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 Technology in Society 24 (2002) 331–347
www.elsevier.com/locate/techsoc

Electronic payment systems: an analysis and

comparison of types
Hsiao-Cheng Yu a,∗, Kuo-Hua Hsi a, Pei-Jen Kuo b
a
Institute of Management of Technology, National Chiao-Tung University, 1001 Ta-Hseuh Road,
Hsinchu 30010, Taiwan
b
IBM Taiwan, Taipei 100, Taiwan

Abstract

Parties conducting electronic business have usually never seen each other face-to-face, nor
do they exchange currency or hard copies of documents hand-to-hand. When payments are to
be made over a telecommunications network such as the Internet, accuracy and security
become critical. Other factors affecting the choice of alternative systems, such as their appli-
cable environments, their potential for evolution, and their likely acceptance by merchants and
consumers, must also be considered. This paper explores the advantages and limitations of
several different electronic payment systems: online credit card payment, electronic cash, elec-
tronic checks, and small payments. Systematic and detailed comparisons of alternative systems
are provided. This analysis is intended to be useful for companies planning to adopt or to
improve an electronic payment system.  2002 Elsevier Science Ltd. All rights reserved.

Keywords: Electronic payment system; Internet; E-commerce

1. Introduction

The worldwide proliferation of the Internet led to the birth of electronic commerce,
a business environment that allows the electronic transfer of transactional infor-
mation. Electronic commerce flourished because of the openness, speed, anonymity,
digitization, and global accessibility characteristics of the Internet, which facilitated
real-time business activities, including advertising, querying, sourcing, negotiation,
auction, ordering, and paying for merchandise.

∗
Corresponding author. Tel.: +886-3-571-2121-57508; fax: +886-3-572-6749.
E-mail address: chengyu@cc.nctu.edu.tw (H.-C. Yu).

0160-791X/02/$ - see front matter  2002 Elsevier Science Ltd. All rights reserved.
PII: S 0 1 6 0 - 7 9 1 X ( 0 2 ) 0 0 0 1 2 - X
332 H.-C. Yu et al. / Technology in Society 24 (2002) 331–347

The main concern with electronic payment is the level of security in each step of
the transaction, because money and merchandise are transferred while there is no
direct contact between the two sides involved in the transaction. If there is even the
slightest possibility that the payment system may not be secure, trust and confidence
in this system will begin to erode, destroying the infrastructure needed for elec-
tronic commerce.
There are currently four major categories of electronic payment systems: (1) online
credit card payment, (2) electronic cash, (3) electronic checks and (4) small payments
[21]. Each of these systems has its advantages and disadvantages. This paper com-
pares the four types of electronic payment systems in terms of the requirements
of merchants and consumers, the appropriate business environments, and the future
potential of expandability.
This research was based on literature reviews and experts’ opinions. Data from
market surveys, technical journals, company reports, product catalogs, research
reports, newspapers, and magazines were analyzed.

2. Assessment criteria for an electronic payment system

An electronic payment system can be assessed along the following five dimen-
sions: the technological aspect, the economic aspect, the social aspect, the insti-
tutional aspect, and the regulatory aspect. The assessments are described in detail
[10,13] in the following sections.

2.1. Technological aspect

When designing an electronic payment system, the system’s ability to adapt to

users’ changing needs, the effectiveness and security of each transaction, the degree
of compatibility among other payment systems, and the complexity in adapting to
the system all need to be taken into account. The Secure Electronic Transaction
(SET) is a protocol co-developed by MasterCard and Visa for secure bankcard trans-
actions [9,15,20]. The Secure Socket Layer (SSL) is a session layer protocol pro-
posed by Netscape for securing exchanges between a client and a server [4,5]. Other
payment systems such as Netbill [8,16,17] and Millicent [3,6,11] are more appropri-
ate for micropayment, i.e., payments of trivial amounts for which the use of credit
cards is uneconomical.
The degree of security involves: users’ security when depositing or withdrawing
money; data, the security of application programs and databases; the security during
transactions and payments; the security of the Internet and system; and security main-
tenance and management. Among these, the security of transactions and payments
is one of the utmost concerns for companies and consumers. Transaction and pay-
ment security needs to satisfy the following requirements:

