1. Electronic Commerce Ninth Edition Chapter 11 Payment Systems for Electronic Commerce

2. Electronic Commerce, Ninth Edition2 2 Learning Objectives In this chapter, you will learn about: The basic functions of online payment systems The use of payment cards in electronic commerce The history and future of electronic cash How electronic wallets work The use of stored-value cards in electronic commerce Internet technologies and the banking industry

3. Electronic Commerce, Ninth Edition3 Online Payment Basics Online payment systems –Still evolving Competition for dominance –Cheaper than mailing paper checks –Convenient for customers –Save companies money Costs per bill –Billing by mail: between $1.00 and $1.50 –Internet billing and payment costs: 50 cents Significant environmental impact

4. Electronic Commerce, Ninth Edition4 Online Payment Basics (cont’d.) Four ways to purchase items (traditional and electronic) –Cash, checks, credit cards, debit cards 90% of all United States consumer payments Electronic transfer: small but growing segment –Popular example: automated payments Credit cards –Worldwide: 90% of online payments –United States: 97% of online payments –Noncard payment alternatives (PayPal) becoming increasingly popular

5. Electronic Commerce, Ninth Edition5 FIGURE 11-1 Forecasted forms of payment for U.S. consumer transactions

6. Electronic Commerce, Ninth Edition6 Online Payment Basics (cont’d.) Scrip –Digital cash minted by a company Cannot be exchanged for cash Exchanged for goods or services –Like a gift certificate: good at more than one store –Current scrip offerings (eScrip) Focus: not-for-profit fundraising market –Popular scrip use Has not materialized –Not much popular

7. Electronic Commerce, Ninth Edition7 Online Payment Basics (cont’d.) Online business payment requirements –Safe, convenient, widely accepted Companies sell payment processing package service

8. Electronic Commerce, Ninth Edition8 FIGURE 11-2 Payment processing service offerings of Payment Online

9. Electronic Commerce, Ninth Edition9 Payment Cards Payment card –Describes all types of plastic cards used to make purchases –Categories: credit cards, debit cards, charge cards Credit card (Visa, MasterCard) –Spending limit based on user’s credit history –Pay off entire credit card balance May pay minimum amount –Card issuers charge unpaid balance interest –Widely accepted –Consumer protection: 30-day dispute period

10. Electronic Commerce, Ninth Edition10 Payment Cards (cont’d.) Credit card (cont’d.) –Card not present transactions Cardholder not present during transaction Extra degree of risk for merchant and bank Debit card –Removes sales amount from cardholder’s bank account –Transfers sales amount to seller’s bank account –Issued by cardholder’s bank Carries major credit card issuer name

11. Electronic Commerce, Ninth Edition11 Payment Cards (cont’d.) Charge card (American Express) –No spending limit –Entire amount due at end of billing period –No line of credit or interest charges –Examples: department store, oil company cards Retailers may offer their own charge cards

12. Electronic Commerce, Ninth Edition12 Payment Cards (cont’d.) Single-use cards –Cards with disposable numbers Addresses concern of giving online vendors payment card numbers Valid for one transaction only Designed to prevent unscrupulous vendor fraud –Withdrawn from the market Problem: required different consumer behavior

13. Electronic Commerce, Ninth Edition13 Advantages and Disadvantages of Payment Cards Advantage for merchants –Fraud protection Can authenticate and authorize purchases using a payment card processing network Advantage for U.S. consumers –Liability of fraudulent card use: $50 Frequently waived if card stolen Greatest advantage –Worldwide acceptance Currency conversion handled by card issuer Online  does not require any hardware or software

14. 14 Advantages and Disadvantages of Payment Cards (cont’d.) Disadvantage for merchants –Per-transaction fees, monthly processing fees Viewed as cost of doing business –Goods and services prices: slightly higher Compared to environment free of payment cards Disadvantage for consumers –Annual fee Provide built-in security for merchants –Assurance of payments Card transaction steps transparent to consumers –Several groups are involved.

