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Electronic Commerce Eighth Edition

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Title: Electronic Commerce Eighth Edition


1
Electronic Commerce Eighth Edition
  • Chapter 11 Payment Systems For Electronic Commerce

2
Learning Objectives
  • In this chapter, you will learn about
  • The basic functions of online payment systems
  • The use of payment cards in electronic commerce
  • The history and future of electronic cash
  • How electronic wallets work
  • The use of stored-value cards in electronic
    commerce
  • Internet technologies and the banking industry

Electronic Commerce, Eighth Edition
2
3
Online Payment Basics
  • E-commerce
  • Exchange money for goods or services
  • Important function handling Internet payments
  • B2B payment transactions
  • Electronic funds transfers (EFTs)
  • B2C payment transactions
  • Evolving and competing for dominance
  • Customer convenience, saves companies money
  • Bill mailed by mail costs 1.00 to 1.50
  • Internet billing cost 50 cents

4
Online Payment Basics (contd.)
  • Four basic means to purchase items in B2C
    (traditional and electronic)
  • Cash, checks, credit cards, debit cards
  • 90 of all United States consumer payments
  • Electronic transfer small but growing
  • Most popular automated payments
  • Credit cards
  • Worldwide 90 of online payments
  • United States 97 of online payments

5
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6
Online Payment Basics (contd.)
  • Scrip
  • Digital cash minted by a company
  • Cannot be exchanged for cash
  • Exchanged for goods or services by company
    issuing scrip
  • Like a gift certificate good at more than one
    store
  • Current scrip offerings (eScrip)
  • Focus not-for-profit fundraising market
  • Merchant should offer customers payment options
  • Safe, convenient, widely accepted
  • Companies sell payment processing package service

7
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8
Payment Cards
  • General term describing all types of plastic
    cards consumers (businesses) use to make
    purchases
  • Categories credit cards, debit cards, charge
    cards
  • Credit card (Visa, MasterCard)
  • Spending limit based on users credit history
  • Charge purchases against credit line
  • Options for user billing cycle payments
  • Pay off entire credit card balance pay minimum
    amount
  • Card issuers charge unpaid balance interest
  • Accepted worldwide, 30-day dispute period

9
Payment Cards (contd.)
  • Credit card (contd.)
  • Card not present transactions
  • Cardholder not present during transaction
  • Requires extra security
  • Debit card
  • Removes sales amount from cardholders bank
    account
  • Transfers sales amount to sellers bank account
  • Issued by cardholders bank
  • Carries major credit card issuer name

10
Payment Cards (contd.)
  • Charge card (American Express)
  • No spending limit
  • Entire balance due at end of billing period
  • No line of credit or interest charges
  • Examples department store, oil company cards
  • Payment card
  • Refers to credit cards, debit cards, and charge
    cards

11
Payment Cards (contd.)
  • Single-use cards
  • Cards with disposable numbers
  • Addresses concern of giving online vendors
    payment card numbers
  • Not used much anymore
  • Problem required consumers to behave differently

12
Advantages and Disadvantages of Payment Cards
  • Advantage for merchants
  • Fraud protection (built-in security)
  • Charge paid through issuer of payment card
  • Advantage for U.S. consumers
  • Liability of fraudulent card use 50
  • Card issuer frequently waives 50 charge if card
    stolen
  • Good for merchants and consumers
  • Worldwide acceptance
  • Currency conversion handled by card issuer

13
Advantages and Disadvantages of Payment Cards
(contd.)
  • Disadvantage for merchants
  • Per-transaction fees, monthly processing fees
  • Cost of doing business
  • Goods and services prices are slightly higher
  • As opposed to environment free of payments cards
  • For payment
  • Merchant must first set up merchant account
  • Disadvantage for consumers
  • Annual fee

14
Payment Acceptance and Processing
  • Internet payment card process easier than
    physical store process
  • EMV standard
  • Single standard handling payment card
    transactions
  • Visa, MasterCard, MasterCard International
  • United States online stores, mail order stores
  • Must ship merchandise within 30 days of charging
    payment
  • Violation penalties are significant
  • Most do not charge payment card accounts until
    merchandise shipped

