CSIT 22 Electronic Commerce Technologies - PowerPoint PPT Presentation


Title: CSIT 22 Electronic Commerce Technologies


1
CSIT 22Electronic Commerce Technologies
  • Lecture 4 - Electronic Payment Systems
  • (Adapted from E. Lawrence et al., Technology of
    Internet Business, John Wiley, 2002)

2
Learning Objectives
  • Describing various types of electronic payment
    systems
  • Explaining how EPSs operate in a B2B and B2C
    context
  • Identifying the security needs of online
    electronic purchasing systems
  • Defining EDI and demonstrating how invoicing and
    payments can be made

3
Learning Objectives
  • Explaining advantages and disadvantages of EDI
    relative to other forms of electronic payment
    systems
  • Describing and explaining the value of various
    forms of e-cash systems
  • Evaluating the utility of stored value cards and
    smart cards as part of an electronic purchasing
    system

4
Comparison of the 4Cs Payment Methods
5
B2C Electronic Payment Systems
  • Many ways to pay for goods electronically
  • Credit cards
  • E-cash
  • E-cheques
  • Stored value cards
  • Magnetic strip card technology ensured
  • Efficient
  • Secure
  • Fast methods of payments

6
Credit Cards on the Internet
  • An instruction by a customer for funds to be
    transferred into a businesss account and charged
    against the customers account
  • Credit card numbers can be sent over the Internet
    encrypted or unencrypted
  • All Internet browsers provide some level of data
    security

7
Encryption
  • 40-bit SSL is typical for most browsers
  • 128-bit SSL is used by financial institutions and
    Internet-capable software suppliers
  • 128-bit encryption is
  • 309 485 009 821 345 068 724 781 056
  • times stronger than 40-bit encryption

8
Encryption On Browsers
  • Customers check if browser supports session
    encryption by
  • small closed lock in Internet Explorer
  • small unbroken key in the Netscape browser family
  • Prodigy Internet and Mastercard developed for
    online and offline purchases

9
How Credit Cards Work on the Internet
  • ANSI Standard X4.13-1983 system used by most US
    national credit card systems
  • Credit card numbers mean
  • The first digit signifies the system
  • 3 travel/entertainment cards
  • 4 Visa
  • 5 Mastercard
  • 6 Discovery Card

10
Credit Cards Numbers
  • The structure of the card number varies according
    to the system
  • American Express example
  • Digits 3 and 4 are type and currency
  • Digits 5-11 are the account number
  • Digits 12-14 are the card number within the
    account,
  • Digit 15 is the check digit

11
EFTPOS
  • Electronic Funds Transfer at point of sale
    operates
  • Either on the credit or the debit basis
  • Popular with shoppers and virtual shoppers as
    well
  • On credit cards, EFTPOS systems check
  • Validity of the card status
  • Credit the value of the exchange against the
    credit card account for future payment by the
    card holder

12
Electronic Cheques
  • The user is issued
  • a set of number combinations from the bank
  • each number combination represent a cheque
  • User uses each set of numbers only once
  • With eCheck,
  • payer writes the cheque on a computer
  • signs it
  • emails it over the Internet

13
eCheck
  • The payee
  • receives it
  • verifies signatures
  • endorses it
  • writes a deposit slip
  • signs it
  • The endorsed cheque (e-Check) is then sent by
    email to the payees bank for deposit

14
eCheck at the Bank
  • Bank personnel
  • verify signatures
  • credit the deposit
  • clear the endorsed eCheck
  • The cheque is sent on to the payers bank where
    signatures are once again verified
  • The amount of the eCheck is debited from the
    payers account

15
E-Wallets
  • An e-wallet stores the users information on
    billing, shipping
  • E-wallet software will instantly fill out online
    order forms with a click of the mouse
  • An e-wallet can also store the shipping addresses
    of friends and family

16
ECML
  • ECML (Electronic Commerce Modelling Language)
  • a universal format for online checkout form data
    fields
  • provides a simple set of guidelines that enable
    digital wallets from multiple vendors to automate
    the exchange of information between consumers and
    merchants

17
Digital Cash
  • Trialled since 1994 using the digital cash
    concept by the DigiCash Corporation based in the
    Netherlands
  • eCash system uses electronic tokens to exchange
    goods and services online
  • Banks are used to verify the value of the token

18
Background Digital Cash
  • CyberCash - secure means to conduct credit card
    transactions on the Internet
  • Digital cashs issuers have
  • Gone bankrupt
  • Dropped the product
  • Moved on into another business
  • Digital cash
  • Small string of encrypted digits or electronic
    tokens
  • Substitute for money to purchase various goods
    and services

19
eCash Operations
  • DigiCash offers eCash
  • Consumers download and install electronic purse
    or wallet software
  • Customers download electronic coins to a hard disk

20
Paying by eCash
  • Initial purchase of coins charged against bank
    accounts or against a credit card
  • To pay with eCash, the customer clicks the Pay
    with eCash button
  • Customers purse software subtracts the payment
    amount from the individuals electronic purse and
    creates a payment that is sent to the bank,
    verified then deposited into the merchants
    account within seconds

