E-Payment MethodsE-Payment Methods

Fazal rehman shamilFazal rehman shamil

2001 Daniel L. Silver 2

Major Architectural Components Major Architectural Components of the Webof the Web

Internet

Browser

DatabaseServer

Client 1

Server A

Server BBank

Server

URL

HTTPTCP/IP

Browser

Client 2 HTTPServer

App.Server

index.html

BankServer

prog1.classprog2.jsp

2001 Daniel L. Silver 3

Traditional Payment MethodsTraditional Payment Methods

Payment: Payment: The transfer of money from one The transfer of money from one individual or legal entity to anotherindividual or legal entity to another

CashCash Personal ChequesPersonal Cheques Money orders (Bank note)Money orders (Bank note) Credit cardsCredit cards Debit cardsDebit cards

2001 Daniel L. Silver 4

Selection of Payment MethodSelection of Payment Method

Based on:Based on:– ConvenienceConvenience– Trace-abilityTrace-ability– Financial riskFinancial risk– Fraud protectionFraud protection

2001 Daniel L. Silver 5

Credit CardsCredit Cards

A very common method of payment A very common method of payment Cards are issued by a bankCards are issued by a bank Unique 16-digit number and an expiration Unique 16-digit number and an expiration

date date Third party authorization companies verify Third party authorization companies verify

purchasespurchases

2001 Daniel L. Silver 6

Credit Card - Business ModelCredit Card - Business ModelLogical Money FlowLogical Money Flow

Customer

CustomerBank

Store

Visa(3rd Party)

1. Charge

2. Credit Authorization

3. Clearance/Settlement

4. Payment

Store’sBank

2001 Daniel L. Silver 7

Credit Card - ITCredit Card - ITPhysical Data FlowPhysical Data Flow

Electronic Funds Transfer (EFT)

CARD

Reader56k bps modem

3rd Party Authorization

System(Visa)

Customer Bank

System

Card Info,Signature

AuthorizationProgram

RequestAuthorization

EFT

POS Terminal OK!

Store’s Bank

System

CustomerEFT

VisaVisa

Visa is an American multinational financial services corporation headquartered in Foster City, California, United States. It facilitates electronic funds transfers throughout the world, most commonly through Visa-branded credit cards and debit cards. 

2001 Daniel L. Silver 8

2001 Daniel L. Silver 9

Various E-Payment MethodsVarious E-Payment Methods

Credit and Debit cardCredit and Debit card Digital CurrencyDigital Currency E-Wallets-E-Wallets- Smart cardSmart card Micro-paymentsMicro-payments Peer-to-Peer MethodsPeer-to-Peer Methods

A digital wallet refers to an electronic device that allows an individual to make electronic commerce transactions. This can include purchasing items on-line with a computer or using a smartphone to purchase something at a store.

2001 Daniel L. Silver 10

A micropayment is an e-commerce transaction involving a very small sum of money in exchange for something made available online, such as payment you get in response to Web-based content and online advertisement etc.

2001 Daniel L. Silver 11

2001 Daniel L. Silver 12

Credit Card FraudCredit Card Fraud A major problem for E-commerceA major problem for E-commerce The merchant has no legal proof of purchase unless the The merchant has no legal proof of purchase unless the

buyer uses authentication certificatebuyer uses authentication certificate Companys such as Visa, nochargeback.com and Companys such as Visa, nochargeback.com and

CyberCash (now VeriSign) are working to limit fraud:CyberCash (now VeriSign) are working to limit fraud:– Visa has established high risk business models and best Visa has established high risk business models and best

practices info for merchantspractices info for merchants– Nochargeback.com has lists of fraudlent cards, e-mail Nochargeback.com has lists of fraudlent cards, e-mail

addresses and postal addressesaddresses and postal addresses– VeriSign/CyberCash has employed Artificial intelligence to VeriSign/CyberCash has employed Artificial intelligence to

catch frauders catch frauders

2001 Daniel L. Silver 13

Digital CurrencyDigital Currency

Digital cash accounts.Digital cash accounts. Buyers deposit cash in the account and spend it at Buyers deposit cash in the account and spend it at

E-Commerce sites (acct # is passed using secure E-Commerce sites (acct # is passed using secure proprietary protocol- SSL(secure socket layer proprietary protocol- SSL(secure socket layer protocol.))protocol.))

