E-Payment Methods Fazal rehman shamil

2001Daniel L. Silver2 Major Architectural Components of the Web Internet Browser Database Server Client 1 Server A Server B Bank Server URL HTTP TCP/IP Browser Client 2 HTTP Server App. Server index.html Bank Server prog1.class prog2.jsp

2001Daniel L. Silver3 Traditional Payment Methods Payment: The transfer of money from one individual or legal entity to another Cash Cash Personal Cheques Personal Cheques Money orders (Bank note) Money orders (Bank note) Credit cards Credit cards Debit cards Debit cards

2001Daniel L. Silver4 Selection of Payment Method Based on: Based on: –Convenience –Trace-ability –Financial risk –Fraud protection

2001Daniel L. Silver5 Credit Cards A very common method of payment A very common method of payment Cards are issued by a bank Cards are issued by a bank Unique 16-digit number and an expiration date Unique 16-digit number and an expiration date Third party authorization companies verify purchases Third party authorization companies verify purchases

2001Daniel L. Silver6 Credit Card - Business Model Logical Money Flow Customer Bank Store Visa (3 rd Party) 1. Charge 2. Credit Authorization 3. Clearance/Settlement 4. Payment Store’s Bank

2001Daniel L. Silver7 Credit Card - IT Physical Data Flow Credit Card - IT Physical Data Flow Electronic Funds Transfer (EFT) CARD Reader 56k bps modem 3 rd Party Authorization System (Visa) Customer Bank System Card Info, Signature Authorization Program Request Authorization EFT POS Terminal OK! Store’s Bank System Customer EFT

Visa Visa is an American multinational financial services corporation headquartered in Foster City, California, United States. It facilitates electronic funds transfers throughout the world, most commonly through Visa-branded credit cards and debit cards. 2001Daniel L. Silver8

2001Daniel L. Silver9 Various E-Payment Methods Credit and Debit card Credit and Debit card Digital Currency Digital Currency E-Wallets- E-Wallets- Smart card Smart card Micro-payments Micro-payments Peer-to-Peer Methods Peer-to-Peer Methods

A digital wallet refers to an electronic device that allows an individual to make electronic commerce transactions. This can include purchasing items on-line with a computer or using a smartphone to purchase something at a store. 2001Daniel L. Silver10

A micropayment is an e-commerce transaction involving a very small sum of money in exchange for something made available online, such as payment you get in response to Web-based content and online advertisement etc. 2001Daniel L. Silver11

2001Daniel L. Silver12 Credit Card Fraud A major problem for E-commerce A major problem for E-commerce The merchant has no legal proof of purchase unless the buyer uses authentication certificate The merchant has no legal proof of purchase unless the buyer uses authentication certificate Companys such as Visa, nochargeback.com and CyberCash (now VeriSign) are working to limit fraud: Companys such as Visa, nochargeback.com and CyberCash (now VeriSign) are working to limit fraud: –Visa has established high risk business models and best practices info for merchants –Nochargeback.com has lists of fraudlent cards, addresses and postal addresses –VeriSign/CyberCash has employed Artificial intelligence to catch frauders

2001Daniel L. Silver13 Digital Currency Digital cash accounts. Digital cash accounts. Buyers deposit cash in the account and spend it at E-Commerce sites (acct # is passed using secure proprietary protocol- SSL(secure socket layer protocol.)) Buyers deposit cash in the account and spend it at E-Commerce sites (acct # is passed using secure proprietary protocol- SSL(secure socket layer protocol.)) E-Comerce merchants can feel sure of payment E-Comerce merchants can feel sure of payment Customers do not need a credit card and spending is limited to account balance Customers do not need a credit card and spending is limited to account balance

2001Daniel L. Silver14 E-Wallets Established by financial institutions in partnership with member E-Commerce sites 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 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 Also can store e-Cheques, e-Cash and credit card information Not as popular as originally projected Not as popular as originally projected Entrypoint’s InfoGate offers an e-wallet Entrypoint’s InfoGate offers an e-wallet

2001Daniel L. Silver15 Peer-to-Peer Methods Digital cash via (eCash.com) Digital cash via (eCash.com) PayPal.com – digital payment system PayPal.com – digital payment system PayPal.com –Acts as a trusted third party (e.g. auction purchase) –To send money: »Sender sets up an account and requests to send payment »Sender places payment into the receivers account by credit- card »Reciever is notified of payment via »Receiver can transfer funds to bank account or request a cheque –There is also a request payment method –FOR FREE.. ? What is the their business model ?

2001Daniel L. Silver16 Smart Cards Cards with computer chips embedded on their faces – very common in Europe Cards with computer chips embedded on their faces – very common in Europe Used for health care, transportation, ID, retail, pay phones, loyalty programs, banking machines Used for health care, transportation, ID, retail, pay phones, loyalty programs, banking machines Smart card readers interface with card and request user PIN for access Smart card readers interface with card and request user PIN for access Bank machines can load cards with cash and then merchants can download cash from card Bank machines can load cards with cash and then merchants can download cash from card GemPlus, MasterCard are leading supplier of SCs GemPlus, MasterCard are leading supplier of SCs

2001Daniel L. Silver17 Micro-Payments Long distance phone call charge is an example of a micro-payment Long distance phone call charge is an example of a micro-payment Digital Equipment Corporatiion (DEC) researchers originally envisioned MPs: Digital Equipment Corporatiion (DEC) researchers originally envisioned MPs: –Payment per newspaper article ($0.005) –Payment by stock quote ($0.001) –Payment per click (Qpass, Inc) Has not been popular, instead advertisers pay for info, or customers pay flat rates … Why? Has not been popular, instead advertisers pay for info, or customers pay flat rates … Why?

2001Daniel L. Silver18 E-Payment Pros/Cons Pros: Pros: –Potential for great flexibility –Low transaction costs –Rapid purchase power Cons: Cons: –Security problem

Assignment What is paypal? How paypal works. Explain mechanism.