Chapter 8 Payment Systems: Getting the Money

OBJECTIVES Brief History of Money Features of Real-World Cash Payment Systems: Objectives OBJECTIVES Brief History of Money Features of Real-World Cash Electronic Money Internet-based Systems Electronic Payment Media Issues & Implications

BRIEF HISTORY OF MONEY Barter Medium of Exchange Tokens Internet Service Providers: Brief History of Money BRIEF HISTORY OF MONEY Barter Medium of Exchange Tokens Notational Money Credit System

FEATURES OF REAL WORLD CASH Internet Service Providers: Features of Real World Cash FEATURES OF REAL WORLD CASH Convenience Wide Acceptance Anonymity No Hidden Cost of Use No Audit Trail

ELECTRONIC MONEY (E-Money) Internet Service Providers: Electronic Money ELECTRONIC MONEY (E-Money) Identified & Online (+I+L) Credit cards & debit cards Identified & Offline (+I-L) Check Anonymous & Online (-I+L) Cash payments Anonymous & Offline (-I-L) Electronic cash

ACID TEST Atomicity Consistency Isolation Durability Internet Service Providers: Electronic Money ACID TEST Atomicity Consistency Isolation Durability

ICES TEST Interoperability Conservation Economy Scalability Internet Service Providers: Electronic Money ICES TEST Interoperability Conservation Economy Scalability

TRANSACTION PROPERTIES Internet Service Providers: Electronic Money TRANSACTION PROPERTIES Token Atomicity Consistency Isolation Durability Interoperability Conservation Economy Scalability Cash Y N Check Credit Card -

INTERNET-BASED PAYMENTS Internet Service Providers: Internet-Based Payments INTERNET-BASED PAYMENTS Electronic Cash Credit Cards Debit Cards Smart Cards

NON-TECHNICAL PROPERTIES Internet Service Providers: Internet-Based Payments NON-TECHNICAL PROPERTIES Acceptability Ease of Integration Customer Base Ease of Use & Access

ELECTRONIC TRANSACTION SYSTEMS Internet Service Providers: Internet-Based Payments ELECTRONIC TRANSACTION SYSTEMS CyberCash Netbill First Virtual

SECURE ELECTRONIC TRANSACTIONS (SET) Internet Service Providers: Internet-Based Payments SECURE ELECTRONIC TRANSACTIONS (SET) Confidentiality Integrity Authentication Interoperability

ELECTRONIC PAYMENT MEDIA Internet Service Providers: Electronic Payment Media ELECTRONIC PAYMENT MEDIA Trusted Third Party Notational Fund Transfer-related Type Digital Cash/ Electronic Money

CREDIT CARDS Shopping Cart Credit Card Processing Services Internet Service Providers: Electronic Payment Media CREDIT CARDS Shopping Cart Credit Card Processing Services Risks of Using Credit Cards Credit Card Laundering

DEBIT CARDS Convenience Widely Accepted Easy Application Internet Service Providers: Electronic Payment Media DEBIT CARDS Convenience Widely Accepted Easy Application No Grace Payment Period Less Protection for Undelivered Items Risks for Merchants - Overspent Customers

SMART CARDS Provide users the ability to make a purchase Internet Service Providers: Electronic Payment Media SMART CARDS Provide users the ability to make a purchase Hold user’s cash, ID information & keys Provide authentication of transaction Contain encryption & decryption of messages Enhance data portability Similar to electronic purse

DIGICASH & E-WALLET No audit trail Offers true digital economy Internet Service Providers: Electronic Payment Media DIGICASH & E-WALLET No audit trail Offers true digital economy Resistance from the Treasury Department E-wallet A carrier of e-cash A simple & secure way of carrying currency electronically

ELECTRONIC FUNDS TRANFER & AUTOMATED CLEARING HOUSE Internet Service Providers: Electronic Payment Media ELECTRONIC FUNDS TRANFER & AUTOMATED CLEARING HOUSE Electronic Funds Transfer (EFT) A computer-based system that facilitates the transfer of money between two financial institutions overnight Automated Clearing House (ACH) Involves more than one financial institution routing to debit and credit the correct accounts

ISSUES & IMPLICATIONS Consumer Needs Corporate Processes Internet Service Providers: Issues & Implications ISSUES & IMPLICATIONS Consumer Needs Corporate Processes Corporate Strategy Regulation of Competition Economics & Social Processes

Chapter 8 Payment Systems: Getting the Money