d7b85electronic payment systems

8/3/2019 d7b85Electronic Payment Systems

1/31

ELECTRONIC PAYMENT SYSTEMMade By:

Apurva


2/31

Overview of Electronic Payments

The availability of appropriate e-payment method is a crucial

element of e-business.

Basic Assessment for the e-business owner/ management.

Which methods of e-payment will the business be ready forcreditcard, e-check, e-cash?

Will traditional payment methods i.e cash, paper checks be accepted?

Or will a combination of both traditional and e-payment method be

accepted?


3/31

Requirements for e-payments

Atomicity

Money is not lost or created during a transfer

Good atomicity

Money and good are exchanged atomically

Non-repudiation

No party can deny its role in the transaction

Digital signatures


4/31

Two storage methods

On-line

Individual does not have possession personally of electronic cash

Trusted third party, e.g. online bank, holds customers cash

accounts

Off-line

Customer holds cash on smart card or software wallet

Fraud and double spending require tamper-proof encryption


5/31

E-payment

Information

$

Products/servi

ces

onlineoffline


6/31

E-Payment

Offline options: Indicate national and international wire-transfer instructions on

the payment page.

Off-line credit card payments. It consist of a form page where

all the essential credit card details are to be keyed in by thecard holder.


7/31

Desirable Properties of Digital Money

Universally accepted

Transferable electronically

Divisible Non-forgeable, non-stealable

Private (no one except parties know the amount)

Anonymous (no one can identify the payer)

Work off-line (no on-line verification needed)

No known system satisfies all.


8/31

Types of E-payments

E-cash

Electronic wallets

Smart card Credit card


9/31

Electronic Cash

Primary advantage is with purchase of items less than $10

Credit card transaction fees make small purchases unprofitable

Micropayments

o Payments for items costing less than $1


10/31

E-cash Concept

Merchant

Consumer

Bank

1

2

3

4

5

1. Consumer buys e-cash from Bank

2. Bank sends e-cash bits to consumer (after

charging that amount plus fee)

3. Consumer sends e-cash to merchant

4. Merchant checks with Bank that e-cashis valid (check for forgery or fraud)

5. Bank verifies that e-cash is valid

6. Parties complete transaction: e.g., merchant

present e-cash to issuing back for deposit

once goods or services are delivered

Consumer still has (invalid) e-cash


11/31

Electronic Cash Issues

E-cash must allow spending only once

Must be anonymous, just like regular currency

Safeguards must be in place to prevent counterfeiting

Must be independent and freely transferable regardless ofnationality or storage mechanism

Divisibility and Convenience


12/31

Advantages and Disadvantages of

Electronic Cash Advantages

More efficient, eventually meaning lower prices

Lower transaction costs

Anybody can use it, unlike credit cards, and does not require

special authorization

Disadvantages

Susceptible to forgery


13/31

Electronic Cash Security

Complex cryptographic algorithms prevent double

spending

Anonymity is preserved unless double spending is attempted

Serial numbers can allow tracing to prevent money

laundering

Does not prevent double spending, since the merchant or consumer

could be at fault


14/31

Past and Present E-cash Systems

Checkfree

Allows payment with online electronic checks

Clickshare

Designed for magazine and newspaper publishers

CyberCash

Combines features from cash and checks

CyberCoins

Stored in CyberCash wallet, a software storage mechanism located oncustomers computer

Used to make purchases between .25c and $10


15/31

Past and Present E-cash Systems

DigiCash

Allowed customers to purchase goods and services using anonymous

electronic cash

Coin.Net

Electronic tokens stored on a customers computer is used to makepurchases

MilliCent

Developed by Digital, now part of Compaq

Electronic scrip system

Participating merchant creates and sells own scrip to broker at a discount


16/31

Electronic Wallets

Stores credit card, electronic cash, owner identification and

address

Makes shopping easier and more efficient

o Eliminates need to repeatedly enter identifying information

into forms to purchase

o Works in many different stores to speed checkout

Amazon.com one of the first online merchants to eliminate repeat

form-filling for purchases


17/31

2/16/00 EMTM 553 17

An Electronic Checkout Counter Form


18/31

Electronic Wallets Agile Wallet

Developed by CyberCash

Allows customers to enter credit card and identifying information once,stored on a central server

eWallet

Developed by Launchpad Technologies Free wallet software that stores credit card and personal information on

users computer, not on a central server; info is dragged into paymentform from eWallet