15. Payment Acceptance and Processing Internet payment card process made easier –Due to standards EMV standard –Single standard handling payment card transactions –Visa, MasterCard, MasterCard International United States online stores, mail order stores –Must ship merchandise within 30 days of charging payment Significant violation penalties Charge account when shipped Electronic Commerce, Ninth Edition15

16. Payment Acceptance and Processing (cont’d.) General steps in payment card transactions –Merchant receives consumer’s payment card information Merchant authenticates payment card to ensure validity Merchant checks with payment card issuer to ensure credit or funds available Puts a hold on credit line or funds needed to cover the charge Settlement occurs (few days after purchase) Funds travel between banks Electronic Commerce, Ninth Edition16

17. Electronic Commerce, Ninth Edition17 Payment Acceptance and Processing (cont’d.) Open and closed loop systems –Closed loop systems Card issuer pays merchant directly Does not use intermediary American Express, Discover Card –Open loop systems (three or more parties) Third party (intermediary bank) processes transaction Visa, MasterCard: not issued directly to consumers Credit card associations: operated by association member banks Customer issuing banks: banks issuing cards

18. Electronic Commerce, Ninth Edition18 Payment Acceptance and Processing (cont’d.) Merchant accounts –Merchant bank (acquiring bank) Bank wanting to accept payment cards –Merchant account required to process Internet transactions payment cards –Obtaining account Merchant provides business information Bank assesses business type risk Bank assesses percentage of sales likely to be contested

19. Electronic Commerce, Ninth Edition19 Payment Acceptance and Processing (cont’d.) Merchant accounts (cont’d.) –Chargeback process Cardholder successfully contests charge Merchant bank must retrieve money from merchant account Merchant may have to cover chargeback potential –Problem facing online businesses: fraud 10 percent of all credit card transactions completed online Responsible for 70 percent of total dollar amount of credit card fraud

20. Electronic Commerce, Ninth Edition20 Payment Acceptance and Processing (cont’d.) Merchant accounts (cont’d.) –Online transaction fraud increased steadily through 2009 –Fraud losses dropped 18 percent from 2008 to 2009 Scoring services providing risk ratings for individual transactions in real time Shipping only to card billing address Requiring card verification numbers (CVNs) for card not present transactions –CVN Three- or four-digit number printed on the credit card Not encoded in the card’s magnetic strip

21. Electronic Commerce, Ninth Edition21 Payment Acceptance and Processing (cont’d.) Processing payment cards online –Payment processing service providers Companies offering payment card processing –Example: InternetSecure Supports Canadian and U.S. Visa and MasterCard payments Provides risk management and fraud detection Handles online merchants’ transactions Uses existing bank-approved payment card processing infrastructure, secure links, firewalls Notifies merchant of all approved orders and supplies buyer authorization codes

22. Payment Acceptance and Processing (cont’d.) Processing payment cards online (cont’d.) –FirstData and Merchant Warehouse Provide credit card processing software and services –Automated Clearing House (ACH) Network of banks connecting credit card processing software vendors and card authorization companies –More information EPN, NACHA - The Electronic Payments Association, The Clearing House, U.S. Federal Reserve Bank’s Federal Reserve Financial Services site Electronic Commerce, Ninth Edition22

23. Electronic Commerce, Ninth Edition23 FIGURE 11-3 Processing a payment card transaction

24. Electronic Commerce, Ninth Edition24 Payment Acceptance and Processing (cont’d.) Processing payment cards online (cont’d.) –InfoSpace’s Authorize.Net Online, real-time payment card processing service Merchants link to system by inserting small HTML code block into transaction page Order encrypted, transferred to Authorize.Net server Server relays transaction to bank network Customers not aware of third-party supplier (usually)

25. Electronic Commerce, Ninth Edition25 Electronic Cash Electronic cash (e-cash, digital cash) –Describes any value storage and exchange system created by private (nongovernmental) entity Does not use paper documents or coins Can serve as substitute for government-issued physical currency Readily exchanged for physical cash on demand Problems –No standard among all electronic cash issuers –Not universally accepted

26. Electronic Commerce, Ninth Edition26 Electronic Cash (cont’d.) Recall from previous section: –Banks make money by charging merchants a credit card processing fee on each transaction Fee ranges: one percent to four percent of the transaction value Banks often impose a minimum fee –20 cents or more per transaction Banks charge electronic commerce sites –More than similar brick-and-mortar stores

27. Electronic Commerce, Ninth Edition27 Electronic Cash (cont’d.) Stores accepting credit cards may require: –Minimum purchase amount of $10 or $15 Small purchases not profitable for merchants –Bank credit card fees greater than profits Factors favoring electronic cash –Potentially significant electronic cash market Internet small purchases (below $10) –Most of world’s population does not have credit cards Idea of electronic cash refuses to die

28. Electronic Commerce, Ninth Edition28 Micropayments and Small Payments Micropayments –Internet payments for items costing few cents to a dollar Micropayments barriers –Not implemented very well on the Web yet –Human psychology People prefer to buy small value items in fixed price chunks Example: mobile phone fixed monthly payment plans