15
Payment Acceptance and Processing (contd.)
  • General steps in payment card transactions
  • Merchant receives payment card information
  • Merchant authenticates payment
  • Merchant ensures funds are available and puts
    hold on credit line or funds to cover charge
  • Settlement occurs (few days after purchase)
    funds travel between banks and are placed into
    merchants account

16
Payment Acceptance and Processing (contd.)
  • Open and closed loop systems
  • Closed loop systems
  • Card issuer pays merchant directly
  • Does not use intermediary
  • American Express, Discover Card
  • Open loop systems (three or more parties)
  • Third party (intermediary bank) processes
    transaction
  • Visa, MasterCard not issued directly to
    consumers
  • Credit card associations operated by association
    member banks
  • Customer issuing banks member banks

17
Payment Acceptance and Processing (contd.)
  • Merchant accounts (acquiring bank)
  • Bank doing business with sellers (Internet,
    non-Internet) wanting to accept payment cards
  • Merchant account
  • Required for online merchant to process payment
    cards
  • Acceptance by bank of merchant account
  • Merchant must provide business information
  • Risk of business type assessed
  • Bank collects credit card receipts on merchants
    behalf
  • Credits value in merchants account

18
Payment Acceptance and Processing (contd.)
  • Merchant accounts (contd.)
  • Chargeback
  • Cardholder successfully contests charge
  • Merchant bank must retrieve money from merchant
    account
  • Merchant may have to cover chargeback potential
  • Problem facing online businesses
  • Level of online transaction fraud
  • Fewer than 5 percent of credit card transactions
    completed online accounts for 60 percent of
    total credit card dollar amount fraud

19
Payment Acceptance and Processing (contd.)
  • Processing payment cards online
  • Payment processing service providers
  • Companies offering payment card processing
  • Example InternetSecure
  • Supports Visa and MasterCard payments for
    Canadian and U.S. accounts
  • Provides risk management and fraud detection
  • Handles online merchants transactions
  • Uses existing bank-approved payment card
    processing infrastructure, secure links, and
    firewalls

20
Payment Acceptance and Processing (contd.)
  • Processing payment cards online (contd.)
  • First Data
  • Provides merchant payment card processing
    services with ICVERIFY and WebAuthorize programs
  • ICVERIFY for small retailers using Microsoft
    Windows electronic cash registers, point-of-sale
    terminal systems
  • WebAuthorize for large enterprise-class merchant
    sites
  • ICVERIFY, WebAuthorize connect directly to
  • Network of banks Automated Clearing House (ACH)
  • Credit card authorization companies
  • Connect to ACH through highly secure, private
    leased telephone lines

21
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22
Payment Acceptance and Processing (contd.)
  • Processing payment cards online (contd.)
  • Merchant Warehouses PayFlow Link system
  • Online payment system developed by CyberCash
  • Now operated by VeriSign
  • InfoSpaces Authorize.Net
  • Online, realtime payment card processing service
  • Merchants link to system by inserting small HTML
    code block into transaction page
  • Order encrypted, transferred to Authorize.Net
    server
  • Server relays transaction to bank network
  • Customers not aware of third-party supplier
    (usually)

23
Electronic Cash
  • Electronic cash (e-cash, digital cash)
  • Describes any value storage and exchange system
    created by private (nongovernmental) entity
  • Does not use paper documents or coins
  • Can serve as substitute for government-issued
    physical currency
  • Readily exchanged for physical cash on demand
  • Problem
  • No standard among all electronic cash issuers
  • Not universally accepted

24
Electronic Cash (contd.)
  • Small purchases not profitable for merchants
  • Bank fees greater than profits
  • Factors in favor of electronic cash
  • Potentially significant market for electronic
    cash
  • Market for Internet small purchases (below 10)
  • Most of worlds population does not have credit
    cards
  • Electronic cash solution to paying for online
    purchases
  • Idea of electronic cash refuses to die
  • Despite failures

25
Micropayments and Small Payments
  • Micropayments
  • Internet payments for items
  • Costing few cents to a dollar
  • Micropayments barriers
  • Not implemented very well on the Web yet
  • Human psychology
  • People prefer to buy small value items in fixed
    price chunks
  • Example mobile phone has fixed monthly payment
    plans