1. Authority: Also referred to as validity. This is one of the most important things
to take into consideration. The purpose is to verify the claimed identities of all
 H.-C. Yu et al. / Technology in Society 24 (2002) 331–347 333

parties involved, and to prevent third parties from sabotaging information or mak-
ing unauthorized transfers.
2. Privacy: The purpose is to protect information that is sent via the Internet, and
to prevent unauthorized personnel or company employees from accessing confi-
dential information.
3. Integrity: This includes the prevention of tampered transactions, making mistakes
when sending information, and avoids accidentally sending a transaction twice,
or accidentally sending of a transaction with false information, to prevent con-
sumers and producers from denying their involvement in a transaction or from
changing information in the transaction.
4. Non-repudiation: The electronic payment system must be designed in such a way
that consumers and companies will be unable to deny their participation in a
transaction if they were involved. Therefore, records of details, such as the time
of the transaction, the information involved in the transaction, etc., must be kept
in a secure database.

2.2. Economic aspect

The economic needs can be divided into two categories: one is associated with
the real currency value aspect; the other is related to the degree of widespread use
of the Internet. The preceding two factors can be used to analyze the economic needs
that include:

1. The cost of transactions: This refers to the cost paid by the seller and buyer
involved in the transaction. This can be divided into direct cost and indirect cost.
In choosing the electronic payment system for small payments, the cost of the
transaction will be a deciding factor.
2. Atomic exchange: This means that, during a transaction, the consumer will pay
money or something equivalent in value.
3. User range: This refers to the range of users to which an electronic payment
system is accessible. This includes whether the system is accessible in all countries
of the world, to all ages.
4. Value mobility: This means that the payment method is not restricted to the com-
pany that created the value. The value can be used in different places, given away,
or exchanged for currency in equal value.
5. Financial risk: Consumers are very concerned about the degree of security
involved in online transactions. So, in addition to added security measures, to
prevent information from being stolen or made public, the question of what will
happen if private information is made public should be considered when designing
the electronic payment system.

2.3. Social aspect

In addition to satisfying the needs associated with the technical and economic
aspects of the electronic payment system, the system still needs to address the social
needs if society is to trust and use it. The social needs include:
334 H.-C. Yu et al. / Technology in Society 24 (2002) 331–347

1. To protect the privacy of the consumer, and to prevent companies or financial

institutions from tracing user information.
2. Degree of acceptability: The electronic payment system should be simple and
user-friendly. The degree of user friendliness is a factor when consumers decide
which system to use, especially for small payments.
3. Mobility: Users do not necessarily always use the same computer when accessing
the Internet. In the case of families or public computer centers, many people often
share the same computer. Therefore, it would be unwise and impractical to store
payment methods on hardware. Electronic payment methods should have mobility,
and should be able to be accessible anywhere. This is another factor that will
affect a user’s decision in selecting a payment system.

2.4. Institution and law aspects

In addition to satisfying the technical, economic, and social needs, the payment
system must abide by governmental regulations and the law. Currently some of the
concerns associated with law include: digital signatures, digital transfers and the
legality of payments, electronic commerce contracts, technical standards, collection
of rental taxes, and international transactions, etc. Owing to the fact that intuitions
and laws are related to the government, each district and nation has its own set of
policies. Therefore, the electronic payment system must abide by the respective poli-
cies of the district and country.

3. Electronic payment system overview

When companies enter the B2C electronic commerce market, choosing an elec-
tronic payment system that will work well with the way they run their business that
is both popular and safe is a major concern. Therefore, this research paper aims to
analyze different kinds of electronic payment systems based on electronic payment
system needs, and target electronic payment systems that have already entered the
market or received support from W3C or other conglomerates. (Some of these
include: VCC, SSL, CyberCash, SET, Ecash, Mondex, Visa Cash, FSTC, Millicent,
MPTP, and IBM small payments [2,7,12,14,18,19].) This paper also supplies infor-
mation for companies that wish to construct B2C payment systems.

