1. Electronic Check Payment Protocols and Systems
Speaker: Jerry Gao Ph.D. San Jose State University URL: May, 2000

2. Topic: Electronic Cash Payment Protocols and Systems
Presentation Outline
- Overview of electronic cash system - Ecash (Digital Cash) - NetCash - Comparisons and summary
Jerry Gao Ph.D. 5/20000
All Rights Reserved

3. Overview of Electronic Cash Payment Protocols and Systems
Topic: Electronic Cash Payment Protocols and Systems
Overview of Electronic Cash Payment Protocols and Systems
What is an electronic cash payment system? E-commerce application systems must provide payment processing and transaction service to buyers and sellers. A payment system, as a part of E-commerce application system, is a such system which support secured payment processes by providing reliable, secured, and efficient transaction services between sellers and buyers. The basic requirements of a payment system: - Provide secured and confidential transaction processes. - Conduct authentication and authorization for all involved parties. - Ensure the integrity of payment instructions for goods and services. - Simple, availability, cost-effective, efficient, and reliable.
Jerry Gao Ph.D. 5/2000

4. Actors Involved in Electronic Cash Payment Systems
Topic: Electronic Cash Payment Protocols and Systems
Actors Involved in Electronic Cash Payment Systems
- Customers: Customers use the digital cash payment systems to make purchases. - Dealers: Dealers have to bear the costs of payment transactions Providers for digital payment systems: Providers are intermediaries between dealers and financial institutions. They provide services and training. - Development vendors for digital payment systems: - Financial institutions: Banking systems or organizations who use electronic payment systems. - Trust Centers: They control digital signature keys, and help to secure customer confidence in certain payment systems. They are responsible for the integrity of transmitted data and authenticity of contractors.
Jerry Gao Ph.D. 5/2000

5. Basic Requirements for Electronic Cash Payment Systems
Topic: Electronic Cash Payment Protocols and Systems
Basic Requirements for Electronic Cash Payment Systems
- Digital money: Payment systems must provide customers and private households with acceptable digital money. Security: Ensure the security of transactions and information privacy of users. - Scalability: A large number of customers and concurrent transactions should be handled in a scalable manner. - Efficient and effective: Payment systems must support efficient and effective payment processing and accounting services for small payment transactions. - Simple: Payment systems must provide customers with simple transparent transactions.
Jerry Gao Ph.D. 5/2000

6. Basic Requirements for Electronic Cash Payment Systems
Topic: Electronic Cash Payment Protocols and Systems
Basic Requirements for Electronic Cash Payment Systems
- Anonymous: Usually, customers wish to stay anonymous for all involved transactions.. - Double spending: Digital coins consists of a number of bits. Payment systems must be able to recognize and/or prevent repeated payments with the same digital coin. - Exchange: Digital money should be convertible into “real” money whenever necessary. - Store: Digital money must be stored locally on hard disks or other media. - Value: Digital cash payment systems must provide a large number of digital coins for circulation and perform authentication checking.
Jerry Gao Ph.D. 5/2000

7. Advantages of Electronic Cash Payment Systems
Topic: Electronic Cash Payment Protocols and Systems
Advantages of Electronic Cash Payment Systems
- Saved time: - Reduce transaction process time - Speed up transaction processes - Reduced costs: - Reduce transaction costs - Reduce cash distribution costs - Flexibility: - Digital cash can take many forms, including prepaid cards - Digital cash can be converted into different currencies - Reduce cash distribution risk: - Reduce the regular cash distribution risk - Error free and efficient: - Reduce transaction errors
Jerry Gao Ph.D. 5/2000

8. Special Features of Electronic Payment Protocols
Topic: Online Payment Protocols and Systems
Special Features of Electronic Payment Protocols
Important features of electronic cash payment protocols and systems: - Anonymity: This ensure that no detailed cash transactions for customer are traceable. Even sellers do not know the identity of customers involved in the purchases. - Liquidity: Digital cash have to be accepted by all concerned economic agents as a payment method. - Prepaid cards: Buyers can buy prepaid cards that are accepted by special sellers. - Electronic payment processing:
Jerry Gao Ph.D. 5/2000

