Payments and security Slides (1,81 MB)

Solvay Business School

SEMINAIRE DE TECHNOLOGIES DE L’INFORMATION ET DE

LA COMMUNICATION

UNIVERSITELIBRE DEBRUXELLES

eBusiness – Payments & SecurityeBusiness – Payments & SecurityPascale Vande VeldePascale Vande Velde

GEST 116GEST 116

V.1.1 Solvay Business School

Technologies de l’information et deLa communication

2


Introduction – Part I

Introduction – Part II

Supply chain management

Payments & Security

Content of eBusiness courseContent of eBusiness course



3


Introduction to epayments

Network security principles and concepts

B2C ePayments solutions

B2B ePayments solutions



4


Generic Payment ProcessGeneric Payment Process

2. Customer’s payment request or

instruction transmitted by the intermediary to the

vendor’s bank

1. Payment request or instruction transmitted by the customer to an intermediary

Intermediary Vendor’s bank

1’. Payment request or instruction transmitted by the customer

directly to the bank

After verification of the customer solvability, the transaction is sent to a

clearing entity

Clearing

Intra-banks

Inter-banks

International

Customer

Settlement when clearing achieved



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The payments market by instrument in BelgiumThe payments market by instrument in Belgium

Volumes(mio transactions)

Value(EUR bio)

1995 1999

Distr.

1999

1995 1999

Distr.

1999

Cheques 117,1 80,2 -31,5% 6% 305 98 -67,9% 0,6%

Paper-based transfers 447,9 412,1 -7,99% 30% 9.054 2.184 -75,9% 14%

Electronic transfers 220,6 310,9 +40,9%

22% 910 13.002 +1328%

85%

Credit cards 32,2 48,7 +51,2%

4% 3 5 +66,7%

NA

Debit cards 185,9 354,3 +90,6%

25% 9 18 +100% 0,1%

Direct Debit 104,5 142,3 +36,2%

10% 24 41 +70,8%

0,2%

Electronic Money 0,7 45,5 +6400%

3% NA 0,2 NA NA

Total 1.108,9 1.394,0 +25,7%

100%

10.305

15.348 +48,9%

100%* The data are very small relative to other relevant data in the table. Source : ECB Blue Book – June 2001

Co

st o

f p

aym

en

t

However, there is a significant shift from paper based towards electronic transfers and use of debit and credit cards has significantly intensified



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Internet is by far the cheapest way to process a Internet is by far the cheapest way to process a paymentpayment

Payment Unit Costs in Europe: € per transaction:

– Paper-based transfer: 1.24 (still 30% of all payments in volumes)

– Direct Debit modification: 0.74 to 4.96 (opening, changes, cancellation, …)

– Phone: 0.50– ATM: 0.27– Online (PC): 0.23– Internet: 0.10



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Significant differences between US and EuropeSignificant differences between US and Europe

US Consumer Payments in 1998

(% Share of Transactions)



100% ~$6.8 Trillion 100% ~$8.8 Trillion

Source: Nilson Reports; Accenture analysis



100% ~$4.5 Trillion

Credit Cards

Electronic

Checks

Cash

5122

20

4

Debit Cards

3

3112

26

10

19Credit Cards

Electronic

Checks

Cash

Debit Cards

22

17

30

14

16

Credit Cards

Electronic

Checks

Cash

Debit Cards

Checks are intensively used in the US while transfers and direct debits are hardly used



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Electronic billing is a promising solution in the USAElectronic billing is a promising solution in the USA

1999 2000 2001 2002 2003 2004

0.9 6.7 84

446

1,142

1,962

EBPP Households (million) 0.6 6.0 20.7

Recurring Household Bills Payable Online (%) 8 52 66

Percentage of all Bills (%) 0.04 3.0 13.1

13.1

61

7.6

0.1

5

0.01

2.1

28

0.6

US Retail Bills Presented & Paid Online

(million)

Consumers able to view &

pay at least 60% of all their recurring bills at

one site

Source: IDC; Jupiter Communications; Data Monitor; Forrester Research; Tower Group; Gartner Group; Accenture analysis

But the situation is different in Europe: actually, in Belgium, 80% of people use direct debit* to pay their bills. Consequently, billing presentation is not so important. e-Billing/invoice used in the US is an obsolete system compared to the system in application in Europe

*Domiciliation



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Billing ProcessBilling Process

Electronic Bill Presentment and Payment Overview

Billers

Internet Website

1. Customer uses Internet to access websites where

bills reside

Customer’s Bank

Biller’s Bank

3. Customer authorizes

payment through website

4. Payment is sent electronically

(ACH*, RPS, etc.) from customer

bank to biller bank

5. Remittance and payment information is sent to biller for posting

2. Billers send electronic bills to

appropriate site(s)

EBPP includes bill presentment and payment

*Automated Clearing Housed: Clearing method including netting, and typical to the U.S.