26
Micropayments and Small Payments (contd.)
  • Small payments
  • All payments of less than 10
  • Companies that have developed micropayment
    systems
  • Millicent, DigiCash, Yaga, BitPass
  • All have failed
  • No company has gained broad acceptance of its
    system despite industry observers seeing such a
    need
  • No company devoted solely to offering
    micropayment services

27
Privacy and Security of Electronic Cash
  • Electronic payment methods concerns
  • Privacy and security, independence, portability,
    convenience
  • Privacy and security most important to consumers
  • Transactions vulnerable
  • Electronic currency copied, reused, forged
  • Unique security problems of electronic cash
  • Possible to spend only once
  • Not counterfeit used in two different
    transactions
  • Anonymous use
  • Prevents sellers from collecting information

28
Privacy and Security of Electronic Cash (contd.)
  • Electronic cash companies
  • eCharge, InternetCash, Valista
  • Advantages of electronic cash
  • Independent
  • Unrelated to any network or storage device
  • Ideally pass transparently across international
    borders converted automatically to recipient
    countrys currency
  • Portable
  • Freely transferable between any two parties
  • Credit and debit cards not portable or
    transferable
  • Important characteristic of cash convenience

29
Holding Electronic Cash Online and Offline Cash
  • Online cash storage
  • Consumer has no personal possession of electronic
    cash
  • Trusted third party (online bank) involved in all
    transfers, holds consumers cash accounts
  • Online system payment
  • Merchants contact consumers bank
  • Helps prevent fraud (confirm valid cash)
  • Resembles process of checking with consumers
    bank to ensure valid credit card and matching name

30
Holding Electronic Cash Online and Offline Cash
(contd.)
  • Offline cash storage
  • Virtual equivalent of money kept in wallet
  • Customer holds it
  • No third party involved in transaction
  • Protection against fraud concern
  • Hardware or software safeguards needed
  • Double-spending
  • Spending electronic cash twice
  • Too late to prevent fraudulent act by time same
    electronic currency clears bank for second time
  • Prevent double-spending use encryption techniques

31
Advantages and Disadvantages of Electronic Cash
  • Traditional brick-and-mortar billing methods
  • Costly
  • Generate invoices, stuff envelopes, buy and affix
    postage to envelopes, send invoices to customers
  • Accounts payable department
  • Keeps track of incoming payments, posts accounts
    in database, ensures current customer data
  • Online stores have the same payment collection
    inefficiencies
  • Online customers use credit cards to pay for
    purchases

32
Advantages and Disadvantages of Electronic Cash
(contd.)
  • Online auction customers use conventional payment
    methods
  • Checks, money orders
  • Electronic cash system
  • Less popular than other payment methods
  • Provides unique advantages and disadvantages
  • Advantages of electronic cash transactions
  • More efficient (less costly)
  • Efficiency fosters more business (lower prices)
  • Occurs on existing infrastructure (Internet)

33
Advantages and Disadvantages of Electronic Cash
(contd.)
  • Advantages of electronic cash transactions
    (contd.)
  • Internet spans globe
  • Distance transaction travels does not affect cost
  • Does not require one party to obtain
    authorization
  • Disadvantages of electronic cash transactions
  • No audit trail
  • Money laundering
  • Technique criminals use to convert money
    illegally obtained into spendable cash
  • Purchase goods, services with ill-gotten
    electronic cash
  • Goods sold for physical cash on open market

34
Advantages and Disadvantages of Electronic Cash
(contd.)
  • Disadvantages of electronic cash transactions
    (contd.)
  • Susceptible to forgery
  • Other potentially damaging digital economic
    factors
  • Expansion of money supply when banks loan
    electronic cash on consumer and merchant
    traditional bank accounts
  • Electronic cash has not yet become a global
    success
  • Will require wide acceptance and solution to
    problem of multiple electronic cash standards

35
How Electronic Cash Works
  • Consumer opens account with electronic cash
    issuer
  • Presents proof of identity
  • Consumer withdraws electronic cash using issuers
    Web site
  • Presents proof of identity
  • Digital certificate issued by certification
    authority
  • Combination of credit card number and verifiable
    bank account