21
Merchants eCash
  • Merchants wishing to use eCash can choose
    between
  • Installing and integrating the eCash software
  • Hiring a third party to integrate it
  • Buying a ready-to-use eCash enabled store from
    store builders such as Intershop

22
Payment Security Protocols
  • Three major protocols developed for payment
    security
  • STT- each user is authenticated by an electronic
    certificate or credential unique to them
  • SEPP uses existing EFT infrastructure to operate
  • SET uses the internets infrastructure

23
SET
  • Advantages of SET
  • Enables bankcard payment on the WWW
  • Provides for special security needs
  • Ensures privacy of financial data
  • Features strong authentication policies for
    participants
  • Offers special purpose certificates

24
Network Architecture of SET System
25
Advantages of SET
  • Provides message integrity
  • Offers non-repudiation for dispute resolution
  • Hides bankcard number from most merchants
  • Sustains existing relationships
  • Provides interoperability
  • Supports end-user choice of payment card
  • Provides links to existing systems

26
SET SSL
  • SET uptake slow
  • See http//www.setco.org
  • SSL the de facto standard
  • See http//www.ssl.com

27
CommerceNet
  • CommerceNet (http//www.commerce.net) deals with
    five initial areas in EPS
  • Infrastructure EDI, robustness, network
    management and related infrastructure services
  • Financial Service payments, RosettaNet, eCheck

28
CommerceNet Portfolios
  • Trust and security public key infrastructure
    (PKI), security showcase and encryption
  • Information access catalogues, directories,
    agencies and search interoperability
  • Architecture and markets eCo framework,
    iMarkets, vertical markets)

29
Why Use Digital Cash?
  • Digital cash products marketed for a variety of
    reasons
  • Anonymous unlike credit cards
  • Many people do not have access to credit cards
  • Useful for auctions and C2C e-commerce
  • Cheaper than Credit Cards for Merchants
  • Sites selling small items need to accept
    micropayments

30
Other Digital Currency Products
  • Some of the new digital cash techniques are
  • Consumers store value in an online account and
    deduct from it the price of small purchases
  • Qpass accumulates payments and deducts the final
    amount from a credit card
  • Trivnet and Ipin use ISPs to track customers
    online spending and add it to their bill

31
Flooz, Beenz CyberGold
  • Flooz use of gift certificates
  • Beenz issued to consumers to visit web sites,
    fill in forms or go shopping online
  • CyberGold allows consumers to convert
    cyberdollars into real money

32
PayPal eGold
  • PayPal developed by Confinity
  • to enable people to open an account at the web
    site and then email dollars to other people
  • E-Gold allows
  • clients to fund their accounts by purchasing gold
    or other metals and then transferring units of
    those metals (measured by weight) by entering a
    recipients account and a password
  • Refer to
  • www.paypal.com

33
Bartering Schemes
  • Various online bartering schemes exist
  • BarterTrust
  • BigVine
  • LassoBucks
  • Oakington (British firm) developed software for
  • automatic payment of taxes and
  • time escrow so that a transaction does not
    clear until the goods arrive

34
Millicent
  • Millicent - account based transaction protocol
    for low-value transactions
  • Allows a vendor
  • to verify a transaction without contacting a
    central authority and without expensive
    encryption
  • to use brokers and scrip

35
Smart Cards(Stored Value Cards)
  • A plastic card with a microchip that stores
    information usually about value
  • Can store more information and perform more
    functions than the more common magnetic stripe
    cards
  • Estimated more than 600 million in operation
    throughout the world

36
SVC Workings
  • Stored value is transferred from a card to
    another organisations account
  • Then adjusted through an electronic banking
    system

37
SVCs
  • Used to store information about
  • Peoples health
  • Identity cards
  • Security cards
  • Electronic signatures for digital mobile phones

38
SVCs May Store
  • University transcripts
  • Personal records
  • Medical information
  • Hospital files
  • Social security information
  • Employment records

39
Limitations
  • The limitations of SVCs relate to
  • Privacy issues
  • Legal issues
  • Social issues
  • Political issues

40
Types of SVCs
  • Closed system SVCs include fixed-priced, pre-paid
    telephone cards or pre-paid transport tickets
  • The owner of the card and the provider of the
    service are the same
  • Open-system SVCs can be recharged in value
  • Described as an electronic wallet
  • Most commonly the owner of the card is not the
    service provider

41
Advantages and Risks of SVCs in Business
  • Centre for Electronic Commerce at Monash
    University conclusions
  • Smart cards will have a significant impact on the
    banking system and the way it operates
  • Smart cards will affect the way money is exchanged

42
SVCs Advantages and Risks
  • Continued
  • Smart cards may erode the traditional role of
    banks in the payment systems used in society
  • Smart cards have the potential to allow
    institutions other than banks to issue value and
    thus create money
  • Smart cards are expensive to establish,
    profitability is lessened in the short term

43
SVCs Advantages and Risks
  • Continued
  • SVCs should improve the efficiency of
    electronically transferring funds for low value,
    high-volume transactions
  • Should offer a great range in payment options and
    improve convenience
  • Will increase costs to consumers by the need for
    suppliers to cover costs