3.1. Electronic payment system types

The electronic payment systems can be divided into online credit card payments,
electronic cash, electronic checks, and small payments, because of the different types
of payment methods and transaction environments [1]. Among the four categories,
small payment is a transaction dependent on the size of the payment and not on the
type of transaction. The remaining three categories are dependent on the type of
transaction. It is worth noting that Ecash, electronic cash, and smart card electronic
cash (for example, Mondex or Visa Cash) are very different in function. For example,
 H.-C. Yu et al. / Technology in Society 24 (2002) 331–347 335

Ecash uses blind signatures and relies on a heavily secured database and extensive
online checking to make sure the amount is deducted once it has been used. On the
other hand, Mondex and Visa Cash operate offline; the transaction is processed in
the respective accounts of both parties afterwards. Not only does they not use the
blind signatures technology, they do not have to maintain a large database. Therefore,
this research paper compares and contrasts Mondex, Visa Cash, and other smart card
types of electronic cash with online credit card transactions, traditional electronic
cash, and electronic checks, to help the reader understand better the different types
of electronic payment systems.
Online credit card payments, electronic cash, electronic checks, and smart card
types of electronic cash systems are compared in Table 1.

3.2. An evaluation of the electronic payment system

Within similar types of electronic payment systems, the encoding and decoding
mechanisms of individualized payment systems follow different procedures. There-
fore, this paper evaluates the different types of payment systems and analyzes the
differences between similar types of system to help the reader understand better
certain characteristics of the systems and identify whether the systems satisfy their
needs.

3.2.1. Online credit card payment

Currently, the more popular and developed online credit card payment systems
include VCC, SSL, InstaBuy, and SET [15]. Table 2 shows how the online credit
card payment system fared when it was tested for the needs described in Section
2 [1].

3.2.2. Electronic cash

Currently, the more popular and developed electronic cash systems include Ecash,
Mondex, and Visa Cash. Table 3 shows how the electronic cash system fared when
it was tested for the needs described in Section 2.

3.2.3. Electronic checks

Currently, FSTC is the only popular and developed electronic check system. Table
4 shows how the electronic check system fared when it was tested for the needs
described in Section 2.

3.2.4. Small payments

Since the early stages of small payment mechanisms the limit ranged from under
US$10 to under US$0.25. The systems were not categorized by structure. Therefore,
in making small payments, some systems used prepaid methods (for example,
Millicent), while other used pay later methods (for example, IBM small payments).
Currently, the more popular and developed small payment systems include Milli-
cent, MPTP, and IBM small payments. Millicent is already in use, MPTP is W3C’s
chosen small payment agreement, and IBM small payment is competing with Milli-

Table 1
Comparison of electronic payment systems
Characteristics Online credit card payment
Actual payment time Paid later
Transaction information The store and bank checks
transfer the status of the credit card
Online and offline Online transactions
transactions
Bank account Credit card account makes
involvement the payment
Users Any legitimate credit card
user
Party to which payment Distributing bank
is made out
Consumer’s transaction Most of the risk is borne by
risk the distributing bank,
consumers only have to bear
part of the risk
Current degree of Credit card organizations
popularity check for certification then
total the purchases.
Therefore, it can be used
internationally, and is the
most popular payment type
Anonymity Partially or entirely
anonymous
Electronic cash
Prepaid
Free transfer. No need to leave
the name of parties involved
Online transactions
No involvement
Anyone
Store
Consumer is at risk of the
electronic cash getting stolen,
lost, or misused
Unable to meet financial
Internet standards in the areas
of expansion potential and
internationalism
Entirely anonymous
Electronic checks
Paid later
Electronic checks or payment
indication must be endorsed
Offline transfers are allowed
The bank account makes the
payment
Anyone with a bank account
Store
Consumer bears most of the
risk, but the consumer can stop smart card getting stolen, lost,
check payments at any time
Cannot meet international
standards, therefore it is not
very popular
No anonymity
336
Smart cards
Prepaid
The smart cards of both parties
make the transfer
H.-C. Yu et al. / Technology in Society 24 (2002) 331–347
Offline transfers are allowed
The smart card account makes
the payment
Anyone with a bank or credit
card account
Store
Consumer is at risk of the
or misused
Credit card organizations check
for certification then total the
purchases. Therefore, it can be
used internationally, and is
becoming more widely used
Entirely anonymous, but, if
needed, the Central Processing
Agency can ask stores to
provide information about a
consumer
(continued on next page)
Table 1 (continued)