36
How Electronic Cash Works (contd.)
  • After consumer identity is verified
  • Electronic cash amount is issued
  • Amount deducted from consumers account
  • Issuer may charge small processing fee
  • Consumer stores electronic cash
  • In electronic wallet
  • On his or her computer
  • On stored-value card
  • Consumer can authorize issuer to make third-party
    payments
  • From electronic cash account

37
Providing Security for Electronic Cash
  • Significant electronic cash problem
  • Potential for double-spending
  • Main deterrent
  • Threat of detection and prosecution
  • Keys to creating tamperproof electronic cash that
    can be traced back to origins
  • Cryptographic algorithms
  • Two-part lock
  • Provides anonymous security
  • Signals someone is attempting to double-spend cash

38
Providing Security for Electronic Cash (contd.)
  • When second transaction occurs
  • Complicated process reveals
  • Attempted second use
  • Identity of original electronic cash holder
  • Electronic cash used correctly
  • Maintains users anonymity
  • Double-lock procedure
  • Protects anonymity of electronic cash users
  • Simultaneously provides built-in safeguards to
    prevent double-spending

39
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40
Providing Security for Electronic Cash (contd.)
  • Double-spending
  • Neither detected nor prevented with truly
    anonymous electronic cash
  • Anonymous electronic cash
  • Cannot be traced back to person who spent it
  • Tracing electronic cash
  • Attach serial number to each electronic cash
    transaction
  • Cash positively associated with particular
    consumer
  • Does not solve double-spending problem

41
Providing Security for Electronic Cash (contd.)
  • Single issuing bank can detect when two deposits
    of same electronic cash are about to occur
  • Impossible to ascertain fault (consumer or
    merchant)
  • Electronic cash contains serial numbers
  • No longer anonymous
  • One reason to acquire electronic cash
  • Raises privacy issues
  • The use of serial numbers to track consumers
    spending habits

42
Providing Security for Electronic Cash (contd.)
  • Creating truly anonymous electronic cash
  • Bank issues electronic cash with embedded serial
    numbers
  • Bank digitally signs electronic cash while
    removing association of cash with particular
    customer

43
Electronic Cash Systems
  • Electronic cash
  • More successful in Europe and Japan
  • Consumers prefer to use cash (does not work well
    for online transactions)
  • Electronic cash fills important need
  • Not successful in United States
  • Consumers have payment cards and checking
    accounts
  • KDD Communications (KCOM)
  • Internet subsidiary Japans largest phone
    company
  • Offers electronic cash through NetCoin Center

44
Electronic Cash Systems (contd.)
  • Reasons for failure of United States electronic
    cash systems
  • Electronic cash systems implementation
  • Required to download and install complicated
    client-side software that ran in conjunction with
    browser
  • Number of competing technologies
  • No standards developed
  • Array of proprietary electronic cash alternatives
  • No interoperable software
  • That runs transparently on variety of hardware
    configurations and different software systems

45
Electronic Cash Systems (contd.)
  • CheckFree
  • Largest online bill processor (in the world)
  • Payment processing services since 1981 to
  • Large corporations, individual Internet users
  • 2007 Fiserv bought CheckFree (4.4 billion)
  • Offers online bill processing under CheckFree
    brand

46
Electronic Cash Systems (contd.)
  • Clickshare
  • Electronic cash system for magazines and
    newspaper publishers
  • Uses technology called micropayment-only system
  • An ISP supporting Clickshare automatically
    registers users
  • When users click links leading to Clickshare
    sites
  • They can make purchases without registering again
  • Clickshare keeps track of transactions and bills
    users ISP

47
Electronic Cash Systems (contd.)
  • Clickshare (contd.)
  • Tracks user on the Internet
  • Significant value to advertisers, marketers
  • Defeats anonymity
  • Micropayment capability
  • By-product of core functionality of tracking
    identified users
  • Tracks users with standard HTTP Web protocol
  • Does not require cookies or software wallets

