IMS 6485: E-Commerce Security & Payment Systems 1 Dr. Lawrence West, MIS Dept., University of Central Florida [email protected] Topics Payments in the

IMS 6485: E-Commerce Security & Payment Systems

1Dr. Lawrence West, MIS Dept., University of Central [email protected]

Topics

• Payments in the Value Chain

• Payment Processing—old and new

• Market Spaces—This space for rent

• Desirable properties of payment systems

• A laundry list of payment options—pros & cons

• Three 900 lb Gorillas

• PayPal



Chapter Topics

• Two versions of this book past had payment systems and security in their own chapters

• Why do you think that the authors chose to combine them in this edition?

– What do the two have in common?



Security Threats

• What are the categories of security threats identified in the chapter (12 pages worth)?

• If you are a firm engaged in e-commerce what is your relationship to the threat?

– Victim (if so, how)?

– Innocent bystander?

– Are your customers victims (if so how)?

– Do your customers perceptions of threats affect their dealings with you?

• What actions are in your decision space?



Dimensions of Security

• Map the threats identified in the chapter to the six dimensions of e-commerce security (Which dimension(s) can each threat impact?)

– Integrity − Confidentiality

– Nonrepudiation − Privacy

– Authenticity − Availability

• How does the threat impact your business?(What is the mechanism through which you lose money)?



Security Remediation/Counter Measures

• Encryption—what are the tradeoffs?

– What are the network effects?

• Securing communication channels—what are the options and tradeoffs



Security Planning

• Will you base your firm's security plan on the three pages of content at the beginning of Section 5.4?

• So what should you do?



Security Tradeoffs

• What are the examples of tradeoffs between security measures and usability?

• Can you give examples of common "tensions" associated with security implementation?

• Who makes the decisions when improved security requires decreased usability?



Public Policy

• How might public policy, including regulatory requirements, affect your e-commerce business?

• How might public attitudes regarding Internet security affect your business?



Payments Occur Throughout the Value Chain

TRANS-PORTATIONCOMPANY

BROKER

INFORMATION FLOWS(SELLERS TO BUYERS)

FLOW OF GOODS

ADVERTISING .

INVOICE .

ORDER INFORMATION .

INFORMATION FLOWS(BUYERS TO SELLERS)

REQUEST INFORMATION .

PLACE ORDER .

MAKE PAYMENTS .

Animal

Vegetable

Mineral

INVENTORY

INVENTORY

INVENTORY

FACTORYWHOLE-SALER

INTERMEDIATE

GOODS

WHOLE-SALER

RETAILER

Where did the majorityof the chapter's focus

apply?



Audiences for Payment Processing

• Who have been the traditional participants in payment processing (prior to eCommerce)?

• Who are the new participants in eCommerce payment processing?

• How have traditional participants entered the new market space?

• Have new participants integrated into traditional market spaces?

• What decisions does each participant make

– (And what are the implications for you?)



Market Spaces

• What specific market spaces did the chapter discuss?

– PayPal case?

• What market spaces were created with the advent of eCommerce?

• Which has been the most troublesome to fill?



Market Spaces (cont.)

• What are the limitations of existing payment systems when used on the web?

– Cash

– Checks

– Credit Cards

• Do these limitations create new market spaces (or opportunities)?

• Are there network effects associated with payment systems?

– Don't just think e-commerce



Desirable Payment System Properties

• What are the desirable properties of an eCommerce payment system from the consumer's point of view?

• From the merchant's point of view?

• What are the differences in the list?

• Again, how do these differences create a market for new services (market spaces)?



Consumer Preference

• What cultural/regional differences in the acceptability of payment systems did you notice in the chapter?

• Where else were consumer preferences (taste) listed as limitations on the acceptance of electronic payment services?

– Do you share these hesitations?

– Which do you think are more likely to persist?

– Which more likely to become more acceptable over time?



Digital Cash

• Digital Cash sought to create a new medium for the Internet that avoided issues with traditional payment forms

• Previous editions of the text listed five examples of "digital cash" services

– Three are out of business

– One is under indictment

• What pressures and economic principles that we have talked about do these new cash substitutes struggle against?



Digital Cash (cont.)

• Exercise: Research the following two companies and decide whether you would wish to be involved with them as either a customer or merchant

– E-gold

– ClearBIT

• Justify your answers



Stored Value Systems

• What new revenue model is introduced with stored value systems?

• BitPass micropayment system ceased operations in Jan 2007—what hurdle did they need to overcome?

• Did "smart cards" really address eCommerce needs?

– Efforts by American Express and Visa in the U.S. to marry the functionality of their credit cards with that of smart cards have largely failed. (Earlier Edition)

• But why has the Octopus smart card been such a resounding success in Hong Kong?



Digital Accumulating Balance Systems

• What traditional services have used accumulating balance systems (since well before the Internet, or even computers)?

• What market space do these systems address in the digital age?

• What implementing decisions must be made?



Digital Credit Cards

• What market space do these cards seek to occupy?

• Go to http://www.echarge.com/index.html.

– Would you sign up with this service?

• Go to http://www.billmelater.com

– Would you sign up?

– What hidden (not very well publicized) agreement are buyers making?

– What does this site offer that few of the others did (well)?

– What revenue models are they using?



Digital Check Payment Systems

• How many of you have used a virtual check to make a payment?

• What market space does the electronic check seek to inhabit?



Electronic Billing Presentment & Payment

• What do you think is the driving factor behind this capability?

– Hint: Who pays and who benefits?

– What is the nature of the benefit?

• How many of you have elected paperless bills from a vendor from which you receive regular bills?



B2B Payment Systems

• The book gives short coverage to B2B payment systems

• 75-85% of B2B payments in the U.S. still use paper checks

– Why the resistance?

– Small and mid-size firms in the U.S. reportedly spend around $14.50 to produce, deliver, collect, and report a paper invoice



Three 900 lb. Gorillas in Payment Systems

• What have been/are/will be the impacts of these factors on the eCommerce payment market?

1. Network externalities

2. Consumer taste (preference)

3. Micropayments

• Also—what opportunities have we seen for leverage in payment systems?



PayPal—Why has it Worked?

• PayPal does a lot of online business

• How does it work?

– What steps does user have to take to make payments?

– Receive payments?

– Who pays?

• Why does it work?

Documents

IMS 6485: E-Commerce Security & Payment Systems 1 Dr. Lawrence West, MIS Dept., University of Central Florida [email protected] Topics Payments in the