Ch05laudon-Traver Ec10

E-commerce 2014
business. technology. society.

tenth edition
Kenneth C. Laudon
Carol Guercio Traver
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Chapter 5
E-commerce Security and
Payment Systems
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Class Discussion
Cyberwar: MAD 2.0
 What is the difference between hacking and

cyberwar?
 Why has cyberwar become more potentially
devastating in the past decade?
 Why has Google been the target of so many
cyberattacks?
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall Slide 5-3
Class Discussion
 Stuxnet worm:Stuxnet (first shot in a cyberwar between the
United States and Iran June 2010). Designed to disable the
software and computers that controlled the centrifuges in
Iran’s uranium enrichment process
 Duqu worm, Sep2011(Believed to have been created by Stuxnet’s
developers) Duqu was designed to collect passwords, take
desktop screenshots to monitor users’ actions Duqu was
intended to further gauge the status of Iran’s nuclear program
 In Aug. 2012 Gauss used to “follow the money” in banking
transactions.
 Industrial cyberespionage is closely related to cyberwarfare.
Google has been battling Chinese cyberespionage for some
time
The E-commerce Security
Environment
 Overall size and losses of cybercrime
unclear
 Reporting issues
 2012 survey: Average annualized cost of

cybercrime was $8.9 million/year
 Underground economy marketplace:
 Stolen information stored on underground
economy servers
What Is Good E-commerce Security?
 To achieve highest degree of security
 New technologies
 Organizational policies and procedures
 Industry standards and government laws
 Other factors
 Time value of money
 Cost of security vs. potential loss
 Security often breaks at weakest link
The E-commerce Security Environment
Figure 5.1, Page 252
Table 5.3, Page 254
Describe the key dimensions of e-commerce security.
There are six key dimensions to e-commerce security:
1. Integrity—ensures that information displayed on a Web site or
sent or received via the Internet has not been altered in any
way by an unauthorized party.
2. Nonrepudiation—ensures that e-commerce participants do not
deny (repudiate) their online actions.
3. Authenticity—verifies an individual’s or business’s identity.
4. Confidentiality—determines whether information shared
online, such as through e-mail communication or an order
process, can be viewed by anyone other than the intended
recipient.
5. Privacy—deals with the use of information shared
during an online transaction. Consumers want to limit
the extent to which their personal information can be
divulged to other organizations, while merchants want
to protect such information from falling into the wrong
hands.
6. Availability—determines whether a Web site is
accessible and operational at any given moment.
The Tension Between Security and Other Values
 Ease of use
 The more security measures added, the more
difficult a site is to use, and the slower it becomes
 Public safety and criminal uses of the
Internet
Use of technology by criminals to plan crimes or
threaten nation-state
-Encrypted files sent via e-mail were used by Ramzi Yousef
Sep -11
-The case of Umar Farouk Abdulmutallab – AA Detroit 2009
-ISIS 2015
Security Threats in the E-com Environment
Three key points of vulnerability in e-com
environment:
1. Client
2. Server
3. Communications pipeline (Internet
communications channels)
A Typical E-commerce Transaction
Vulnerable Points in an E-commerce
Transaction
Most Common Security Threats in the
I. Malicious code (malware,

