Electronic Payment Systems Dr. Donal O’Mahony Director, Networks & Telecommunications Research Group, Trinity College Dublin

Introduction  Academic at Trinity College, Dublin, Ireland  Author and Reseacher in the areas of –Mobile and Wireless Communications –Cryptographic Applications Electronic Payment Trust Building

Outline  The ‘Net Effect’ on Payment/E-Payment  Impact on Developed Countries  Starting point for Developing Nations  New Opportunities

Conventional Payment Mechanisms in United States  Approx 80% of payments in Cash  International Trade involves Wire Transfers, Letters of Credit etc. Non-Cash Payment Instrument Trans. Volume Trans. Value Average Value Check71%10%$1,179 C/D Card25%0.1%$59 C/D Transfer by ACH 2.5%2%$2,000 Wire Transfer0.1%86%$4.3m 1999 – Source BIS

Retail Payments – Net Evolution  Cash – evolving (very slowly) to Internet based systems such as Paypal  Credit-Card based systems –Ideal for Internet – already a global payment method – tradition of ‘card-not-present’ –Combined with Secure Socket Layer, it is used for almost all retail E-commerce – high fraud rate  Retail Check – being eroded by Electronic Bill Payment, electronic home banking

Trade Payments – Net Evolution  Check Payments migrating to Electronic Transfers – in the U.S. via the Automated Clearing House (ACH) networks –FSTC E-check and BIPS Projects  ACH Transfers growing in importance –European Initiatives: STEP1 (<€50K) –Global Initiatives : WATCH, CLS –Internet access to these is coming  Total trading Systems –Bolero, Tradecard

Other Aspects of Electronic Trading  Electronic Trust building becoming more common –Legislative Changes in E-Commerce in Europe, US and Asia enable this –PKI Infrastructure being (slowly) built Verisign Identrus Wisekey –In combination with E-payments…will enable complete transactions on-line

Conventional Payments in Developing Countries  Generally less developed banking industry  Credit Cards not widely available  More reliance on paper  Foreign Exchange transactions more problematic  Being left out of new payment initiatives Currently

New Opportunities  On the Internet no-one knows you are a dog  Internet banking infrastructure is cheap and easy to build.. Opportunity to leap-frog  Open standards level the paying field  Must work with new standards