9. Special Features of Electronic Check Protocols and Payment Systems
Topic: Electronic Check Payment Protocols and Systems
Special Features of Electronic Check Protocols
and Payment Systems
Important features of electronic cash payment protocols and systems: - Anonymity: This ensure that no detailed cash transactions for customer are traceable. Even sellers do not know the identity of customers involved in the purchases. - Liquidity: Digital cash have to be accepted by all concerned economic agents as a payment method. - Prepaid cards: Buyers can buy prepaid cards that are accepted by special sellers. - Electronic payment processing:
Jerry Gao Ph.D. 5/2000

10. Electronic Check Payment Protocol: NetBill
Topic:Elect ronic Check Payment Protocols and Systems
Electronic Check Payment Protocol: NetBill
Overview of NetBill: - ECash is a payment protocol for anonymous digital money on the Internet. - It is developed by DigiCash Co, of Amsterdam, The Netherlands. - It is currently implemented and offered by Mark Twain Bank, St. Louis since DeutscheBank Ag, Frankfurt (Main) offers Ecash as a pilot project to its customers since October A public trial of the Millicent system was scheduled for the summer of 1997.
Jerry Gao Ph.D. 5/2000

11. Electronic Check Payment Protocols: NetBill
Topic: Electronic Check Payment Protocols and Systems
Electronic Check Payment Protocols: NetBill
NetBill model: MilliCent protocols use a form of electronic currency called Scrip to connect three involved parties: - vendors, customers, and brokers. Scrip is vendor specific. A Millicent broker: --> medicate between vendors and customers to simplify the tasks they perform. --> aggregate micro-payments --> sell vendor Scrip to customers --> handle the real money in the Millicent system. --> maintain customer accounts and vendors (subScripion services) --> buy and produce large chunks of vendor Scrips (for licensed vendors) Vendors: --> are merchants selling low-value services or information to customers Customers: --> buy broker Scrip with real money from selected brokers. --> use the vendor Scrips to make purchases.
Jerry Gao Ph.D. 5/2000

12. Electronic Check Payment Protocol: NetBill
Topic: Electronic Check Payment Protocols and Systems
Electronic Check Payment Protocol: NetBill
NetBill Archecture: (Source: NetBill 1994 Prototype)
Consumer
Application
Checkbook
Merchant
Application
Till
Security
Server
Transaction
Server
User Admin.
Server
Payment &
Collection Server
System Admin.
Server DB
Jerry Gao Ph.D. 5/2000

13. Electronic Check Payment Protocol: NetBill
Topic: Electronic Check Payment Protocols and Systems
Electronic Check Payment Protocol: NetBill
Consumer
Merchant
NetBill Server
1. Credit card # (macro-payment protocol)
2. $5.00 Broker scrip(Millicent protocol)
1. $0.19 Vendor scrp + request
Start of week
Transaction Sequence
Jerry Gao Ph.D. 5/2000

14. Electronic Check Payment Protocol: NetBill
Topic: Electronic Check Payment Protocols and Systems
Electronic Check Payment Protocol: NetBill
Customer
Broker
Vendor
1.0 Broker scrip
2. $0.20 Vendor scrip $4.80 Broker scrip
Purchasing from a vendor
3. $0.20 Vendor scrp + request
4. $0.19 Vendor scrip change + purchased ino/service
Transaction Sequence
Jerry Gao Ph.D. 5/2000

15. Electronic Check Payment Protocol: NetBill
Topic: Electronic Check Payment Protocols and Systems
Electronic Check Payment Protocol: NetBill
Customer make purchases with vendor Scrips
Vendor
Customer
Vendor sell low-value information and services
Broker sell vendor Scrip
Brokers buy/produce large chunks of “vendor Scrip” for licensed vendors
Broker
Jerry Gao Ph.D. 5/2000