E-Comerce merchants can feel sure of paymentE-Comerce merchants can feel sure of payment Customers do not need a credit card and spending Customers do not need a credit card and spending

is limited to account balanceis limited to account balance www.ecash.comwww.ecash.com

2001 Daniel L. Silver 14

E-WalletsE-Wallets

Established by financial institutions in Established by financial institutions in partnership with member E-Commerce sitespartnership with member E-Commerce sites

Allows customer to submit billing and Allows customer to submit billing and shipping info with one click at member sitesshipping info with one click at member sites

Also can store e-Cheques, e-Cash and credit Also can store e-Cheques, e-Cash and credit card informationcard information

Not as popular as originally projectedNot as popular as originally projected Entrypoint’s InfoGate offers an e-walletEntrypoint’s InfoGate offers an e-wallet

2001 Daniel L. Silver 15

Peer-to-Peer MethodsPeer-to-Peer Methods Digital cash via email (eCash.com)Digital cash via email (eCash.com) PayPal.com – digital payment system– digital payment system

– Acts as a trusted third party (e.g. auction purchase) Acts as a trusted third party (e.g. auction purchase) – To send money:To send money:

» Sender sets up an account and requests to send payment Sender sets up an account and requests to send payment » Sender places payment into the receivers account by credit-cardSender places payment into the receivers account by credit-card» Reciever is notified of payment via emailReciever is notified of payment via email» Receiver can transfer funds to bank account or request a chequeReceiver can transfer funds to bank account or request a cheque

– There is also a request payment methodThere is also a request payment method– FOR FREE .. ? What is the their business model ?FOR FREE .. ? What is the their business model ?

2001 Daniel L. Silver 16

Smart CardsSmart Cards Cards with computer chips embedded on their Cards with computer chips embedded on their

faces – very common in Europefaces – very common in Europe Used for health care, transportation, ID, retail, pay Used for health care, transportation, ID, retail, pay

phones, loyalty programs, banking machinesphones, loyalty programs, banking machines Smart card readers interface with card and request Smart card readers interface with card and request

user PIN for accessuser PIN for access Bank machines can load cards with cash and then Bank machines can load cards with cash and then

merchants can download cash from cardmerchants can download cash from card GemPlus, MasterCard are leading supplier of SCsGemPlus, MasterCard are leading supplier of SCs

2001 Daniel L. Silver 17

Micro-PaymentsMicro-Payments

Long distance phone call charge is an example of Long distance phone call charge is an example of a micro-paymenta micro-payment

Digital Equipment Corporatiion (DEC) Digital Equipment Corporatiion (DEC) researchers originally envisioned MPs:researchers originally envisioned MPs:– Payment per newspaper article ($0.005)Payment per newspaper article ($0.005)– Payment by stock quote ($0.001)Payment by stock quote ($0.001)– Payment per click (Qpass, Inc)Payment per click (Qpass, Inc)

Has not been popular, instead advertisers pay for Has not been popular, instead advertisers pay for info, or customers pay flat rates … Why?info, or customers pay flat rates … Why?

2001 Daniel L. Silver 18

E-Payment Pros/ConsE-Payment Pros/Cons Pros:Pros:

– Potential for great flexibilityPotential for great flexibility– Low transaction costsLow transaction costs– Rapid purchase powerRapid purchase power

Cons:Cons:– Security problemSecurity problem

AssignmentAssignmentWhat is paypal? How paypal works. Explain What is paypal? How paypal works. Explain

mechanism.mechanism.