1. Electronic Payment Systems

2. How do we make an electronic payment? Credit and debit cards Smart cards Electronic cash (digital cash) Electronic wallets Person-to-person payments Electronic billing systems Electronic cheques

3. Digital Wallet Located on user’s system Stores: –User identification information –Credit card details –Digital cash Automatically provides this information to vendor site in order to make a purchase E.g. Amazon.com’s 1-Click shopping service

4. Electronic cheque Check with secure digital signature

5. Smart cards Credit card-sized cards with an embedded microprocessor Stores identification data and monetary value Can be used to store health records, telephone numbers, etc. Can be used to receive payments and to make them

6. Electronic Cash Digital currency that may be used to make small payments – smaller sums than you would use a credit or debit card for User has special software on his computer that allows him to access his bank account for cash He will spend e-cash at a shop which accepts it and which has an account at a bank that redeems e-cash

7. Person-to-person payments You cannot pay a person with a credit card PayPal, Yahoo PayDirect and BillPoint have put up web sites to which one may direct a payment to another person The intended recipient logs on to the site, offers proof of identity, and directs where the payment should be sent – e.g. to a bank account

8. Electronic Billing Systems These are services offered by intermed- iaries who function as collection agents for companies that have made credit sales to customers over the web. They notify purchases as bills fall due, present the bills, and process the payments

9. Infrastructure Certificate authority Digital certificate Data encryption Secure Sockets Layer (SSL) Compliant banking system Merchant accounts Stable currency

10. Certificate Authority Issues digital certificates Verifies authenticity of a certificate Installs your certificate with public key accessible to your clients Saves your private key on your computer

11. Data encryption Data streaming into your computer is encrypted using your public key Prior to sending you data, the sender uses your public key to validate the authenticity of your site Encrypted data sent can only be decrypted via your private key

12. Secure Sockets Layer A communications protocol used to secure sensitive data –Authenticates the target computer –Determines the encryption algorithm –Transfers the encrypted data

13. Merchant accounts An account which a firm establishes with a bank allowing it to accept credit cards from customers Many firms fail to get merchant accounts They have recourse to Independent Sales Organisations (ISO) Risk assessment – can the firms handle charge back transactions?

14. Credit card payment Vendor swipes credit card and enters amount of purchase Transaction sent to vendor’s banker Bank requests authorisation from the bank that issued the credit card If approved, issuing bank sends back approval code to vendor’s bank Code relayed to vendor, appears on sales draft Buyer signs sales draft, collects credit card

15. Credit card payment Credit card company debits vendor’s bank with Interchange Fee Bank in turn debits vendor with a Merchant Discount Both are levied on the basis of a percentage of sales value

16. Questions 1.Given that individuals may not open accounts to receive credit card payments, describe a web-based option designed to meet their needs. 2.Describe the charges made for the provision of credit card services. 3.E-cash opens up the possibility of making payments as small as one cent or less for some item. Describe some uses for such a facility. 4.Describe the role of the Certificate Authority.