INTERNET & E-COMMERCE E-Payment Lecturer : Bambang Warsuta, S.Kom, M.T.I S1 Teknik Informatika Fakultas Ilmu Komputer Universitas Pembangunan Nasional “Veteran” Jakarta

Schedule Pertemuan 1 (14 September 2013) : Introduction to Internet and E-Commerce Pertemuan 2 (21 September 2013) : Categories Of E-Commerce I (B2B, B2C) Pertemuan 3 (28 September 2013) : Categories Of E-Commerce II (C2C, G2B, G2C) Pertemuan 4 (5 Oktober 2013) : E-Commerce Supporting Technology Pertemuan 5 (12 Oktober 2013) : Case Study Pertemuan 5 (19 Oktober 2013) : eBusiness Framework Pertemuan 7 (26 Oktober 2013) : eProducts and eServices Mid-semester test (Oktober / Nopember 2013) Pertemuan 8 (16 Nopember 2013) : Presentasi Kelompok I Pertemuan 9 (23 Nopember 2013) : ePayment Pertemuan 10 (30 Nopember 2013) : Internet Marketing and eMarketing Pertemuan 11 (7 Desember 2013) : Internet and E-Commerce Security Pertemuan 12 (14 Desember 2013) : eCRM Pertemuan 13 (21 Desember 2013): Presentasi kelompok SESI I Libur Tahun Baru Pertemuan 14 (11 Januari 2014) : Presentasi kelompok SESI II Final-semester test (Januari 2014)

E-Payment  This Section on ePayment highlights electronic monetary transactions  Various classification schemes for payment solutions  Discuss the most popular means of electronic payment  Asset-based procedures  Innovative solutions by ePayment

Overview And Classification  The term ePayment refers to the completion of payment processes electronically.  For example, a product that is bought in an online shop is paid for using ePayment.

ePayment solutions can be classified in various ways:  By Amount  picopayments, micropayments (paypal:less than 12USD), and macropayments  By The Time Of Payment  prepaid, pay now, and pay later  By Technological Concept  This is deposited into an account or stored in the form of virtual coins in software or hardware  By The Degree Of Anonymity  If a person pays for a product with cash in a nonelectronic payment process, then this is considered an anonymous transaction.

Credit Card-Based Procedures

Credit Card with Secure Sockets Layer (SSL)  Credit cards are a very popular means of ePayment.  To ensure that only the online trader receives this number,it is transmitted over a secure line.  The SSL protocol is available in most browsers and provides an encoded connection between the client (the customer’s browser) and the server (the provider).

Reasons for the popularity of credit cards  Credit cards have already been in use for decades in offline trading.  Credit cards are available and accepted worldwide.  Credit cards are simple in terms of implementation and do not need special software.  Online payment simply involves entering the credit card number along with the name of the card owner into a form.  Credit cards are generally convenient for the buyer.  Many banks add a small basic charge for processing payments by credit card and lure in corresponding turnover with additional discounts or premiums.

Disadvantages of credit cards (1)  Credit cards do not possess any security mechanism.  If an attacker steals a credit card number, this is sufficient to buy products online.  some online traders require a three-digit card security number (security code) along with the credit card number to reduce fraud.

Back of a credit card with a security number of 999

Disadvantages of credit cards (2)  Credit cards are not anonymous.  the owner of the credit card and its number become known to both the seller and the banks involved in the transaction  represents a security risk.  Credit cards are not suitable for payments between private individuals.  A special contract must be concluded with the credit card company and bank to enable a person to receive money through a credit card

Disadvantages of credit cards (3)  Credit cards are expensive for the seller.  Credit card institutions and banks require the seller to pay relatively high basic charges as well as a percentage of sales to them.

PAYPAL  PayPal was created in 1998  2002 taken over by eBay  PayPal is a credit card-oriented payment system  In contrast to the direct use of credit cards described above, it makes payments between two private individuals possible  A US-based company, for a long time PayPal only offered accounts in US dollars, but has recently backed other currencies, such as Euros or British pounds. Now, included Indonesia.