E-commerce exploits)
Environment
*Includes a variety of threats such as viruses, worms,
Trojan horses, ransomware, and bots.
*Designed to take advantage of software
vulnerabilities in a computer’s operating system,
Web browser, applications, or other software
components
*the latest innovations in malicious code distribution
is to embed it in the online advertising chain
The Malware
1. Drive-by downloads malware that comes with a
downloaded file that a user
2. Viruses a computer program that has the ability to
replicate or make copies of itself, and spread to other files
most computer viruses deliver a “payload
3. Worms is designed to spread from PC to PC (Slammer)
4. Ransomware type of a worm that locks your PC or files to
stop you from accessing them.
The Malware Con’t
5. Trojan horses appears to be benign, but then does
something other than expected. Often a way for viruses
or other malicious code to be introduced into a
computer system
6. Backdoors feature of viruses, worms and Trojans that
allows an attacker to remotely access a compromised
7. Bots, (short for robots) covertly installed on
your computer when attached to the Internet
Botnets collection of captured bot PC
Around 90% of the world’s spam, and 80% of the world’s malware, is delivered
by botnets. Once installed, the bot responds to external commands sent by the
attacker; your computer becomes a “zombie” and is able to be controlled by an
external third party
Malware are threats at both client and
server levels
At the server level, bring down an entire Web
site, preventing millions of people from using
the site. (infrequent)
At the client level malicious code attacks occur,
and the damage can quickly spread to millions
of other computers connected to the
Internet(frequent)
Most Common Security Threats (cont.)
II. Potentially unwanted programs (PUPs)
Program that installs itself on a computer, typically without
the user’s informed
 Browser parasites is a program that can monitor
and change the settings of a user’s browser
 Adware used to call for pop-up ads
 Spyware a program used to obtain information such
as a user’s keystrokes, e-mail instant messages, and
even take screenshots
III. Phishing
is any deceptive, online attempt by a third party to obtain
confidential information for financial gain.
 Social engineering relies on human curiosity, greed, and
gullibility in order to trick people into taking an action that
will result in the downloading of malware
 E-mail scams “Nigerian letter” scam
 Spear-phishing “account verification “
 Identity fraud/theft “steal your identity”
 Hacking
 Hacker an individual who intends to gain unauthorized
access to a computer system
 Crackers term typically used to denote a hacker with
criminal intent
Types of hackers: White, black, grey hats
 Hacktivist typically attack governments,
organizations, and even individuals for political
purposes
 Cybervandalism:
 intentions to disrupt, deface, or destroy sites
Or
 to steal personal or corporate information they
can use for financial gain
 Data breach
 Losing control over corporate information to
outsiders
Insight on Business: Class Discussion
We Are Legion
 What organization and technical failures
led to the data breach on the
PlayStation Network?
 Are there any positive social benefits of
hacktivism?
 Have you or anyone you know
experienced data breaches or
cybervandalism?
 Credit card fraud/theft
 Spoofing involves attempting to hide a true identity by
using someone else’s e-mail or IP address.
 Pharming automatically redirecting a Web link to an
address different from the intended one, with the site
masquerading as the intended destination.
 Spam (junk) Web sites (link farms) promise to
offer products or services, but in fact are just collections of
advertisements
 Identity fraud/theft
Unauthorized use of another person’s personal data,
such as social security, driver’s license, and/or credit
card numbers, as well as user names and passwords,
for illegal financial benefit
 Denial of service (DoS) attack
 uses hundreds or even thousands of computers to
attack the target network from numerous launch points
 Distributed denial of service (DDoS) attack
 Hackers flood site with useless traffic to overwhelm
network
 Sniffing
Eavesdropping program that monitors info traveling over a network
 Insider attacks
 Poorly designed server and client software
 Social network security issues
 Mobile platform security issues
 Vishing attacks target gullible cell phone users with verbal
messages to call a certain number and, for example, donate
money to starving children
 Smishing attacks exploit SMS(malicious URL)
 Madware innocent-looking apps that contain adware that
launches pop-up ads and text messages on your mobile device
Slide 5-26
Insight on Technology: Class Discussion
Think Your Smartphone Is Secure?

 What types of threats do smartphones face?
 Are there any particular vulnerabilities to this
type of device?
 What did Nicolas Seriot’s “Spyphone” prove?
 Are apps more or less likely to be subject to
threats than traditional PC software
programs?
Technology Solutions
 Protecting Internet communications
 Encryption
 Securing channels of communication

 SSL, VPNs
 Protecting networks
 Firewalls
 Protecting servers and clients
Tools Available to Achieve Site Security
Encryption
 Encryption
 Transforms data into cipher text readable only by
sender and receiver
 Secures stored information and information
transmission
 Provides 4 of 6 key dimensions of e-commerce security:
 Message integrity
 Nonrepudiation
 Authentication
 Confidentiality
Symmetric Key Encryption
 Sender and receiver use same digital key to encrypt
and decrypt message
 Requires different set of keys for each transaction
 Strength of encryption
 Length of binary key used to encrypt data
 Data Encryption Standard (DES) 56-bit encryption key
 Advanced Encryption Standard (AES)
 Most widely used symmetric key encryption
 Uses 128-, 192-, and 256-bit encryption keys
 Other standards use keys with up to 2,048 bits
Public Key Encryption
 Uses two mathematically related digital keys
 Public key (widely disseminated)
 Private key (kept secret by owner)
 Both keys used to encrypt and decrypt message