29. Electronic Commerce, Ninth Edition29 Micropayments and Small Payments (cont’d.) Companies that have developed micropayment systems –Millicent, DigiCash, Yaga, BitPass All failed –No company gained broad acceptance of its system –No company devoted solely to offering micropayment services

30. Electronic Commerce, Ninth Edition30 Micropayments and Small Payments (cont’d.) Small payments –All payments of less than $10 –Being offered through mobile telephone carrier Buyers make purchases using their mobile phones Charges appear on monthly mobile phone bill Bright future held back by mobile carriers’ substantial charges

31. Privacy and Security of Electronic Cash Electronic payment method concerns –Privacy and security, independence, portability, convenience –Privacy and security: most important to consumers Vulnerable transactions Electronic currency: copied, reused, forged Important characteristics of electronic cash –Ability to spend only once –Anonymous use –Convenience Electronic Commerce, Ninth Edition31

32. Electronic Commerce, Ninth Edition32 Advantages and Disadvantages of Electronic Cash Traditional brick-and-mortar billing methods –Costly and inefficient Online stores have the same payment collection inefficiencies Online customers use credit cards to pay for purchases Online auction customers use conventional payment methods –Checks, money orders

33. Electronic Commerce, Ninth Edition33 Advantages and Disadvantages of Electronic Cash (cont’d.) Electronic cash system –Less popular than other payment methods –Provides unique advantages and disadvantages Advantages of electronic cash transactions –More efficient (less costly) Efficiency fosters more business (lower prices) –Occurs on existing infrastructure (Internet) –Does not require one party to obtain authorization

34. Advantages and Disadvantages of Electronic Cash (cont’d.) Disadvantages of electronic cash transactions –No audit trail –Money laundering Technique criminals use to convert money illegally obtained into spendable cash Purchase goods, services with ill-gotten electronic cash Goods sold for physical cash on open market Electronic cash has not yet become a global success –Will require wide acceptance and solution to problem of multiple electronic cash standards Electronic Commerce, Ninth Edition34

35. Electronic Commerce, Ninth Edition35 Advantages and Disadvantages of Electronic Cash (cont’d.) Creating truly anonymous electronic cash –Bank issues electronic cash with embedded serial numbers Bank digitally signs electronic cash while removing association of cash with particular customer

36. Electronic Commerce, Ninth Edition36 Holding Electronic Cash: Online and Offline Cash Online cash storage –Consumer has no personal possession of electronic cash Trusted third party (online bank) involved in all transfers, holds consumers’ cash accounts Online system payment –Merchants contact consumer’s bank Helps prevent fraud (confirm valid cash) Resembles process of checking with consumer’s bank to ensure valid credit card and matching name

37. Holding Electronic Cash: Online and Offline Cash (cont’d.) Offline cash storage –Virtual equivalent of money kept in wallet –Customer holds it No third party involved in transaction –Protection against fraud concern Hardware or software safeguards needed –Double-spending Spending electronic cash twice Submit same electronic currency to two different vendors Not enough time to prevent fraudulent act Electronic Commerce, Ninth Edition37

38. Electronic Commerce, Ninth Edition38 Holding Electronic Cash: Online and Offline Cash (cont’d.) Main deterrent to double-spending –Threat of detection and prosecution Keys to creating tamperproof electronic cash traceable back to origins –Cryptographic algorithms –Two-part lock Provides anonymous security Signals an attempt to double-spend cash

39. Electronic Commerce, Ninth Edition39 Holding Electronic Cash: Online and Offline Cash (cont’d.) When second transaction occurs –Complicated process reveals: Attempted second use Identity of original electronic cash holder Electronic cash used correctly –Maintains user’s anonymity Double-lock procedure –Protects anonymity of electronic cash users –Simultaneously provides built-in safeguards to prevent double-spending

40. Electronic Commerce, Ninth Edition40 FIGURE 11-4 Detecting double-spending of electronic cash

41. Electronic Commerce, Ninth Edition41 Holding Electronic Cash: Online and Offline Cash (cont’d.) Double-spending –Neither detected nor prevented with truly anonymous electronic cash Anonymous electronic cash –Cannot be traced back to person who spent it Tracing electronic cash –Attach serial number to each electronic cash transaction Cash positively associated with particular consumer Does not solve double-spending problem

