E-Payment Methods

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 Objectives
 To introduce the basic methods of
electronic payment
 Outline
 Trandition Payment Methods
 E-Payment Methods
 Major Architectural Components
of the Web Bank
Server
Client 1
Browser HTTP
Server A
TCP/IP

Client 2 Internet
Internet HTTP App. Database
Server Server Server
Browser

prog1.class
URL index.html prog2.jsp
Server B
Bank
Server
 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
 Selection of Payment Method
 Based on:
– Convenience
– Trace-ability
– Repudiation
– Financial risk
– Fraud protection
 Attacks on traditional methods?
 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
 Requirements of
E-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!
 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
 Various E-Payment Methods
 Credit and Debit card
 Digital Currency
 E-Wallets
 Peer-to-Peer Methods
 Smart card
 Micro-payments
 B2B
 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
 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
 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
 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
 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
 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)
 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