Characteristics Online credit card payment Electronic cash Electronic checks Smart cards

H.-C. Yu et al. / Technology in Society 24 (2002) 331–347

Small payments Transaction costs are high. Transaction costs are low, Allows stores to accumulate Transaction costs are low.
Not suitable for small suitable for small payments debts until it reaches a limit Allows stores to accumulate
payments before paying for it. Suitable debts until it reaches a limit
for small payments before paying for it. Therefore,
it is suitable for small
payments
Database safeguarding Safeguards regular credit Needs to safeguard a large Safeguards regular account Safeguards regular account
card account information database, and maintain records information information
of the serial numbers of used
electronic cash
Transaction information Can be signed and issued Face value is often set, and Can be signed and issued Can be deducted freely in
face value freely in compliance with the cannot give change freely in compliance with the compliance with the limit
limit limit
Real/virtual world Can be partially used in real Can only be used in the virtual Limited to virtual world, but Can be used in real and virtual
word world can share a checking account worlds
in the real world
Limit on transfer Dependent on the limit of the Dependent on how much is No limit Dependent on how much
amounts credit card prepaid money is saved.
Mobility Yes No No Yes

337
 338
Table 2
An evaluation of the online credit card payment system

Characteristics VCC SLL InstaBuy SET

Authority Good: VCC card number and Fair: uses only the consumer’s Good: InstaBuy account number Good: uses SET certification
PIN are used to check identity account information to establish and PIN are used to establish and consumer’s account
identity identity information to check identity