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Presentment options:• White labeled: direct billing through

ASP or presentment via a third party CSP• TTP branded: on the TTP’s Portal

Payment options:1. For the B2C and SME

• eBanking• Credit cards• E-mail based payments (paypall, x.com)

2. For corporates• Regular payment systems• International• Netting of payments

EBPP Multi-channel presentation and delivery EBPP Multi-channel presentation and delivery

eBanking

Other Portal

Consumer

SME

Corporate

Client subscription DB with:• delivery preferences:

• Physical delivery• WAP & PDA• eBanking • TTP Portal• Other Portal• [email protected] • Other eMail

• Notification preferences:• SMS• eMail• Portal Alert

Printing & physical delivery

SmallEnterprises &independents

Large billers

Mediumenterprises

FTP/XML/EDIFACT

Online invoice templates

FTP/XML/EDIFACT

Third party CSPBillers

FTP/XML/EDIFACT

FTP/XML/EDIFACT

GUI for view and pay+ eMail with bills

+ notification

GUI for view and pay . + integration into standard accounting packages

+ bill analysis features

Consumer

FTP/XML/EDIFACT+ integration into ERP systems

+ notification to responsible A/P

Trusted Third Party (TTP) Trusted Third Party (TTP) EBPP ConsolidatorEBPP Consolidator

Customers

Potential Value Added Services by TTP:1. Factoring2. Intra-corporate and inter-

corporate Netting3. Cash Management (incl. FX)4. Trade Finance5. Trust services



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Need Description

Integrity Data is not changed in an unauthorized way

Confidentiality Transactions and communications are kept private

Identification Our customers are identified

Non-Repudiation An individual cannot deny that a transaction was made

Six security principlesSix security principles

Digital security Digital security data data must address several critical needsmust address several critical needs

Authentication Transaction participants are known

Authorization Transaction participants are authorized



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AuthenticationAuthentication

Entity One (Business)

ApplicationServer

Web ServerFirewall

Entity Two (User)End User PC

User ID &Password

AuthenticationServer

AuthenticationClient

Internet

Entity One (Business)

ApplicationServer

Web ServerFirewall

Entity Two (User)End User PC



Internet

Yes/NoResponse

• Two components necessary : authentication server and authentication client

• The authentication client will prompt the user to enter his identifier and shared secret and will pass the information to the authentication server

• The authentication server will then confirm that the identifier is valid, and that the shared secret matches the identifier.

• The authentication server will then pass a yes/no response back to the autentication client. The user will then be granted or denied access to the application

Authentication flow

Authentication response



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EncryptionEncryption

Firewall

InternetEntity One (Business)

Entity Two (User)

Public Key Storage

Private Key

ApplicationServer

Web Server

End User PC



Firewall


Entity Two (User)

Public Key Storage

ApplicationServer

Web Server

End User PC



Private Key

Encrypt with user’sprivate digitalsignature key

Decrypt with user’spublic digitalsignature key

Encryption architecture

Message encryption process

• Cryptography services are provided with a Public Key Infrastructure (PKI)

• In public key encryption, all entities will be issued public keys

• The private key is generated via an algorithm based on the public key and all public keys are stored in a central storage location

• The distribution of public keys and maintenance of central storage for the public keys establishes the public key infrastructure for ecommerce transactions

• When the end user wants to send a message, he generates a private key based on its public key

• He encrypts the message using his private digital signature key

• When the business application server receives the transaction, it looks up the end user’s public key from the central storage location and decrypts the message with the key

• The business application server can decrypt the message because he has the corresponding public key



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Digital signaturesDigital signatures

011010111011

Firewall


Entity Two (User)

Public Key Storage

Encrypts message hashwith user’s private key

ApplicationServer

Web Server

End User PC



Private Key

Computesmessage hash

X= [(y)*]

Certificate Authority

End User Signature

CertificateDirectory

Private Key

FirewallEntity One (Business)

