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Electronic

Payment
Mechanisms
Submitted by : Group
5
Janak Rajpurohit ( 10P202 )
Nidhi Bhartia ( 10P214 )
Pinak Mukherjee ( 10P218 )
Sushant ( 10P238 )
Vaibhav Chaudhary
( 10P239 )
Vipul Manglik ( 10P241 )
Payment Methods

Cash

•Notes
•Coins
•Tokens

Non - Cash

•Cheques
•Money Orders
•Bills of Exchange
•Payment card vouchers
•Letters of Credit
Conventional Payment Process

Seller bank Seller


Deposit cash
or payment
information

Goods
Payment
Info flows for notational
changes

Withdraw cash or
payment
information

Buyer bank Buyer


Issues with the Traditional Process

nvenience
curity
§Need to provide credit card info by phone or mail
verage
§Does not support individual - individual or bus to bus tran
igibility : not all potential buyers can get credit card
pport for micro - transactions ( micropayment )
E - Payment Systems

e payment system facilitates the acceptance of payments for online tr


s a non - cash type of transaction

Requirements for E - Payments


ersally accepted
sferable electronically
sible
forgeable, non-stealable
ate (no one except parties know the amount)
ymous (no one can identify the payer)
off-line (no on-line verification needed)
E - Cash System

Merchant

5
4

Bank 3

Consumer
n ta g e s a n d D isa d va n ta g e s o f E le ctro n ic

§ Advantages
§ More efficient, eventually meaning lower
prices
§ Lower transaction costs
§ Anybody can use it, unlike credit cards, and
does not require special authorization
§ Disadvantages
§ Tax trail non-existent, like regular cash
§ Money laundering
§ Susceptible to forgery
A g g re g a tio n

• Used when individual transactions are too small for


credit card (e.g. $2.00)
• Consumer and Merchant sign up with Aggregator
• When amount owed is large enough (or every month),
charges to Consumer’s credit card
• Aggregator sends money (less fees) to Merchant
• QPASS, CyberCash, GlobeID
Electronic Wallets
Smart Cards
Smart Cards
Different Types of Payment Cards

•Credit Cards

•Debit Cards

•Stored Value Cards

•Fleet Cards

•Prepaid Cards

•Charge Cards

•Gift Cards
Credit Cards
Credit Cards
Open & Closed Loop Systems

serve as brokers between card users and merchants -- no other institution is invol
les
Solut ion Advantages
Advantages
Risks
ecure Electronic Transaction (SET) Protoco
• Jointly designed by MasterCard and Visa with backing of
Microsoft, Netscape, IBM, GTE, SAIC, and others
• Designed to provide security for card payments as they
travel on the Internet
• Contrasted with Secure Socket Layers (SSL) protocol,
SET validates consumers and merchants in addition
to providing secure transmission
• SET specification
• Uses public key cryptography and digital certificates for
validating both consumers and merchants
• Provides privacy, data integrity, user and merchant
authentication, and consumer nonrepudiation
e cu re E le ctro
Then ic SET
Tra n sa ctio n ( S E T ) Pro to c
protocol

The SET protocol coordinates the activities of the customer,


merchant, merchant’s bank, and card issuer. [Source: Stein]
SET Payment Transactions
• SET-protected payments work like this:
– Consumer makes purchase by sending
encrypted financial information along with
digital certificate
– Merchant’s website transfers the information to
a payment card processing center while a
Certification Authority certifies digital
certificate belongs to sender
– Payment card-processing center routes
transaction to credit card issuer for approval
– Merchant receives approval and credit card is
charged
– Merchant ships merchandise and adds
transaction amount for deposit into
merchant’s account
2/16/00 EMTM 553 21
S E T u se s a h ie ra rch y o f Tru st

All parties hold certificates signed directly or


indirectly by a certifying authority. [Source: Stein]
2/16/00 EMTM 553 22
e cu re E le ctro n ic Tra n sa ctio n ( S E T ) Pro to c
SET Protocol
§ Extremely secure
§ Fraud reduced since all parties are authenticated
§ Requires all parties to have certificates

§ So far has received lukewarm reception


§ 80 percent of SET activities are in Europe and Asian
countries
§ Problems with SET
§ Not easy to implement
§ Not as inexpensive as expected
§ Expensive to integrated with legacy applications
§ Not tried and tested, and often not needed
§ Scalability is still in question
Thank You