Electronic Commerce

1
Electronic Commerce
MIS 6453 -- Fall 2004

• Paying for the Goods

Instructor John Seydel, Ph.D.
2
Overview

• Online payment basics
• Payment cards
• Advantages/disadvantages
• Payment acceptance and processing
• Open/closed loop systems
• Electronic cash
• Electronic wallets
• Stored-value cards

3
Some Interesting Figures
4
Basic Info

• eCommerce you must pay for it somehow!
• Electronic transactions
• Cheaper (50 vs 1.50)
• More accurate
• Environmentally more friendly (?)
• Interesting facts
• 85 of all consumer transactions are paid via
  credit card
• Over 50 of the worlds population doesnt have
  credit cards
• An idea that failed scrip
• Flooz and Beanz
• Currently used somewhat for non-profit
  fundraising
• Required learning new way of payment handling
• Didnt mesh well with legacy systems

5
Payment Cards

• Advantages/disadvantages
• Wide acceptance no special hardware (consumer)
• Fraud/consumer protection
• Extra security required (cardholder not present)
• Transaction fees
• Payment acceptance and processing
• Note
• Online transactions constitute 5 of all credit
  card purchases
• Online transactions account for 50 of all credit
  card fraud
• Processing payment cards online
• Merchant can process card info locally
• Alternatively, use InternetSecure, PCAuthorize,
  etc.
• Refer to Figure 11-3

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An Overview of the Process
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Electronic Cash

• Expected to account for over 60 of all
  transactions by 2009
• But, given the benefits of payment cards, why?
• Transaction fees!
• Many goods (e.g., subscriptions) are less than
  10
• High priced goods also provide a market
• Recall also that most of the world is without
  credit cards
• Children (teens!)
• Bad credit
• Other countries besides USA

8
Small Payments

• Classifications
• Micropayments (under 1)
• Other (1-10)
• Popular for digital content
• Yaga (large media companies)
• BitPass (individual authors, etc.)
• Process
• Accumulate charges, then bill
• Debit accounts

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Concerns about eCash

• Security
• Can be spent only once
• Must be anonymous
• Hard to counterfeit
• Independence eCash is unrelated to any network
  or other infrastructure
• Portability no need for the recipient to have a
  merchant account
• Convenience people wont adopt otherwise

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Holding the eCash

• Online third party involved in all transfers
  (holds consumers cash)
• Offline
• Like a virtual wallet
• Must have safeguards against double spending

11
How eCash Security Works
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Major eCash Systems

• CheckFree
• ClickShare
• InternetCash
• PayPal

13
Electronic Wallets

• Hold
• Credit card numbers,
• eCash,
• Owner ID,
• Contact info
• Can be either client-side or server-side
• Major players
• Microsoft .NET Passport
• Yahoo! Wallet
• Standards
• W3C micropayment standards
• ECML standard

14
eWallet Standards
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Stored-Value Cards

• Two basic types
• Magnetic strip cards
• Smart cards
• Examples?
• Disadvantages?