Entity Two (User)

Public Key Storage

ApplicationServer

Web Server

End User PC



Private Key


End User Signature

UserCertificate

Internet

Private Key


Digitally signing a message

Sending a digitally signed message

• A digital signature is an encrypted message hash

• A message hash is a mathematical formula that is run against a message to create a unique number. This mathematical formula is well known to all participants in a transaction

• When the message hash is encrypted with the user’s private key, it becomes a digital signature

• A certificate is a digital document that binds a public key to an entity. In their simplest form, certificates contain an entity’s name and public key

• When signing a message with a digital signature, an entity will also send its certificate containing its identity and public key

• Certificates are issued and maintained by a Certificate Authority (CA). This CA is a secure, trusted entity who will issue certificates to authorized entities only and who will verify that a certificate is valid



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RecipientSender

Trusted third party

SecurityServices

Certificate Authority(CA)

CertificateRepository

Certificatesand Revocation

Lists (CRLs)

Certificatesand Revocation

Lists (CRLs)

Digital signatures/2Digital signatures/2

** If recipient does not trust CA, they can find a certificate attesting to identity of ICA, and possible construct a chain of certificates terminating at trusted root CA (Source: Digital Signature Trust; Accenture analysis)

•Sender applies to Certificate Authority (CA) as trusted third party*

•CA verifies sender’s identity, issues certificate (with public key data) and publishes certificate in repository

•Sender creates and signs message and attaches certificate

•Recipient trusts CA, certificate and contents, including public key**

•Recipient extracts public key to verify sender signature

•Recipient verifies identity and integrity

Digital Certificate

Digital Certificate Industry Standard: name, public key, expiration date, CA

name, CA signature, CA signature algorithm identifier, certificate version,

and serial number

* In practice the entity that identified the users is called a Registration Authority



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Validating digital signaturesValidating digital signatures


Entity Two (User)

Public Key Storage

ApplicationServer

Web Server

End User PC



Private Key


End User Signature

UserCertificate

Internet

Private Key



Entity Two (User)

Public Key Storage

ApplicationServer

Web Server

End User PC



Private Key


End User Signature

UserCertificate

Internet

Private Key


Validating a digitally signed message

Validating a certificate

• The business will receive the message and the end user’s certificate. However, the business has no way of knowing that the certificate is valid; i.e. that it contains the correct name and public key information

• Therefore the business will send the end user’s certificate to the CA

• The CA maintains a directory of authorized entities and their public keys. When the CA receives the end user’s certificate, it will confirm or deny the validity of the certificate and send it back to the business



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Digital signature – Recent legislationDigital signature – Recent legislation

European directive (December 13, 1999) on digital signatures Belgian law (October 20, 2000 and July 9, 2001)

– A signature can consist of a set of electronic data which can be associated to a well defined person and which certifies the integrity of the content

– Legally binding of a digitally signed document

The law targets mainly the digital signatures based on assymmetric cryptography and combined with a digital certificate (PKI)

Legislation defines role and responsibilities of the Certification Authority– Approval

– Control

CA role consists of certifying the link between a person and its public key CA liability : a CA which delivers a qualified certificate is liable for any damages

caused to anyone who has trusted the certificate – In practice, purpose is to limit carelessness (not timely revocation of a certificate…)



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Providing non repudiationProviding non repudiation


Entity Two (User)

Public Key Storage

ApplicationServer

Web Server

End User PC



Private Key


End User Signature

Internet

011010111011

Decrypts message hashwith user’s public key

Re-computesmessage hash

X= [(y)*]011010111011

Messagehashesmatch

Private Key


Providing non repudiation

• The business now knows that the certificate contains the correct public key for the end user. The business will then decrypt the message hash using that public key. The business will then rerun the message hash using the known mathematical formula. If the decrypted message hash matches the message hash which the business just created, then it has been verified that the message was sent by the end user, and that the message was not altered during transmission. Therefore non repudiation for the message is provided



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Transport/Encrypted connectionTransport/Encrypted connection

The TCP/IP (Transmission Control protocol/Internet Protocol) governs the transport and routing of data over the internet

The SSL protocol allows an SSL-enabled server to authenticate itself to an SSL-enabled client, allows the client to authenticate itself to the server, and allows both machines to establish an encrypted connection