 Once key used to encrypt message, same key
cannot be used to decrypt message
 Sender uses recipient’s public key to encrypt
message; recipient uses private key to decrypt it
Public Key Cryptography: A Simple Case
Public Key Encryption using Digital
Signatures and Hash Digests
 Hash function:
 Mathematical algorithm that produces fixed-length number called
message or hash digest
 Hash digest of message sent to recipient along with
message to verify integrity
 Hash digest and message encrypted with recipient’s
public key
 Entire cipher text then encrypted with recipient’s
private key—creating digital signature—for
authenticity, nonrepudiation
Public Key Cryptography with Digital
Signatures
Digital Envelopes
 Address weaknesses of:
 Public key encryption
 Computationally slow, decreased transmission speed, increased
processing time
 Symmetric key encryption
 Insecure transmission lines
 Uses symmetric key encryption to encrypt
document
 Uses public key encryption to encrypt and
send symmetric key
Creating a Digital Envelope
Digital Certificates
 Digital certificate includes:
 Name of subject/company
 Subject’s public key
 Digital certificate serial number
 Expiration date, issuance date
 Digital signature of certification authority
CA a trusted third party that issues digital certificates
Public Key Infrastructure (PKI)
 Public Key Infrastructure (PKI):
 Public key infrastructure (PKI) refers to the CAs and
digital certificate procedures that are accepted by all
parties.
 Pretty Good Privacy (PGP)
a widely used e-mail public key encryption software
program
invented in 1991 by Phil Zimmerman, and has become
one of the most widely used e-mail public key encryption
software tools in the world. Using PGP software installed on your
computer, you can compress and encrypt your messages as well as
authenticate both yourself and the recipient
Slide 5-39
Digital Certificates and Certification
Authorities
Limits to Encryption Solutions
 Doesn’t protect storage of private key
 PKI not effective against insiders, employees
 Protection of private keys by individuals may be
haphazard
 No guarantee that verifying computer of
merchant is secure
 CAs are unregulated, self-selecting
organizations
Securing Channels of Communication
 Secure Sockets Layer (SSL)/Transport
Layer Security (TLS)
 Establishes secure, negotiated client–server
session
 Virtual Private Network (VPN)
 Allows remote users to securely access internal network via
the Internet using the Point-to-Point Tunneling Protocol
(PPTP)
 Wireless (Wi-Fi) networks

 WPA2 wireless security standard that uses the AES algorithm
for encryption
Slide 5-42
Secure Negotiated Sessions Using SSL/TLS
Protecting Networks
 Firewall
 Hardware or software
 Uses security policy to filter packets
 Two main methods:
 Packet filters
 Application gateways
 Proxy servers (proxies)
 Software servers that handle all communications from
or sent to the Internet
 Intrusion detection systems IDS
 Intrusion prevention systems IPS
Firewalls and Proxy Servers
Protecting Servers and Clients
 Operating system security
enhancements
 Upgrades, patches
 Anti-virus software
 Easiest and least expensive way to prevent
threats to system integrity
 Requires daily updates
Management Policies, Business
Procedures, and Public Laws
 Worldwide, companies spend more than
$65 billion on security hardware,
software, services
 Managing risk includes:
 Technology
 Effective management policies
 Public laws and active enforcement
A Security Plan: Management Policies
 Risk assessment
 Security policy
 Implementation plan
 Security organization
 Access controls
 Authentication procedures, including biometrics
 Authorization policies, authorization management
systems
 Security audit
Developing an E-commerce Security Plan
The Role of Laws and Public Policy
 Laws that give authorities tools for identifying,
tracing, prosecuting cybercriminals:
 National Information Infrastructure Protection Act of 1996
 USA Patriot Act
 Homeland Security Act
 Private and private-public cooperation
 CERT Coordination Center
 US-CERT
 Government policies and controls on encryption
software
 OECD, G7/G8, Council of Europe, Wassener Arrangement
 Cash
Types of Payment Systems
 Most common form of payment
 Instantly convertible into other forms of value
 No float
 Checking transfer
 Second most common payment form in United States
 Credit card
 Credit card associations(sets standards for issuing banks)
 Issuing banks(bank that actually issues credit cards and
processes transactions)
 Processing centers (clearinghouse)
institution that handles verification of accounts and balances
Slide 5-51
Types of Payment Systems (cont.)
 Stored value
 Funds deposited into account, from which funds
are paid out or withdrawn as needed
 Debit cards, gift certificates
 Peer-to-peer payment systems (PayPal)
 Accumulating balance
 Accounts that accumulate expenditures and to
which consumers make period payments
 Utility, phone, American Express accounts
Payment System Stakeholders
 Consumers
 Low-risk, low-cost, refutable, convenience, reliability
 Merchants
 Low-risk, low-cost, irrefutable, secure, reliable
 Financial intermediaries
 Secure, low-risk, maximizing profit
 Government regulators
 Security, trust, protecting participants and enforcing
reporting
E-commerce Payment Systems
 Credit cards
 42% of online payments in 2013 (United States)
 Debit cards
 29% online payments in 2013 (United States)
 Limitations of online credit card