44
SVCs Advantages and Risks
  • Continued
  • May not be affordable to all consumers, thus
    raising equity issues in society
  • The existing protections for consumers when using
    current payment systems and cards do not always
    apply with SVCs

45
SVCs Advantages and Risks
  • Continued
  • Smart cards are more secure than cash, depending
    on the card design and the method of recording
    stored value
  • The trials on SVCs currently in operation in
    Australia (Visa, Transcard, MasterCard, Quicklink
    and Mondex) are technically incompatible

46
B2B Electronic Payment Systems
  • Electronic commerce was suggested in the 1960s by
    financial institution that began investigating
    ways to automate their back-end banking systems
  • Starting with basic electronic processing of
    cheques, they then moved on to process credit
    card and wire-transfer transactions electronically

47
Electronic Data Interchange
  • EDI is the automated exchange of structured
    business documents between an organisation and
    its customers, suppliers or other trading
    partners
  • Traditional, non-internet EDI is actually a set
    of specifications for formatting documents
    designed specifically to automate business flow

48
Strengths of EDI
  • The strength of EDI is its ability to enable
    organisations with different business and
    computer systems to link those systems
    cost-effectively
  • EDI represents an effective technology for
    reducing the overheads associated with paper
    processing, product verification, handling and
    storage

49
EDI Characteristics
  • EDI processes must have the following
    characteristics
  • The exchange of information must be in a
    structured format so that the data are placed and
    found in predetermined places in the electronic
    message
  • The format or structure of the information must
    be agreed upon by both the receiver and the
    sender
  • The data must be machine readable

50
Traditional EDI
  • Requires communication between two or more
    trading partners
  • The network infrastructure must contain two major
    components
  • A communication channel that delivers the EDI
    documents across the trading network
  • Conformance to EDI standards

51
Communications Channels
  • The communications channel of a trading network
    is dictated by the complexity of the trading
    network and the type of communication link

52
DIRECT LINK EDI
  • ISDN leased lines and high-speed modem dial-up
    networks are used
  • A business communicates with trading partners by
    dialling up the trading partners network and
    transmitting EDI documents as required

53
DIRECT LINK EDI (continued)
  • DIRECT LINK EDI
  • Trading partners install and maintain their own
    direct link lines
  • Issues with speed, protocols and reliability
    across the trading partner network make direct
    link EDI prohibitive to smaller businesses
  • Suited primarily to large organisations
    transmitting large volumes of data regularly

54
PRIVATE NETWORKS
  • Closed network available to a selected group of
    trading partners
  • Hub company manages document handling overheads
    and protocol conversion facilities for spoke
    trading partners
  • Spoke companies can dial up the private network
    using a standard modem and perform their EDI
    transfers for the cost of a telephone call

55
Value Added Networks
  • A third party network or intermediary capable of
    providing reliable, secure transmission of
    documents between trading partners
  • Provide many services including
  • Transmission
  • EDI support services
  • Speed conversion
  • Mailbox services
  • Technical support, consulting, training

56
VANs
  • VANs provide electronic mailboxes
  • Support administrative facilities such as
    document auditing, message tracking, usage
    reporting and billing services
  • Using EDI translation software, converts
    documents between the standards such as X12 and
    EDIFACT, between standard and proprietary formats
    to email, fax

57
VANs (continued)
  • VANs function as intermediaries for large numbers
    of businesses acting as a focal point for
    multi-transactional, multi-nodal businesses
  • Act as a router for data
  • Consultancy point for new businesses

58
EDI Standards
  • Linking a customer with a supplier in an EDI
    relationship involves a hierarchy of
    communication levels
  • Each level has different accepted standards and
    protocols
  • Most standards are derived from the International
    Consultative Committee for Telephony (Now ITU)

59
X.25 Protocol
  • Standards usually involve the data being broken
    down into smaller packages for transmission
  • The receiver reassembles these packages into a
    coherent message
  • The X.25 protocol controls the EDI process at the
    communications level

60
X.400 X.500
  • X.400 and X.500 protocols enable the message to
    be handled by the sending and receiving PCs, they
    are not concerned with content
  • X.400 deals with how the data can be broken up
    and packaged
  • X.500 deals with the addresses and directories
    used in the EDI process

61
EDI Specific Standards
  • Specific standards for successful EDI processes
  • TRADACOMS
  • EDIFACT, the standard used in EDI.EDIFACT is the
    United Nations agreed standard for EDI
    transmission

62
Benefits of Traditional EDI
  • Traditionally only large firms have employed EDI
    technology because it is an expensive,
    proprietary technology
  • EDI can typically save 5 to 10 per cent of all
    procurement costs

63
EDI Benefits
  • Advantages of traditional EDI also include
  • The ability to maintain control over the movement
    of material
  • A reduction in labour costs
  • Reduction in routine tasks than can often cause
    errors
  • Reduction in stock holding and accounts receivable

64
EDI Benefits (continued)
  • An increase in cash flow due to the effective
    management of trade creditors
  • An increase in customer service
  • A move to one-time entry and elimination of
    superfluous administration

