The Present and Future of Electronic Payment Systems Vivek Reddy Information Assurance 5/19/04

Background  Electronic Commerce and Business  Characteristics of Current Systems  Advantages and Disadvantages  What the Future may hold

Classifying Payment Systems  The way money is transfer and organized  Electronic Cash vs. Credit Systems  Token-based vs. Account Based

Further classification  Electronic Money: Online Cash and Smart Cards  Account based: Credit cards and based systems

Account Based Systems: The Credit Card  First step in the evolution to electronic payment systems  Authentication Protocol  PIN  Security Features

Account Based Systems: Based Systems  Inherently insecure  for notification and traditional banking to transfer funds  Transaction-level Security: SSL  Authentication

Account Based Systems: PayPal  Generic account based system  Works off of existing financial infrastructure  Middle man for Credit transactions  Uses SSL  Not secure enough for large business transactions

Account Based Systems: General  SSL  Secure Electronic Transaction(SET)  SET is a better version of SSL

Account Based Systems: The Good and Bad  Ease of Use and Scalability  Works on existing networks and terminals  No need for creating new hardware  No Anonymity like physical cash provides

Electronic Currencies: Smart Cards  Credit card with a “brain”  Embedded computer chip that can store 100 to 200 times more information  Used extensively in Japan and Europe  Card has a number representing money stored on it  Compatible with electronic devices such as phones, PDAs, and Pcs

Electronic Currencies: E-Cash  European Central Bank Definition  New sub-category of money

Electronic Currencies: The Good and Bad  Smart Cards are a large advancement over the system of credit cards  E-Cash provides anonymity  Large Database of past transactions need to be kept(double spending)  Lack of scalability  New learning curve for consumer  Identifiable vs. Anonymous(blind signature)

Future of Electronic Payment Systems: RFIds  Radio barcodes embedded in goods  Already used in retail outlets to know what is going in and out of stores  Purchase items simply by walking through a terminal  Security lacking  Can they make it scalable?

Conclusion  Account Systems provide ease of use and scalability  Electronic currencies provide anonymity but have a lot of overhead  Systems that are successful have a low learning curve