42. Electronic Commerce, Ninth Edition42 Holding Electronic Cash: Online and Offline Cash (cont’d.) Single issuing bank can detect when two deposits of same electronic cash are about to occur –Impossible to ascertain fault (consumer or merchant) Electronic cash containing serial numbers –No longer anonymous One reason to acquire electronic cash –Raises privacy issues Using serial numbers to track consumers’ spending habits

43. Electronic Commerce, Ninth Edition43 Electronic Cash Systems Electronic cash –More successful in Europe and Japan Consumers prefer to use cash (does not work well for online transactions) Electronic cash fills important need –Not successful in United States Consumers have payment cards and checking accounts KDD Communications (KCOM) –Internet subsidiary: Japan’s largest phone company –Offers electronic cash through NetCoin Center

44. Electronic Commerce, Ninth Edition44 Electronic Cash Systems (cont’d.) Reasons for failure of United States electronic cash systems –Electronic cash systems implementation Required to download and install complicated client- side software that ran in conjunction with browser –Number of competing technologies No standards developed Array of proprietary electronic cash alternatives –No interoperable software Runs transparently on variety of hardware configurations and different software systems

45. 45 Electronic Cash Systems (cont’d.) CheckFree Largest online bill processor in the world Provides online payment processing services Clickshare An electronic cash system aimed at magazine and newspaper publishers Micropayment only system Tracks a user’s travel on the internet.

46. Electronic Commerce, Ninth Edition46 Electronic Cash Systems (cont’d.) PayPal –Payment processing services to businesses, individuals –Earns profit from float Money deposited, not used immediately –Charges transaction fee Businesses using service to collect payments –Peer-to-peer (P2P) payment system Free payment clearing service for individuals Payments from one type of entity to another of the same type

47. Electronic Commerce, Ninth Edition47 Electronic Cash Systems (cont’d.) PayPal (cont’d.) –Eliminates writing and mailing checks or payment cards –Send money instantly and securely to anyone with an e-mail address –Convenient for auction bidders to pay for purchases –Convenient for auction sellers Eliminates risks posed by other online payment types –Transactions clear instantly –Redemption PayPal check or direct deposit to checking accounts

48. Electronic Commerce, Ninth Edition48 Electronic Cash Systems (cont’d.) PayPal (cont’d.) –Merchants and consumers first register for PayPal account No minimum amount account balance Add money by authorizing checking accounts transfer, using credit card Merchants need PayPal accounts to accept PayPal payments Another example: Western Union

49. Electronic Commerce, Ninth Edition49 Electronic Wallets Consumer concerns when shopping online –Entering detailed shipping and payment information for each online purchase –Filling out forms Solution –Allows customer to store name, address, credit card information on the site –Problem Consumers must enter information at each site

50. Electronic Commerce, Ninth Edition50 Electronic Wallets (cont’d.) Electronic wallet (e-wallet) –Holds credit card numbers, electronic cash, owner identification, owner contact information –Provides information at electronic commerce site checkout counter –Benefit: consumer enters information once More efficient shopping Server-side electronic wallet –Stores customer’s information on remote server of merchant or wallet publisher –No download time or installation on user’s computer

51. Electronic Commerce, Ninth Edition51 Electronic Wallets (cont’d.) Server-side electronic wallet (cont’d.) –Main weakness Security breach can reveal thousands of users’ personal information (credit card numbers) Client-side electronic wallet –Stores information on consumer’s computer –Disadvantages Must download wallet software onto every computer Not portable –Advantage Sensitive information stored on user’s computer

52. Electronic Commerce, Ninth Edition52 Electronic Wallets (cont’d.) Characteristics of useful wallets –Wallet accessibility Populate data fields in any merchant’s forms for any site consumer visits –Electronic wallet manufacturer and merchants from many sites must coordinate efforts Wallet recognizes consumer information going into each field of given merchant’s forms

53. Electronic Commerce, Ninth Edition53 Electronic Wallets (cont’d.) Electronic wallets can: –Store shipping and billing information –Hold credit card names, numbers Offers consumer choice of credit cards at online checkout –Hold electronic cash from various providers

54. Electronic Commerce, Ninth Edition54 Electronic Wallets (cont’d.) MasterCard electronic wallet –Abandoned effort Current major browsers include feature to remember names, addresses, other commonly requested information Browser provides one-click Web form field completion –Two e-wallet arena survivors Microsoft Windows Live ID Yahoo! Wallet

55. Electronic Commerce, Ninth Edition55 Microsoft Windows Live ID Formerly called Passport, Microsoft.NET Passport Single sign-in service –Includes server-side electronic wallet –Operated by Microsoft All personal data entered into Windows Live ID wallet –Encrypted and password protected