48
Electronic Cash Systems (contd.)
  • PayPal
  • Payment processing services to businesses,
    individuals
  • Earns profit from float
  • Money deposited, not used immediately
  • Charges transaction fee
  • Businesses using service to collect payments
  • Peer-to-peer (P2P) payment system
  • Free payment clearing service for individuals
  • Payments from one type of entity to another of
    the same type

49
Electronic Cash Systems (contd.)
  • PayPal (contd.)
  • Eliminates writing and mailing checks or payment
    cards
  • Send money instantly and securely to anyone with
    an e-mail address
  • Convenient for auction bidders to pay for
    purchases
  • Convenient for auction sellers
  • Eliminates risks posed by other online payment
    types
  • Transactions clear instantly
  • Redemption
  • PayPal check
  • Direct deposit to checking accounts

50
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51
Electronic Cash Systems (contd.)
  • PayPal (contd.)
  • Merchants and consumers first register for PayPal
    account
  • No minimum amount account balance
  • Add money by authorizing checking accounts
    transfer, using credit card
  • Merchants need PayPal accounts to accept PayPal
    payments

52
Electronic Cash Systems (contd.)
  • PayPal (contd.)
  • Competition from Billpoint
  • Joint venture between eBay, Wells Fargo
  • PayPal maintained first-mover advantage
  • Remained most widely used eBay payment processing
    system
  • eBay purchased PayPal
  • Other peer-to-peer payment business companies
  • First Data Corporation offered electronic money
    orders through BidPay site (closed in 2007)
  • Citibanks c2it payments service (closed in 2003)

53
Electronic Wallets
  • Concerns of consumers when shopping online
  • Entering detailed shipping and payment
    information for each online purchase
  • Filling out forms
  • Solution
  • Electronic commerce sites allows customer to
    store name, address, credit card information on
    the site
  • Problem
  • Consumers must enter information at each site

54
Electronic Wallets (contd.)
  • Electronic wallet (e-wallet)
  • Holds credit card numbers, electronic cash, owner
    identification, owner contact information
  • Provides information at electronic commerce site
    checkout counter
  • Benefit consumer enters information once
  • More efficient shopping
  • Server-side electronic wallet
  • Stores customers information on remote server of
    merchant or wallet publisher
  • No download time or installation on users
    computer

55
Electronic Wallets (contd.)
  • Server-side electronic wallet (contd.)
  • Main weakness
  • Security breach can reveal thousands of users
    personal information (credit card numbers)
  • Servers must employ strong security measures to
    minimize possibility of unauthorized disclosure
  • Client-side electronic wallet
  • Stores information on consumers computer
  • Disadvantages
  • Must download wallet software onto every computer
  • Not portable

56
Electronic Wallets (contd.)
  • Client-side electronic wallet (contd.)
  • Advantage
  • Sensitive information stored on users computer
  • Sensitive information safer on client machine
  • Attackers must launch many attacks on user
    computers (more difficult to identify)
  • Prevents easily identifiable wallet vendors
    servers from attack

57
Electronic Wallets (contd.)
  • Characteristics of useful wallets
  • Wallet accessibility
  • Populate data fields in any merchants forms for
    any site consumer visits
  • Electronic wallet manufacturer and merchants from
    many sites must coordinate efforts
  • Wallet recognizes consumer information going into
    each field of given merchants forms

58
Electronic Wallets (contd.)
  • Electronic wallets
  • Store shipping and billing information
  • Consumers first and last names, street address,
    city, state, country, postal code
  • Hold credit card names, numbers
  • Offers consumer choice of credit cards at online
    checkout
  • Hold electronic cash from various providers

59
Electronic Wallets (contd.)
  • Electronic wallet used by business companies
  • Example MasterCard
  • Most abandoned efforts
  • Current major browsers include feature to
    remember names, addresses, other commonly
    requested information
  • Browsers provides one-click Web form field
    completion
  • Two e-wallet arena survivors
  • Microsoft Windows Live ID
  • Yahoo! Wallet

60
Microsoft Windows Live ID
  • Formerly called Passport, Microsoft .NET Passport
  • Single sign-in service
  • Includes server-side electronic wallet
  • Operated by Microsoft
  • All personal data entered into Windows Live ID
    wallet
  • Encrypted and password protected

