1. Electronic Payment Systems University of Palestine University of Palestine Eng. Wisam Zaqoot Eng. Wisam Zaqoot March 2010 March 2010 ITSS 4201 Internet Insurance and Information Hiding

2. E-commerce and E-Payment Online store that accepts e-payment allows you to be open 24/7 Online store that accepts e-payment allows you to be open 24/7 This is an important convenience for your customers This is an important convenience for your customers It also means more revenues for you. It also means more revenues for you. It may reduce your overhead costs since you don ’ t need to hire reception staff and people to take orders (???). It may reduce your overhead costs since you don ’ t need to hire reception staff and people to take orders (???).

3. E-commerce and E-Payment In fact it is not that good: In fact it is not that good: E-payment is more vulnerable to fraud E-payment is more vulnerable to fraud E-payment maybe costly and challenging to install E-payment maybe costly and challenging to install Receiving e-payments causes extra costs since the retailer for example must pay a commission to the financial institution processing the card details. Receiving e-payments causes extra costs since the retailer for example must pay a commission to the financial institution processing the card details.

4. E-payment systems: Many systems are there, including: 1. Traditional card payments 2. Mail order – payments by phone, post or fax 3. Online payments 4. Payment bureaus 5. Secure order forms 6. Banks Automated Clearing System (BACs) 7. Alternative payment options 8. No payment option

5. 1.Traditional card payments Traditional card payments: Traditional card payments: Credit cards/ Debit cards Credit cards/ Debit cards PDQ machine PDQ machine

6. 1.Traditional card payments (contd.) Most high street stores take offline electronic payments through credit and debit cards. Note here that the customer is present at the point of sale. Most high street stores take offline electronic payments through credit and debit cards. Note here that the customer is present at the point of sale. Terms: Terms: Merchant service: any service provided by the banks that allow you to ‘ swipe ’ cards at the place of business. Merchant service: any service provided by the banks that allow you to ‘ swipe ’ cards at the place of business. PDQ machine: a machine that is used to ‘ swipe ’ a credit or debit card. PDQ machine: a machine that is used to ‘ swipe ’ a credit or debit card. Acquiring bank: it is the bank that provides the merchant service. When the customer swipes his card, the cards details are sent to the acquiring bank for processing and authorization. Acquiring bank: it is the bank that provides the merchant service. When the customer swipes his card, the cards details are sent to the acquiring bank for processing and authorization.

7. 2. Mail order – payments by phone, post or fax The customer sends his credit card number and his details via phone, post of fax. The merchant will process the transaction. The customer sends his credit card number and his details via phone, post of fax. The merchant will process the transaction. The customer is not present at the point of sale. The customer is not present at the point of sale. This type of payment is more at risk of fraud. Consequently, acquiring banks usually asks for higher commission. This type of payment is more at risk of fraud. Consequently, acquiring banks usually asks for higher commission.

8. 3. Online Payments As a merchant, you need to get a Merchant Service from the acquiring bank. You will need also a Payment Service Provider (PSP) who will collect the card details over the internet. As a merchant, you need to get a Merchant Service from the acquiring bank. You will need also a Payment Service Provider (PSP) who will collect the card details over the internet. The PSP can be considered as a ‘ virtual PDQ ’. It collects the card details over internet and passes them to the acquiring bank. The PSP can be considered as a ‘ virtual PDQ ’. It collects the card details over internet and passes them to the acquiring bank. Among other services it provides, VeriSign is a well known PSP. Among other services it provides, VeriSign is a well known PSP.

9. 4. Payment Bureaus A payment bureau is the easiest way of taking payment online as they do all the work for you. As a merchant, you don ’ t need a service from and acquiring bank or a PSP. A payment bureau is the easiest way of taking payment online as they do all the work for you. As a merchant, you don ’ t need a service from and acquiring bank or a PSP. However, they take long time to clear merchant ’ s funds. Usually 30 days. This mechanism is very effective since most fraud and refunds occur within the first 30 days. However, they take long time to clear merchant ’ s funds. Usually 30 days. This mechanism is very effective since most fraud and refunds occur within the first 30 days.