Registration Process  A newly registered user enters his credit card information but cannot use PayPal until his account has been activated.  PayPal subsequently debits a small amount (normally $1) from the credit card entered.  The description of this deduction on the credit card statement contains a number.  The user then sends this number to PayPal in order to activate the account.  This method makes it difficult to register a stolen number with PayPal, since the thief normally has no access to the credit card account.  If the user has successfully registered himself with PayPal, he can then carry out a transaction to another PayPal member

The PayPal payment process between two individuals

Secure Electronic Transaction (SET)  SET is a secure protocol  The SET protocol was developed by some of the large SET is a credit card companies secure protocol (VISA, Mastercard) in cooperation with technological companies such as IBM, Microsoft, and Netscape.  SET is considered one of the most secure protocols in ePayment  Its use requires a set of conditions from all parties involved.  In particular, SET is based on a public key cryptosystem  All of the parties involved need a pair of keys.

In addition, there are other conditions for the parties involved:  The buyer needs a SET wallet, a type of electronic purse.  The SET wallet the buyer stores the necessary data and communicates with the seller.  The seller must install and operate special software (SET server) on his web the seller server.  The SET server communicates with both the buyer’s SET wallet and the seller’s bank.  The buyer’s bank and the seller’s bank must make a SET payment server server for the bank available.

SET Transaction (1)  SET is a credit card-based solution. If a buyer wants to acquire a product, he enters his credit card number into his SET wallet.  Example : 1. The buyer sends his coded and digitally signed payment information along with his order to the seller. 2. The seller (or his SET server) likewise signs the payment information and passes it on to his bank.

SET Transaction (2) 4. The data from the SET payment server is decoded there, and the digital signature is checked. If the data is correct, the buyer’s bank is asked for confirmation. 5. If the buyer’s bank responds affirmatively, the payment can be carried out. 6. A receipt is sent to the seller as confirmation. 7. The dealer can deliver the product to the customer.

SET Transaction (3)

Asset-Based Procedures  In contrast to credit card-based procedures, a certain amount is deposited in advance into an account (prepaid)  Example : Virtual Money is Stored on a Smartcard

CASH (offline)  CASH is an electronic currency for small amounts that Virtual money is offered in the form of a is stored on a smartcard smartcard in Switzerland.  Many banks have integrated CASH and Mastercard.  The big advantage of CASH is the ability to use it to pay small amounts offline. (micropayment solution)  Need a card reader

Geldkarte (German)  The used of Geldkarte is same like CASH  In contrast to the CASH system, the Geldkarte can be used in online payment usable online transactions.

Any Question???

Innovative ePayment Solutions

eCash  eCash was a development of the DigiCash Company.  It was a coin-based sytems which combined the advantages of cash with those of electronic payment transactions. (electronic coins were deposited)  When the user made a payment, coins from one purse were transferred into another purse.

eCash Payment Process

eCash lacked customer acceptance  eCash was rejected by the banks involved (Deutsche Bank, Mark Twain Bank, USA, among others) after a short test phase because of a lack of acceptance by customers.  Part of the reason for this lack of acceptance were the prerequisites for using eCash, including the need to register for the service and the need to install software for the electronic purse.  Another problem was the complex scaling of the eCash server that examined the validity of the coins.

Milicent  Milicent  based on electronic coupons.  Used for casino via web browser.  The Customer must having a purse (wallet)

PayWord and MicroMint (Ronald L. Riverst and Adi Shamir)  The PayWord procedure was based on the computation of virtual coins and required an asymmetric pair of keys.  using certificate  the MicroMint procedure for cases where asymmetric pairs of keys would not be used by customers.

Random Payment  The Customers should pass lottery tickets (each with a known chance of winning a known amount—some large multiple of a single micropayment) to a particular trader.  A lottery would ensue where the customer supplying a winning ticket would be required to pay the winning amount to the trader.  This would mean that only one transaction would be required on behalf of all of the customers.

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Solutions for Fee-Based Web Sites

Firstgate Click & Buy  Firstgate Click & Buy  Developed by Firstgate Company  The Customer and Provider must Register via Web page  For the transaction, the customer is transferred to the Firstgate Click & Buy server and must authenticate himself.  Firstgate deducts the cost from the customer and credits it to the provider, minus a fee.

Allopass  Developed by French company Frog Planète.  The Allopass system is paid through the phone bill.  The Customer acces through the web page with a form that requires a pin code and shows a telephone number.  If the Customer calls the number, he receives the pin code required for entry to the fee-based site  No need registration (anonymouse)

Comparison of ePayment Solutions (PayPal, Geldkarte, Click & Buy, and Allopass)

Customers prefer simple solutions  Based on the ePayment solutions that are now generally accepted, it is clear that customers attach great value to a simple solution that does not require software updates on their system.  The solution should have favorable transaction costs, basic charges, and worldwide acceptance.

Thank You Have a nice weekend…