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Electronic Check Payment Protocols and Systems. Speaker: Jerry Gao Ph.D. San Jose State University email: jerrygao@email.sjsu.edu URL: http://www.engr.sjsu.edu/gaojerry May, 2000. Topic: Electronic Cash Payment Protocols and Systems. Presentation Outline.

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electronic check payment protocols and systems
Electronic Check Payment Protocols and Systems

Speaker: Jerry Gao Ph.D.San Jose State Universityemail: jerrygao@email.sjsu.eduURL: http://www.engr.sjsu.edu/gaojerryMay, 2000

topic electronic cash payment protocols and systems
Topic: Electronic Cash Payment Protocols and Systems

Presentation Outline

- Overview of electronic cash system- Ecash (Digital Cash)- NetCash- Comparisons and summary

Jerry Gao Ph.D. 5/20000

All Rights Reserved

slide3

Topic: Electronic Cash Payment Protocols and Systems

Overview of Electronic Cash Payment Protocols and Systems

What is an electronic cash payment system?E-commerce application systems must provide payment processing and transaction service to buyers and sellers. A payment system, as a part of E-commerce application system, is a such system which support secured payment processes by providing reliable, secured, and efficient transaction services between sellers and buyers.The basic requirements of a payment system:- Provide secured and confidential transaction processes.- Conduct authentication and authorization for all involved parties.- Ensure the integrity of payment instructions for goods and services.- Simple, availability, cost-effective, efficient, and reliable.

Jerry Gao Ph.D. 5/2000

slide4

Topic: Electronic Cash Payment Protocols and Systems

Actors Involved in Electronic Cash Payment Systems

- Customers: Customers use the digital cash payment systems to make purchases.- Dealers: Dealers have to bear the costs of payment transactions.- Providers for digital payment systems: Providers are intermediaries between dealers and financial institutions. They provide services and training.- Development vendors for digital payment systems:- Financial institutions: Banking systems or organizations who use electronic payment systems.- Trust Centers: They control digital signature keys, and help to secure customer confidence in certain payment systems. They are responsible for the integrity of transmitted data and authenticity of contractors.

Jerry Gao Ph.D. 5/2000

slide5

Topic: Electronic Cash Payment Protocols and Systems

Basic Requirements for Electronic Cash Payment Systems

- Digital money:Payment systems must provide customers and private households with acceptable digital money.Security: Ensure the security of transactions and information privacy of users.- Scalability: A large number of customers and concurrent transactions should be handled in a scalable manner.- Efficient and effective: Payment systems must support efficient and effective payment processing and accounting services for small payment transactions.- Simple: Payment systems must provide customers with simple transparent transactions.

Jerry Gao Ph.D. 5/2000

slide6

Topic: Electronic Cash Payment Protocols and Systems

Basic Requirements for Electronic Cash Payment Systems

- Anonymous: Usually, customers wish to stay anonymous for all involved transactions..- Double spending: Digital coins consists of a number of bits. Payment systems must be able to recognize and/or prevent repeated payments with the same digital coin.- Exchange: Digital money should be convertible into “real” money whenever necessary.- Store: Digital money must be stored locally on hard disks or other media. - Value: Digital cash payment systems must provide a large number of digital coins for circulation and perform authentication checking.

Jerry Gao Ph.D. 5/2000

slide7

Topic: Electronic Cash Payment Protocols and Systems

Advantages of Electronic Cash Payment Systems

- Saved time: - Reduce transaction process time - Speed up transaction processes- Reduced costs: - Reduce transaction costs - Reduce cash distribution costs- Flexibility: - Digital cash can take many forms, including prepaid cards - Digital cash can be converted into different currencies- Reduce cash distribution risk: - Reduce the regular cash distribution risk- Error free and efficient: - Reduce transaction errors

