paying on the web

7/31/2019 Paying on the Web

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Paying on the web

In todays business world, one of the major concerns is the security of financial and

informational transactions. This security is and one of the obvious and vital steps to the usage of

the Internet for business interactions.

Electronic payment is the financial exchange of value that takes place online between buyers

and sellers. It is an alternative to cash or credit payments. Payment for the products and services

purchased over the Internet is an obvious and vital step in the elecrtonic commerce transaction

process. Purchases over the Internet are increasing dramatically every year. But the process is

not very simple because most transactions are nearly anonymous and take place over a complex

computerized networt comprised of many buyers and sellers. Many security issues worry

people. Making matters worse are the many alternatives and/or financial institutions and

middlement that may be part of the process. Because of this predicament a variety of electronic

payment systems are used today.

Electronic funds transfer is the major from used by banking and retailing industries today totransfer funds electronically instead of using cash or paper documents, such as checks. EFT

uses a variety of information technologies to capture and process money and credit transfers

between banks and businesses, and their customers. A simple example that most people are

aware of are the automated teller machines located everywhere or the, point of sale terminals

located in almost all retail stores. These make it possible for consumers to get cahs or purchase

products or services without having to use cash simply by using a credit or debit card.

In the world of Internet commerce, one of the major concerns in todays marketplace is the

security of Internet transactions. Credit cars information is vulnerable to interception by networt

sniffers: softwer that can recognize and record the credit cart number format, allowing someoneother than the ower to use the card for purchases. Some of the methods used to make these

transactions safer are:

Encryption, or enciphering scrambles data or converts it prior to unauthorized

recipients. This keeps important data from being intercepted, read, or modified illicitly.

Exemples include the following: add the number 3 to the digital representation of each

character in the text; reverse the bit representation of the last foru bits of each byte that

represent a character.

Authentication verifies the ID of the sender and helps to guarantee that the message

has not been altered. It keepa users from misrepresenting thei identity and committing

fraud.

Firewall a computer, or network processor, and software that protects the networ fromintruders not authorized for entry; allows from a secure connection between networks,

and keeps unauthorized users from gaining access to a network.

Non-repudiation documentation that prevents anyone from denying that they send or

received a certain message.

Privacy ability to shield communications from unauthorized viewing.

Many factors affect elecronic payments in todays business world, such as:

Constantly decreasing technology costs,

Reduced operational and processing costs,

Ever-increasing online commerce.


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Traditional methods of processing payments on-line, such as credit cards, are not working that

well; the problems are:

Lack of convenience,

Lack of security

Lack of coverage: individual to individual transactions,

Lach of eligibility: not all potential buyers have credit cards, and

Lack of support from microtransactions. For example, assume you are charging each

user 5 cents from downloading a file from your site. How much will it cost you to

process each transaction and receive your money? Is it really worth it?

The different electronic payment mechanisms include the following:

Digital cahs digital cash combines computerized convenience wiht security and

privacy. It is an improvement over paper cash. Digital cash must have

the following properties:

Digital cash must have a monetary value; cash, bank authorized credit, or a bank

certified cashier check must back it. Digital cash must be interoperable, or exchangeable as payment for other digital cash,

paper cash, goods or services, lines of credit, and items of value, such as deposits in

banking accounts.

Digital cash must be storable and retrievable. The cash could be stored on a remote

computers memory, in smart cards, or on other easily transpored special purpose

devices.

Digital cash should be difficult to copy or tamper with while it is being exchanged. It

should be possible to prevent or detect duplication and double spending of digital cash.

Electronic token

Electronic token is a digital analog of payments backed by

a bank or financial institutions. There are two types of

tokens:

Real Time: (or Pre-paid tokens) - These are

exchanged between buyer and seller, their users pre-

pay for tokens that serve as currency. Transactions

are settled with the exchange of these tokens.

Examples of these are DigiCash, Debit Cards,

Electronic purse etc.

Post Paid Tokens are used with fund transferinstructions between the buyer and seller. Examples

Electronic cheques, Credit card data etc.

Some tokens are specifically designed to handle micro

payments, or pay-ments for small snippets of information

(such as five cents for a file). Some systems target specific

niche transactions; others seek more general transac-tions.

The key is to identify the parties involved, the average

amounts, and the purchase interaction.

Tokens must be backed by cash, credit, electronic bill payments (prearranged and spontaneous),

cashiers checks, letters of credit, or wire transfers. Each option incurs trade-offs amongtransaction speed, risk, and cost. Most transaction settlement meth-ods use credit cards, while


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paying on the web

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