SSL protocol addresses security issue of the communication while symmetric and assymmetric encryption addresses security issues related to data transferred

TCP/IP layer

Secure sockets layer (SSL)

HTTPApplication layer

Network layer



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Data encryption - Isabel illustrationData encryption - Isabel illustration

Registration Authority (RA)

Isabel Platform (acting as root

Certification Authority)

Isabel’s network=

Belgian banks network

Isabel Platform (acting as root

Certification Authority)

Isabel’s network=


Identification of the clientClient

Public Key (key publicly known)

Public Directory (Yellow pages)

Containsclient data and stores public key

Private Key(key known only to user)

++

Software InterfaceThe private key is generated and recorded on the chipWhen the PC is started. To use the chipcard, a pincode must be entered

Payment software + empty microship

Client’s bank

There is a logical (mathematical relation) between the private and the public key

Certification Authority (CA) delivers digital

certificate

The digital certificate is stored in a directory



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Data encryption - Isabel illustration/2Data encryption - Isabel illustration/2

User

Isabel Platform

Isabel’s network=


Isabel Platform

Isabel’s network=


User’s Banks

+

Software Interface

via

Checks his

AccountsAnd

Initiatespayments

Four characteristics to determine the security level of an electronic file:

Authentication: confirming the identity of parties involved in the transactionIntegrity: confirmation that the content of a message has not been alteredNon-repudiation: the signer can not deny the signing of the messageEncryption: allow the sender to encrypt the messages he wants to send in order to keep its content secret

These characteristics can only be conferred to an electronic file through Certification



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What do the Belgians buy online and where ?What do the Belgians buy online and where ?

Most frequent goods bought online are books, CDs, softwares, hardware, events tickets, transport tickets

More than one third of purchases are made on a foreign internet site. This has an impact on the payments methods used

Source : Belgian internet mapping – October 2000



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Which tools do the Belgians use to pay their online Which tools do the Belgians use to pay their online purchases ?purchases ?

One order out of two is paid by credit card. Use of edebit cards is limited at this stage

Remittance (eg virements) account for a significant share of payments, in particular for domestic purchases

Source : Belgian internet mapping – October 2000



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Retail Solutions: eDebit Card Retail Solutions: eDebit Card

2°)Choose your Banxafe payment sytem: Bancontact, Mister Cash, Visa, Mastercard

1°)Install your Banxafe terminal

Banxafe is the security label developed by Banksys to guarantee total reliability of bankcard payments over the Internet. This concept has already set a new standard for on-line payment security.

3°)Insert your Bancontact/ Mister Cash card In the terminal

4°)Type your secret code twice and confirm the amount of your purchasesYour payment is done!

PKI and digital signatureSecurity is achieved by a public key authentication applet. This applet is accessed by a banking PIN and generates a digital signature which is checked by a public key infrastructure certificate. The client uses a private key to sign his payments. Banksys has the corresponding public key and can authentify the identity of the sender



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BanxafeBanxafe

011010111011

Firewall


Entity Two (User)

Public Key Storage

Encrypts message hashwith user’s private key

ApplicationServer

Web Server

End User PC



Private Key

Computesmessage hash

X= [(y)*]


End User Signature


Private Key


Entity Two (User)

Public Key Storage

ApplicationServer

Web Server

End User PC



Private Key


End User Signature

UserCertificate

Internet

Private Key


Digitally signing a message

Sending a digitally signed message

• An authentication applet will generate a message hash when the user inputs his PIN code

• The payment itself and the message hash are encrypted with a private key. The user certificate is sent with the encrypted transaction

• Certificates are issued and maintained by Banksys (Certificate Authority (CA)).



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BanxafeBanxafe


Entity Two (User)

Public Key Storage

ApplicationServer

Web Server

End User PC



Private Key


End User Signature

UserCertificate

Internet

Private Key



Entity Two (User)

Public Key Storage

ApplicationServer

Web Server

End User PC



Private Key


End User Signature

UserCertificate

Internet

Private Key


Validating a digitally signed message

Validating a certificate

• Banksys will receive the message and the end user’s certificate.