Jerry Gao Ph.D. 5/2000

slide8

Topic: Online Payment Protocols and Systems

Special Features of Electronic Payment Protocols

Important features of electronic cash payment protocols and systems:- Anonymity: This ensure that no detailed cash transactions for customer are traceable. Even sellers do not know the identity of customers involved in the purchases.- Liquidity: Digital cash have to be accepted by all concerned economic agents as a payment method.- Prepaid cards: Buyers can buy prepaid cards that are accepted by special sellers. - Electronic payment processing:

Jerry Gao Ph.D. 5/2000

slide9

Topic: Electronic Check Payment Protocols and Systems

Special Features of Electronic Check Protocols

and Payment Systems

Important features of electronic cash payment protocols and systems:- Anonymity: This ensure that no detailed cash transactions for customer are traceable. Even sellers do not know the identity of customers involved in the purchases.- Liquidity: Digital cash have to be accepted by all concerned economic agents as a payment method.- Prepaid cards: Buyers can buy prepaid cards that are accepted by special sellers. - Electronic payment processing:

Jerry Gao Ph.D. 5/2000

slide10

Topic:Elect ronic Check Payment Protocols and Systems

Electronic Check Payment Protocol: NetBill

Overview of NetBill:- ECash is a payment protocol for anonymous digital money on the Internet. - It is developed by DigiCash Co, of Amsterdam, The Netherlands.- It is currently implemented and offered by Mark Twain Bank, St. Louis since 1995.- DeutscheBank Ag, Frankfurt (Main) offers Ecash as a pilot project to its customers since October 1997.A public trial of the Millicent system was scheduled for the summer of 1997.

Jerry Gao Ph.D. 5/2000

slide11

Topic: Electronic Check Payment Protocols and Systems

Electronic Check Payment Protocols: NetBill

NetBill model: MilliCent protocols use a form of electronic currency called Scrip to connect three involved parties: - vendors, customers, and brokers.Scrip is vendor specific.A Millicent broker:--> medicate between vendors and customers to simplify the tasks they perform.--> aggregate micro-payments--> sell vendor Scrip to customers--> handle the real money in the Millicent system.--> maintain customer accounts and vendors (subScripion services)--> buy and produce large chunks of vendor Scrips (for licensed vendors) Vendors: --> are merchants selling low-value services or information to customersCustomers: --> buy broker Scrip with real money from selected brokers. --> use the vendor Scrips to make purchases.

Jerry Gao Ph.D. 5/2000

slide12

Topic: Electronic Check Payment Protocols and Systems

Electronic Check Payment Protocol: NetBill

NetBill Archecture: (Source: NetBill 1994 Prototype)

Consumer

Application

Checkbook

Merchant

Application

Till

Security

Server

Transaction

Server

User Admin.

Server

Payment &

Collection Server

System Admin.

Server

DB

Jerry Gao Ph.D. 5/2000

slide13

Topic: Electronic Check Payment Protocols and Systems

Electronic Check Payment Protocol: NetBill

Consumer

Merchant

NetBill Server

1. Credit card # (macro-payment protocol)

2. $5.00 Broker scrip(Millicent protocol)

