Financial Transactions on Internet

1
Financial Transactions on Internet

• Financial transactions require the cooperation of
  more than two parties.
• Transaction must be very low cost so that small
  transactions can be afforded.
• Transactions must be very secure in order for
  financial players to want to enter the Internet
  market.
• Electronic payment is the corner stone of
  electronic commerce.

2
Payment Technologies

• Digital Currency
• Can be used with or without smartcards.
• Ideal for very small payments.
• Electronic Credit Card Payment
• Some rely on secure transmission of credit card
  numbers.
• Others accumulate payment requests at a trusted
  third party holding the credit card number.
• Electronic Cheque payments
• Elecronic version of cheques, using the existing
  cheque clearing process.

3
Digital Currency

• Mondex Uses smartcards for funds transfer from
  buyer to seller without intervention of a bank.
  Supported by MasterCard.

4
Digital Currency (on Internet)

• Mondex
• Mondex card is an electronic purse that can hold
  up to 5 different currencies at a time.
• Card can be recharged over the phone or at ATM
  machines.
• Card can be locked so that only the owner who
  knows a PIN can use it.
• Money is transferred from the customers card to
  the vendors card.
• ATT provides technology to use Mondex cards over
  Internet.

5
Digital Currency (on Internet)

• Digicash software-only solution.
  Represents a true replacement for
  cash.

6
Digital Currency (on Internet)

• Digicash
• Uses digital coins. A user has a purse with
  coins of different denomination, optimally
  distributed.
• A users software creates coins, puts them in an
  envelope, and sends them to the bank. The bank
  signs the envelope. When the coin is later sent
  to the bank to credit an account the bank cannot
  identify the user who created the coin.

7
Digital Currency (on Internet)

• Digicash
• When A buys something from B user As computer
  sends coins to B. Bs computer sends the coins
  (indirectly through Bs bank) to As bank for
  validation. As bank will (tell Bs bank to)
  credit Bs account.
• The coints have a serial number. The Mint
  (central authority) can verify duplication.

8
Digital Currency (on Internet)

• DigiCash
• Person to person payments do not really work
  like cash when A gives cash to C, C actually
  sends the coins to her bank (who verifies the
  coins with As bank) and gives C an equal
  amount in new coins.

9
Digital Currency (no Internet yet)

• VisaCash
• Very similar to Mondex.
• Comes in disposable and reloadable version.
• First tested during the Atlanta Olympics.
• Works without a PIN.
• Proton
• Developed by Banksys in Belgium.
• Supported by American Express.
• Pilots in many countries (Netherlands Chipknip)
• Works without a PIN.

10
Electronic Credit Card Payment

• First Virtual
• Credit card numbers are known by First Virtual
  but not transferred over Internet.

11
Electronic Credit Card Payment

• First Virtual
• Does not use any encryption technique.
• Credit card numbers are registered with First
  Virtual through a normal phone call.
• When a user sees an interesting item she can ask
  to try it. She presents her First Virtual account
  number.
• First Virtual sends an email to the user asking
  if the product was satisfactory.
• If the user responds yes the charge is
  registered, and periodically forwarded to VISA.

12
Electronic Credit Card Payment

• Open Market
• Similar to First Virtual, but encrypted ditigal
  receipts are used instead of the email
  validation.
• SET (Secure Electronic Transactions)
• Standards developed by Visa and Mastercard.
• Credit card numbers are transmitted using strong
  encryption.
• No protection against Trojan Horse attacks in the
  OS.
• No provision for micropayments.

13
Electronic Cheque Payment

• NetChex
• Unique thumb print of users hardware is used
  instead of digital signatures. As a result, the
  software will not work if copied to another
  machine.
• Each user has a shadow account which is used in
  the transactions. Once confirmed a transaction
  is moved to the users real checking account and
  processed.
• Electronic cheques are confirmed by the bank
  through e-mail.

14
Combinations of Techniques

• Cybercash
• Provides secure credit card payments. When a
  user agrees on a purchase, the agreement and
  credit card number are sent to the vendor in an
  encrypted way such that the vendor cannot read
  it. The vendor uses the agreement, and passes on
  the credit card number to the credit card
  company.
• Provides a Cybercoin wallet, similar to Digicash.
• Provides Paynow electronic cheques.
• GlobeID
• Similar, provides all three payment mechanisms.

15
Conclusions

• There are secure protocols for three types of
  electronic funds transfer
• A digital form of cash.
• Secure credit card transactions, either by not
  transmitting the credit card number or by
  transmitting it in such a way that nobody,
  including the vendor, can read the number.
• Secure cheque transactions, with essentially the
  same kind of clearance procedure as for paper
  cheques.