• Banksys is the CA and maintains a directory of authorized entities and their public keys. Based on the end user’s certificate, it will confirm or deny the validity of the certificate

• Banksys will decrypt the transaction with the corresponding public key



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Banksys overviewBanksys overview

Key facts and figures per business line

Founded in 1989 as a merger of Bancontact and Mister Cash

Consortium owned by 58 banks (Belgian or with subsidiary in Belgium)

Provider of integrated card-system to banking industry, traders, self-employed persons and card holders:

– Networking: managing Banknet, private IP network, with 25 mio transactions monthly

– Equipment: design, installation and maintenance of terminals Bancontact/Mister Cash, Proton(76.000)

– Customer services and support for Visa cards, due to take-over of activities (except sales) of Bank Card Company in 1999

Banknet accounts for International presence:– STEP, managing ATM-ETP activities in different European countries– Proton as the international standard of rechargeable wallets (34,5 mio

cards in 24 countries)– Terminal and card applications (C-Zam/Smash, solution for e-

commerce)– Banxafe as ultra secure payment solution for Credit card payment over

Internet

6 accountable units since 1999:– Customer services and support

– Networking

– Field service

– Operations

– Terminals and card applications

– Card transactions

Evolution of Ratios

Source : Annual report Banksys and Dun & Bradstreet

38%

15% 11%

44%

14% 12%

135%

53% 60%

87%

36% 42%

0%

20%

40%

60%

80%

100%

120%

140%

160%

98 99 00

Profit margin Return on assets Shareholders return Return on capital

• Net sales: € 211 mio• Operating Income: 24 mio• Net profit (after tax): € 13 mio• Employees: 1008



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Most common security configuration– Use of SSL for transport security– Use of digital signatures (via Digipass or a C-ZAM/PC terminal)

The Digipass looks like a “calculator”, but is a little electronic machine which generates a digital signature. This signature will allow the user to present himself to PC Banking, will “sign” the operations, … The Digipass is connected to the PC

The C-ZAM/PC terminal is a little machine provided with a keyboard, and connected to the PC. To login or sign operations in PC Banking, the user must introduce his bankcard in the terminal, and then type his usual secret code. Encryption of transaction

Internet Banking securityInternet Banking security



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Use of mPaymentsUse of mPayments

FACT: Customers will start using mobile devices to make payments

TelCo Payment Provider Bank

PKI and digital signatureSecurity is achieved by a public key authentication applet embedded in the SIM card. This applet is accessed by a PIN and generates a digital signature which is checked by a public key infrastructure certificate. The client uses a private key to sign his payments. The telco or a company like Banksys could have the corresponding public key and could authentify the identity of the sender

New actors emerge in the payments market



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eCash/Deutsche Bank illustrationeCash/Deutsche Bank illustration

Customer deposits money into an eCash-enabled account. The electronic money is stored into the bank’s system until the customer uploads the money on his personal system or makes a purchase by mobile device

Customer deposits money into an eCash-enabled account. The electronic money is stored into the bank’s system until the customer uploads the money on his personal system or makes a purchase by mobile device

Customer can choose from the following payment options:-Upload money from bank’s system onto personal system and e-mail eCash to vendor- Use a mobile device to transfer eCash to the vendor

Customer can choose from the following payment options:-Upload money from bank’s system onto personal system and e-mail eCash to vendor- Use a mobile device to transfer eCash to the vendor

Vendor needs to have an account with a bank supporting the eCash payment system. This bank will then convert eCash into a regular deposit on vendor’s bank account after it has verified the payer’s eCash account with the DB 24.

Vendor needs to have an account with a bank supporting the eCash payment system. This bank will then convert eCash into a regular deposit on vendor’s bank account after it has verified the payer’s eCash account with the DB 24.

Virtual wallet

Virtual pre-paid account is credited with credit card or electronic transfer and used for e-commerce/C2C payments. Enormous success of Paypal in the US based on e-mail payment procedure (12 million users. Volume : 200.000 payments/day. Value : 10 MUSD/day)



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Payment functionality for a B2B sitePayment functionality for a B2B site

eCommerce applications are often pre-enabled to use a vendor’s payment services application The payments services application has links with many payments networks Transfer of payments orders from the B2B site via the web or interface

ME

RC

HA

NT

INT

ER

NE

T

SW

IFT

Off the shelf ecommerce applications

Custom ecommerce application

Payments services

vendor site

Isa

be

lM

as

terc

ard

/E

uro

ca

rdB

an

ks

ys

Clearing House

$ $ $

INT

ER

FA

CE

Buyer’s bank

Seller’s bank

Services•Transaction reporting•Virtual terminal•Merchant configuration•Manual capture and settlement



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The value chain desegregates a firm into its strategically relevant activities

The eCommerce technologies and possibilities for interaction have an impact on the classic sale value chain by enriching it with two new factors of differentiation: content and context.