56. Electronic Commerce, Ninth Edition56 Microsoft Windows Live ID (cont’d.) Four integrated services –Single sign-in service (SSI) Allows user to sign in using username and password –Wallet service Provides electronic wallet functions –Kids service Helps parents protect, control children’s online privacy –Public profiles Allows consumers to create public page of information about themselves

57. Electronic Commerce, Ninth Edition57 Yahoo! Wallet Server-side electronic wallet offered by Yahoo! Completes order forms automatically –Identifying information, credit card payment information Stores information Accepted by: –Thousands of Yahoo! Store merchants, Yahoo! Travel –Yahoo! Services Premium e-mail storage, Web hosting fees

58. Electronic Commerce, Ninth Edition58 Yahoo! Wallet (cont’d.) Yahoo! advantage –Hosts many services and shops Large number of merchants accept wallet Privacy concern –Company issuing wallet has access to much information about individual using wallet

59. Electronic Commerce, Seventh Annual Edition59 W3C Micropayment Standards Development Activity Common Markup for Micropayment Per-Fee-Links –Standards developed by W3C Electronic Commerce Interest Group (ECIG) –Provide extensible and interoperable way to embed micropayment information in a Web page Extensible system –One that developers can add to (or extend) without voiding any earlier work on the system

60. Electronic Commerce, Seventh Annual Edition60 The ECML Standard Electronic Commerce Modeling Language Proposed alternative standard that would replace electronic wallet standards with a single standard Has failed to catch on

61. Electronic Commerce, Ninth Edition61 Stored-Value Cards Microchip smart card or magnetic strip plastic card –Records currency balance Microchip versus magnetic strip –Microchip stores more information –Tiny microchip computer processor Performs calculations and storage operations on card –Different microchip card reader needed Examples: prepaid phone, copy, subway, bus cards “Stored-value card” and “smart card” used interchangeably

62. Electronic Commerce, Ninth Edition62 Magnetic Strip Cards Holds rechargeable value Passive magnetic strip cards cannot: –Send or receive information –Increment or decrement cash value stored Processing done on device into which card inserted Magnetic strip cards and smart cards store electronic cash –Smart card better suited for Internet payment transactions

63. Electronic Commerce, Ninth Edition63 Smart Cards Stored-value card –Plastic card with embedded microchip Credit, debit, charge cards store limited information on magnetic strip Information storage –About 100 times more than magnetic strip plastic card Holds private user data –Financial facts, encryption keys, account information, credit card numbers, health insurance information, medical records

64. Electronic Commerce, Ninth Edition64 Smart Cards (cont’d.) Safer than conventional credit cards –Information encrypted on smart card Popular in Europe, parts of Asia –Public telephone calls, cable television programs –Hong Kong Retail counters, restaurant cash registers have smart card readers Octopus: public transportation smart card can be reloaded at transportation locations, 7-Eleven stores

65. Electronic Commerce, Ninth Edition65 Smart Cards (cont’d.) Beginning to appear in United States –San Francisco TransLink integrated ticketing system for public transportation Smart Card Alliance –Advances smart card benefits –Promotes widespread acceptance of multiple- application smart card technology –Promotes compatibility among smart cards, card reader devices, applications

66. Electronic Commerce, Ninth Edition66 Internet Technologies and the Banking Industry Paper checks –Largest dollar volume of payments –Processed through world’s banking system Other major payment forms –Involve banks one way or another Banking industry Internet technologies –Providing new tools –Creating new threats

67. Check Processing Old method of physical check processing –Person wrote check; retailer deposited check in bank account –Retailer’s bank sent paper check to clearinghouse Clearinghouse managed fund transfer (consumer’s bank to retailer’s account) –Paper check transported to consumer’s bank –Send cancelled check to consumer Banks now provide PDF images of processed checks Electronic Commerce, Ninth Edition67

68. Electronic Commerce, Ninth Edition68 Check Processing (cont’d.) Disadvantage of paper checks –Cost of transporting tons of paper checks –Float Delay between the time person writes check and the time check clears person’s bank Bank’s customer obtains free use of funds for few days Bank loses use of funds for same time period Can become significantly longer than a few days

69. Electronic Commerce, Ninth Edition69 Check Processing (cont’d.) Technologies helping banks reduce float –2004 U.S. law: Check Clearing for the 21st Century Act (Check 21) Banks eliminate movement of physical checks entirely Check 21-compliant world –Retailer scans customer's check –Scanned image transmitted instantly Through clearing system –Posts almost immediately to both accounts Eliminates transaction float

