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7/30/2019 Electronic Pyment Systems
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Electronic Payment Systems
Electronic Commerce,
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Online Payment Basics
Cash, checks, credit cards, and debit cards
account for more than 90 percent of allconsumer payments in the United States
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Payment Cards
The term payment card describes all types of
plastic cards used to make purchases
Credit card
Has a spending limit based on a users credit
history
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Payment Cards (continued)
Debit card
Removes an amount from a cardholders bankaccount
Transfers it to the sellers bank account
Charge card
Carries no spending limit Amount charged is due at the end of the billing
period
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Advantages and Disadvantages of
Payment Cards Advantages:
Worldwide acceptance
Built-in security for merchants
Disadvantage:
Payment card service companies chargemerchants per-transaction fees and monthly
processing fees
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Payment Acceptance and
Processing
Steps followed once a merchant receives a
consumers payment card information:
Merchant authenticates payment card Merchant checks with payment card issuer
To ensure that credit or funds are available
Puts a hold on the credit line or the funds needed tocover the charge
Settlement occurs
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Open and Closed Loop Systems
Closed loop systems
Card issuer pays the merchants that accept the
card directly and does not use an intermediary
Open loop systems
Involve three or more parties
Systems using Visa or MasterCardare examples
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Merchant Accounts
To process payment cards for Internet
transactionsan online merchantmust set upa merchant account
New merchants must supply:
Business plans
Details about existing bank accounts
Business and personal credit histories
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Processing Payment Cards Online
InternetSecure
Provides secure payment card services
First Data
Provides merchant payment card processing services
with the following programs:
ICVERIFY and WebAuthorize
Banks connect to an Automated Clearing House(ACH)through highly secure, private leased
telephone lines
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Electronic Cash
Term that describes any value storage and
exchange system created by a private entity
that:
Does not use paper documents or coins Can serve as a substitute for government-issued
physical currency
Attractive in two arenas:
Sale of goods and services of less amount
Sale of goods and services to those without credit
cards
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Micropayments and Small
Payments Micropayments
Internet payments for items costing say foreg.
from a few cents to app roximately a do l lar
Small payments
Payments of less than say less than $10
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Privacy and Security of Electronic
Cash Concerns about electronic payment methods
include:
Privacy and security
Independence
Portability
Convenience
Advantages of electronic cash include being:
Independent and portable
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Holding Electronic Cash: Online
and Offline Cash Online cash storage
Trusted third party is involved in all transfers of
electronic cash
Holds consumers cash accounts
Offline cash storage
Virtual equivalent of money kept in a wallet
No third party is involved in the transaction Double-spending
Spending electronic cash twice
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Advantages and Disadvantages of
Electronic Cash Advantages of electronic cash:
Transactions are more efficient
Transfer on the Internet costs less than processingcredit card transactions
Disadvantages of electronic cash:
Use provides no audit trail
Susceptible to forgery
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Providing Security for Electronic
Cash Cryptographic algorithms
Keys to creating tamperproof electronic cash that
can be traced back to its origins
Anonymous electronic cash Electronic cash that cannot be traced back to the
person who spent it
Creating truly anonymous electronic cash Requires a bank to issue electronic cash withembedded serial numbers
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Electronic Cash Systems
CheckFree
Largest online bill processor in the world
Provides online payment processing services
Clickshare
An electronic cash system aimed at magazine and
newspaper publishers
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Electronic Cash Systems
(continued) PayPal
Provides payment processing services to
businesses and to individuals Peer-to-peer (P2P) payment system
Free payment clearing service for individuals
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Electronic Wallets
Hold credit card numbers, electronic cash,
owner identification, and contact information
Give consumers the benefit of entering their
information just once
Make shopping more efficient
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Electronic Wallets (continued)
Server-side electronic wallet
Stores a customers information on a remote
server belonging to a particular merchant or walletpublisher
Client-side electronic wallet
Stores a consumers information on his or her own
computer
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Microsoft .NET Passport
An electronic wallet operated by Microsoft
Passport consists of four integrated services:
Passport single sign-in service (SSI)
Passport Wallet service
Kids Passport service
Public profiles
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Yahoo! Wallet
Server side electronic wallet offered byYahoo!
Lets users store information about severalmajor credit and charge cards
Many industry observers and privacy rights
activist groups are concerned aboutelectronic wallets
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W3C Micropayment Standards
Development Activity Common Markup for Micropayment Per-Fee-
Links
Standards developed by W3C Electronic
Commerce Interest Group (ECIG)
Provide extensible and interoperable way to embedmicropayment information in a Web page
Extensible system
One that developers can add to (or extend) withoutvoiding any earlier work on the system
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Stored-Value Cards
Stored-value cards can be an elaborate smart
card with a microchip that records currency
balance
Common stored-value cards include:
Prepaid phone, copy, subway, and bus cards
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Magnetic Strip Cards
Magnetic strip cards
Cannot send or receive information
Cannot increment or decrement value of cashstored on the card
Processing must be done on a device into which
the card is inserted
Smart cards are better suited for Internet
payment transactions
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Smart Cards
Are stored-value cards
Can hold private user data, such as financial
facts
Can store about 100 times more informationthan a magnetic strip plastic card
Safer than conventional credit cards
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Smart Cards (continued)
Smart Card Alliance:
Promotes benefits of smart cards
Promotes widespread acceptance of multiple-
application smart card technology
Members include companies in banking, financial
services, computer technology, and healthcare
Promotes compatibility among smart cards, cardreader devices, and applications
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Internet Technology and the
Banking Industry Check Clearing for the 21st Century Act
(Check 21)
Permits banks to eliminate the movement of
physical checks entirely
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Phishing Attacks
Basic structure:
Attacker sends e-mail messages to a large
number of recipients
Message states that an account has beencompromised and the matter should be corrected
Message includes a link
User enters a login name and password, which
the perpetrator captures Once inside a victims account, the perpetrator
can access personal information
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Phishing Attack Countermeasures
Most important step that companies can take
today is to educate Web site users
Many companies contract consulting firms
that specialize in anti-phishing work
Anti-phishing technique
Monitor online chat rooms used by criminals
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Summary
Most popular forms of payment on the
Internet include:
Credit cards
Debit cards
Charge cards (payment cards)
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Summary (continued)
Electronic cash is:
A form of online payment
Slow to catch on in the United States
Especially useful for making micropayments
Advantages of electronic cash:
Portable, anonymous, and usable for international
transactions
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Summary (continued)
Electronic wallets
Provide convenience to online shoppers
Eliminate the need to reenter payment card and
shipping information at a sites electronic checkoutcounter
Smart cards are intended to replace the
collection of plastic cards people now carry
Phishing expeditions create a significantthreat to online financial institutions and their
customers