Payment Systems for Electronic Commerce Chapter

1
Payment Systems for Electronic CommerceChapter
10
2
Electronic Payment Systems

• Electronic commerce involves the exchange of some
  form of money for goods and services.
• Implementation of electronic payment systems is
  in its infancy and still evolving.
• Electronic payments are far cheaper than the
  traditional method of mailing out paper invoices
  and then processing payments received.

3
Electronic Payment Systems

• Estimates of the cost of billing one person vary
  between 1 and 1.50.
• Sending bills and receiving payments over the
  Internet promises to drop the transaction cost to
  an average of 50 cents per bill.
• Today, three basic ways to pay for purchases
  dominate business-to-consumer commerce.
• Credit Card
• Charge Card
• Debit Card

4
Debit Cards, Credit Cards and Charge Cards

• A credit card, such as a Visa or a MasterCard,
  has a preset spending limit based on the users
  credit limit.
• A charge card, such as one from American Express,
  carries no preset spending limit.
• A debit card removes the amount of the charge
  from the cardholders account and transfers it to
  the sellers bank.
• The collective term payment card refers to
  credit cards, debit cards, and charge cards.

5
Advantages and Disadvantages of Payment Cards

• Advantages
• Payment cards provide fraud protection.
• They have worldwide acceptance.
• They are good for online transactions.
• Disadvantages
• Payment card service companies charge merchants
  per-transaction fees and monthly processing fees.

6
Is there a future for electronic cash?

• Electronic cash is a general term that describes
  the attempts of several companies to create a
  value storage and exchange system that operates
  online in much the same way that
  government-issued currency operates in the
  physical world.
• Online cash storage means that an online bank is
  involved in all transfers of electronic cash.

7
Examples of Electronic Cash Services

• CheckFree permits users to pay all their bills
  with online electronic checks.
• PayPal.com is a free service that earns a profit
  on the float, which is money that is deposited in
  PayPal account.
• Microsoft Passport Wallet comes preinstalled in
  Internet Explorer 4.0 and higher versions. All
  the personal data you enter into your Microsoft
  Passport, including your name, address, and
  credit card information, are encrypted and
  password-protected. Passport consists of four
  integrated services Passport single sign-in
  service, Passport Wallet Service, Kids Passport
  service, and public profiles.

8
Standards for Secure eCommerce Transactions

• Encryption (cryptography)
• The translation (scrambling) of data into a
  secure code
• Secure Sockets Layer (SSL)
• A transport mechanism for an encrypted session
  between a browser and a server
• Session only valid once, if SSL connection is
  broken a new session must start
• Well tested technology, widely supported by
  browsers and web servers
• Cost of implementation is lowest
• Requires a Digital Certificate to enable the
  encrypted session

9
Transaction Security with Certificates
10
Emerging standards for secure eCommerce
transactions

• Secure Electronic Transactions (SET)
• First commercial implementation in December 1997
• Accepts eWallet credentials
• Not yet widely deployed
• Provides better mechanism for automatic
  verification of credit cards
• Both the merchants web store and the customers
  credit card are required to have digital
  certificates
• Drawbacks may be the learning curve for
  customers, may not be widely adopted in C2B but
  may be popular for B2B
• Not turnkey expensive to implement