UNIT-IV

What is Electronic Payment System

Electronic Payment System (e-Payment) is a type of payment conducted via electronic or

online mediums.

 Online payment systems eliminate the need for cash or cheque payments.

It is a unique payment method that allows you to conduct online transactions via digital
wallets, bank cards and internet banking systems

The funds are directly debited from your bank account.

Types of Electronic Payment System

The RBI has introduced various cost-effective payment solutions as an alternative to cash
transactions.

The commonly used types of electronic payment systems include:

 ECS Payments

For bulk and repetitive payments like salary credit, interest payment, dividend payments
from companies, etc., the RBI introduced the Electronic Clearing Service (ECS) credit
scheme in the 1990s.

This system enables payers to credit a specific amount directly into the payees account on
a particular date.

enables recurring payments to banks, Mutual Fund companies, service providers, utility
companies, etc.

The bank collects payment from your account and passes it on to the relevant companies.
 Electronic Fund Transfers: NEFT, RTGS, and IMPS

National Electronic Fund Transfer (NEFT), Real-Time Gross Settlement (RTGS), and
Immediate Payment Services (IMPS) are three modes of electronic fund transfers.

With NEFT, you can transfer any amount of money, while the minimum transaction limit
for RTGS is INR 2 lakhs.

These transactions are cleared in half-hour batches, whereas IMPS transactions have a
daily limit of INR 5 lakhs and are instantly cleared.
Pre-Paid Payment Systems

These include the purchase of goods and services using bank cards.

You can use internet and mobile banking facilities, third party or bank digital and mobile
wallets, and credit and debit cards to make payments on domestic and international e-
commerce websites.
 Advantages of Electronic Payment System

Having explained what is e-payment system, here are its primary advantages.

1. Lower costs

E-payments eliminate the costs associated with paper cheques, cash and postage.

Payments conducted via electronic payment systems like credit card or debit card charges,
processing fees, internet fees, etc., are lower.

2. Highly accessible

You only need an internet-enabled device like a smartphone or computer to access the various
type of types of electronic payment systems from any place, any time.

3. Speedy transactions

You can buy the product within seconds, transfer money, pay your loan EMIs, get salary credits,
and more with electronic payments.
 What Is an Electronic Check (E-Check)

An electronic check, or e-check, is a form of payment made via the Internet, or another
data network, designed to perform the same function as a conventional paper check.

Since the check is in an electronic format, it can be processed in fewer steps.

How an Electronic Check (E-Check) Works

An electronic check is part of the larger electronic banking field and part of a subset of
transactions referred to as electronic fund transfers (EFTs).

This includes not only electronic checks but also other computerized banking functions
such as ATM withdrawals and deposits, debit card transactions, and remote check
depositing features.

The transactions require the use of various computer and networking technologies to gain
access to the relevant account data to perform the requested actions.
 What is a smart card

A smart card is a physical card that has an embedded integrated chip that acts as a
security token.

Smart cards are typically the same size as a driver's license or credit card and can be made
out of metal or plastic.

 They connect to a reader either by direct physical contact -- also known as chip and dip --
or through a short-range wireless connectivity standard such as radio-frequency
identification (RFID) or near-field communication.
 Credit & Debit

The differences between Credit vs Debit Card Online Payment Processing are widely
understood.

 Debit cards are directly linked to a customer’s bank account and transactions pull funds
directly from that account.

Credit cards are an entirely different type of account; transactions do not withdraw funds
from an actual bank account, instead, they count against the available credit limit.

 When the customer chooses their payment type, they understand where the funds will
withdraw from, but don’t typically have in-depth knowledge of how each payment type is
processed, particularly online.
 Credit vs. Debit Card Online Payment Processing

How debit and credit card processing works

For all intents and purposes, credit cards, and debit cards run with signatures, and are
processed the same way, the main difference being the funding of each account type.

Debit and credit cards are both processed in three steps: authorization, settlement, and
funding.

Below is a simplified flow of the steps to process debit card and credit card transactions.

The authorization step of credit and debit card processing happens in six sub-steps:

The cardholder initiates a transaction.

Card information is either entered into the payment gateway online at checkout, or a card
reader is used to swipe, insert the chip, or tapped to pay using contactless, near-field
communication (NFC) technology.
The merchant requests payment authorization from their chosen payment processor.

