1 - PowerPoint PPT Presentation

1 / 41
About This Presentation



PayPal is very popular with eBay auction customers. PayPal allows customers to send money instantly and securely to anyone with an ... – PowerPoint PPT presentation

Number of Views:87
Avg rating:3.0/5.0
Slides: 42
Provided by: dch9
Tags: paypal


Transcript and Presenter's Notes

Title: 1

Chapter 7
  • Electronic Payment Systems

Learning Objectives
  • In this chapter, you will learn about
  • Distinct methods to collect payments from
  • The history and near-term future for electronic
  • The implementation of electronic cash systems
  • Electronic wallets and how they work

Learning Objectives
  • The role of smart cards in electronic commerce
  • Credit and debit card processing for electronic
    commerce transactions
  • The most popular electronic payment systems
  • The SET protocol and how it protects credit card

The Basics of Electronic Payment Systems
  • Electronic commerce involves the exchange of some
    form of money for goods and services.
  • Implementation of electronic payment systems is
    in its infancy and still evolving.
  • Four technologies to be used electronic cash,
    software wallets, smart cards, and credit/debit

Electronic Cash
  • Electronic cash is attractive in two arenas
  • in the sale of goods and services of less than
  • in the sale of higher-priced goods and services
    to those without access to credit cards
  • Internet payments for items costing from a few
    cents to approximately 10 are called
  • Companies offer micropayment systems include
    iPin, eChange, Qpass, 1ClickBrands, and

Electronic Cash
  • Concerns about electronic payment methods
  • privacy and security
  • independence
  • portability
  • divisibility
  • convenience

Electronic Cash
  • Electronic cash should have two important
    characteristics in common with real currency
  • it must be possible to spend electronic cash only
  • electronic cash ought to be anonymous
  • Beenz is a kind of scrip that consumers can earn
    and exchange for goods and services.

Online and Offline Cash
  • Two approaches to holding cash online storage
    and offline storage.
  • Online cash storage means that an online bank is
    involved in all transfers of electronic cash.
  • Offline cash storage is the virtual equivalent of
    money you keep in your wallet. However, it must
    prevent double or fraudulent spending.

Advantages of Electronic Cash
  • Electronic cash transactions are more efficient
    and less costly than other methods.
  • The distance that an electronic transaction must
    travel does not affect cost.
  • The fixed cost of hardware to handle electronic
    cash is nearly zero.
  • Electronic cash does not require that one party
    have any special authorization.

Disadvantages of Electronic Cash
  • The concept of an Internet tax poses many
    problems and questions.
  • Because true electronic cash is not traceable,
    money laundering is a problem.
  • Electronic cash is susceptible to forgery.
  • Electronic cash is, so far, a commercial flop.

How Electronic Cash Works
  • To establish electronic cash, a consumer goes in
    person to open an account with a bank.
  • The consumer uses a digital certificate to access
    the bank through the Internet to make a purchase.
  • Consumers can spend their electronic cash at
    sites that accept electronic cash for payment.
  • The electronic cash must be protected from both
    theft and alteration.

Providing Security for Electronic Cash
  • To prevent double spending, the main security
    feature is the threat of prosecution.
  • A complicated two-part lock provides anonymous
    security that also signals when someone is
    attempting to double spend cash.
  • One way to trace electronic cash is to attach a
    serial number to each electronic cash
  • Click to see Figure 7-3

(No Transcript)
Electronic Cash Systems
  • Compaq Computers electronic cash technology
    allows users to use its NetCoin electronic cash.
  • CyberCash created CyberCoin for micropayments.
  • No standards were ever developed for the entire
    electronic cash system.

  • CheckFree provides online payment processing
    services to both large corporations and
    individual Internet users.
  • CheckFree permits users to pay all their bills
    with online electronic checks.
  • CheckFree signed an agreement with Yahoo! to
    provide Yahoo! customers the option of paying
    directly from the Yahoo! site.

  • Clickshare is an electronic cash system aimed at
    magazine and newspaper publishers.
  • Users with an ISP that supports Clickshare are
    automatically registered with Clickshare.
  • Clickshare tracks users with the standard HTTP
    Web protocol.

DigiCash (eCash)
  • DigiCash was a trailblazer in the electronic cash
  • DigiCash made software products that allowed
    users to purchase goods and services on the
    Internet and pay for them using anonymous
    electronic cash.

  • ECoins are electronic tokens issued by eCoin.net.
  • Consumers can use the tokens to pay for online
  • The electronic cash is stored in an eCoin wallet
    on the consumers computer.
  • The eCoin system uses a three-link chain
    consisting of a consumer, a merchant, and the
    eCoin server.

  • InternetCash provides electronic currency that is
    very similar to traditional cash.
  • Customers must first purchase an InternetCash
    card from stores such as Circle K.
  • Customers then go online and activate their cards
    by entering a 20-digit code and creating a PIN.
  • Once their card is activated, customers can pay
    for purchases using the InternetCash card at any
    site accepting them.

  • MilliCent is an electronic scrip system that does
    not issue one standard currency.
  • Each participating merchant creates and sells its
    own scrip to a broker at discount.
  • Consumers register with one broker and buy broker
    scrip in bulk.
  • Paying for an item involves simply transferring a
    merchants scrip to the merchant in exchange for
    a purchased item.

