Figure 15.1 Conventional Cryptography

1
Figure 15.1Conventional Cryptography
KEY
ENCRYPT
DECRYPT
SIGNER
RECIPIENT
PLAINTEXT
CIPHERTEXT
PLAINTEXT
2
Figure 15.2Asymmetric Cryptography
PUBLIC KEY
PRIVATE KEY
ENCRYPT
DECRYPT
SIGNER
RECIPIENT
PLAINTEXT
CIPHERTEXT
PLAINTEXT
3
Figure 15.3Message Digest
HASH FUNCTION
DIGEST
DIGEST

SAME?
PLAINTEXT
PLAINTEXT
PLAINTEXT
DIGEST
HASH FUNCTION
4
Figure 15.4
Digitally Signed Document
Plaintext
Plaintext
One-way Hash Function
Step 4
Plaintext
One-way Hash Function
Step 1
Message Digest
Verify?
Step 6
Message Digest
Message Digest
Signature
Encrypt
Decrypt
Step 2
Step 3
Step 5
PUBLIC KEY
PRIVATE KEY
5
Step 1 Signer uses one-way hash function to
create message digest from plaintext. Step 2
Singer encrypts message digest with private key
to create signature. Step 3 Signer sends
plaintext and signature to recipient. Step 4
Recipient uses one-way has function to create
message digest from plaintext. Step 5
Recipient decrypts signature with public key to
create message digest. Step 6 Recipient
compares message digest generated by one-way hash
function to message digest
generated by public key.
6
Figure 15.5Certificate Authority
Signer
Step 2
Certificate Authority
PUBLIC KEY
Request Certificate
Issue
Step 3
CA Certificate
This is signers public key
PRIVATE KEY
Step 1
PUBLIC KEY
Isl Certificate Authority
Sign (Private Key)
Step 4
Verify?
Step 6
Step 5
Signature
Signature


