usable tools that empower users to express their

privacy preferences and to communicate confidentially (e.g., encryption), anonymously; and

enable service providers to offer choices and visibility into what is happening with user data.

Legal Framework

The need for legal machinery is felt in case when marketers do not follow the principle of self-

regulation, do not respect consumer's privacy, and indulge in unethical practices. In such cases,

in order to protect the interest of consumers, Government formed an act called Consumer

Protection Act, 1986. This is an Act of the Parliament of India enacted in 1986 to protect the

interests of consumers in India. It makes provision for the establishment of consumer councils

and other authorities for the settlement of consumers' disputes and for matters connected

therewith also.

This act of consumer protection was passed for checking the unfair trade practices and ‘defect in

goods’ and ‘deficiencies in services’. It led to the establishment of a widespread network of

consumer forums and appellate courts all over the country. It has significantly impacted how

businesses approach consumer complaints and empowered consumers to a great extent.

Consumer Protection Councils

In order to provide justice to consumers, who have suffered any loss due to the unethical

practices of the marketers, government has established Consumer Protection Councils at the

national, state and district level to increase consumer awareness.

The Central Consumer Protection Council

The Central Government shall establish with effect from (w.e.f) such date as it may specify in

such notification a Council to be known as the Central Consumer Protection Council, whose job

is to set up Consumer Dispute Redressal Agencies at district, state and national level.

❖ District Consumer Disputes Redressal Forum (DCDRF): Also known as the "District

Forum" established by the State Government in each district of the State. The State Government

may establish more than one District Forum in a district. It is a district level court that deals with

cases valuing up to 20 Lakhs

❖ State Consumer Disputes Redressal Commission (SCDRC): Also known as the "State

Commission" established by the State Government in the State. It is a state level court that takes

up cases valuing less than 1 Crore

❖ National Consumer Disputes Redressal Commission (NCDRC): Established by the

Central Government. It deals with matters of more than 1Crore.

Objectives of Consumer Courts

The objectives of the Consumer Courts is to promote and to protect the rights of the consumers

such as:-

1. The right to be protected against the marketing of goods and services which are

hazardous to life and property.

2. The right to be informed about the quality, quantity, potency, purity, standard and price

of goods or services, as the case may be so as to protect the consumer against unfair trade

practices;

3. The right to be assured, wherever possible, access to a variety of goods and services at

competitive prices ;

4. The right to be heard and to be assured that consumer's interest will receive due

consideration at appropriate forums;

5. The right to seek redressal against unfair trade practices or restrictive trade practices or

unscrupulous exploitation of consumers; and

6. The right to consumer education.

Jurisdiction of District Forum

1. Subject to the other provisions of this Act, the District Forum shall have jurisdiction to

entertain complaints where the value of the goods or services and the compensation, if any,

claimed does not exceed rupees twenty lakhs.

2. A complaint shall be instituted in a District Forum within the local limits of whose

jurisdiction:-

a) – the opposite party or each of the opposite parties, where there are more than one, at the time

of the institution of the complaint, actually and voluntarily resides or carries on business or has a

branch office or personally works for gain, or

b) – any of the opposite parties, where there are more than one, at the time of the institution of

the complaint, actually and voluntarily resides, or carries on business or has a branch office, or

personally works for gain, provided that in such case either the permission of the District Forum

is given, or the opposite parties who do not reside, or carry on business or have a branch office,

or personally work for gain, as the case may be, acquiesce in such institution; or

c) – the cause of action, wholly or in part, arises.

Consumer courts do not have jurisdiction over matters where services or goods were bought for a

commercial purpose.

Jurisdiction of State Commission

Subject to the other provisions of this Act, the State Commission shall have jurisdiction:-

a) – to entertain

i) – complaints where the value of the goods or services and compensation, if any, claimed

exceeds rupees twenty lakhs but does not exceed rupees one crore; and

ii) – appeals against the orders of any District Forum within the State;

Jurisdiction of National Commission

To call for the records and pass appropriate orders in any consumer dispute

(a) to entertain—

(i) complaints where the value of the goods or services and compensation, if any, claimed

exceeds rupees one crore; and

(ii) appeals against the orders of any State Commission; and

(b) to call for the records and pass appropriate orders in any consumer dispute which is pending

before or has been decided by any State Commission. However, the Supreme Court of India has

held that the jurisdiction of National Commission under Revision Jurisdiction is very limited and

can only be exercised when State Commission exceeds its jurisdiction, fails to exercise its

jurisdiction or there is material illegality in the order passed by State Commission.

To conclude, it can be said that, in the world of wireless connectivity, virtual shopping malls and

real-time communication, it is clear that Internet will be touching more lives than ever before.

And as the number of online businesses grow, the difference between “good” and “bad” will be

difficult to judge. Thus, it is high time that a standard code of ethics for e-marketing and

advertising is implemented globally, and compliance to these rules should be made mandatory.

Adherence to these standards must result in rewards to e-marketers, encouraging others to

follow. In the long run what a company needs is a loyal customer base, one that keeps coming

back to their website for the product/service and above all the “experience” that the e-marketers

can offer them.

LET US SUM UP

➢ Payment Gateways prove to be a big help in enabling easy online payments. It is an

application that enables online credit card transactions to take place in the real time with

utmost safety and security.

➢ Payment gateways provide a wide range of processing services which may include

authorization only, authorization and capture, refunds and voids.

➢ They save consumer's time and at the same time reduces administration work.

➢ Cash on delivery (COD), is the sale of goods by mail order where payment is made on

delivery rather than in advance.

➢ COD is highly convenient for consumers as it increases their confidence level and they

need not own a credit/debit card to make online purchases.

➢ In pay-per-click advertising, the advertisers doesn't pay when the ad is displayed, they

only pay when the ad is clicked and leads the consumer to a visit to the advertiser's

website.

➢ While e-marketers have standard privacy policies in place to protect user data, it is

often noticed that they are not very effective.

➢ Businesses are also leveraging the power of social networking platforms and using them

as grounds for “viral” advertising.

➢ As personal data has monetary and strategic value to others, it is a challenge to ensure

that it is only collected and used appropriately.

➢ The need for legal machinery is felt in case when marketers do not follow the principle of

self-regulation, do not respect consumer's privacy, and indulge in unethical practices.

➢ Consumer protection act makes provision for the establishment of consumer councils and

other authorities for the settlement of consumers' disputes and for matters connected

therewith also.

QUESTIONS FOR REVIEW

1. Define the concept of payment gateways. How do they work?

2. "Payment gateways facilitate the online transactions for both: marketers as well as

consumers", do you agree. Explain giving examples of some of the popular options available in

our country.

3. What is COD? List out the various reasons as to why is it so popular in India?

4. What are the various problems faced by marketers in implementing COD? What steps are

taken by them to discourage consumers to place orders on COD?

5. Define the concept of pay-per-click advertising. How does this work and benefit marketers?

6. What are the various ethical considerations being faced by e-marketers these days? Explain

with examples.

7. "Ensuring the privacy and secrecy of consumer's data is the prime responsibility of e-

marketers", comment upon the statement in the light of key considerations in the privacy policy.

8. What are the various challenges to ensuring consumer's privacy? How can these challenges be

handled effectively?

9. Suggest guidelines for ensuring privacy of consumer's data to e-marketers.

10. Explain the legal framework adopted by the government of India to protect the interest of

consumers.

11. Consumer protection act, 1986 tries to provide speedy and easy redressal to consumers

against all frauds and unethical practices of e- marketers. Explain.