  • PayPal.com is a free service that earns a profit
    on the float, which is money that is deposited in
    PayPal account.
  • PayPal is very popular with eBay auction
  • PayPal allows customers to send money instantly
    and securely to anyone with an e-mail address,
    including an online merchant.

Loyalty and Rewards Systems
  • Scrip is a form of electronic cash that is stored
    on your computer or on the server of the scrip
  • Loyalty and rewards programs endorsed by various
    Web stores frequently use scrip to reward Web
  • Flooz and beenz are two most popular brands of

  • Beenz is a brand of scrip that is marketed as a
    loyalty reward program for Internet consumers.
  • Consumers collect beenz and later redeem them for
    merchandise at participating merchant Web sites.
  • On average, on beenz is worth approximately one

  • Flooz is scrip that you purchase using a credit
    card and either use for your own purchases or
    send to a recipient as a gift or payment.
  • Flooz is redeemable for purchases at any merchant
    that accepts it.
  • The Flooz exchange rate is one Flooz equals to
    one dollar.

Electronic Wallets
  • An electronic wallet serves a function similar to
    a physical wallet, also
  • Holds credit cards, electronic cash, owner
    identification, and owner contact information
  • Provides owner contact information at an
    electronic commerce sites checkout counter
  • Contains an address book

Electronic Wallets
  • Electronic wallets make shopping more efficient.
  • Electronic wallets fall into two categories based
    on where they are stored
  • Server-side electronic wallet
  • Client-side electronic wallet

Electronic Wallets
  • Electronic wallets are particularly useful and
    save a lot of time to fill out electronic
    checkout counter form.
  • Electronic wallets can enter required information
    into checkout forms automatically.
  • MasterCard offers its own electronic wallet,
    called the MasterCard e-wallet.

  • EntryPoint produces eWallet, a free wallet
    software that consumers download and install on
    their computer.
  • eWallet stores personal and payment information
    inside the electronic wallet.
  • To protect your information, eWallet is encrypted
    and password protected.

Microsoft Passport
  • Microsoft Passport Wallet comes preinstalled in
    Internet Explorer 4.0 and higher versions.
  • All the personal data you enter into your
    Microsoft Passport, including your name, address,
    and credit card information, are encrypted and
  • Passport consists of four integrated services
    Passport single sign-in service, Passport Wallet
    Service, Kids Passport service, and public

The W3C Proposed Standard
  • The W3C proposed standards for electronic wallets
    will impact every vendors wallet offerings.
  • The W3C Electronic Commerce Interest Group (ECIG)
    developed the Common Markup for Web Micropayment
    Systems public working draft.

The ECML Standard
  • The consortium of America Online, Brodia, Compaq,
    CyberCash, Dell, IBM, Microsoft, Visa USA, and
    MasterCard has agreed on a technology called
    ECML, or electronic commerce modeling language.
  • The ECML standard will expedite online processing
    for customers by simplifying the form-filling

Stored-Value Cards
  • A stored-value card can be an elaborate smart
    card or a simple plastic card with a magnetic
    strip that records the currency balance.
  • A smart card is better suited for Internet
    payment transactions because it has limited
    processing capability.

What is a Smart Card?
  • A smart card is a plastic card with an embedded
    microchip containing information about you.
  • A smart card contains private user information
    such as financial facts, private encryption keys,
    account information, credit card numbers, health
    insurance information, etc.

Mondex Smart Card
  • Mondex is a smart card that holds and dispenses
    electronic cash.
  • Mondex requires special equipment such as card
    reader to process.
  • Containing a microcomputer chip, Mondex cards can
    accept electronic cash directly from a users
    bank account.
  • Click to see Figure 7-18

(No Transcript)
Credit and Charge Cards
  • A credit card, such as a Visa or a MasterCard,
    has a preset spending limit based on the users
    credit limit.
  • A charge card, such as one from American Express,
    carries no preset spending limit.
  • The collective term payment card will refer to
    both types of card.

Advantages and Disadvantages of Payment Cards
  • Advantages
  • Payment cards provide fraud protection
  • Their worldwide acceptance
  • They are good for online transactions
  • Disadvantages
  • Payment card service companies charge merchants
    per-transaction fee and monthly processing fee

Payment Acceptance and Processing
  • Open and closed loop systems will accept and
    process payment cards.
  • A merchant bank or acquiring bank is a bank that
    does business with merchants who want to accept
    payment cards.
  • Software packaged with your electronic commerce
    software can handle payment card processing
  • Click to see Figure 7-19

(No Transcript)
Secure Electronic Transaction (SET) Protocol
  • SET is a secure protocol jointly designed by
    MasterCard and Visa with the backing of
    Microsoft, Netscape, IBM, GTE, SAIC, and other
  • The purpose of SET is to provide security for
    card payments as they traverse the Internet
    between merchant sites and processing banks.

Secure Electronic Transaction (SET) Protocol
  • The SET specification uses public key
    cryptography and digital certificates for
    validating both consumers and merchants.
  • The SET protocol provides confidentiality, data
    integrity, user and merchant authentication, and
    consumer nonrepudiation.
Write a Comment
User Comments (0)
About PowerShow.com