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Comp2513 E-Payment Methods. Daniel L. Silver, Ph.D. Objectives. To introduce the basic methods of electronic payment Reference: Deital Ch. 4. Outline. Trandition Payment Methods E-Payment Methods. Major Architectural Components of the Web. Bank Server. Client 1. Browser. HTTP TCP/IP.

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comp2513 e payment methods

Comp2513E-Payment Methods

Daniel L. Silver, Ph.D.

objectives
Objectives
  • To introduce the basic methods of electronic payment
  • Reference: Deital Ch. 4

Daniel L. Silver

outline
Outline
  • Trandition Payment Methods
  • E-Payment Methods

Daniel L. Silver

major architectural components of the web
Major Architectural Components of the Web

Bank

Server

Client 1

Browser

HTTP

TCP/IP

Server A

HTTP

Server

App.

Server

Database

Server

Internet

Client 2

Browser

prog1.class

prog2.jsp

URL

index.html

Server B

Bank

Server

Daniel L. Silver

traditional payment methods
Traditional Payment Methods

Payment: The transfer of money from one individual or legal entity to another

  • Cash
  • Personal Cheques
  • Money orders (Bank note)
  • Credit cards
  • Debit cards

Daniel L. Silver

selection of payment method
Selection of Payment Method
  • Based on:
    • Convenience
    • Trace-ability
    • Repudiation
    • Financial risk
    • Fraud protection
  • Attacks on traditional methods?

Daniel L. Silver

credit cards
Credit Cards
  • A very common method of payment
  • Cards are issued by a bank
  • Unique 16-digit number (including check digits) and an expiration date
  • Third party authorization companies verify purchases

Daniel L. Silver

credit card business model logical money flow
Credit Card - Business ModelLogical Money Flow

3. Clearance/Settlement

Visa

(3rd Party)

Customer

Bank

Store’s

Bank

2. Credit

Authorization

4. Payment

Store

Customer

1. Charge

What can you do if your statement shows

a fraudulent purchase?

Daniel L. Silver

credit card it physical data flow
Credit Card - ITPhysical Data Flow

3rd Party

Authorization

System

(Visa)

Customer

Bank

System

EFT

Customer

EFT

Store’s

Bank

System

Card Info,

Signature

CARD

Authorization

Reader

Request

Authorization

Program

56k bps

modem

POS Terminal

OK!

Daniel L. Silver

requirements of e payment methods
Requirements ofE-Payment Methods
  • Enable an honest customer to convince a seller to accept payment
  • Prevent a dishonest customer from making unauthorized or fraudulent payments
  • Ensure the privacy of honest participants
  • Scalable to very large numbers of customers
  • Integrate with existing and evolving systems

NOT EASY!

Daniel L. Silver

e payment pros cons
E-Payment Pros/Cons
  • Pros:
    • Potential for great flexibility
    • Low transaction costs
    • Rapid and diverse purchase power
  • Cons:
    • Perfect copying of transactions is possible
    • Vulnerability to world-wide attack
    • Lack of anonymity, potential for privacy intrusion

Daniel L. Silver

various e payment methods
Various E-Payment Methods
  • Credit and Debit card
  • Digital Currency
  • E-Wallets
  • Peer-to-Peer Methods
  • Smart card
  • Micro-payments
  • B2B

Daniel L. Silver

use of credit card on the web
Use of Credit Card on the Web

Store’s

Bank

System

3rd Party

Authorization

System

cybercash.com

EFT

Customer

Bank

System

Authorization

Server A

HTTP

Server

App.

Server

Database

Server

Internet

Client 1

Browser

prog.jsp

URL

index.html

Daniel L. Silver

credit card fraud
Credit Card Fraud
  • A major problem for E-commerce
  • The merchant has no legal proof of purchase unless the buyer uses authentication certificate
  • Companys such as Visa, nochargeback.com and CyberCash (now VeriSign) are working to limit fraud:
    • Visa has established high risk business models and best practices info for merchants
    • Nochargeback.com has lists of fraudlent cards, e-mail addresses and postal addresses
    • VeriSign/CyberCash has employed AI to catch frauders

Daniel L. Silver

digital currency
Digital Currency
  • Digital cash accounts like traditional bank accounts
  • Buyers deposit cash in the account and spend it at E-Commerce sites (acct # is passed using secure proprietary protocol)
  • E-Comm merchants can feel sure of payment
  • Customers do not need a credit card and spending is limited to account balance
  • www.ecash.com

Daniel L. Silver

e wallets
E-Wallets
  • Established by financial institutions in partnership with member E-Commerce sites
  • Allows customer to submit billing and shipping info with one click at member sites
  • Also can store e-Cheques, e-Cash and credit card information
  • Not as popular as originally projected
  • Entrypoint’s InfoGate offers an e-wallet

Daniel L. Silver

peer to peer methods
Peer-to-Peer Methods
  • Digital cash via email (eCash.com)
  • PayPal.com – digital payment system
    • Acts as a trusted third party (e.g. auction purchase)
    • To send money:
      • Sender sets up an account and requests to send payment
      • Sender places payment into the receivers account by credit-card
      • Reciever is notified of payment via email
      • Receiver can transfer funds to bank account or request a cheque
    • There is also a request payment method
    • FOR FREE .. ? What is the their business model ?

Daniel L. Silver

smart cards
Smart Cards
  • Cards with computer chips embedded on their faces – very common in Europe
  • Used for health care, transportation, ID, retail, pay phones, loyalty programs, banking machines
  • Smart card readers interface with card and request user PIN for access
  • Bank machines can load cards with cash and then merchants can download cash from card
  • Returns anonymity of purchase to customer
  • GemPlus, MasterCard are leading supplier of SCs

Daniel L. Silver

micro payments
Micro-Payments
  • Long distance phone call charge is an example of a micro-payment
  • Digital Equipment Corporatiion (DEC) researchers originally envisioned MPs:
    • Payment per newspaper article ($0.005)
    • Payment by stock quote ($0.001)
    • Payment per click (Qpass, Inc)
  • Has not been popular, instead advertisers pay for info, or customers pay flat rates … Why?

Daniel L. Silver

why have micro payments failed
Why have micro-payments failed?
  • Overly complicated for customer and business – technology & accounting
  • Income is very dependent on customer use (difficulties in cashflow management)
  • Customer anxiety – could act as a deterent
  • Difficulties in standardization – lost of different approaches, variant media

Daniel L. Silver

slide21
B2B
  • B2B transactions are the fastest area of $ growth on the web
  • B2B transactions are substantially larger than B2C
  • Paymantech is major provider:
    • 24/7 availability, all manner of EFT supported
    • many management tools and reporting methods
  • Ecredit.com offers real-time automated credit approval and financing
  • TradeCard offers comprehensive B2B E-commerce facilities on an international scale

Daniel L. Silver