Summary of Reading Assignments: Credits and Debits on the Internet

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Summary of Reading Assignments Credits and
Debits on the Internet New Payment Systems Hope
To Cash In

• Dr. Deepak Khazanchi

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Conventional Payment Systems
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Designing an electronic credit or debit system
Major issues

• Naming
• There must be an unambiguous way of identifying
  the payers' bank accounts and the payees' bank
  accounts.
• Signatures
• It must be possible for the payers' banks to
  verify that payment instructions were generated
  by people authorized to use accounts.
• Integrity
• Electronic checks should be difficult to alter.
• Confirmation
• Payees must have confirmation that transfers took
  place payers must have notification of transfers
  out of their accounts.
• Confidentiality
• Third parties should not be able to monitor such
  payments.
• Settlement
• Separate banking institutions must have a way of
  settling their accounts.

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Credit Card Transactions
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CyberCashs Gateway

• Provides software to both consumers and
  merchants, in which CyberCash public key is built
  into
• Only CyberCash knows everybodys public key
• Information is encrypted under CyberCashs public
  key, the merchant doesnt actually see the
  consumers credit card number
• Failed as a company and acquired by Verisign in
  2002.

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SETSecure Electronic Transactions

• Designed to operate both in real time (e.g. WWW)
  and store-and-forward environment (e.g. e-mail)
• Also designed to permit consumer, merchant, and
  banking software companies to develop software
  for their respective clienteles independently
• SET assumes the existence of a hierarchy of
  digital certificate authorities that vouch for
  the binding between a user and a public key.
• Digital Certificates create a trust chain
  throughout the transaction, verifying cardholder
  and merchant validity.
• SET standards were developed jointly by Visa and
  Mastercard as a way to facilitate secure payment
  card transactions over the Internet.

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SET (http//www.setco.org/set.html)
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First Virtual

• Consumers establish account IDs with First
  Virtual and fax/telephone their credit card
  number to it
• Required information is sent directly to consumer
  with valid ID
• First Virtual will not charge consumers until
  they are satisfied
• First Virtual delays payment to merchants for 90
  days
• First Virtual does not provide service any
  longer

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NetBank

• The largest FDIC-insured federal savings bank
  operating exclusively online
• Approves mortgages, home equity or business
  loans, credit or debit card applications quicker
  than traditional bank
• Provides three stages of security (robust
  firewall, customers personal password, and the
  encryption of customer messages)

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Electronic Checks

• Consumers uses smartcards or secure processors to
  compose and sign electronic checks
• Check is sent to the payee together with the
  consumers' public-key certificates and
  transaction details
• payee adds its own signature and certificates and
  sends the check to its bank for deposit
• Transaction results are reported to both
  merchants and consumers

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Electronic Checks
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Instant Debit Systems

• Immediate posting of transactions make payees get
  real-time confirmation that funds are available
• Aggregate many on-line transactions for batch
  settlement over traditional settlement networks

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GC Techs turnkey offering

• Intermediation server maintains a ledger of
  consumer funds on account in the payment system
• Intermediation server and the merchant have
  publicprivate-key pairs, while consumers have
  only a PIN number
• This model eliminates the need to issue and
  manage certificates for consumers

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NetBill for Information Delivery

• Optimized for delivering information goods (e.g.
  text, images, software) over the Internet)
• Consumers are not charged until the goods reach
  them
• Only the merchant talks directly to the
  accounting server

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Person-to-Person payment Systems

• Person-to-person (P2P) payment systems
• The person sending the money registers with the
  service and forks over information on the credit
  card or checking account they want the funds
  withdrawn from.
• The recipient generally gets an e-mail with
  instructions to go to the service's site and
  register to claim the money, which is then
  transferred from an online account directly into
  the recipient's bank account, or debited against
  a credit card.
• The Holy Grail in P2P is to create a model where
  consumers can use a single interface to pay
  anyone.
• The winner will be a single product that
  transcends online and offline channels

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P2P Systems

• Some P2P Systems
• FDRs MoneyZap
• PayPal (X.com)
• eBays Billpoint
• Bank Ones eMoneyMail
• Yahoos Paydirect