The payment processor communicates with the appropriate card association (think Visa,
MasterCard, Discover, or American Express) to request payment authorization from the
issuing bank.

The card-issuing bank verifies information such as billing address, security code, and
expiration date.

The issuing bank then either approves or declines the transaction.

Finally, the bank sends the status of the transaction back through the card association and
merchant bank, and then to the merchant.
 What Is a Crypto currency Payment Gateway

A crypto currency payment gateway is a payment processor for digital currencies, similar
to payment processors gateways and acquiring bank credit cards use.

Crypto currency gateways enable you to accept digital payments and receive fiat currency
immediately in exchange.

With crypto currency beginning to be accepted as payment at more merchants, these

companies remove any uncertainties or reservations a merchant might have about crypto
currency and allow them to offer more payment options.1

It's important to note that digital currency payment gateways are not required.

It's perfectly acceptable to use your personal wallet to accept cryptocurrency payments;
however, gateways take the extra work of exchanging cryptocurrency and managing a wallet
out of your hands.
Crypto currency is beginning to be accepted as payment at many merchants, but some
remain wary about its safety.1

Crypto currency payment gateways act as transaction facilitators between merchants and
customers for processing payments.

If you don't understand or trust crypto currency, payment gateways give you the ability to
accept them as payment and receive fiat currency in exchange.
How Does a Crypto currency Payment Gateway Work

Payment gateways are companies taking on the perceived risk of crypto currency
payments by using their wallet(s) to facilitate transactions between merchants and their
customers.
 Payment Flow

In terms of steps, the following workflow gets executed:

Your customer opts to make payment in cryptocurrency at checkout (in-store, on the web,
or in-app).
They pay you an amount equal to the digital currency's fair market value at the time of the
transaction.
The crypto currency payment service instantly converts the payment into the currency
you choose.
The money is added to your account with the provider; it is deposited to your designated
bank account in intervals decided on in your service contract.
The process is transparent to you because you don't have to worry about crypto currencies; only
that your crypto currency service provider will place the appropriate funds in your account.
 Fees

The provider uses a crypto currency wallet to facilitate the transfers.

 If that currency is designed with a payment system, the provider will incur fees charged
by the currency network's transaction validators.

Transaction validators verify blocks and transactions in the block chain — in exchange for
their energy use and computational power, they are paid in small increments in the crypto
currency transaction they validated.

The providers pass on these fees to you, and charge their service fees so that they can
continue operating and offering their services.
 Advantages

A payment gateway removes the anonymity of who you're dealing with while maintaining
your customer's preference for it.

You have someone to contact if there are payment issues.

You can accept payments from anywhere in the world, in any crypto currency your
provider will take.

You receive the funds in the account with your provider, who transfers them to you.
 Disadvantages

A payment gateway is a third party, which cryptocurrencies were originally designed to

bypass.

You have to rely on the provider's ability to maintain uninterrupted services because you
might be receiving payments from around the world and in different time zones.

Gateways are companies providing a service, so they will market themselves in a fashion
that makes it seem like you need their services when realistically you don't.

You pay small transaction fees when you use your crypto currency wallet; you pay more
when you use a crypto currency payment gateway.

If the payment gateway is hacked, you'll lose any funds you have in your account with the
provider while you're waiting for them to be transferred.
 Electronic Funds Transfer (EFT) Meaning

An electronic funds transfer (EFT) is a digital transfer of cash through an online payment
system.

 An EFT can be performed within the same bank, or between banks, and typically uses
payment systems such as the Automated Clearing House for ACH payments, or credit card
and debit card networks.
 What are Types of Electronic Funds Transfer (EFT)
Types of EFT (electronic funds transfer) include:
1. Global ACH (like SEPA payments in the EU)
2. Wire transfers
3. ecommerce transactions
4. Credit card or debit card transactions
5. Peer-to-peer payments

1. Global ACH as Electronic Funds Transfer (EFT)

International ACH electronic payments may be loosely called global ACH payments if they
use a similar network to the ACH network to make electronic payments.