61
Microsoft Windows Live ID (contd.)
  • Four integrated services
  • Single sign-in service (SSI)
  • Allows user to sign in at participating Web site
    using username and password
  • Wallet service
  • Provides electronic wallet functions (secure
    storage, form completion of credit card, address
    information)
  • Kids service
  • Helps parents protect, control childrens online
    privacy
  • Public profiles
  • Allows consumers to create public page of
    information about themselves

62
Yahoo! Wallet
  • Server-side electronic wallet offered by Yahoo!
  • Completes order forms automatically
  • Identifying information, credit card payment
    information
  • Stores information
  • Several major credit, charge cards, Visa and
    MasterCard debit cards
  • Accepted by
  • Thousands of Yahoo! Store merchants, Yahoo!
    Travel
  • Yahoo! Services
  • Premium e-mail storage, Web hosting fees

63
Yahoo! Wallet (contd.)
  • Yahoo! Advantage
  • Number of services and shops accommodate own
    wallet
  • Large number of merchants accept wallet
  • Privacy concern
  • Company issuing wallet has access to great deal
    of information about individual using wallet

64
Stored-Value Cards
  • Microchip smart card or magnetic strip plastic
    card
  • Records currency balance
  • Microchip versus magnetic strip
  • Microchip stores more information
  • Tiny microchip computer processor
  • Performs calculations and storage operations on
    card
  • Different microchip card reader needed
  • Examples prepaid phone, copy, subway, bus cards
  • Stored-value card and smart card used
    interchangeably

65
Magnetic Strip Cards
  • Holds rechargeable value
  • Passive magnetic strip cards cannot
  • Send or receive information
  • Increment or decrement cash value stored
  • Processing done on device into which card
    inserted
  • Magnetic strip cards and smart cards store
    electronic cash
  • Smart card better suited for Internet payment
    transactions
  • Has processing capability

66
Smart Cards
  • Stored-value card
  • Plastic card with embedded microchip
  • Credit, debit, charge cards store limited
    information on magnetic strip
  • Store information
  • About 100 times more than magnetic strip plastic
    card
  • Hold private user data
  • Financial facts, encryption keys, account
    information, credit card numbers, health
    insurance information, medical records

67
Smart Cards (contd.)
  • Safer than conventional credit cards
  • Information encrypted on smart card
  • Popular in Europe, parts of Asia
  • Public telephone calls, cable television programs
  • Hong Kong
  • Retail counters, restaurant cash registers have
    smart card readers
  • Octopus is the public transportation smart card
    can be reloaded at transportation locations,
    7-Eleven stores

68
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69
Smart Cards (contd.)
  • Beginning to appear in United States
  • San Francisco TransLink integrated ticketing
    system for public transportation
  • Smart Visa card (2000)
  • Target Visa smart card (2002)
  • Smart Card Alliance
  • Advances smart card benefits
  • Promotes widespread acceptance of
    multiple-application smart card technology
  • Promotes compatibility among smart cards, card
    reader devices, applications

70
Internet Technologies and the Banking Industry
  • Paper checks
  • Largest dollar volume of payments
  • Processed through worlds banking system
  • Other major payment forms
  • Involve banks one way or another
  • Banking industry Internet technologies
  • Providing new tools
  • Creating new threats

71
Check Processing
  • Physical check processing (banks, clearinghouses)
  • Person wrote check retailer deposited check in
    bank account
  • Retailers bank sent paper check to clearinghouse
  • Clearinghouse managed fund transfer (consumers
    bank to retailers account)
  • Paper check transported to consumers bank
  • Send cancelled check to consumer
  • Many banks stopped sending cancelled checks to
    consumer
  • Provide PDF images of processed checks

72
Check Processing (contd.)
  • Disadvantage of paper checks
  • Cost of transporting tons of paper checks
  • Float
  • Delay between the time person writes check and
    the time check clears persons bank
  • Banks customer obtains free use of funds for few
    days
  • Bank loses use of funds for same time period
  • Can become significantly longer than a few days