Content

• Information presented with text, graphics, sound and video, i.e. a product description in an on-line catalogue– Context:

• The context adapts and presents the content (useful for the one-to-one marketing), i.e. a catalogue where the content is customised with respect to a specific customer

The B2B eCommerce Value ChainThe B2B eCommerce Value Chain

The eCommerce value chain as an instance of the sale value chain

Post-SalePost-SaleSalePre-Sale Post-Sale

Post-SalePost-Sale SalePre-SaleContent

Context

Post-Sale

The classic sale value chain



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eCommerce value chaineCommerce value chain

Sellers: - Prepare market presence - Publish offerings - Bid in expressed demand - Respond to standard inquiries - Process orders - Confirm order - Acknowledge cancellation - Distribute goods - Issue invoice - Receive payment - Provide support

Buyers: - Investigate offerings - Publish need - Evaluate and select offers - Place order - Cancel order - Receive goods or services - Accept/non-accept goods - Receive invoice - Dispute (protest invoice,…) - Submit payment - Request support

These processes illustrate the typical interactions between buyers and sellers in trading relationships

The processes of the actors interact mutually through the services provided by intermediaries eCommerce intermediaries: actors enabling various eCommerce related activities



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Specific issues in eCommerce value chainSpecific issues in eCommerce value chain

MandatoryOptional

Sellers

Buyers

Post-SalePost-SaleSalePre-SaleContent

Context

Post-Sale

$ $ $

Identification and

non-repudiationAuthorizations

Integrity

Standardizedmessage

exchangesArchiving of transactions

Transaction andpayment closure

Electroniccontract

enforcement

Guarantees and financing

The transposition of The transposition of a B2B sales cyclea B2B sales cycle into a fully ‘electronic’ value chain context raises into a fully ‘electronic’ value chain context raises specific issues to be addressedspecific issues to be addressed



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The Roles of eCommerce IntermediariesThe Roles of eCommerce Intermediaries

In an eCommerce market place, a number of (new) intermediaries are assuming several responsibilities:– Certification Authority: an entrusted service by one or more entities to create and assign certificates, and to mange

the revocation of certificates

– Registration Authority: reliable services, which have the responsibility of registration and approval of users of certificates on behalf of the Certification Authority

– Transaction authorisation Authority: when a transaction is sent, the transaction authorisation authority checks if the amount being ordered is under the limit authorised, and takes the engagement to the receiving party

– Transaction tracing Authority: offers a proof-of-evidence of a particular transaction at an instance in time. Querying services can be provided to the buyer and seller. This can be extended with the association services of linking related transactions

– Transaction archiving Authority: archives and manages digital documents and other data for longs period of time

– Notarial Authority: notaries can provide their certification or digital signature to trading or other official documents

– Transaction translation Authority: facilitates the integration of systems by translating the output data of the sending system into a suitable format of the receiving system

– Network Services provider: ensures the network management and provides additional services directly related to the infrastructure

– Navigation Services provider: ensures the ease of navigation on the main areas of the platform

– Trusted security software provider: designs and implements trusted security solutions based on the platform’s standards



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The Intermediaries of eCommerceThe Intermediaries of eCommerce

All these service providers intermediaries are forming the middle layer in the model

Buyers

Sellers

Intermediaries

CertificationAuthority

RegistrationAuthority

TransactionAuthorisatio

nAuthority

TransactionTracing

Authority

TransactionArchivingAuthority

NotarialAuthority

Transaction Translation Authority

Network Services provider

Navigation Services provider

Trusted securitysoftware provider



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International considerationsInternational considerations

When actors with no previous business

relationship are involved in an ‘electronic’ value

chain at ‘e-speed’, trading communities are built

from scratch and use the power of a virtual network

(representing by the 4-corner model)

For this 4-corner model to operate efficiently, there

is a need for a community or industry wide

convention to agree on standards relating to

contracts, financing, delivery,…

Third party (e.g. Seller service provider)

$ $$

Buyer

Seller

Third party (e.g. Buyer service provider)

‘Trust’ Zone for Seller‘Trust’ Zone for Buyer

When virtual communities are created with overlapping trust zones, When virtual communities are created with overlapping trust zones, standardstandards and s and governance are needed to support the B2B sales cyclesgovernance are needed to support the B2B sales cycles