 In the European Union (EU), electronic SEPA (Single Area Euro Payments) using debit
and credit transfers are a type of global ACH payment that are EFT payments. SEPA is useful
for cross-border payments.
 2. Wire Transfer as Electronic Funds Transfer (EFT)

Wire transfers are domestic or international electronic funds transfers to a recipient’s

bank account made through the Fed wire Funds Service (Federal Reserve Banks)

 or Clearing House Interbank Payments System (CHIPS) in the U.S. or the SWIFT network
or IBAN internationally and for cross-border payment transactions for the transfer of
money.

3. ecommerce and Point of Sale Retail Transactions as EFT

Online ecommerce and electronic point of sale (POS) transactions made from physical
stores are types of electronic fund transfer (EFT)when the customer pays the merchant via
online bank account transactions, debit cards, or credit cards using a payment processor.

Cash transactions on-premises paid using paper and coin currency like dollar bills and
quarters are not considered EFT.
 4. Credit Card or Debit Card Transactions Always EFT

Credit card and debit card transactions are always an EFT (electronic funds transfer)
transaction between the payer and the payee.

The purchase price, including any sales tax, is electronically charged to the customer on a
credit card or to their bank account using a debit card.

The funds are electronically transferred in batches to a merchant’s bank account.

5. Peer to Peer Payments as Electronic Funds Transfer (EFT)

Peer-to-peer payments are electronic funds transfers (EFTs) made through mobile apps or
the Internet to transfer money electronically between them.

 Examples of peer-to-peer payment systems include PayPal, Venmo, Zelle, Apple Cash,
and eWallet apps where both parties (the payer and payee receiver) have accounts.

 EFTs are electronic money (E-money) transactions.

 What Is a Unified Payments Interface (UPI)

A Unified Payments Interface (UPI) is a smartphone application that allows users to

transfer money between bank accounts.

 It is a single-window mobile payment system developed by the National Payments

Corporation of India (NPCI).

 It eliminates the need to enter bank details or other sensitive information each time a
customer initiates a transaction.
How Unified Payments Interface (UPI) Works

The Unified Payments Interface is a real-time payment system.

It is designed to enable peer-to-peer inter-bank transfers through a single two-click factor
authentication process.

The interface is regulated by the Reserve Bank of India (RBI), India's central bank.
It works by transferring money between two bank accounts along with a mobile
platform.2
The system is said to be a safe and secure method of transferring money between two
parties and eliminates the need to transact with physical cash or through a bank.

UPI uses existing systems, such as Immediate Payment Service (IMPS) and Aadhaar
Enabled Payment System (AEPS), to ensure seamless settlement across accounts.

It facilitates push (pay) and pull (receive) transactions and even works for over-the-
counter or barcode payments, as well as for multiple recurring payments such as utility
bills, school fees, and other subscriptions.
 What is IMPS

IMPS, which stands for Immediate Payment Service, is an interbank electronic funds
transfer system in India.

 It allows individuals to send and receive money instantly using their mobile phones or
internet banking.

IMPS facilitates real-time transactions, enabling users to transfer funds conveniently and
securely.

With IMPS, individuals can make payments, settle bills, send money to friends and family,
and conduct various financial transactions swiftly and efficiently.
 Features of IMPS

Before you begin using IMPS as a method of online money transfer, it’s important to familiarize
yourself with its key features and considerations:

1. Daily Transaction Limit : IMPS transactions are subject to a daily maximum limit of Rs.
5 Lakh. This limit ensures a balance between convenience and security for users.

2. Transaction charges: The charges associated with IMPS transactions may vary between
Rs. 5 to Rs. 15, depending on the specific conditions set by the respective banks. It is
advisable to check with your bank to understand the applicable charges.

3. Service Tax: In addition to transaction charges, IMPS transactions may also levy an
additional service tax. This tax is typically governed by the prevailing tax regulations and
can vary depending on the specific transaction and bank.
 4. 24/7 Inter-bank Transfer

 IMPS provides a robust and real-time fund transfer option that operates round the clock.

It allows users to transfer funds instantly between banks, irrespective of time and
location, ensuring enhanced convenience and accessibility.

5. Safe and Economical

IMPS offers a secure platform for transferring funds within banks across the country.

The system employs robust security measures, such as encryption and authentication
protocols, to ensure the safety of transactions.

IMPS transactions are often considered economical, providing a cost-effective solution for
users.
 How to get Digital Signature Certificate

The Office of Controller of Certifying Authorities (CCA), issues Certificate only to Certifying
Authorities(CAs). CAs issue Digital Signature Certificates to end-entities.