H.-C. Yu et al. / Technology in Society 24 (2002) 331–347

Privacy Good: actual card number is not Fair: uses actual card number to Fair: uses actual card number to Fair: uses actual card number to
sent through the Internet. The make transaction. At risk of make transaction. At risk of make transaction. At risk of
VCC card number is limited to information being stolen information being stolen information being stolen
Internet use
Integrity Yes: uses hash function to Yes: uses hash function to Yes: uses digital signatures to Yes: uses digital signatures to
ensure integrity ensure integrity ensure integrity ensure integrity
Non-repudiation None None Yes: uses digital signatures to Yes: uses digital signatures to
ensure integrity ensure integrity
Expansion Good Good Fair: when the number of users Fair: because the process is
increases, to ensure that the complex, this uses asymmetric
server’s gold key will not be golden keys. Therefore when
easily extracted, the gold key the number of users increases,
needs to be lengthened. Because the processing time increases
of this, the length of time accordingly
needed to complete security
measures increases
Transaction Good Good Fair: using public golden key Fair: using public golden key
efficiency added security would increase added security would increase
the time needed to complete the time needed to complete
transaction transaction
Compatibility Good: compatible with all types Good: compatible with all types Good: compatible with all types Good: compatible with all types
of browsers of browsers of browsers of browsers
Acceptability Good Good Good Poor: needs to construct entirely
open golden key structure (PKI)
(continued on next page)
Table 2 (continued)
Characteristics VCC
Transaction cost About the same as regular
credit card transaction costs
Atomic exchange None: consume first, payment
later
User range Fair: limited to people who
have a credit card
Value mobility None: cannot be transferred
among parties
Financial risk Low: most of the risk is borne
by the credit card industry
Anonymity Good: companies are unable to
attain information about the
consumer’s VCC account, and
distributors are unable to attain
details about the spending habits
of the consumer
Convenience Fair: besides needing to have a
credit card account, consumers
must apply for a VCC account
Mobility Good: there is no limit on
where it can be used
PIN, personal identification number.
SLL InstaBuy SET
About the same as regular A bit higher than credit card A bit higher than credit card
credit card transaction costs transactions: besides regular transactions: besides regular
credit card transfer costs, there credit card transfer costs, there
is still the fixed cost of the is still the fixed costs of
H.-C. Yu et al. / Technology in Society 24 (2002) 331–347
public golden key patent applying for certification and
the public golden key patent
None: consume first, payment None: consume first, payment None: consume first, payment
later later later
Fair: limited to people who Fair: limited to people who Fair: limited to people who
have a credit card have a credit card have a credit card
None: cannot be transferred None: cannot be transferred None: cannot be transferred
among parties among parties among parties
Low: most of the risk is borne Low: most of the risk is borne Low: most of the risk is borne
by the credit card industry by the credit card industry by the credit card industry
Fair: companies are able to Fair: companies are able to Good: companies are unable to
attain information about the attain information about the attain information about the
consumer’s credit card account, consumer’s credit card account, consumer’s VCC account, and
but the distributor is unable to but the distributor is unable to distributors are unable to attain
attain details about the spending attain details about the spending details about the spending habits
habits of the consumer habits of the consumer of the consumer
Good: as long as the consumer Fair: besides needing to have a Fair: consumers need to apply
has a credit card, it is credit card account, consumers for SET certification from the
convenient to make transactions need to apply for and install certification center
InstaBuy electronic purse
Good: there is no limit on Good: there is no limit on Poor: restricted to computers
where it can be used where it can be used that have the consumer’s SET
certification installed
339
 340
Table 3
An evaluation of the electronic cash system

Characteristics Ecash Mondex Visa Cash

Authority Fair: uses PIN to establish identity Fair: uses PIN to establish identity Fair: uses PIN to establish identity
Privacy Good: the store or third parties online Good: the store or third parties online Good: the store or third parties online
have no way of attaining the consumers have no way of attaining the consumers have no way of attaining the consumers

H.-C. Yu et al. / Technology in Society 24 (2002) 331–347

bank account information
Integrity Yes: uses blind signatures to ensure
integrity
Non-repudiation None: stores have no way of knowing
who is on the other side of the transaction
Expansion Poor: as the number of users increases,
the size of the databank that needs to be
protected will increase as well, thereby
lengthening the time needed to complete
a transaction
Transaction efficiency Poor: needs to enter a large database to
make comparisons
Compatibility Poor: is incompatible with other financial
systems or electronic payment systems
Acceptability Good
Transaction cost Low
Atomic exchange Yes: payment first, consume later
User range Good: consumers do not need to have a
bank account or credit card
Value mobility Yes: can be transferred among parties
bank account information
Yes: uses signatures to ensure integrity
Yes: uses signatures to ensure non-
repudiation
Good
Good
Fair: currently, the magnetic strip readers
for Mondex and Visa Cash are
incompatible
Poor: companies and consumers both
need to install smart card magnetic strip
readers
The cost of regular transactions is
relatively low, but one needs to account
for the fixed costs of smart cards and
magnetic strip readers
Yes: payment first, consume later
Fair: users are limited to those who have
a bank account or credit card
Yes: can be transferred among parties
bank account information
Yes: uses signatures to ensure integrity
Yes: uses signatures to ensure non-
repudiation
Good
Good
Fair: currently, the magnetic strip readers
for Mondex and Visa Cash are
incompatible
Poor: companies and consumers both
need to install smart card magnetic strip
readers
The cost of regular transactions is
relatively low, but there is the fixed costs
of smart cards and magnetic strip readers
Yes: payment first, consume later
Fair: users are limited to those who have
a bank account or credit card
Yes: can be transferred among parties
(continued on next page)
 H.-C. Yu et al. / Technology in Society 24 (2002) 331–347
Table 3 (continued)