Plaintext
Plaintext
7
Step 1 Signer creates its own public key and
private key. Step 2 Signer requests
certificate from certification authority
(CA). Step 3 CA issues a certificate of
signers public key, signed by CAs private
key. Step 4 Singer uses one-way hash
function to create message digest from plaintext
(Step 1 from Diagram 14.4) and
encrypts message digest with private key to
create signature (Step 2 from
Diagram 15.4). Step 5 Signer sends plaintext
and signature to recipient (Step 3 form Diagram
15.4). Step 6 Recipient uses one-way hash
function to create message digest from plaintext
(Step 4 from Diagram 15.4),
decrypts signature with public key to create
message digest (Step 5 from
Diagram 15.4), and compares the two message
digests (Step 6 from Diagram 15.4).
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Figure 15.6SSL
CA
1
2
Root CA Cert installed in browser
CA cert for Merchant Sig
3
Merchant Cert to Consumer Browser
Consumer
Web Merchant
4
Symmetric key encrypted with Merchant public
key to encrypt communications
9
Figure 19.1Sight Draft for Documentary Collection
At Sight Any City, Ks. May 2,
1997 Pay to the order of Seller Ten Thousand
and no/100 U.S. Dollars Through Banco di
Roma Buer Seller Any City,
Italy Exporter
10
Figure 19.3Issuing the Letter of Credit
Issuing Bank
Beneficiarys Bank
3. Issues Letter of Credit
2. Applies for Letter of Credit
4. Informs Seller Letter of Credit Has Been Issued
5. Goods
Applicant/ Purchaser
Beneficiary/ Seller
1. Contract Calling for Payment by Letter of
Credit
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Figure 19.4Payment by Letter of Credit
Issuing Bank
Beneficiarys Bank
3. Documents Evidencing Shipment
4. Payment
2. Documents Evidencing Shipment
6. Payment
5. Reimbursement
Applicant/ Purchaser
Beneficiary/ Seller
1. Shipment of Goods
12
Figure 27.1Direct Presentment
Payor Bank
Step 2
Step 3
Step 1
Payee
Payee
Step 1 Payee provides goods and services to
payor payor gives check to payee. Step
2 Payee presents check to payor bank payor bank
gives cash to payee. Step 3 Payor bank removes
funds from payors account.
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Figure 27.2Clearinghouse Collection
Step 3
Step 3
Bank 1
Bank 2
Clearinghouse
Step 2
Step 2
Step 1
Step 4
Step 1
Step 4
Bank 1 Customer
Bank 2 Customer
Step 1 Customers deposit checks at their banks.
Their banks credit their accounts. Step 2 Banks
send to the clearinghouse checks they have
received for deposit.
Clearinghouse credits banks for those checks.
Step 3 Clearinghouse sends to banks checks
drawn on them. Clearinghouse debits banks
for those checks. Step 4
Banks debit customer accounts for checks received
from clearinghouse.
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Figure 27.3Direct-Send Collection
S.F. Bank
N.Y. Bank
Step 3
Step 2
Step 4
Step 2
Step 1
Step 4
S.F. Payor
N.Y. Payee
N.Y. Payor
S.F. Payee
Step 1
Step 1 Payees provide goods and services to
payors. Payors give checks to payees. Because
the process proceeds
simultaneously on checks in each city, it can
apply when a New York payor sends a check to
a San Francisco payee and also when a
San Francisco payor sends a check to a New York
payee. Step 2 Payees deposit checks (one in
San Francisco and one in New York). Their banks
credit their accounts. Step 3 Each bank
sends to the other the checks the first bank has
received that are drawn on the other.
Specifically, the San Francisco bank sends
to New York the checks that the San Francisco
bank has received that are drawn
on the New York bank the New York bank sends to
San Francisco the checks that
the New York bank has received that are drawn on
the San Francisco bank. Funds are transferred
to settle the difference in amount.
Step 4 Both banks remove funds from the
payors accounts the San Francisco bank from
its customers and the New York
bank from its customers.
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Figure 27.4Federal- Reserve Collection
Federal Reserve Bank
Step 3
Step 4
Depository Bank
Payor Bank
Step 2
Step 5
Step 1
Payee
Payor
Step 1 Payee provides goods and services to
payor payor gives check to payee. Step 2
Payee deposits check. Depositary bank credits
payees account. Step 3 Depositary bank
sends check to the Federal Reserve bank. The
Federal Reserve bank credits the
depositary bank for the check. Step 4 The
Federal Reserve bank sends the check to the payor
bank and debits it for the
check. Step 5 The payor bank debits the
payor for the check.
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Figure 28.1POS Conversion
Step 4
Customers Bank
Merchants Bank
Step 3
Step 5
Step 4
Step 2
Step 1
Customer
Merchant
Step 1 The Customer gives a check to the
Merchant. The Merchant runs the check through a
reader (capturing the
information on the MICR line of the check) and
returns the paper check to the
Customer. Step 2 The Merchant sends to its
bank a message including both the amount of the
transaction and the data from the
check about the Customers bank account. Step 3
The Merchants Bank sends an ACH debit entry
to the Customers Bank. Step 4 The
Customers Bank responds to that entry by
removing funds from the Customers account
and sending them to the Merchants Bank
(through the ACH network). Step 5 The
Merchants Bank credits the Merchants account.
17
Figure 28.2ACH Checks
Step 4
Customers Bank
Merchants Bank
Step 3
ACH Provider
Step 4
Step 5
Step 1
Step 1
Customer
Merchant
Step 2
Step 1 The Customer sends payment information
to the ACH Provider (probably through a link at
the merchants website). The
information should include the information from
the MICR line of Customers check (the
ABA routing number of the Customers Bank
and the Customers account number at the
bank). Step 2 Based on the commitment to pay
represented by that information, the Merchant
completes the transaction. It
might ship the goods at that time, or it might
wait a few days to receive payment. Step 3
The ACH Provider sends the ACH debit entry to the
Customers Bank. Step 4 The Customers Bank
responds to that entry by removing funds form the
Customers account and sending
them to the Merchants Bank (through ACH network).
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Figure 31.1Bill Aggregators
Biller
Step 1
Customer
Step 2
Customers Bank
Step 4
Aggregator
Step 5
Step 3
Step 1
Biller
Step 1 Billers send bills to Aggregator
(perhaps through intermediary service
providers). Step 2 Aggregator advises
Customer of bills Step 3 Customer views
bills and authorizes payment. Step 4
Aggregator directs Customers Bank to pay
bills. Step 5 Customers Bank pays Billers
(directly or through a financial institution.
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Figure 32.1Using Stored-Value Cards
Merchants Bank
Step 4
Operator
Step 3
Step 1
Step 2
Customer
Merchant
Step 1 Cardholder obtains card and stores
value on it. Step 2 Cardholder transfers
transaction data to Merchant and receives goods
or services. Step 3 Merchant sends
transaction data to Operator. Step 4
Operator sends funds to account at Merchant's
Bank. In accountable systems, Operator
deducts funds from Cardholders shadow
balance.
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Figure 32.2Using Electronic Money
Step 5
Merchants Bank
Issuer
Step 3
Step 1
Step 2
Customer
Merchant
Step 4
Step 1 Customer opens account and creates
ecoins. Step 2 Customer sends coins to
Merchant. Step 3 Merchant confirms
authenticity of coins by communication with
Issuer. Step 4 Merchant releases product to
Customer. Step 5 Issuer sends funds to
account at Merchants Bank.
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Figure 34.1Software Leasing
Financier
Payments over time
One-time payment
Software License
Licensor
User
22
Figure 34.2Article 9 View of General Intangibles
Financier/ Secured Party
Promissory Note

Software License
Licensor/ Account Debtor
User/ Debtor
23
Figure 34.3Finance Licensing
Software License
Sublicense
Financier
Licensor
User
Payments over time
One-time payment
24
Figure 38.1Account-Based Lending Systems
Step 1 Borrower deposits assets with
Intermediary. Step 2 Lender arranges with
Intermediary to have control of assets. Step 3
On default, Lender takes assets or directs
Intermediary to dispose of them
on Lenders behalf.