How do I get a Digital Signature Certificate (DSC)

One can approach any one of the Licensed CAs for getting a Digital Signature Certificate. The list
of Licensed CAs is available at http://www.cca.gov.in/licensed_ca.html. The different categories
of certificates offered by different CAs are listed at
http://www.cca.gov.in/CAServicesOverview.html.

The contact address of each CA and their help desk numbers are available in the disclosure
record of each CA published at http://www.cca.gov.in/licensed_ca.html.

What are the identity verification options available to a DSC applicant

The identity verification options available to a DSC applicant are:-

Which are the CAs issuing Class 2 and Class 3 DSCs to public at present? Please provide their
contact details?
 Digital Signature

A digital signature is a mathematical technique used to validate the authenticity and integrity of
a message, software, or digital document.

1. Key Generation Algorithms:

 Digital signature is electronic signatures, which assure that the message was sent by a particular
sender.

 While performing digital transactions authenticity and integrity should be assured, otherwise, the
data can be altered or someone can also act as if he was the sender and expect a reply.

2. Signing Algorithms:

To create a digital signature, signing algorithms like email programs create a one-way
hash of the electronic data which is to be signed.

The signing algorithm then encrypts the hash value using the private key (signature key).
 This encrypted hash along with other information like the hashing algorithm is the digital signature.

 This digital signature is appended with the data and sent to the verifier.

 The reason for encrypting the hash instead of the entire message or document is that a hash
function converts any arbitrary input into a much shorter fixed-length value.

 This saves time as now instead of signing a long message a shorter hash value has to be signed and
moreover hashing is much faster than signing.

3. Signature Verification Algorithms :

Verifier receives Digital Signature along with the data.

It then uses Verification algorithm to process on the digital signature and the public key (verification
key) and generates some value.

It also applies the same hash function on the received data and generates a hash value. Then the hash
value and the output of the verification algorithm are compared.

 If they both are equal, then the digital signature is valid else it is invalid.
 The steps followed in creating digital signature are :

Message digest is computed by applying hash function on the message and then message digest is
encrypted using private key of sender to form the digital signature. (digital signature = encryption
(private key of sender, message digest) and message digest = message digest algorithm(message)).

Digital signature is then transmitted with the message.(message + digital signature is transmitted)

Receiver decrypts the digital signature using the public key of sender.(This assures authenticity, as
only sender has his private key so only sender can encrypt using his private key which can thus be
decrypted by sender’s public key).

The receiver now has the message digest.

The receiver can compute the message digest from the message (actual message is sent with the
digital signature).
The message digest computed by receiver and the message digest (got by decryption on digital
signature) need to be same for ensuring integrity.
 Mobile computing

Mobile computing is the technology that allows users to connect and transmit data,
audio/voice, and video from one device to another without being tethered to a
stationary area with cabling and wires.

Devices supporting mobile computing include smartphones, tablets, laptops, and

wearable devices, such as smartwatches.
Mobile computing refers to the set of IT technologies, products, services and operational
strategies and procedures that enable end users to access computation, information and
related resources and capabilities while mobile.

Mobile most commonly refers to access in motion, where the user is not restricted to a
given geographic location.

Mobile may also refer to access in a fixed location via equipment that users can relocate as
required but is stationary while in operation. This mode of operation is often called
nomadic computing.
Today, mobile computing technology is everywhere. It has applications in business and
consumer markets, industrial and entertainment industries, as well as many specialized
vertical markets.

Desktop computers offer more hardware configuration capabilities and computational

performance. However, the majority of end users prefer mobile devices.

The key advantage of mobile computing is convenience, where users have access to
information and computational resources anytime and anywhere.
 How does mobile computing work

Generally, a mobile computing system involves a mobile device, such as a laptop computer,
tablet or smartphone, and a wireless network connection based on Wi-Fi or cellular
wireless technology, such as 5G.

 Mobile devices typically can store data locally, and access to that data doesn't require a
network connection.

Mobile computers typically accommodate access to both wireless and wired technology.

Access to shared network resources, including mobile cloud-based resources, is essential

given the collaborative nature of work today.

 Integrated, rechargeable batteries power mobile devices, and most can run on an
alternating current (AC) power source when used from a fixed location.
 Embedded system
An embedded system is a combination of computer hardware and software designed
for a specific function.