Characteristics Ecash Mondex Visa Cash

Financial risk High: people are solely responsible if it is
lost or stolen
Anonymity Good: companies have no way of finding
out the consumer’s account information,
and the distributors of Ecash have no way
of finding out how the consumer spent
the Ecash
Convenience Fair: consumer must first install Ecash
cash purse
Mobility Poor: consumers can only use computers
that have the Ecash cash purse installed
High: people are solely responsible if the
smart card is lost or stolen
Good: but if necessary, the Central
Processing Agency can ask stores to
provide consumers’ transaction records
Fair: consumer must apply for the smart
card
Fair: can only be used with a smart card
magnetic strip reader
High: people are solely responsible if the
smart card is lost or stolen
Good: but if necessary, the Central
Processing Agency can ask stores to
provide consumers’ transaction records
Fair: consumer must apply for the smart
card
Fair: can only be used with a smart card
magnetic strip reader

PIN, personal identification number.

341
342 H.-C. Yu et al. / Technology in Society 24 (2002) 331–347

Table 4
An evaluation of the electronic check system

Characteristics FSTC

Authority Good: uses digital signatures and digital certification to check identity
Privacy Fair: although it uses asymmetrical golden keys to calculate and send
information, consumer’s payment account information is at risk of being
stolen
Integrity Good: uses information certification number and asymmetrical golden keys
for increased security, to ensure the integrity of transaction information
Non-repudiation Good: uses digital signatures and digital checks to ensure non-repudiation
Expansion Good: the consumer’s and store’s electronic checkbook complete the
transaction. Financial systems only provide check certification and
exchanges
Transaction efficiency Good: but if the transaction is offline, the transaction efficiency will
decrease
Compatibility Good: is compatible with an actual check account and traditional financial
organizations
Acceptability Poor: company and consumers must both install a smart card reader
Transaction cost Normal transaction costs are low, but it must be responsible for electronic
checkbooks (smart cards) and digital certification and other fixed costs
Atomic exchange None: use check first, pay later
User range Fair: limited to those who have a check account
Value mobility Yes: uses endorsement limit. Can be transferred among parties
Financial risk Fair: consumers can stop check payments for questionable transactions
Anonymity None: everyone who writes out and transfers a check need to sign their
names
Convenience Fair: consumers need to apply for an electronic checkbook from a bank
Mobility Good: includes signing, certification, signing temporary saving checks,
checking the check’s legitimacy and uniqueness

cent to become W3C’s set micropayment per-fee-links standard. Table 5 shows how
the small payment system fared when it was tested for the needs described in Sec-
tion 2.

4. Conclusions and suggestions

After analyzing and comparing the different types of payment systems, and accord-
ing to the development of electronic payment systems, one can reach the follow-
ing conclusions.

4.1. Online credit card payment

Although using a credit card requires the payment of a high fee and even though
credit cards have a limit on how much money you can charge to the card, it is
popular because of its acceptability in many foreign countries and also because it is
a relatively safe method of payment. For this reason, this method of payment is
Table 5
An evaluation of the small payment system

Characteristics Millicent MPTP IBM small payments

Authority Good: uses the serial number of Good: uses “consumer’s identification Good: uses “day’s electronic
temporary currency and certification to certificate” to check identity certification” to check identity
check identity