65
Shortcomings of Traditional EDI
  • EDI is an expensive means of doing business
  • Small and medium sized firms tend not to be EDI
    capable because of the inherent costs in
    proprietary software purchase, hardware
    installation and ongoing maintenance

66
Shortcomings (continued)
  • Implementing translation software may range from
    5000 (for a PC based system) through to 250 000
    (for a mainframe application)
  • In general, typical monthly fees are 50 and
    transaction fees of 50 to 70 cents apply

67
Web Server
  • Provides authentication of suppliers through user
    ID
  • Suppliers access their own mailbox and have read
    access to the incoming documents
  • Web servers use SSL encryption for security

68
Adapter
  • An adapter converts hub documents for the
    supplier from EDI into proprietary format

69
Open Buying on the Internet (OBI)
  • The OBI roundtable is a standard for B2B Internet
    Commerce
  • Version 1.0 of the standards document contains an
    architecture as well as technical specifications
    and guidelines

70
OBI
  • Is a freely available standard that adheres to
    the following guiding principles
  • Common business version
  • Vendor neutrality
  • Interoperability
  • Value-added services
  • Cost-effectiveness
  • Robust infrastructure
  • flexibility

71
OBI Architecture
  • OBI architecture can be viewed as the interaction
    of four entities
  • Purchasing officer
  • Buying organisation
  • Selling organisation
  • Payment authority

72
OBI Standard
  • The OBI standard provides
  • buying and selling organisations with a
    standards-based solution that achieves
    interoperability through a flexible, technology
    product-neutral architecture
  • For Internet business requisitions that combine
    web technologies with legacy or back-end systems
    such as EDI

73
OBI B2B
  • Open standards for trading and open financial
    exchanges like the BIPS Project 10, developed by
    the FSTC, will enable better B2B e-commerce
  • FSTC sponsors project-oriented, collaborative
    research and development on interbank technical
    projects affecting the whole financial services
    industry

74
Internet EDI Components
  • Back-end database system
  • an application system with a database for
    information storage
  • Generally has own proprietary format (SAP or
    Siebel)
  • A translator is required to take proprietary
    format back and forth from EDI format
  • XML solutions have developed an application
    called XEDI to help automate the process of
    converting between EDI and XML

75
Internet EDI XML
  • Back-end database system
  • XEDI can tag additional XML data along with the
    document that enables full recovery of the
    original EDI document on the other end
  • XML solutions is also working with the XML/EDI
    groups standardisation effort to create industry
    standards for these translations

76
Translator
  • Translator
  • Converts proprietary format to EDI standard
    format
  • New Era of Networks Inc. (NEON) recently released
    its PaperFree EDI adapter
  • This adapter provides connections between XML
    dialects such as Biztalk and RosettaNet and
    widely used formats such as X12 and EDIFACT

77
Mail Repository
  • Mail Repository
  • A database is utilised for the mailbox system, a
    web server to list and serve documents and
    applets
  • The hub maintains mailboxes for each spoke
  • Provides email, audit and control, tracking,
    querying and reporting
  • Unread EDI documents can be monitored and
    suppliers contacted

78
EDI versus Internet
  • EDI has been standardised through ANSI and
    EDIFACT
  • High operational costs, extensive customisation
    requirements and the need for VANS have hindered
    widespread adoption
  • Internets low cost transport mechanism and
    standardised protocols offer organisations low
    cost B2B e-commerce at low cost

79
Internet EDI
  • Offers organisations
  • basic transactional capability,
  • online catalogues,
  • pricing information,
  • scheduling and delivery information and
  • new ways of auctioning procurement such as online
    auctions

80
Internet EDI Advantages
  • Allows buyers and sellers to transact on a global
    scale
  • Offers a simple platform-independent vehicle for
    information exchange through
  • The TCP/IP protocol
  • Open Buying on the Internet

81
Internet EDI OBI
  • The OBI stand focuses on the Internet transaction
    and the components of which this is comprised
  • EDI
  • Digital certification
  • Supporting back-end systems
  • BIPS project will enable better B2B
  • e-commerce

82
Internet EDI BIPs
  • BIPS is a project to develop an open
    specification for bank customers to securely
    negotiate payment instructions to bank systems
    over the Internet
  • This project is supported by Citibank, and is
    closely linked with existing EFTPOS payment
    systems like SWIFT which is used across Australia

83
Summary
  • Electronic Payment Systems are becoming
    increasingly important to B2B and B2C commerce
  • Internet has enabled consumers access to many
    products and services that can be ordered
    electronically
  • Electronic catalogues are being developed

84
Summary
  • EPSs using smart cards, online EFTPOS-type
    systems and digital-money systems enable
    businesses and consumers to pay electronically
  • New forms of purchasing has reduced the
    importance of cash or money as the only form of
    transaction

85
Summary
  • EDI transactions enable more efficient allocation
    of resources for production and servicing, and
    permit better planning and inventory control in
    businesses
  • Financial uses of EDI through VANs enable more
    efficient transactions and monitoring of
    manufacturiing or service provision

86
Summary
  • Electronic purchasing is cost-effective and
    time-effective
  • There are security demands that have to be
    recognised by both businesses and consumers
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Transcript and Presenter's Notes

