Electronic Payment Systems

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Electronic Payment Systems

• Lecture 8
• Supakorn Kungpisdan

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Outline

• The Payment Evolution
• Using Payment Cards Online
• Secure Electronic Transaction (SET)
• E-Micropayment
• E-Checking
• Electronic Bill Presentment and Payment
• PayPal

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The Payment Revolution

• Crucial Factors
• Independence
• Some e-payment systems require specialized
  software or hardware to make payment
• Interoperability and portability
• Security
• Anonymity
• Divisibility
• Ease of use
• Transaction fees
• Regulations

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Outline

• The Payment Evolution
• Using Payment Cards Online
• Secure Electronic Transaction (SET)
• E-Micropayment
• E-Checking
• Electronic Bill Presentment and Payment
• PayPal

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Using Payments Cards Online

• payment card
• Electronic card that contains information that
  can be used for payment purposes
• Three forms of payment cards
• Credit cards
• Debit cards
• Stored-Value Cards

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Using Payments Cards Online

• Key participants in processing credit card
  payments online include the following
• Acquiring bank
• Credit card association
• Customer
• Issuing bank
• Merchant
• PSP or Payment Gateway

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Using Payments Cards Online

• Processing Credit Cards Online
• authorization
• Determines whether a buyers card is active and
  whether the customer has sufficient funds
• settlement
• Transferring money from the buyers to the
  merchants account

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Using Payments Cards Online

• Fraudulent Credit Card Transactions
• Address Verification System (AVS)
• Detects fraud by comparing the address entered
  on a Web page with the address information on
  file with cardholders issuing bank
• Result in a number of false positive
• Only available in US and Canada

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Using Payments Cards Online

• card verification number (CVN)
• Detects fraud by comparing the verification
  number printed on the signature strip on the back
  of the card with the information on file with the
  cardholders issuing bank

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Using Payments Cards Online

• Fraudulent Credit Card Transactions
• Additional tools used to combat fraud include
• Manual review
• Negative files
• check to see if customers transaction is matched
  against the file containing customers
  information
• Card association payer authentication services
• 3D (3-domain) Secure
• E.g. Verified by Visa, MasterCard SecureCode, JCB
  J/Secure
• Require cardholders to register with the systems
  and merchants to adopt and support both existing
  systems and the new systems
• Cardholder needs to have an additional password
  to authenticate him/herself
• Merchant must also enroll itself to the program

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Smart Card

• An electronic card containing an embedded
  microchip that enables predefined operations or
  the addition, deletion, or manipulation of
  information on the card

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Types of Smart Cards

• contact card
• A smart card containing a small gold plate on
  the face that when inserted in a smart card
  reader makes contact and passes data to and from
  the embedded microchip
• contactless (proximity) card
• A smart card with an embedded antenna, by means
  of which data and applications are passed to and
  from a card reader unit or other device without
  contact between the card and the card reader

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Applications of Smart Cards

• e-purse or e-wallet
• Smart card application that loads money from a
  card holders bank account onto the smart cards
  chip
• Transit Fares
• To eliminate the inconvenience of multiple types
  of tickets used in public transportation, most
  major transit operators in the United States are
  implementing smart card fare-ticketing systems
• E-Identification
• Because they have the capability to store
  personal information, including pictures,
  biometric identifiers, digital signatures, and
  private security keys, smart cards are being used
  in a variety of identification, access control,
  and authentication applications

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Applications of Smart Cards

• Health Care
• Storing vital medical information in case of
  emergencies
• Preventing patients from obtaining multiple
  prescriptions from different physicians
• Verifying a patients identity and insurance
  coverage
• Speeding up the hospital or emergency room
  admissions process

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Securing Smart Cards

• Smart cards store or provide access to either
  valuable assets or to sensitive information
• Because of this, they must be secured against
  theft, fraud, or misuse
• The possibility of hacking into a smart card is
  classified as a class 3 attack, which means
  that the cost of compromising the card far
  exceeds the benefits

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Outline

• The Payment Evolution
• Using Payment Cards Online
• Secure Electronic Transaction (SET)
• E-Micropayment
• E-Checking
• Electronic Bill Presentment and Payment
• PayPal

