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:Objectives What is Electronic Payment Requirements of E-Payment Methods Various E-Payment Methods ePayment Risks How can we secure ePayment 3

What is Electronic Payment? Is a system that permits online payment between parties using an electronic surrogate of a financial tender The electronic surrogate is backed by financial institutions and/or trusted intermediaries The intent is to act as an alternative form of payment to the physical cash, cheque or other financial tender 4

Current Status ePayment opportunities are growing albeit slowly New players are entering ePayment marketplace Variety of ePayment mechanisms and devices - creating state of chaos Infrastructure for ePayment is complex and expensive to deploy Lack of critical mass adoption and acceptance Online payment is hard to implement globally 5

Cash Transaction 1. BUYER PHYSICALLY GIVES CASH TO SELLER BUYER SELLER THE VISIBLE TRANSACTION -2. CENTRAL BANK ISSUES FIDUCIARY MONEY (ANTI-FORGERY) + (SERIAL NUMBERS) -1. CENTRAL BANK SELLS CASH TO BUYER’S BANK 0. BUYER’S BANK ALLOWS BUYER TO DRAW CASH FROM BUYER’S ACCOUNT 2. SELLER DEPOSITS CASH IN SELLER’S BANK ACCOUNT 3. SELLER’S BANK CREDITS SELLER’S BANK ACCOUNT 4. SELLER’S BANK SENDS CASH TO CENTRAL BANK CENTRAL BANK BUYER’S BANK SELLER’S BANK 6

Requirements of E-Payment Methods Enable an honest customer to convince a seller to accept payment Prevent a dishonest customer from making unauthorized or fraudulent payments Ensure the privacy of honest participants Scalable to very large numbers of customers Integrate with existing and evolving systems NOT EASY! 7

:Various E-Payment Methods Credit card Debit card Digital Currency E-Wallets Smart card B2B E-check 8

Parties to a Credit Card Transaction BUYER’S BANK SELLER’S BANK BUYER SELLER CARD ASSOCIATION CARD, TELEPHONE, INTERNET DIALUP OR LEASED LINE U.S. MAIL! PROPRIETARY NETWORK 9

Credit Cards A very common method of payment Cards are issued by a bank Unique 16-digit number (including check digits) and an expiration date Third party authorization companies verify purchases 10

Debit Cards Direct electronic transfer of account - direct account debiting Digital signature to secure access Connected to eBanking solution 11

Digital Currency Digital cash accounts like traditional bank accounts Buyers deposit cash in the account and spend it at E-Commerce sites E-Comm merchants can feel sure of payment Customers do not need a credit card and spending is limited to account balance A system of purchasing cash and storing the credits in consumer’s computer Computerised stored value is used as a form of cash to be spent in small increments A third party is involved in the payment transactions 12

E-Wallets Established by financial institutions in partnership with member E-Commerce sites Allows customer to submit billing and shipping info with one click at member sites Also can store e-Cheques, e-Cash and credit card information 13

Smart Cards Magnetic stripe 140 bytes, cost $ Memory cards 1-4 KB memory, no processor, cost $ Optical memory cards 4 megabytes read-only (CD-like), cost $ Microprocessor cards Imbedded microprocessor (OLD) 8-bit processor, 16 KB ROM, 512 bytes RAM Equivalent power to IBM XT PC, cost $ bit processors now available Intelligent, active devices with defenses 14

B2B B2B transactions are the fastest area of $ growth on the web B2B transactions are substantially larger than B2C 15

E-check A formatted message that consists of payee name, amount, payment date, payer’s account number, and payer’s bank Digital certificate and signature are used to secure the cheque so that the contents are not tampered with A signed electronic cheque is exchanged between the parties’ financial institutions through automated clearing house 16

ePayment Risks Internet Private network Internet Bank network Use of stolen card Credit card number or password stolen from computer Unauthorised access Informatio n modified in transit Payment info stolen from merchant Masquerading as legitimate merchant Key info stolen by merchant staff Informatio n modified in transit Informatio n stolen BuyerMerchan t Payment gateway 17

60% of non-buyers said “credit card security,” the highest factor cited. Factors that would convert non-buyers to buyers online? Odyssey, % of new Internet users said “ better security,” the 3 rd highest factor cited. Factors that would motivate new users to purchase online? Jupiter Research, May % of Internet users said “ hackers getting credit card number,” 2 nd highest concern cited Worries and concerns regarding online activities? Pew Internet & Am Life Project, June % of Internet users said “ credit card security,” the 3 rd highest barrier cited. Barriers to online purchasing?Greenfield Online, % of Internet users said “ credit card security,” the number one cited barrier. Barriers to online purchasing?Pricewaterhouse Coopers, % of online shoppers said “ secure transactions,” the highest cited feature. Important features of online shopping sites? Cyber Dialogue, % of online shoppers said “ guaranteed credit card security ”, 2 nd highest feature cited. Features that will increase the likelihood to buy online? Odyssey, 2000Results Question Asked Survey By Research on online shopping 18

How can we secure ePayment? The Trust Principle The parties to the transaction must trust each other Buyer must believe that seller is legitimate and will deliver the goods Buyer must believe that goods are as represented and are worth the price Seller must believe that buyer is legitimate and will pay for the goods purchased 19

How can we secure ePayment? The Security Principle Parties need a secure environment in which to conduct the electronic transactions Seller needs to protect the details of the transactions Buyer needs to be certain that his/her information is securely handled and stored Buyer needs to be certain that information is not stolen that it can be inappropriately used 20

Thanks For Your Attention 21