IMS 6485: E-Commerce Security & Payment Systems 1 Dr. Lawrence West, MIS Dept., University of Central Florida Topics Payments in the Value Chain Payment Processing—old and new Market Spaces—This space for rent Desirable properties of payment systems A laundry list of payment options—pros & cons Three 900 lb Gorillas PayPal

IMS 6485: E-Commerce Security & Payment Systems 2 Dr. Lawrence West, MIS Dept., University of Central Florida Chapter Topics Two versions of this book past had payment systems and security in their own chapters Why do you think that the authors chose to combine them in this edition? –What do the two have in common?

IMS 6485: E-Commerce Security & Payment Systems 3 Dr. Lawrence West, MIS Dept., University of Central Florida Security Threats What are the categories of security threats identified in the chapter (12 pages worth)? If you are a firm engaged in e-commerce what is your relationship to the threat? –Victim(if so, how)? –Innocent bystander? –Are your customers victims (if so how)? –Do your customers perceptions of threats affect their dealings with you? What actions are in your decision space?

IMS 6485: E-Commerce Security & Payment Systems 4 Dr. Lawrence West, MIS Dept., University of Central Florida Dimensions of Security Map the threats identified in the chapter to the six dimensions of e-commerce security (Which dimension(s) can each threat impact?) –Integrity− Confidentiality –Nonrepudiation− Privacy –Authenticity− Availability How does the threat impact your business? (What is the mechanism through which you lose money)?

IMS 6485: E-Commerce Security & Payment Systems 5 Dr. Lawrence West, MIS Dept., University of Central Florida Security Remediation/Counter Measures Encryption—what are the tradeoffs? –What are the network effects? Securing communication channels—what are the options and tradeoffs

IMS 6485: E-Commerce Security & Payment Systems 6 Dr. Lawrence West, MIS Dept., University of Central Florida Security Planning Will you base your firm's security plan on the three pages of content at the beginning of Section 5.4? So what should you do?

IMS 6485: E-Commerce Security & Payment Systems 7 Dr. Lawrence West, MIS Dept., University of Central Florida Security Tradeoffs What are the examples of tradeoffs between security measures and usability? Can you give examples of common "tensions" associated with security implementation? Who makes the decisions when improved security requires decreased usability?

IMS 6485: E-Commerce Security & Payment Systems 8 Dr. Lawrence West, MIS Dept., University of Central Florida Public Policy How might public policy, including regulatory requirements, affect your e-commerce business? How might public attitudes regarding Internet security affect your business?

IMS 6485: E-Commerce Security & Payment Systems 9 Dr. Lawrence West, MIS Dept., University of Central Florida Payments Occur Throughout the Value Chain Where did the majority of the chapter's focus apply?

IMS 6485: E-Commerce Security & Payment Systems 10 Dr. Lawrence West, MIS Dept., University of Central Florida Audiences for Payment Processing Who have been the traditional participants in payment processing (prior to eCommerce)? Who are the new participants in eCommerce payment processing? How have traditional participants entered the new market space? Have new participants integrated into traditional market spaces? What decisions does each participant make –(And what are the implications for you?)

IMS 6485: E-Commerce Security & Payment Systems 11 Dr. Lawrence West, MIS Dept., University of Central Florida Market Spaces What specific market spaces did the chapter discuss? –PayPal case? What market spaces were created with the advent of eCommerce? Which has been the most troublesome to fill?

IMS 6485: E-Commerce Security & Payment Systems 12 Dr. Lawrence West, MIS Dept., University of Central Florida Market Spaces (cont.) What are the limitations of existing payment systems when used on the web? –Cash –Checks –Credit Cards Do these limitations create new market spaces (or opportunities)? Are there network effects associated with payment systems? –Don't just think e-commerce

IMS 6485: E-Commerce Security & Payment Systems 13 Dr. Lawrence West, MIS Dept., University of Central Florida Desirable Payment System Properties What are the desirable properties of an eCommerce payment system from the consumer's point of view? From the merchant's point of view? What are the differences in the list? Again, how do these differences create a market for new services (market spaces)?