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Secure Electronic Transaction
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Services Provided by SET

• Secure communications channel among involved
  parties
• Trust by using X.509 certs
• Party privacy parties will receive only the
  information that they are intended to receive

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Secure Electronic Transaction
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5, 10, 11
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7
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SET Transaction Overview

1. Client opens an account
2. Client receives a certificate
3. Merchants have their own certs
4. The client places an order (C ? M)
5. The merchant is verified (M ? C)
6. The order and payment are sent (C ? M)
7. The merchant requests payment authorization (M ?
   PG)
8. Payment is approved (PG ? I, I ? A, I,A ? PG)
9. The merchant receives authorization response (PG
   ? M)
10. The merchant confirms the order (M ? C)
11. The merchant provides goods or service (M ? C)
12. The merchant requests payment (M ? A)

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Stored-Value Cards

• A card that has monetary value loaded onto it and
  that is usually rechargeable

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Outline

• The Payment Evolution
• Using Payment Cards Online
• Secure Electronic Transaction (SET)
• E-Micropayment
• E-Checking
• Electronic Bill Presentment and Payment
• PayPal

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E-Micropayments

• Small online payments, typically under US 10
• Companies with e-micropayment products
• BitPass (bitpass.com)
• Paystone (paystone.com)
• PayLoadz (payloadz.com)
• Peppercoin (peppercoin.com)

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Millicent
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Outline

• The Payment Evolution
• Using Payment Cards Online
• Secure Electronic Transaction (SET)
• E-Micropayment
• Electronic Check
• Electronic Bill Presentment and Payment
• PayPal

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E-Check

• e-check
• A legally valid electronic version or
  representation of a paper check
• Automated Clearing House (ACH) Network
• A nationwide batch-oriented electronic funds
  transfer system that provides for the interbank
  clearing of electronic payments for participating
  financial institutions

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Benefits of e-check processing

• Reduces the merchants administrative costs by
  providing faster and less paper-intensive
  collection of funds
• Improves the efficiency of the deposit process
  for merchants and financial institutions
• Speeds the checkout process for consumers
• Provides consumers with more information about
  their purchases on their account statements
• Reduces the float period and the number of checks
  that bounce because of insufficient funds (NSFs)

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Processing E-Checks with Authorize.Net
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Outline

• The Payment Evolution
• Using Payment Cards Online
• Secure Electronic Transaction (SET)
• E-Micropayment
• E-Checking
• Electronic Bill Presentment and Payment
• PayPal

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Electronic Bill Presentment and Payment (EBPP)

• Presenting and enabling payment of a bill
  online. Usually refers to a B2C transaction

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E-Bill Presentment
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Types of E-Billing

• Online banking
• Biller Direct
• Bill Consolidator

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Advantages of E-Billing

• Reduction in expenses related to billing and
  processing payments
• Electronic advertising inserts can be customized
  to the individual customer
• Reduces customers expenses

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E-Billing Process for Single Biller
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E-Billing Processes for Bill Consolidator
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Outline

• The Payment Evolution
• Using Payment Cards Online
• Secure Electronic Transaction (SET)
• E-Micropayment
• E-Checking
• Electronic Bill Presentment and Payment
• PayPal

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PayPal
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PayPal Interface
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Send Money Person-to-Person
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Request Money
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PayPal Website Payment
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PayPal Website Payment (contd)
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PayPal Website Payment (contd)
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PayPal Website Payment (contd)
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Receiving money

• A merchant who wants to withdraw money from
  Paypal account must add bank account to Paypal
  first.

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Withdraw Fund
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Withdraw Fund (contd)
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Withdraw Fund (contd)
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Paypal Virtual Terminal

• Its an online version of the credit card swipe
  machines used in stores. But it gives you added
  advantages
• Increase sales. Expand your business beyond the
  internet.
• Save money. Theres no need to invest in
  expensive equipment.

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Paypal Sandbox

• Go to https//developers.paypal.com/

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Paypal Sandbox (contd)
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Paypal Sandbox (contd)
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Paypal Sandbox (contd)
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Question?

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