WWWWWW

ELC 200

DAY 25 & 26

2WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

Agenda

• Assignment 8 Graded– 6 A’s, 9 B’s, 1 C and 1 D and 2 non submits

• Assignment Avgs Posted– 2 A’s, 8 B’s, 2 C’s, 2 D’s and 5 F’s

• Quiz 4 (last) will be April 29• Chap 13, 14, & 15• 20 M/C and 4 Short Essay

• Assignment 9 on next slide• Should be progressing on Framework

– Need a schedules – Everything due on May 6

• Lecture Discuss Payment Systems

3WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

Assignment # 9

• Due April 29 At 2 PM (right before quiz)

• Complete Discussion Questions (1, 2 & 3) on Page 500 of the text

• Turn in well formatted Word Document

4WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

Presentation schedule

• May 3 (9-10) • May 6 (everyone else)

WWWWWW

Chapter 15

E-Payments: Getting the Money

6WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

OBJECTIVES

• Brief History of Money

• Features of Real-World Cash

• Electronic Money

• Internet-based Systems

• Electronic Payment Media

• Issues and Implications

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BRIEF HISTORY OF MONEY

• Barter

• Medium of Exchange– Tokens– Notational Money– Credit System

8WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

FEATURES OF REAL-WORLD CASH

• Convenience

• Wide Acceptance

• Anonymity

• No Hidden Cost of Use

• No Audit Trail

Can we have something like this for eCommerce???

9WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

Properties Of Money

• Online/offline represents risk– Online is on the spot validated transaction– An offline transactions is validated later

• Identified and Online (+I+L)– Credit cards and debit cards

• Identified and Offline (+I-L)– Checks, Money orders

• Anonymous and Online (-I+L)– Cash payments

• Anonymous and Offline (-I-L)– Electronic cash (but not real cash)

10WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

ACID TEST

• Atomicity– All or nothing

• Consistency– All agree

• Isolation– Doesn’t effect other transactions

• Durability– Can go back to previous state (i.e. reversible)

11WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

ICES TEST

• Interoperability– Ability to move between system

• Conservation– Temporal consistency and durability

• Economy– Cost of use

• Scalability– Multiple users

12WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

TRANSACTION PROPERTIES

Token

Atom

icity

Consistency

Isolation

Durability

Interoperability C

onservation

Econom

y

Scalability

Cash Y Y Y Y Y Y N Y Y

Check N Y Y N Y N Y N Y

Credit Card N N Y N Y N - N Y

Postal Money Order

? ? ? ? ? ? ? ? ?-

13WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

Agenda

• Assignment 8 Graded– 6 A’s, 9 B’s, 1 C and 1 D and 2 non submits

• Assignment Avgs Posted– 2 A’s, 8 B’s, 2 C’s, 2 D’s and 5 F’s

• Quiz 4 (last) will be April 29• Chap 13, 14, & 15• 20 M/C and 4 Short Essay

• Assignment 9 on next slide• Should be progressing on Framework

– Need a schedules – Everything due on May 6

• Lecture Discuss Payment Systems

14WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

Assignment # 9

• Due April 29 At 2 PM (right before quiz)

• Complete Discussion Questions (1, 2 & 3) on Page 500 of the text

• Turn in well formatted Word Document

15WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

Presentation schedule

• May 3 (9-10) • May 6 (everyone else)

16WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

INTERNET-BASED PAYMENTS

• Electronic Cash

• Credit Cards

• Debit Cards

• Smart Cards

17WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

NONTECHNICAL PROPERTIES

• Acceptability

• Ease of Integration

• Customer Base

• Ease of Use and Access

18WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

ELECTRONIC TRANSACTION SYSTEMS

• CyberCash– http://www.cybercash.com/– Bought by Verisign

• Netbill– http://www.netbill.com/

• First Virtual– No longer in internet payment systems

• Paypal– www.paypal.com

Internet Service Providers: Internet-Based Payments

19WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

How PayPal Works

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SECURE ELECTRONIC TRANSACTIONS (SET)

• http://www.setco.org/

• Confidentiality

• Integrity

• Authentication

• Interoperability

Internet Service Providers: Internet-Based Payments

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SET

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ELECTRONIC PAYMENT MEDIA

• Trusted Third Party– CyberCash

• Notational Fund Transfer-related Type– Credit Card (SET)

• Digital Cash/ Electronic Money– Anonymous & untraceable digital cash

– David Chaum

– http://www.cs.newcastle.edu.au/Research/MSEG/visual/ecash/ecash.html

Internet Service Providers: Electronic Payment Media

23WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

CREDIT CARDS

• Transactional cost paid by merchants– 2-5 cents per transaction– Monthly fees

• Shopping Cart

• Credit Card Processing Services

• Risks of Using Credit Cards

• Credit Card Laundering

24WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

DEBIT CARDS

• Convenience• Widely Accepted• Easy Application• No Grace Payment Period• Less Protection for Undelivered Items

– No limits of liability like credit Card• Risks for Merchants - Overspent Customers

– 2-3 day processing versus immediate for credit cards• Use of PIN creates online transaction

– Hard to dispute!• Higher transaction fee for merchants

25WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

SMART CARDS

• Provide users the ability to make a purchase

• Hold user’s cash, ID information and keys

• Provide authentication of transaction

• Contain encryption and decryption of messages

• Enhance data portability

• Similar to electronic purse

26WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

DIGICASH & E-WALLET

• No audit trail

• Offers true digital economy

• Resistance from the Treasury Department

• E-wallet– A carrier of e-cash– A simple and secure way of carrying currency

electronically

27WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

ELECTRONIC FUNDS TRANFER & AUTOMATED CLEARING HOUSE

• Electronic Funds Transfer (EFT)– A computer-based system that facilitates the

transfer of money between two financial institutions overnight

• Automated Clearing House (ACH)– Involves more than one financial institution

routing to debit and credit the correct accounts

28WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

ACHCustomer’s

BankMerchant’sBank

Customer Merchant

Step 1

Step 3

Step 4

Step 4 Step 5

Step 1: The Customer sends payment information to the ACH Provider (probably through a link at the merchant’s website). The information should include the information from the MICR line of Customer’s check (the ABA routing number of the Customer’s Bank and the Customer’s account number at the bank).

Step 2: Based on the commitment to pay represented by that information, the Merchant completes the transaction. It might ship the goods at that time, or it might wait a few days to receive payment.

Step 3: The ACH Provider sends the ACH debit entry to the Customer’s Bank.

Step 4: The Customer’s Bank responds to that entry by removing funds form the Customer’s account and sending them to the Merchant’s Bank (through ACH network).

ACHProvider

ACHProvider

Step 2

Step 1

29WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

Check Numbers

30WWWWWW Awad –Electronic Commerce 2/e© 2004 Pearson Prentice Hall

ISSUES & IMPLICATIONS

• Consumer Needs

• Corporate Processes

• Corporate Strategy

• Regulation of Competition

• Economics & Social Processes

WWWWWW

Chapter 15

E-Payments: Getting the Money