70. Electronic Commerce, Ninth Edition70 Mobile Banking Banks exploring mobile commerce potential 2009: banks launched sites allowing customers using smart phones to: –Obtain bank balance, view account statement, find a nearby ATM Future plans –Offering downloadable applications smart phone users can install Use to transact all types of banking business

71. Electronic Commerce, Ninth Edition71 Criminal Activity and Payment Systems: Phishing and Identity Theft Online payment systems –Offer criminals and criminal enterprises an attractive arena in which to operate Average consumers: easy prey Large amounts of money provide tempting targets –Phishing expedition Technique for committing fraud against online businesses customers Particular concern to financial institutions

72. Phishing Attacks Basic structure –Attacker sends e-mail message To accounts with potential for an account at targeted Web site –E-mail message tells recipient: account compromised Recipient must log on to account to correct problem –E-mail message includes link Appears to be Web site login page Actually leads to perpetrator’s Web site disguised to look like the targeted Web site Electronic Commerce, Ninth Edition72

73. Phishing Attacks (cont’d.) Basic structure (cont’d.) –Recipient enters login name, password Perpetrator captures Uses to access recipient’s account Perpetrator accesses personal information, makes purchases, withdraws funds Electronic Commerce, Ninth Edition73

74. Electronic Commerce, Ninth Edition74 FIGURE 11-5 Phishing e-mail message

75. Electronic Commerce, Ninth Edition75 FIGURE 11-5 Phishing e-mail message (cont’d.)

76. Electronic Commerce, Ninth Edition76 Phishing Attacks (cont’d.) Spear phishing –Carefully designed phishing expedition targeting a particular person or organization –Requires considerable research –Increases chance of e-mail being opened –Example: 2008 government stimulus checks Phishing e-mails appeared within one week of passage

77. Electronic Commerce, Ninth Edition77 Phishing Attacks (cont’d.) E-mail link disguises and tricks –Example: Web server ignores all characters preceding “@”: https://www.paypal.com@218.36.41.188/fl/login.html Link appears different in e-mail Phony site invisible due to JavaScript code –Pop-up windows Look exactly like browser address bar –Including Web site graphics of financial institutions Looks more convincing

78. Electronic Commerce, Ninth Edition78 FIGURE 11-6 Phishing e-mail with graphics

79. Electronic Commerce, Ninth Edition79 Using Phishing Attacks for Identity Theft Organized crime (racketeering) –Unlawful activities conducted by highly organized, disciplined association for profit –Differentiated from less-organized groups –Internet providing new criminal activity opportunities Generates spam, phishing, identity theft Identity theft –Criminal act: perpetrator gathers victim’s personal information –Uses information to obtain credit –Perpetrator runs up account charges and disappears

80. Electronic Commerce, Ninth Edition80 FIGURE 11-7 Types of personal information most useful to identity thieves

81. Electronic Commerce, Ninth Edition81 Using Phishing Attacks for Identity Theft (cont’d.) Large criminal organizations –Efficient perpetrators of identity theft Exploit large amounts of personal information quickly and efficiently –Sell or trade information that is not of immediate use Other worldwide organized crime entities –Zombie farm Large number of computers implanted with zombie programs –Pharming attack Hacker sells right to use zombie farm to organized crime association

82. Electronic Commerce, Ninth Edition82 Using Phishing Attacks for Identity Theft (cont’d.) Two elements in phishing –Collectors: collect information –Cashers: use information –Require different skills Crime organizations facilitate transactions between collectors and cashers –Increases phishing activity efficiency, volume Each year –More than a million people fall victim –Financial losses exceed $500 million

83. Electronic Commerce, Ninth Edition83 Phishing Attack Countermeasures Change protocol –Improve e-mail recipients’ ability to identify message source Reduce phishing attack threat Educate Web site users Contract with consulting firms specializing in anti- phishing work Monitor online chat rooms used by criminals

84. Summary Online stores: payment forms –Credit, debit, charge cards (payment cards) Ubiquitous, convenient, easy to use –Electronic cash advantages and potential uses Making micropayments, stored online or offline –Electronic wallets provide convenience –Stored-value cards Smart cards, magnetic strip cards Electronic Commerce, Ninth Edition84

85. Summary (cont’d.) Banks process most monetary transactions –Use Internet technologies to process checks Concerns: phishing expeditions, identity theft Electronic Commerce, Ninth Edition85