16. Electronic Check Payment Protocol: NetBill
Topic: Electronic Check Payment Protocols and Systems
Electronic Check Payment Protocol: NetBill
About Scrip: ---> a piece of data used to represent microcurrency within the Millicent systems. Scrip has the following properties: - Scrip is vendor specific, thus has value at one specific vendor only. - Scrip can be spent only once by its owner. - Scrip can be represented any denomination of currency. - Scrip represents a prepaid value. - Scrip make no use of public-key cryptography. - Scrip cannot provide full anonymity. It can be traced and recorded. Scrip like cash has a defined value and can be used to purchase merchandise. Major differences between Scrip and cash: - Scrip can only spent once, and cash can be spent many times. - Scrip is vendor specific, and cash is not. - Scrip can only spent by the customer who obtained it from the broker. - Scrip has an expiration date and a digital signature.
Jerry Gao Ph.D. 5/2000

17. Electronic Check Payment Protocol: NetBill
Topic: Electronic Check Payment Protocols and Systems
Electronic Check Payment Protocol: NetBill
Scrip Message Structure
Vendor
Value
Scrip-id
customer-id
expiration-date
info
certificate
Jerry Gao Ph.D. 5/2000

18. Electronic Check Payment Protocol: NetBill
Topic: Electronic Check Payment Protocols and Systems
Electronic Check Payment Protocol: NetBill
Millicent Security Checking: ---> Provide three different security levels. All transactions should be protected, and fraud must be detectable and traceable Millicent Protocol Efficiency Ranking Secure Private Scrip in the clear 1 No No Encrypted connection 3 Yes Yes Request signatures 2 Yes No ________________________________________________________________ .
Jerry Gao Ph.D. 5/2000

19. Electronic Check Payment Protocol: NetBill
Topic: Electronic Check Payment Protocols and Systems
Electronic Check Payment Protocol: NetBill
Authentication and signature: Millicent protocol uses one-way has functions - such as 128-bit MD5 and HMAC-MD5. - The message is sent in clear, but is protected by the customer_secret in hash function. - Upon receiving the request, the vendor calculates the hash function using a pre-selected message digest function. - The vendor returns, upon receiving this information, the customer can compute the message digest to ensure authenticity. - Signature: a request signature is generated based on the customer_secret by hashing Encryption: No encryption, but maintains a level of security that prevents Scrip being stolen.
Jerry Gao Ph.D. 5/2000

20. Electronic Check Payment Protocol: NetBill
Topic: Electronic Check Payment Protocols and Systems
Electronic Check Payment Protocol: NetBill
1. Scrip, Request, Request signature
Customer
Vendor
2. Change, Reply, Reply signature
Purchase using a request signature
Customer Secret
Scrip
Request
Request Signature
Compare
Hash
Request Signature
Vendor verifies the request signature
Jerry Gao Ph.D. 5/2000

21. Electronic Check Payment Protocol: NetBill
Topic: Electronic Check Payment Protocols and Systems
Electronic Check Payment Protocol: NetBill
Vendor secret keys
Master Scrip secret 5
Master Scrip secret 6
Master Scrip secret 7
Vendor
Value
Scrip-id
customer-id
expiration-date
info
Master Scrip secret 6
“certificate”
Hash eg. MD5
To customer
Scrip certificate generation
Jerry Gao Ph.D. 5/2000

22. Electronic Check Payment Protocol: NetBill
Topic: Electronic Check Payment Protocols and Systems
Electronic Check Payment Protocol: NetBill
Vendor secret keys
Master Scrip secret 5
Master Scrip secret 6
Master Scrip secret 7
Vendor
Value
Scrip-id
customer-id
expiration-date
info
Master Scrip secret 6
certificate
From customer
compare
certificate
Scrip validation
Jerry Gao Ph.D. 5/2000

23. Comparisons of Electronic Check Payment Protocols
Topic: Electronic Check Payment Protocols and Systems
Comparisons of Electronic Check Payment Protocols
Jerry Gao Ph.D. 5/2000

24. Analysis of Electronic Check Payment Protocols
Topic: Electronic Check Payment Protocols and Systems
Analysis of Electronic Check Payment Protocols
Jerry Gao Ph.D. 5/2000