H.-C. Yu et al. / Technology in Society 24 (2002) 331–347

Privacy Good: uses consumer’s serial number to Good: all sent information passes Good: personal account information is
complete transaction, account through DSS and El Gamal and other not send through the Internet
information is not sent through the offline added security measures
Internet
Integrity None: does not use signatures or the Good: at the same time, all sent None: does not use signatures or the
hash function to compare information information passes through DSS and El hash function to compare information
stored in the database Gamal and other offline added security stored in the database
measures
Non-repudiation None: does not use signatures, Yes: uses signatures and digital None: does not use signatures,
certification or other security measures certification to ensure non-repudiation certification or other security measures
Expansion Good Good Good
Transaction efficiency Good Good Good
Compatibility Good: can share a bill with banks, ISPs, Good: financial organization can assume Good: is compatible with ISPs, banks,
water fees, electricity fees and other the role of the broker telecommunications users, and websites
fees
Acceptability Good Good Good
Transaction cost Low Low Low
Atomic exchange Yes: pay first, consume later None: consume first, pay later None: consume first, pay later
User range Fair: is limited to consumers who have Fair: is limited to consumers who have Good: can accept ISPs, banks, and
a credit card or bank account a credit card account telecommunications and website
customers
Value mobility None: cannot be transferred among None: cannot be transferred among None: cannot be transferred among
parties parties parties
Financial risk Low: because transferred amount is low, Low: the store has control of its Low: the electronic certification is only
financial risk is also low financial risk valid for one day. There is also a limit
of the amount for offline use
(continued on next page)

343

Table 5 (continued)
Characteristics Millicent
Anonymity Good: can use the user’s serial number
to replace user’s name
Convenience Poor: consumers must apply for a
special certificate from a broker each
time a transaction is made, to preserve
the temporary currency different stores
might give out. When the certificate
expires, the consumer must apply for
another one
Mobility Poor: can only be used with computers
that have the Millicent cash purse
installed
ISP, Internet service provider.
344
H.-C. Yu et al. / Technology in Society 24 (2002) 331–347
MPTP IBM small payments
Good: can use MPTP account number to Good: can use blind signatures to ensure
replace the real account number and anonymity of stores and account server
user’s name
Fair: consumers must attain identity Poor: consumers must extract the “day’s
certification from a broker electronic certification” from the IBM
small payment account server every
time a transaction is about to be made
Poor: can only be used with computers Poor: can only be used with computers
that support the MPTP agreement that have IBM small payment cash
purse installed
 H.-C. Yu et al. / Technology in Society 24 (2002) 331–347 345

suitable for most consumers and retail markets. Among the different online credit
cards, VCC is secure and protects the privacy of the user when the user makes online
transactions. VCC also has the advantage of being used everywhere; its use is not
limited to one location, and is suitable for wireless setups and web TV. Therefore,
in the future, the use of virtual credit cards will escalate.

4.2. Electronic cash

Smart cards lack the disadvantages of traditional electronic cash; for example, the
maintenance of large databanks and also the inability to give change. But they have
most of the advantages of electronic cash, including anonymity, payment between
parties, and low transaction fee. Therefore, in the future, smart cards will replace
traditional electronic cash in the market. But because electronic cash is not replace-
able when it is lost, consumers will bear the risk of electronic cash being lost or
stolen. To solve the described problem, the amount of electronic cash used should
always be a relatively small amount, making this the perfect payment system for
small payments.
Currently, the two large smart card systems have different kinds of policies, and
are not compatible with the magnetic strip reader. Before it is ascertained which
smart card system will become the main one used in markets, banks are unwilling
to adopt either system. Therefore, when establishing a smart card system, its compati-
bility with other systems is a key success factor in popularizing the system and for
its development.
In addition, there are other organizations that wish to enter the smart card market.
Therefore, different brands of smart cards and different organizations must establish a
global smart card standard interface, and need to establish a trustworthy and certified
organization in charge of overseeing the making of all smart card systems compat-
ible, otherwise the smart card products will not develop.