Title: CSIT 22 Electronic Commerce Technologies


1
CSIT 22Electronic Commerce Technologies
  • Lecture 4 - Electronic Payment Systems
  • (Adapted from E. Lawrence et al., Technology of
    Internet Business, John Wiley, 2002)

2
Learning Objectives
  • Describing various types of electronic payment
    systems
  • Explaining how EPSs operate in a B2B and B2C
    context
  • Identifying the security needs of online
    electronic purchasing systems
  • Defining EDI and demonstrating how invoicing and
    payments can be made

3
Learning Objectives
  • Explaining advantages and disadvantages of EDI
    relative to other forms of electronic payment
    systems
  • Describing and explaining the value of various
    forms of e-cash systems
  • Evaluating the utility of stored value cards and
    smart cards as part of an electronic purchasing
    system

4
Comparison of the 4Cs Payment Methods
5
B2C Electronic Payment Systems
  • Many ways to pay for goods electronically
  • Credit cards
  • E-cash
  • E-cheques
  • Stored value cards
  • Magnetic strip card technology ensured
  • Efficient
  • Secure
  • Fast methods of payments

6
Credit Cards on the Internet
  • An instruction by a customer for funds to be
    transferred into a businesss account and charged
    against the customers account
  • Credit card numbers can be sent over the Internet
    encrypted or unencrypted
  • All Internet browsers provide some level of data
    security

7
Encryption
  • 40-bit SSL is typical for most browsers
  • 128-bit SSL is used by financial institutions and
    Internet-capable software suppliers
  • 128-bit encryption is
  • 309 485 009 821 345 068 724 781 056
  • times stronger than 40-bit encryption

8
Encryption On Browsers
  • Customers check if browser supports session
    encryption by
  • small closed lock in Internet Explorer
  • small unbroken key in the Netscape browser family
  • Prodigy Internet and Mastercard developed for
    online and offline purchases

9
How Credit Cards Work on the Internet
  • ANSI Standard X4.13-1983 system used by most US
    national credit card systems
  • Credit card numbers mean
  • The first digit signifies the system
  • 3 travel/entertainment cards
  • 4 Visa
  • 5 Mastercard
  • 6 Discovery Card

10
Credit Cards Numbers
  • The structure of the card number varies according
    to the system
  • American Express example
  • Digits 3 and 4 are type and currency
  • Digits 5-11 are the account number
  • Digits 12-14 are the card number within the
    account,
  • Digit 15 is the check digit

11
EFTPOS
  • Electronic Funds Transfer at point of sale
    operates
  • Either on the credit or the debit basis
  • Popular with shoppers and virtual shoppers as
    well
  • On credit cards, EFTPOS systems check
  • Validity of the card status
  • Credit the value of the exchange against the
    credit card account for future payment by the
    card holder

12
Electronic Cheques
  • The user is issued
  • a set of number combinations from the bank
  • each number combination represent a cheque
  • User uses each set of numbers only once
  • With eCheck,
  • payer writes the cheque on a computer
  • signs it
  • emails it over the Internet

13
eCheck
  • The payee
  • receives it
  • verifies signatures
  • endorses it
  • writes a deposit slip
  • signs it
  • The endorsed cheque (e-Check) is then sent by
    email to the payees bank for deposit

14
eCheck at the Bank
  • Bank personnel
  • verify signatures
  • credit the deposit
  • clear the endorsed eCheck
  • The cheque is sent on to the payers bank where
    signatures are once again verified
  • The amount of the eCheck is debited from the
    payers account

15
E-Wallets
  • An e-wallet stores the users information on
    billing, shipping
  • E-wallet software will instantly fill out online
    order forms with a click of the mouse
  • An e-wallet can also store the shipping addresses
    of friends and family

16
ECML
  • ECML (Electronic Commerce Modelling Language)
  • a universal format for online checkout form data
    fields
  • provides a simple set of guidelines that enable
    digital wallets from multiple vendors to automate
    the exchange of information between consumers and
    merchants

17
Digital Cash
  • Trialled since 1994 using the digital cash
    concept by the DigiCash Corporation based in the
    Netherlands
  • eCash system uses electronic tokens to exchange
    goods and services online
  • Banks are used to verify the value of the token

18
Background Digital Cash
  • CyberCash - secure means to conduct credit card
    transactions on the Internet
  • Digital cashs issuers have
  • Gone bankrupt
  • Dropped the product
  • Moved on into another business
  • Digital cash
  • Small string of encrypted digits or electronic
    tokens
  • Substitute for money to purchase various goods
    and services

19
eCash Operations
  • DigiCash offers eCash
  • Consumers download and install electronic purse
    or wallet software
  • Customers download electronic coins to a hard disk

20
Paying by eCash
  • Initial purchase of coins charged against bank
    accounts or against a credit card
  • To pay with eCash, the customer clicks the Pay
    with eCash button
  • Customers purse software subtracts the payment
    amount from the individuals electronic purse and
    creates a payment that is sent to the bank,
    verified then deposited into the merchants
    account within seconds