IMS 6485: E-Commerce Security & Payment Systems 14 Dr. Lawrence West, MIS Dept., University of Central Florida Consumer Preference What cultural/regional differences in the acceptability of payment systems did you notice in the chapter? Where else were consumer preferences (taste) listed as limitations on the acceptance of electronic payment services? –Do you share these hesitations? –Which do you think are more likely to persist? –Which more likely to become more acceptable over time?

IMS 6485: E-Commerce Security & Payment Systems 15 Dr. Lawrence West, MIS Dept., University of Central Florida Digital Cash Digital Cash sought to create a new medium for the Internet that avoided issues with traditional payment forms Previous editions of the text listed five examples of "digital cash" services –Three are out of business –One is under indictment What pressures and economic principles that we have talked about do these new cash substitutes struggle against?

IMS 6485: E-Commerce Security & Payment Systems 16 Dr. Lawrence West, MIS Dept., University of Central Florida Digital Cash (cont.) Exercise: Research the following two companies and decide whether you would wish to be involved with them as either a customer or merchant –E-gold –ClearBIT Justify your answers

IMS 6485: E-Commerce Security & Payment Systems 17 Dr. Lawrence West, MIS Dept., University of Central Florida Stored Value Systems What new revenue model is introduced with stored value systems? BitPass micropayment system ceased operations in Jan 2007—what hurdle did they need to overcome? Did "smart cards" really address eCommerce needs? –Efforts by American Express and Visa in the U.S. to marry the functionality of their credit cards with that of smart cards have largely failed. (Earlier Edition) But why has the Octopus smart card been such a resounding success in Hong Kong?

IMS 6485: E-Commerce Security & Payment Systems 18 Dr. Lawrence West, MIS Dept., University of Central Florida Digital Accumulating Balance Systems What traditional services have used accumulating balance systems (since well before the Internet, or even computers)? What market space do these systems address in the digital age? What implementing decisions must be made?

IMS 6485: E-Commerce Security & Payment Systems 19 Dr. Lawrence West, MIS Dept., University of Central Florida Digital Credit Cards What market space do these cards seek to occupy? Go to –Would you sign up with this service? Go to –Would you sign up? –What hidden (not very well publicized) agreement are buyers making? –What does this site offer that few of the others did (well)? –What revenue models are they using?

IMS 6485: E-Commerce Security & Payment Systems 20 Dr. Lawrence West, MIS Dept., University of Central Florida Digital Check Payment Systems How many of you have used a virtual check to make a payment? What market space does the electronic check seek to inhabit?

IMS 6485: E-Commerce Security & Payment Systems 21 Dr. Lawrence West, MIS Dept., University of Central Florida Electronic Billing Presentment & Payment What do you think is the driving factor behind this capability? –Hint: Who pays and who benefits? –What is the nature of the benefit? How many of you have elected paperless bills from a vendor from which you receive regular bills?

IMS 6485: E-Commerce Security & Payment Systems 22 Dr. Lawrence West, MIS Dept., University of Central Florida B2B Payment Systems The book gives short coverage to B2B payment systems 75-85% of B2B payments in the U.S. still use paper checks –Why the resistance? –Small and mid-size firms in the U.S. reportedly spend around $14.50 to produce, deliver, collect, and report a paper invoice

IMS 6485: E-Commerce Security & Payment Systems 23 Dr. Lawrence West, MIS Dept., University of Central Florida Three 900 lb. Gorillas in Payment Systems What have been/are/will be the impacts of these factors on the eCommerce payment market? 1.Network externalities 2.Consumer taste (preference) 3.Micropayments Also—what opportunities have we seen for leverage in payment systems?

IMS 6485: E-Commerce Security & Payment Systems 24 Dr. Lawrence West, MIS Dept., University of Central Florida PayPal—Why has it Worked? PayPal does a lot of online business How does it work? –What steps does user have to take to make payments? –Receive payments? –Who pays? Why does it work?