4.3. Electronic checks

Because the direct cost of electronic checks is high, they can only be used in a
virtual world; they does not protect users’ privacy. Therefore this method is not
suitable for most consumers. But for governments and private corporations, most
transactions and deals made between corporations and corporations or between cor-
porations and the government are publicized, and the need for user privacy is not a
concern. Also, since the amount of money transferred is usually a large sum, online
credit card payments or electronic cash systems are both unable to make such a large
transfer. So electronic checks are suitable for corporations and the government.
Currently, FTSC’s participants consist mostly of American financial organizations,
research organizations and government agencies. FTSC lacks participants from other
countries and organizations. In the global trend, FSTC should plan to cooperate with
other countries’ companies or agencies (for example, W3C) to become widely used
all over the world; otherwise, if it is only used in America, it will not become
popularized worldwide.
346 H.-C. Yu et al. / Technology in Society 24 (2002) 331–347

4.4. Small payments

Consumers are gradually beginning to accept the fact that information has value,
and are willing to pay a reasonable price to browse through information. According
to the value of the information, not only will small payments be more reasonable
than a “member” set price, they will also be more convenient for those consumers
who are not frequent users. Therefore pay-per-click and per-fee-links will definitely
become an online trend for transactions. But since small payment structures are not
brought forth by international financial organizations, and it does not use traditional
financial systems or methods as its structure, to increase consumer acceptability there
needs to be cooperation with banks, Internet service providers, the telecommuni-
cations industry, and websites and customer services. The described industries pro-
vide servers or become suppliers, therefore compiling bills, to promote system com-
patibility, and to gain the customers of these industries.

4.5. Others

Wireless and wideband Internet is a trend in future telecommunications. WAP and

televisions that are able to access the Internet are increasingly becoming a trend day
by day. Consumers are no longer limited to using their personal computers to access
the Internet and buy merchandise. Therefore, personal computers, digital televisions,
personal digital assistants, and other wireless installations must have the electronic
payment function. This is a trend for future electronic payment systems.
Secondly, there are more types of electronic payment systems and the same elec-
tronic payment system may have different distributors. Therefore, to increase the
frequency of use of electronic payment systems and to increase the loyalty of dis-
tributors, it is necessary for the other industries to share the same policies and to
provide deals. For example, they can form alliances with the telecommunications,
traffic, water, electricity, insurance, financial and other industries, to undergo online
bill payment and search, or to provide consumer points and discounts on products.
In addition, distance is not a factor on the Internet; online consumers come from
different countries. Therefore, electronic payment systems must have the function
of exchanging currencies. The system must track all applicable fluctuating exchange
rates and perhaps also take into consideration any applicable sales taxes, which will
vary by locality and over time. No matter where the website is based, or where the
consumer is, everyone should be able to use the same electronic payment system,
and not have to reapply for an electronic payment system that uses the desired cur-
rency. This step is necessary to make the electronic payment system multi-functional
and enable it to compete in the international market.

References

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Hsiao-Cheng Yu is an associate professor in the Institute of Management of Technology, Chiao-Tung Univer-

sity, Taiwan. His current research interests include telecommunications policies and e-commerce strategies.
Yu earned a B.S. degree in electronic engineering from Chung-Yuan University, Taiwan, in 1972, and a Ph.D.
in Industrial & Systems Engineering from Georgia Institute of Technology, Atlanta, Georgia in 1981. He was
a telecommunications consultant with Contel Information System in Great Neck, NY from 1981 to 1985. He
then joined AT&T Bell Labs as a system engineer and architecture planner from 1985 to 1992.

Kuo-Hua Hsi serves as a colonel in the army and is currently a Ph.D. student in the Institute of Management
of Technology, Chiao-Tung University, Taiwan. He received a B.S. in Mechanical Engineering from the Acad-
emy of Army in 1984, and an M.S. in Management of Information from the National Defense University,
Taiwan, in 1998. His research interests include technology transfer, global logistics, and e-commerce.

Pei-Jen Kao graduated from the Depatment of Electrical Engineering, National Taiwan University, Taipei in
1998. She received an MBA degree from Institute of Management of Technology, Chiao-Tung University, in
2000. She is currently an IT specialist of IBM Taiwan.