Microsoft Wallet

Comes pre-installed in Internet Explorer All information is encrypted and password protected

Microsoft Wallet Merchant directory shows merchants setup to

accept Microsoft Wallet


19/31

Entering Information Into Microsoft Wallet


20/31

Smart Cards

Magnetic stripe 140 bytes, cost $0.20-0.75

Memory cards

1-4 KB memory, no processor, cost $1.00-2.50

Optical memory cards

4 megabytes read-only (CD-like), cost $7.00-12.00

Microprocessor cards

Embedded microprocessor

o (OLD) 8-bit processor, 16 KB ROM, 512 bytes RAM

o Equivalent power to IBM XT PC, cost $7.00-15.00o 32-bit processors now available


21/31

Smart Cards

Plastic card containing an embedded microchip

Available for over 10 years

So far not successful in U.S., but popular in Europe,Australia, and Japan

Unsuccessful in U.S. partly because few card readersavailable

Smart cards gradually reappearing in U.S.; successdepends on: Critical mass of smart cards that support applications

Compatibility between smart cards, card-reader devices, andapplications


22/31

Smart Card Applications

Ticketless travel Seoul bus system: 4M cards, 1B transactions since 1996

Planned the SF Bay Area system

Authentication, ID

Medical records

Ecash

Store loyalty programs

Personal profiles

Government

Licenses

Mall parking

. . .


23/31

Credit Cards Credit card provides a card holder credit

to make purchase up to amount fixed by acard issuer.

In B2C business, it continues to be themost used form of payment system givenits high convenience.

Entities that involve in the credit cardpayment system include

- Card holder

- Merchant (seller)

- Card Issuer (Your bank)- Acquirer (merchants financial institution

- Card Association (Visa, Master Card etc)

- Third party processor


24/31

Payment Acceptance and Processing

Merchants must set up merchant accounts to acceptpayment cards

Law prohibits charging payment card until merchandise is

shipped

Payment card transaction requires:

Merchant to authenticate payment card

Merchant must check with card issuer to ensure funds are available

and to put hold on funds needed to make current charge

Settlement occurs in a few days when funds travel through bankingsystem into merchants account


25/31

EMTM 553

Processing a Payment Card Order


26/31

Credit Card Processing


27/31

Risk in using Credit cards

Customer uses a stolen card or account number to fraudulently purchasegoods or service online

Family members use bankcard to order goods/ services online, but havenot been authorized to do so.

Customer falsely claims that he or she did not receive a shipment

Hackers find the ways into an e-commerce merchants paymentprocessing system and then issue credits to hacker card account numbers.


28/31

Risk in using Credit cards

Extra protection when there's no card

Card-not-present (CNP) merchants must take extra precaution against fraud exposureand associated losses. Anonymous scam artists bet on the fact that many Visa fraud

prevention features do not apply in this environment. Follow these recommendations to

help prevent fraud in your card-not-present transactions.

Quick steps to ensure against CNP fraud

Obtain an authorization.1. Verify the card's legitimacy:

a. Ask the customer for the card expiration date, and include it in your authorization

request. An invalid or missing expiration date might indicate that the customer does not

have the actual card in hand.

b. Use fraud prevention tools such as Visa's Address Verification Service (AVS), CardVerification Value 2 (CVV2), and Verified by Visa.


29/31

Main factors when selecting e-payment

method Availability (bank system, laws and regulations)

The consideration of size and type of business, type of a target

group of consumers, types of products and services.

The ability to provide security against fraudulent activity Being cost effective for low value transaction fees

Being protective of the privacy of the users

Easy to use, and being convenient for purchasing on the web

based e-business


30/31

Concerns of e-payment mechanism Security.

Feel secured from being hijacked by unauthorized party orprocesses. The need to fill out credit card numbers and otherpersonal information on the Internet creates unsecured feelingfurther than the current transaction.

Acceptability. A wide range of parties needs to acceptpayment.

Convenience. To make small purchase, the action required

during a transaction should minimal.

Cost


31/31

Thanks..

d7b85electronic payment systems

Documents