payment
 Security, merchant risk
 Cost
 Social equity
How an Online Credit Transaction Works
Alternative Online Payment Systems
 Online stored value systems:
 Based on value stored in a consumer’s bank,
checking, or credit card account
 Example: PayPal
 Other alternatives:
 Amazon Payments
 Google Checkout
 Bill Me Later
 WUPay, Dwolla, Stripe
Mobile Payment Systems
 Use of mobile phones as payment devices
established in Europe, Japan, South Korea
 Near field communication (NFC)
 Short-range (2”) wireless for sharing data between
devices
 Expanding in United States
 Google Wallet
 Mobile app designed to work with NFC chips
 PayPal
 Square
Digital Cash and Virtual Currencies
 Digital cash
 Based on algorithm that generates unique
tokens that can be used in “real” world
 Example: Bitcoin
 Virtual currencies
 Circulate within internal virtual world
 Example: Linden Dollars in Second Life,
Facebook Credits
From Wikipedia,
Bitcoin is a cryptocurrency and worldwide payment system.[8]:3 It is the first
decentralized digital currency, as the system works without a central bank or
single administrator.[8]:1[9] The network is peer-to-peer and transactions take place
between users directly through the use of cryptography, without an intermediary.
[8]:4
These transactions are verified by network nodes and recorded in a public
distributed ledger called a blockchain. Bitcoin was invented by an unknown
person or group of people under the name Satoshi Nakamoto[10] and released as
open-source software in 2009.[11]
Bitcoins are created as a reward for a process known as mining. They can be
exchanged for other currencies,[12] products, and services. As of February 2015,
over 100,000 merchants and vendors accepted bitcoin as payment.
The word bitcoin is a compound of the words bit and coin
The blockchain is a public ledger that records bitcoin transactions.
Bitcoin is a digital asset[94] designed by its inventor, Satoshi Nakamoto, to work as
a currency.The price of bitcoins has gone through various cycles in 2011, the value
of one bitcoin rapidly rose from about US$0.30 to US$32 before returning to US$2
2013 – around US$224 today 20/12/17 1 Bitcoins =16312.88
Insight on Society: Class Discussion
Bitcoin
 What are some of the benefits of using a
digital currency?
 What are the risks involved to the user?
 What are the political and economic
repercussions of a digital currency?
 Have you or anyone you know ever used
Bitcoin?
Electronic Billing Presentment and
Payment (EBPP)
 Online payment systems for monthly bills
 50% of all bill payments
 Two competing EBPP business models:
 Biller-direct (dominant model)
 Consolidator
 Both models are supported by EBPP

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E-commerce 2014

business. technology. society.

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall

Cyberwar: MAD 2.0

 What is the difference between hacking and

 2012 survey: Average annualized cost of

Figure 5.1, Page 252

Figure 5.2, Page 256

Figure 5.3, Page 257

I. Malicious code (malware,

Think Your Smartphone Is Secure?

 Securing channels of communication

 Protecting servers and clients

Figure 5.5, Page 276

 Both keys used to encrypt and decrypt message

Figure 5.6, Page 279

Figure 5.7, Page 281

Figure 5.8, Page 282

Figure 5.9, Page 283

 Wireless (Wi-Fi) networks

Figure 5.10, Page 286

Figure 5.11, Page 289

Figure 5.12, Page 291

 Limitations of online credit card

Figure 5.15, Page 302

 Both models are supported by EBPP

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