1. $0.19 Vendor scrp + request

Start of week

Transaction Sequence

Jerry Gao Ph.D. 5/2000

slide14

Topic: Electronic Check Payment Protocols and Systems

Electronic Check Payment Protocol: NetBill

Customer

Broker

Vendor

1.0 Broker scrip

2. $0.20 Vendor scrip $4.80 Broker scrip

Purchasing from a vendor

3. $0.20 Vendor scrp + request

4. $0.19 Vendor scrip change + purchased ino/service

Transaction Sequence

Jerry Gao Ph.D. 5/2000

slide15

Topic: Electronic Check Payment Protocols and Systems

Electronic Check Payment Protocol: NetBill

Customer make purchases with vendor Scrips

Vendor

Customer

Vendor sell low-value information and services

Broker sell vendor Scrip

Brokers buy/produce large chunks of “vendor Scrip” for licensed vendors

Broker

Jerry Gao Ph.D. 5/2000

slide16

Topic: Electronic Check Payment Protocols and Systems

Electronic Check Payment Protocol: NetBill

About Scrip: ---> a piece of data used to represent microcurrency within the Millicent systems.Scrip has the following properties:- Scrip is vendor specific, thus has value at one specific vendor only.- Scrip can be spent only once by its owner.- Scrip can be represented any denomination of currency.- Scrip represents a prepaid value.- Scrip make no use of public-key cryptography.- Scrip cannot provide full anonymity. It can be traced and recorded.Scrip like cash has a defined value and can be used to purchase merchandise.Major differences between Scrip and cash:- Scrip can only spent once, and cash can be spent many times.- Scrip is vendor specific, and cash is not.- Scrip can only spent by the customer who obtained it from the broker.- Scrip has an expiration date and a digital signature.

Jerry Gao Ph.D. 5/2000

slide17

Topic: Electronic Check Payment Protocols and Systems

Electronic Check Payment Protocol: NetBill

Scrip Message Structure

Vendor

Value

Scrip-id

customer-id

expiration-date

info

certificate

Jerry Gao Ph.D. 5/2000

slide18

Topic: Electronic Check Payment Protocols and Systems

Electronic Check Payment Protocol: NetBill

Millicent Security Checking: ---> Provide three different security levels.All transactions should be protected, and fraud must be detectable and traceable.-----------------------------------------------------------------------------------------------Millicent Protocol Efficiency Ranking Secure PrivateScrip in the clear 1 No NoEncrypted connection 3 Yes YesRequest signatures 2 Yes No________________________________________________________________.

Jerry Gao Ph.D. 5/2000

slide19

Topic: Electronic Check Payment Protocols and Systems

Electronic Check Payment Protocol: NetBill

Authentication and signature: Millicent protocol uses one-way has functions - such as 128-bit MD5 and HMAC-MD5.- The message is sent in clear, but is protected by the customer_secret in hash function.- Upon receiving the request, the vendor calculates the hash function using a pre-selected message digest function.- The vendor returns, upon receiving this information, the customer can compute the message digest to ensure authenticity.- Signature: a request signature is generated based on the customer_secret by hashing Encryption: No encryption, but maintains a level of security that prevents Scrip being stolen.

Jerry Gao Ph.D. 5/2000

slide20

Topic: Electronic Check Payment Protocols and Systems

Electronic Check Payment Protocol: NetBill

1. Scrip, Request, Request signature

Customer

Vendor

2. Change, Reply, Reply signature

Purchase using a request signature

Customer Secret

Scrip

Request

Request Signature

Compare

Hash

Request Signature

Vendor verifies the request signature

Jerry Gao Ph.D. 5/2000

slide21

Topic: Electronic Check Payment Protocols and Systems

Electronic Check Payment Protocol: NetBill

Vendor secret keys

Master Scrip secret 5

Master Scrip secret 6

Master Scrip secret 7

Vendor

Value

Scrip-id

customer-id

expiration-date

info

Master Scrip secret 6

“certificate”

Hash eg. MD5

To customer

Scrip certificate generation

Jerry Gao Ph.D. 5/2000

slide22

Topic: Electronic Check Payment Protocols and Systems

Electronic Check Payment Protocol: NetBill

Vendor secret keys

Master Scrip secret 5

Master Scrip secret 6

Master Scrip secret 7

Vendor

Value

Scrip-id

customer-id

expiration-date

info

Master Scrip secret 6

certificate

Fromcustomer

compare

certificate

Scrip validation

Jerry Gao Ph.D. 5/2000

slide23

Topic: Electronic Check Payment Protocols and Systems

Comparisons of Electronic Check Payment Protocols

Jerry Gao Ph.D. 5/2000

slide24

Topic: Electronic Check Payment Protocols and Systems

Analysis of Electronic Check Payment Protocols

Jerry Gao Ph.D. 5/2000