73
Check Processing (contd.)
  • Technologies helping banks reduce float
  • 2004 U.S. law Check Clearing for the 21st
    Century Act (Check 21)
  • Banks eliminate movement of physical checks
    entirely
  • Check 21-compliant world
  • Retailer scans customer's check
  • Scanned image transmitted instantly
  • Through clearing system
  • Posts almost immediately to both accounts
  • Eliminates transaction float

74
Phishing Attacks
  • Phishing expedition
  • Technique for committing fraud against online
    businesses customers
  • Launched against all online business types
  • Particular concern to financial institutions
  • Customers expect high degree of personal
    information security
  • Basic structure
  • Attacker sends e-mail message
  • Large number of recipients
  • Account at targeted Web site

75
Phishing Attacks (contd.)
  • Basic structure (contd.)
  • E-mail message tells recipient account is
    compromised
  • Recipient must log on to account to correct
    problem
  • E-mail message includes link
  • Appears to be Web site login page
  • Actually disguised perpetrators Web site
  • Recipient enters login name, password
  • Perpetrator captures
  • Uses to access recipients account
  • Access personal information, make purchases,
    withdraw funds

76
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77
Phishing Attacks (contd.)
  • Spear phishing
  • Phishing expedition that is carefully designed to
    target particular person or organization
  • Requires considerable research
  • Increases chance of e-mail being opened
  • Example 2008 government stimulus checks
  • Phishing e-mails appeared within one week of
    passage

78
Phishing Attacks (contd.)
  • E-mail link disguises and tricks
  • Example of Web server that ignores all characters
    preceding _at_
  • https//www.paypal.com_at_218.36.41.188/fl/login.html
  • Example of disguised link
  • https//www.paypal.com_at_218.36.41.188/fl/login.html
  • Example of invisible phony site displayed due to
    JavaScript code
  • http//leasurelandscapes.com/snow/webscr.dll

79
Phishing Attacks (contd.)
  • E-mail link disguises and tricks (contd.)
  • Pop-up windows
  • Look exactly like browser address bar
  • Including Web site graphics of financial
    institutions
  • Looks more convincing

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Organized Crime, Identity Theft, and Phishing
Attacks
  • Organized crime (racketeering)
  • Unlawful activities conducted by highly
    organized, disciplined association for profit
  • Differentiated from less organized terrorist
    groups
  • Internet providing new criminal activity
    opportunities
  • Generates spam, phishing, identity theft
  • Identity theft
  • Criminal act where perpetrator gathers victims
    personal information
  • Uses information to obtain credit
  • Perpetrator runs up account charges and disappears

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Organized Crime, Identity Theft, and Phishing
Attacks (contd.)
  • Large criminal organizations
  • Efficient perpetrators of identity theft
  • Exploit large amounts of personal information
    quickly and efficiently
  • Sell or trade information that is not of
    immediate use
  • Other worldwide organized crime entities
  • Zombie farm
  • Large number of computers implanted with zombie
    programs
  • Pharming attack
  • Hacker sells right to use zombie farm to
    organized crime association

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Organized Crime, Identity Theft, and Phishing
Attacks (contd.)
  • Two elements in phishing
  • Collectors collect information
  • Cashers use information
  • Require different skills
  • Crime organizations facilitate transactions
    between collectors and cashers
  • Increases phishing activity efficiency, volume
  • Each year
  • More than a million people fall victim
  • Financial losses exceed 500 million

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Phishing Attack Countermeasures
  • Change protocol
  • Improve e-mail recipients ability to identify
    message source
  • Reduce phishing attack threat
  • Educate Web site users
  • Contract with consulting firms specializing in
    anti-phishing work
  • Monitor online chat rooms used by criminals

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Summary
  • Online stores payment forms
  • Credit, debit, charge cards (payment cards)
  • Ubiquitous, convenient, easy to use
  • Electronic cash advantages and potential uses
  • Making micropayments, stored online or offline
  • Convenience of electronic wallets
  • Stored-value cards
  • Smart cards, magnetic strip cards
  • Banks process most monetary transactions
  • Use Internet technologies to process checks
  • Concerns phishing expeditions, identity theft
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