21
Merchants eCash
  • Merchants wishing to use eCash can choose
    between
  • Installing and integrating the eCash software
  • Hiring a third party to integrate it
  • Buying a ready-to-use eCash enabled store from
    store builders such as Intershop

22
Payment Security Protocols
  • Three major protocols developed for payment
    security
  • STT- each user is authenticated by an electronic
    certificate or credential unique to them
  • SEPP uses existing EFT infrastructure to operate
  • SET uses the internets infrastructure

23
SET
  • Advantages of SET
  • Enables bankcard payment on the WWW
  • Provides for special security needs
  • Ensures privacy of financial data
  • Features strong authentication policies for
    participants
  • Offers special purpose certificates

24
Network Architecture of SET System
25
Advantages of SET
  • Provides message integrity
  • Offers non-repudiation for dispute resolution
  • Hides bankcard number from most merchants
  • Sustains existing relationships
  • Provides interoperability
  • Supports end-user choice of payment card
  • Provides links to existing systems

26
SET SSL
  • SET uptake slow
  • See http//www.setco.org
  • SSL the de facto standard
  • See http//www.ssl.com

27
CommerceNet
  • CommerceNet (http//www.commerce.net) deals with
    five initial areas in EPS
  • Infrastructure EDI, robustness, network
    management and related infrastructure services
  • Financial Service payments, RosettaNet, eCheck

28
CommerceNet Portfolios
  • Trust and security public key infrastructure
    (PKI), security showcase and encryption
  • Information access catalogues, directories,
    agencies and search interoperability
  • Architecture and markets eCo framework,
    iMarkets, vertical markets)

29
Why Use Digital Cash?
  • Digital cash products marketed for a variety of
    reasons
  • Anonymous unlike credit cards
  • Many people do not have access to credit cards
  • Useful for auctions and C2C e-commerce
  • Cheaper than Credit Cards for Merchants
  • Sites selling small items need to accept
    micropayments

30
Other Digital Currency Products
  • Some of the new digital cash techniques are
  • Consumers store value in an online account and
    deduct from it the price of small purchases
  • Qpass accumulates payments and deducts the final
    amount from a credit card
  • Trivnet and Ipin use ISPs to track customers
    online spending and add it to their bill

31
Flooz, Beenz CyberGold
  • Flooz use of gift certificates
  • Beenz issued to consumers to visit web sites,
    fill in forms or go shopping online
  • CyberGold allows consumers to convert
    cyberdollars into real money

32
PayPal eGold
  • PayPal developed by Confinity
  • to enable people to open an account at the web
    site and then email dollars to other people
  • E-Gold allows
  • clients to fund their accounts by purchasing gold
    or other metals and then transferring units of
    those metals (measured by weight) by entering a
    recipients account and a password
  • Refer to
  • www.paypal.com

33
Bartering Schemes
  • Various online bartering schemes exist
  • BarterTrust
  • BigVine
  • LassoBucks
  • Oakington (British firm) developed software for
  • automatic payment of taxes and
  • time escrow so that a transaction does not
    clear until the goods arrive

34
Millicent
  • Millicent - account based transaction protocol
    for low-value transactions
  • Allows a vendor
  • to verify a transaction without contacting a
    central authority and without expensive
    encryption
  • to use brokers and scrip

35
Smart Cards(Stored Value Cards)
  • A plastic card with a microchip that stores
    information usually about value
  • Can store more information and perform more
    functions than the more common magnetic stripe
    cards
  • Estimated more than 600 million in operation
    throughout the world

36
SVC Workings
  • Stored value is transferred from a card to
    another organisations account
  • Then adjusted through an electronic banking
    system

37
SVCs
  • Used to store information about
  • Peoples health
  • Identity cards
  • Security cards
  • Electronic signatures for digital mobile phones

38
SVCs May Store
  • University transcripts
  • Personal records
  • Medical information
  • Hospital files
  • Social security information
  • Employment records

39
Limitations
  • The limitations of SVCs relate to
  • Privacy issues
  • Legal issues
  • Social issues
  • Political issues

40
Types of SVCs
  • Closed system SVCs include fixed-priced, pre-paid
    telephone cards or pre-paid transport tickets
  • The owner of the card and the provider of the
    service are the same
  • Open-system SVCs can be recharged in value
  • Described as an electronic wallet
  • Most commonly the owner of the card is not the
    service provider

41
Advantages and Risks of SVCs in Business
  • Centre for Electronic Commerce at Monash
    University conclusions
  • Smart cards will have a significant impact on the
    banking system and the way it operates
  • Smart cards will affect the way money is exchanged

42
SVCs Advantages and Risks
  • Continued
  • Smart cards may erode the traditional role of
    banks in the payment systems used in society
  • Smart cards have the potential to allow
    institutions other than banks to issue value and
    thus create money
  • Smart cards are expensive to establish,
    profitability is lessened in the short term

43
SVCs Advantages and Risks
  • Continued
  • SVCs should improve the efficiency of
    electronically transferring funds for low value,
    high-volume transactions
  • Should offer a great range in payment options and
    improve convenience
  • Will increase costs to consumers by the need for
    suppliers to cover costs

