ELC 200 DAY 25 & 26

Agenda Assignment 8 Graded Assignment Avgs Posted 6 A’s, 9 B’s, 1 C and 1 D and 2 non submits Assignment Avgs Posted 2 A’s, 8 B’s, 2 C’s, 2 D’s and 5 F’s Quiz 4 (last) will be April 29 Chap 13, 14, & 15 20 M/C and 4 Short Essay Assignment 9 on next slide Should be progressing on Framework Need a schedules Everything due on May 6 Lecture Discuss Payment Systems

Assignment # 9 Due April 29 At 2 PM (right before quiz) Complete Discussion Questions (1, 2 & 3) on Page 500 of the text Turn in well formatted Word Document

Presentation schedule May 3 (9-10) May 6 (everyone else)

Chapter 15 E-Payments: Getting the Money

OBJECTIVES Brief History of Money Features of Real-World Cash Electronic Money Internet-based Systems Electronic Payment Media Issues and Implications

BRIEF HISTORY OF MONEY Barter Medium of Exchange Tokens Notational Money Credit System

FEATURES OF REAL-WORLD CASH Convenience Wide Acceptance Anonymity No Hidden Cost of Use No Audit Trail Can we have something like this for eCommerce???

Properties Of Money Online/offline represents risk Online is on the spot validated transaction An offline transactions is validated later Identified and Online (+I+L) Credit cards and debit cards Identified and Offline (+I-L) Checks, Money orders Anonymous and Online (-I+L) Cash payments Anonymous and Offline (-I-L) Electronic cash (but not real cash)

ACID TEST Atomicity Consistency Isolation Durability All or nothing All agree Isolation Doesn’t effect other transactions Durability Can go back to previous state (i.e. reversible)

ICES TEST Interoperability Conservation Economy Scalability Ability to move between system Conservation Temporal consistency and durability Economy Cost of use Scalability Multiple users

TRANSACTION PROPERTIES Token Atomicity Consistency Isolation Durability Interoperability Conservation Economy Scalability Cash Y N Check Credit Card - Postal Money Order ? ?-

Agenda Assignment 8 Graded Assignment Avgs Posted 6 A’s, 9 B’s, 1 C and 1 D and 2 non submits Assignment Avgs Posted 2 A’s, 8 B’s, 2 C’s, 2 D’s and 5 F’s Quiz 4 will be April 29 (Next Class) Chap 13, 14, & 15 20 M/C and 4 Short Essay Assignment 9 on next slide Should be progressing on Framework Need a schedules Everything due on May 6 Finish Discussion Payment Systems

Assignment # 9 Due April 29 At 2 PM (right before quiz) Complete Discussion Questions (1, 2 & 3) on Page 500 of the text Turn in well formatted Word Document

Presentation schedule May 3 (9-10) May 6 (everyone else)

INTERNET-BASED PAYMENTS Electronic Cash Credit Cards Debit Cards Smart Cards

NONTECHNICAL PROPERTIES Acceptability Ease of Integration Customer Base Ease of Use and Access

ELECTRONIC TRANSACTION SYSTEMS Internet Service Providers: Internet-Based Payments ELECTRONIC TRANSACTION SYSTEMS CyberCash http://www.cybercash.com/ Bought by Verisign Netbill http://www.netbill.com/ First Virtual No longer in internet payment systems Paypal www.paypal.com

How PayPal Works

SECURE ELECTRONIC TRANSACTIONS (SET) Internet Service Providers: Internet-Based Payments SECURE ELECTRONIC TRANSACTIONS (SET) http://www.setco.org/ Confidentiality Integrity Authentication Interoperability

SET

ELECTRONIC PAYMENT MEDIA Internet Service Providers: Electronic Payment Media ELECTRONIC PAYMENT MEDIA Trusted Third Party CyberCash PaymentTech http://www.paymentech.com/ Notational Fund Transfer-related Type Credit Card (SET) Digital Cash/ Electronic Money Anonymous & untraceable digital cash David Chaum

CREDIT CARDS Transactional cost paid by merchants Shopping Cart 2-5 cents per transaction Monthly fees Shopping Cart Credit Card Processing Services Risks of Using Credit Cards http://www.nonprofitcredit.org/education/12secretscredit.html Credit Card Laundering

DEBIT CARDS Convenience Widely Accepted Easy Application No Grace Payment Period Less Protection for Undelivered Items No limits of liability like credit Card Risks for Merchants - Overspent Customers 2-3 day processing versus immediate for credit cards Use of PIN creates online transaction Hard to dispute! Higher transaction fee for merchants

SMART CARDS Provide users the ability to make a purchase Hold user’s cash, ID information and keys Provide authentication of transaction Contain encryption and decryption of messages Enhance data portability Similar to electronic purse

DIGICASH & E-WALLET No audit trail Offers true digital economy Resistance from the Treasury Department E-wallet A carrier of e-cash A simple and secure way of carrying currency electronically http://www.cs.newcastle.edu.au/Research/MSEG/visual/ecash/ecash.html

ELECTRONIC FUNDS TRANFER & AUTOMATED CLEARING HOUSE Electronic Funds Transfer (EFT) A computer-based system that facilitates the transfer of money between two financial institutions overnight Automated Clearing House (ACH) Involves more than one financial institution routing to debit and credit the correct accounts

ACH Customer’s Bank Merchant’s Bank ACH Provider Customer Merchant Step 4 Customer’s Bank Merchant’s Bank Step 3 ACH Provider Step 4 Step 5 Step 1 Step 1 Customer Merchant Step 2 Step 1: The Customer sends payment information to the ACH Provider (probably through a link at the merchant’s website). The information should include the information from the MICR line of Customer’s check (the ABA routing number of the Customer’s Bank and the Customer’s account number at the bank). Step 2: Based on the commitment to pay represented by that information, the Merchant completes the transaction. It might ship the goods at that time, or it might wait a few days to receive payment. Step 3: The ACH Provider sends the ACH debit entry to the Customer’s Bank. Step 4: The Customer’s Bank responds to that entry by removing funds form the Customer’s account and sending them to the Merchant’s Bank (through ACH network).

Check Numbers New Check 21 Rules

ISSUES & IMPLICATIONS Consumer Needs Corporate Processes Corporate Strategy Regulation of Competition Economics & Social Processes

Chapter 15 E-Payments: Getting the Money