Embedded systems may also function within a larger system. The systems can be
programmable or have a fixed functionality.

An embedded system is a microprocessor- or microcontroller-based system of hardware

and software designed to perform dedicated functions within a larger mechanical or
electrical system.
An embedded system is a microprocessor-based computer hardware system with software that
is designed to perform a dedicated function, either as an independent system or as a part of a
large system. At the core is an integrated circuit designed to carry out computation for real-time
operations.
‍
Complexities range from a single microcontroller to a suite of processors with connected
peripherals and networks; from no user interface to complex graphical user interfaces. The
complexity of an embedded system varies significantly depending on the task for which it is
designed.
‍
Embedded system applications range from digital watches and microwaves to hybrid vehicles
and avionics. As much as 98 percent of all microprocessors manufactured are used in embedded
systems.
 The Role of Embedded Systems in the Internet
of Things (IoT)

The Internet of Things (IoT) has changed how we interact with our environment.

The possibilities for connected devices to improve efficiency, manageability, and accessibility
appear limitless, from smart homes to linked automobiles. But what enables the Internet of
Things to exist?

The success of the Internet of Things is dependent on embedded systems. Embedded systems
are sophisticated computerized systems that are built into physical objects and linked to
networks to perform specific functions.

They provide computational power, data storage, and communication capabilities as well. All
are needed by different devices to interact with one another and the "cloud" via their network.
Embedded systems are responsible for sensor integration, communication, data processing, security,
and power management.

Examples of embedded systems in the IoT include smart home devices, medical devices, and
industrial automation systems.
An embedded system is based on a microprocessor computer system of hardware with software that
is intended to execute a specific task, either independently or as part of a larger whole.

An integrated circuit is at the heart of the system, which performs computing for real-time
operations.

Programming instructions for embedded systems, also known as firmware, are stored in read-only
memory or flash memory chips(a type of nonvolatile memory that erases data in units called
blocks and rewrites data at the byte level.)and run-on computers with restricted hardware
resources.

Peripherals connect embedded systems to the outside world, linking input and output devices.
 What is the role of embedded systems in IoT?

Embedded systems are quite useful because of their features like

• Real- time computing
• Lower power consumption
• Low maintenance
• High availability

For this purpose, there has to be a shift from conventional embedded systems which are not well
developed to support IoT, to a more contemporary embedded system with a smart approach.

All the big organizations are working to incorporate these changes into their existing products in
order to utilize the growing IoT market. This will lead to integrating embedded systems in IoT more
rapidly.

Real-time operating systems (RTOS) and microprocessors and microcontrollers will be

transformed, followed by memory footprints and networking, open- source communities, and
developers.
 Benefits of using IoT in embedded systems

Increased safety and security:

 IoT-enabled embedded systems can help businesses to increase safety and security by
monitoring and controlling physical assets, detecting and preventing unauthorized access,
and alerting authorities to potential threats.
 Number Systems — Decimal, Binary, Octal and
Hexadecimal

For example,
Base 10 (Decimal) — Represent any number using 10 digits [0–9]
Base 2 (Binary) — Represent any number using 2 digits [0–1]
Base 8 (Octal) — Represent any number using 8 digits [0–7]
Base 16(Hexadecimal) — Represent any number using 10 digits and 6 characters [0–9, A, B,
C, D, E, F]
So how do we build a number system?

We all know how to write numbers up to 9, don’t we? What then? Well, it’s simple really.
When you have used up all of your symbols, what you do is,

you add another digit to the left and make the right digit 0.

Then again go up to until you finish up all your symbols on the right side and when you hit
the last symbol increase the digit on the left by 1.
When you used up all the symbols on both the right and left digit, then make both of them
0 and add another 1 to the left and it goes on and on like that.
If you use the above 3 rules on a decimal system,

Write numbers 0–9.

Once you reach 9, make rightmost digit 0 and add 1 to the left which means 10.

Then on right digit, we go up until 9 and when we reach 19 we use 0 on the right digit and
add 1 to the left, so we get 20.

Likewise, when we reach 99, we use 0s in both of these digits’ places and add 1 to the left
which gives us 100.

So you see when we have ten different symbols, when we add digits to the left side of a number,
each position is going to worth 10 times more than it’s previous one.