44
SVCs Advantages and Risks
  • Continued
  • May not be affordable to all consumers, thus
    raising equity issues in society
  • The existing protections for consumers when using
    current payment systems and cards do not always
    apply with SVCs

45
SVCs Advantages and Risks
  • Continued
  • Smart cards are more secure than cash, depending
    on the card design and the method of recording
    stored value
  • The trials on SVCs currently in operation in
    Australia (Visa, Transcard, MasterCard, Quicklink
    and Mondex) are technically incompatible

46
B2B Electronic Payment Systems
  • Electronic commerce was suggested in the 1960s by
    financial institution that began investigating
    ways to automate their back-end banking systems
  • Starting with basic electronic processing of
    cheques, they then moved on to process credit
    card and wire-transfer transactions electronically

47
Electronic Data Interchange
  • EDI is the automated exchange of structured
    business documents between an organisation and
    its customers, suppliers or other trading
    partners
  • Traditional, non-internet EDI is actually a set
    of specifications for formatting documents
    designed specifically to automate business flow

48
Strengths of EDI
  • The strength of EDI is its ability to enable
    organisations with different business and
    computer systems to link those systems
    cost-effectively
  • EDI represents an effective technology for
    reducing the overheads associated with paper
    processing, product verification, handling and
    storage

49
EDI Characteristics
  • EDI processes must have the following
    characteristics
  • The exchange of information must be in a
    structured format so that the data are placed and
    found in predetermined places in the electronic
    message
  • The format or structure of the information must
    be agreed upon by both the receiver and the
    sender
  • The data must be machine readable

50
Traditional EDI
  • Requires communication between two or more
    trading partners
  • The network infrastructure must contain two major
    components
  • A communication channel that delivers the EDI
    documents across the trading network
  • Conformance to EDI standards

51
Communications Channels
  • The communications channel of a trading network
    is dictated by the complexity of the trading
    network and the type of communication link

52
DIRECT LINK EDI
  • ISDN leased lines and high-speed modem dial-up
    networks are used
  • A business communicates with trading partners by
    dialling up the trading partners network and
    transmitting EDI documents as required

53
DIRECT LINK EDI (continued)
  • DIRECT LINK EDI
  • Trading partners install and maintain their own
    direct link lines
  • Issues with speed, protocols and reliability
    across the trading partner network make direct
    link EDI prohibitive to smaller businesses
  • Suited primarily to large organisations
    transmitting large volumes of data regularly

54
PRIVATE NETWORKS
  • Closed network available to a selected group of
    trading partners
  • Hub company manages document handling overheads
    and protocol conversion facilities for spoke
    trading partners
  • Spoke companies can dial up the private network
    using a standard modem and perform their EDI
    transfers for the cost of a telephone call

55
Value Added Networks
  • A third party network or intermediary capable of
    providing reliable, secure transmission of
    documents between trading partners
  • Provide many services including
  • Transmission
  • EDI support services
  • Speed conversion
  • Mailbox services
  • Technical support, consulting, training

56
VANs
  • VANs provide electronic mailboxes
  • Support administrative facilities such as
    document auditing, message tracking, usage
    reporting and billing services
  • Using EDI translation software, converts
    documents between the standards such as X12 and
    EDIFACT, between standard and proprietary formats
    to email, fax

57
VANs (continued)
  • VANs function as intermediaries for large numbers
    of businesses acting as a focal point for
    multi-transactional, multi-nodal businesses
  • Act as a router for data
  • Consultancy point for new businesses

58
EDI Standards
  • Linking a customer with a supplier in an EDI
    relationship involves a hierarchy of
    communication levels
  • Each level has different accepted standards and
    protocols
  • Most standards are derived from the International
    Consultative Committee for Telephony (Now ITU)

59
X.25 Protocol
  • Standards usually involve the data being broken
    down into smaller packages for transmission
  • The receiver reassembles these packages into a
    coherent message
  • The X.25 protocol controls the EDI process at the
    communications level

60
X.400 X.500
  • X.400 and X.500 protocols enable the message to
    be handled by the sending and receiving PCs, they
    are not concerned with content
  • X.400 deals with how the data can be broken up
    and packaged
  • X.500 deals with the addresses and directories
    used in the EDI process

61
EDI Specific Standards
  • Specific standards for successful EDI processes
  • TRADACOMS
  • EDIFACT, the standard used in EDI.EDIFACT is the
    United Nations agreed standard for EDI
    transmission

62
Benefits of Traditional EDI
  • Traditionally only large firms have employed EDI
    technology because it is an expensive,
    proprietary technology
  • EDI can typically save 5 to 10 per cent of all
    procurement costs

63
EDI Benefits
  • Advantages of traditional EDI also include
  • The ability to maintain control over the movement
    of material
  • A reduction in labour costs
  • Reduction in routine tasks than can often cause
    errors
  • Reduction in stock holding and accounts receivable

64
EDI Benefits (continued)
  • An increase in cash flow due to the effective
    management of trade creditors
  • An increase in customer service
  • A move to one-time entry and elimination of
    superfluous administration