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Therefore, to enable trusted exchanges throughout the full Therefore, to enable trusted exchanges throughout the full electronic value chain involving many actors, the following electronic value chain involving many actors, the following

Trust Transaction Services need to be set upTrust Transaction Services need to be set up (1/2)(1/2)

$ $$

Seller

Buyer

Trust enablement through the Trust Transaction Services

Transactions Value-addedServices

Roles and Rules

Seller Bank

Buyer Bank

Registration

Identification

Transactional Support

Administration

Trusted Third Party Trusted Third Party



42


Therefore, to enable trusted exchanges throughout the full Therefore, to enable trusted exchanges throughout the full electronic value chain involving many actors, the following electronic value chain involving many actors, the following

Trust Transaction Services need to be set upTrust Transaction Services need to be set up (2/2)(2/2)

Trust enablement through the Trust Transaction ServicesRegistration -Enrollment

-Registration-Certification

Identification -Authentication-Warranty (Insurance of identify)

Roles and Rules-Organization and roles-Authorization and Privileges-Policies

-SLA/OLA-Revocation

Transactions-Selection and execution of transactions-Fulfilment of order process-Settlement of payment

Value-Added Services-Reputation services (e.g. creditworthiness)-Financing -Warranty/insurance of settlement, quality, timely delivery,etc-Notary Services


-Standards and protocols-Integrity and non-repudiation-Privacy and confidentiality

Administration -Trusted archiving and logging-Dispute resolution-Montoring, measurement and management

-Integrity-Compliance auditing

Seller Seller Bank

$ $ $$ $ $

Buyer Buyer Bank



43


Traditional economic actors and new entrants are starting to Traditional economic actors and new entrants are starting to provide fragmented and piece-wise Trust Transactions provide fragmented and piece-wise Trust Transactions

Services (1/2) Services (1/2)

Financial institutions:• Registration and identification (strong security level)

• Transactions – Settlement of payment

•Value-Added Services – Reputation services (off-line)

• Value-Added Services – Financing (off-line)

• Privacy and confidentiality

$ $ $$ $ $

Seller

Buyer

Trust enablement through the Trust Transaction Services

Transactions Value-addedServices

Roles andRules

Seller Bank

Buyer Bank

Registration

Identification


Administration

Trusted Third Party Trusted Third Party

Standardization bodies:• Transactional support – Standards and protocols

• Transactional support – Compliance auditing

• Roles and Rules - Policies

Secured Infrastructure Providers:• Registration and identification

• Value-Added Services – Warranty/insurance

• Value-Added Services – Notary services

• Transactional support – Integrity and non-repudiation

• Administration

Marketplaces:• Registration and identification (low security level)

• Roles and Rules

• Transactions – Bid/Order/Buy/Sell

• Transactions – Settlement of payment

• Transactional support – Standards and

protocols



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Traditional economic actors and new entrants are starting to Traditional economic actors and new entrants are starting to provide fragmented and piece-wise Trust Transactions provide fragmented and piece-wise Trust Transactions

Services (2/2)Services (2/2)

Financial institutions:• Registration and identification

– Corporate customers of Belgian banks with Isabel

– ABN-AMRO, Deutsche Bank and Allianz (via

HypoVereinsbank) started using Identrus-based

certificates to secure new applications

• Transactions

– Barclays B2B.com UK first purchase-to-payment portal

to cover entire B2B trading chain

– Dresdner Bank Europe’s first transactional financial

portal to offer corporates online banking, risk

management and transaction services Standardization bodies:• S.W.I.F.T. with Bolero have released 65 XML document

definitions as used in international trade (e.g. commercial,

documentary credit, customs) to be transported through the

secured S.W.I.F.T. /TrustAct infrastructure

• Identrus has defined a industry standard for digital certificates, a

payment initiation application and a contractual framework that

regulates their usage

• E.U. passed a directive on 19 January 2000 making digital

signatures equivalent to paper based signatures

Secured Infrastructure Providers:• S.W.I.F.T. with TrustAct is a secured Internet-based messaging

service with non-repudiation and identification based on

Identrus certificates

• Isabel provides proprietary certificates and a secured

messaging service to all corporate customers of the Belgian

banks (more than 45,000 companies)