10. 5. Secure Order Forms Secure order form is a simple page on the ecommerce site that the customer fills with details of themselves and the goods they want to buy. Secure order form is a simple page on the ecommerce site that the customer fills with details of themselves and the goods they want to buy. There is no automation here. The fields can be sent to the merchant as an e-mail. There is no PSP. This will reduce the cost, but there wouldn ’ t be live authorization of the cards. So that incorrect details will still appear to the customer as they have been accepted. There is no automation here. The fields can be sent to the merchant as an e-mail. There is no PSP. This will reduce the cost, but there wouldn ’ t be live authorization of the cards. So that incorrect details will still appear to the customer as they have been accepted. The customer later will handle the payment manually using his PDQ machine. The customer later will handle the payment manually using his PDQ machine. The customer may not notice the difference between this system and the typical online payment system. The customer may not notice the difference between this system and the typical online payment system.

11. 6. Banks Automated Clearing System (BACs) This payment system is ideally suited for business-to-business (B2B) transactions between regular and repeated customers. Usually there is a dedicated software linked in with the banks systems. This payment system is ideally suited for business-to-business (B2B) transactions between regular and repeated customers. Usually there is a dedicated software linked in with the banks systems. It is used for example to pay over 70% of salaries of the UK workforce. It is used for example to pay over 70% of salaries of the UK workforce. ACH is a network that connects the banks and financial institutions in the US for money clearance between them. ACH is a network that connects the banks and financial institutions in the US for money clearance between them. BACs can be integrated with the e-commerce B2B systems to allow automated accounts settlement between companies. BACs can be integrated with the e-commerce B2B systems to allow automated accounts settlement between companies.

12. 7. Alternative payment options Many alternative of taking payments online without using credit/debit cards. Many alternative of taking payments online without using credit/debit cards. Person-to-Person: customers set up an account using their bank account details. Eligible merchants will be allowed to debit (draw from) this account directly when the customer purchase something. Person-to-Person: customers set up an account using their bank account details. Eligible merchants will be allowed to debit (draw from) this account directly when the customer purchase something. Mobile commerce: online purchases can be confirmed by sending an SMS to the customer ’ s mobile phone. The customer can accept or decline the transaction. If accepted, the sale will be charged to the bank account or the mobile phone bill of the customer. ( like some coffee machines in the street). Mobile commerce: online purchases can be confirmed by sending an SMS to the customer ’ s mobile phone. The customer can accept or decline the transaction. If accepted, the sale will be charged to the bank account or the mobile phone bill of the customer. ( like some coffee machines in the street).

13. 7. Alternative payment options (contd.) Pre-paid Cash cards: these cards can be charged by the customer using cash, credit/debit cards or direct debit from his bank account. Pre-paid Cash cards: these cards can be charged by the customer using cash, credit/debit cards or direct debit from his bank account. - These cards can be used at participating websites and shops. - This option is very good when an e-cash environment is required for children without credit cards, and for people without bank accounts and for small valued transactions. - These cards includes limited amount of money, this minimize the damage if the card was stolen.

14. 7. Alternative payment options (contd.) Micro-billing and electronic cash: Micro-billing and electronic cash: Digital money. Virtual banks: like paypal Virtual banks: like paypal

15. 8. No payment option What do you think about that? What do you think about that?

16. Secure Electronic Transactions protocol (SET): It is a protocol that is designed specifically to secure payment-card transactions over the Internet. This protocol was a result of cooperation between Visa International, MasterCard International, Microsoft, Netscape, IBM and many other leading technology companies around the world in 1996. It is a protocol that is designed specifically to secure payment-card transactions over the Internet. This protocol was a result of cooperation between Visa International, MasterCard International, Microsoft, Netscape, IBM and many other leading technology companies around the world in 1996.

17. Making a purchase using SET protocol