65
Shortcomings of Traditional EDI
  • EDI is an expensive means of doing business
  • Small and medium sized firms tend not to be EDI
    capable because of the inherent costs in
    proprietary software purchase, hardware
    installation and ongoing maintenance

66
Shortcomings (continued)
  • Implementing translation software may range from
    5000 (for a PC based system) through to 250 000
    (for a mainframe application)
  • In general, typical monthly fees are 50 and
    transaction fees of 50 to 70 cents apply

67
Web Server
  • Provides authentication of suppliers through user
    ID
  • Suppliers access their own mailbox and have read
    access to the incoming documents
  • Web servers use SSL encryption for security

68
Adapter
  • An adapter converts hub documents for the
    supplier from EDI into proprietary format

69
Open Buying on the Internet (OBI)
  • The OBI roundtable is a standard for B2B Internet
    Commerce
  • Version 1.0 of the standards document contains an
    architecture as well as technical specifications
    and guidelines

70
OBI
  • Is a freely available standard that adheres to
    the following guiding principles
  • Common business version
  • Vendor neutrality
  • Interoperability
  • Value-added services
  • Cost-effectiveness
  • Robust infrastructure
  • flexibility

71
OBI Architecture
  • OBI architecture can be viewed as the interaction
    of four entities
  • Purchasing officer
  • Buying organisation
  • Selling organisation
  • Payment authority

72
OBI Standard
  • The OBI standard provides
  • buying and selling organisations with a
    standards-based solution that achieves
    interoperability through a flexible, technology
    product-neutral architecture
  • For Internet business requisitions that combine
    web technologies with legacy or back-end systems
    such as EDI

73
OBI B2B
  • Open standards for trading and open financial
    exchanges like the BIPS Project 10, developed by
    the FSTC, will enable better B2B e-commerce
  • FSTC sponsors project-oriented, collaborative
    research and development on interbank technical
    projects affecting the whole financial services
    industry

74
Internet EDI Components
  • Back-end database system
  • an application system with a database for
    information storage
  • Generally has own proprietary format (SAP or
    Siebel)
  • A translator is required to take proprietary
    format back and forth from EDI format
  • XML solutions have developed an application
    called XEDI to help automate the process of
    converting between EDI and XML

75
Internet EDI XML
  • Back-end database system
  • XEDI can tag additional XML data along with the
    document that enables full recovery of the
    original EDI document on the other end
  • XML solutions is also working with the XML/EDI
    groups standardisation effort to create industry
    standards for these translations

76
Translator
  • Translator
  • Converts proprietary format to EDI standard
    format
  • New Era of Networks Inc. (NEON) recently released
    its PaperFree EDI adapter
  • This adapter provides connections between XML
    dialects such as Biztalk and RosettaNet and
    widely used formats such as X12 and EDIFACT

77
Mail Repository
  • Mail Repository
  • A database is utilised for the mailbox system, a
    web server to list and serve documents and
    applets
  • The hub maintains mailboxes for each spoke
  • Provides email, audit and control, tracking,
    querying and reporting
  • Unread EDI documents can be monitored and
    suppliers contacted

78
EDI versus Internet
  • EDI has been standardised through ANSI and
    EDIFACT
  • High operational costs, extensive customisation
    requirements and the need for VANS have hindered
    widespread adoption
  • Internets low cost transport mechanism and
    standardised protocols offer organisations low
    cost B2B e-commerce at low cost

79
Internet EDI
  • Offers organisations
  • basic transactional capability,
  • online catalogues,
  • pricing information,
  • scheduling and delivery information and
  • new ways of auctioning procurement such as online
    auctions

80
Internet EDI Advantages
  • Allows buyers and sellers to transact on a global
    scale
  • Offers a simple platform-independent vehicle for
    information exchange through
  • The TCP/IP protocol
  • Open Buying on the Internet

81
Internet EDI OBI
  • The OBI stand focuses on the Internet transaction
    and the components of which this is comprised
  • EDI
  • Digital certification
  • Supporting back-end systems
  • BIPS project will enable better B2B
  • e-commerce

82
Internet EDI BIPs
  • BIPS is a project to develop an open
    specification for bank customers to securely
    negotiate payment instructions to bank systems
    over the Internet
  • This project is supported by Citibank, and is
    closely linked with existing EFTPOS payment
    systems like SWIFT which is used across Australia

83
Summary
  • Electronic Payment Systems are becoming
    increasingly important to B2B and B2C commerce
  • Internet has enabled consumers access to many
    products and services that can be ordered
    electronically
  • Electronic catalogues are being developed

84
Summary
  • EPSs using smart cards, online EFTPOS-type
    systems and digital-money systems enable
    businesses and consumers to pay electronically
  • New forms of purchasing has reduced the
    importance of cash or money as the only form of
    transaction

85
Summary
  • EDI transactions enable more efficient allocation
    of resources for production and servicing, and
    permit better planning and inventory control in
    businesses
  • Financial uses of EDI through VANs enable more
    efficient transactions and monitoring of
    manufacturiing or service provision

86
Summary
  • Electronic purchasing is cost-effective and
    time-effective
  • There are security demands that have to be
    recognised by both businesses and consumers
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