• Government sponsored bodies such as the Spanish Mint

provide all citizens with a digital certificate and signature

Marketplaces:• ‘Industry-centered’ (industry consortia or independent) or

‘company-centered’

• Focus on seamless procurement and supply chain

integration



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IdentrusIdentrus

Contracts & Procedures

Seller(Relying Party)

Client AppClient App Business to Business

Interactions

Identrus

PurchasingManager

(Certificate Holder)


Risk ManagementModule

OCSP Responder& Repository

TransactionCoordinator


Risk ManagementModule

OCSP Responder& Repository

TransactionCoordinator

Root Certificate Authority (CA)

Issuing Participant Relying Participant

Subscribing Customer

Relying Customer

Root CA

Transaction Coordinator

Risk Mgmt Module

OCSP Resp. & Repository

System-wide roles & responsibilities

Online Certification Service Provider: check

banks’ certificates + yellow page



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IdentrusIdentrus

• Identrus was created in April ’99. It acts as Root Certification Authority (CA) amongst the different public key infrastructures (PKI) of the banks set-up across the world, ensuring their inter-operability.

• Identrus uses the “four-corner” model among the Buyer, the Seller, and their respective banks to allow these banks to provide trusted eCommerce services

• Payments, Warranty of identity and of settlement, Letters of credit, Commercial paper, Credits, Creditworthiness, Secure Mail and intermediation, …

• Identrus and Swift have recently announced an alliance whereby Swift will operate a trusted and value added network for B2B exchanges based on the Identrus model and trust tree

• A number of the original Identrus founding banks are working on the Eleanor project, jointly defining new global standards for B2B ePayments and market place facilities

$

Buyer‘s Identrus Bank

$ $$

Buyer Seller

Identrus Root CA

$

Seller‘s Identrus Bank

Figure 1

B2B Commerce

Its 30 to 40 shareholder banks includeABN AmroANZ Banking GroupBank of AmericaBarclays BankBNP ParibasBSCHCIBCChase Manahattan BankCitigroupCrédit Agricole de France

CommerzbankDeutsche BankDresdner BankHSBC GroupHypo VereinsbankIndustrial Bank of Japan (IBJ)NatWest Group - RB of ScotlandSanwa BankScotiabankSociété GénéraleWells Fargo



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TrustAct - SWIFTTrustAct - SWIFT

How the service works Two businesses having subscribed to the e-trust service from their respective financial institutions. Using TrustAct, businesses can validate their trading partners' certificates and have complete assurance of the identity of the other trading party

1. The buyer browses the seller's catalogue.

2. The seller wants identity assurance and requests the buyer to forward a signed commercial document to TrustAct together with a certificate from the buyer's financial institution.

3. TrustAct performs a basic validation of the certificate and requests the respective financial institutions to validate the identity of their business. TrustAct also checks with Identrus to ensure that both institutions are scheme members.

4. TrustAct relays the assured order to the seller who now has an order that can be relied upon.

5. The seller returns a signed receipt to the buyer, via TrustAct, who now has an assured receipt that can be relied upon.

6. TrustAct records and maintains time-stamped records of all messages received by the TrustAct server.

SWIFT and Identrus™ LLC have entered into an alliance to offer a joint solution to facilitate business-to-business (B2B) trusted communication (based on Identrus' identity trust services and SWIFT's messaging capability.



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SWIFT overview SWIFT overview

• Swift (Society for Worldwide Interbank Financial Telecommunication), located in Brussels, is a cooperative society owned by 239 member banks and financial institutions (founded in 1974)

• Offices in 25 locations worldwide• Employees : 1,800 (of which 1,000 in Belgium)• Geographic spread : Europe accounts for 2/3rd of revenues

• US #1• UK #2• Germany #3• France #4• Belgium #5

Business include• Financial messaging

• Payments• Securities• Treasury• Trade finance

• E services• TrustAct (Identrus)

Swift statistics YTD 08 2001

Traffic

# messages YTD 082001 987,617,134

# messages 2000 1,274,000,000

Message growth YTD 16,42%

Average daily traffic 5,868,194

FIN Availability

FIN Systems 100%

Transport network 99.995%

Overall service 99.995%

Customer base

Live countries 193

Live members 2,268

Live sub members 3,054

Live participants 1,901

Total live users 7,223

Payments and security Slides (1,81 MB)

Economy & Finance

Transcript of Payments and security Slides (1,81 MB)