1. Chapter 11: Payment Systems For Electronic Commerce Dr. Jing Zhou
Dr. Jing Zhou - School of Computer Science, Communication University of China, Beijing; © 2007

2. Learning Objectives In this chapter, you will learn about:
The basic functions of online payment systems (结算系统)
The use of payment cards (结算卡) in electronic commerce
The history and future of electronic cash (电子现金)

3. Learning Objectives (Cont’d)
How electronic wallets (电子钱包) work
The use of stored-value cards (储值卡) in electronic commerce
Internet technologies and the banking industry (银行业)

4. Online Payment Basics
An important function of EC sites is handling of payments over Internet
Four basic ways to pay for purchases dominate both traditional and electronic B2C commerce: cash (现金), checks (支票), credit cards (信用卡), and debit cards (借记卡)
which account for more than 90 percent of all consumer payments in the United States

5. Online Payment Basics (Cont’d)
Most popular consumer electronic transfers are automated payments of
Auto loans (汽车贷款)
Insurance payments (保险费)
Mortgage payments (还贷)
made from consumers’ checking accounts (活期存款账户)

7. Online Payment Basics (Cont’d)
Scrip (代币)
Digital cash minted (铸造) by a company instead of by a government
Cannot be exchanged for cash
Must be exchanged for goods or services by company that issued the scrip
Like a gift certificate (礼品券) that is good at more than one store
Businesses should provide multiple secure, convenient, and widely accepted payment methods for customers – Key is to find the best payment method that suits both you and your customer the best

8. Payment Cards (结算卡)
Describe all types of plastic cards used to make purchases
Main categories of payment cards are credit cards, debit cards, and charge cards (签账卡)

9. Credit Cards Has spending limit based on user’s credit history
User can pay off (偿清欠款) entire credit card balance or pay a minimum amount each billing period (记帐期)
Online credit card purchases are similar to telephone purchases in that card holder is not present, which is called card not present transactions (不出示卡交易)

10. Debit Cards Removes amount of sales from cardholder’s bank account
Transfers it to seller’s bank account
Debit cards are issued by the cardholder’s bank and usually carry the name of a major credit card issuer by agreement between the issuing bank and the credit card issuer

11. Charge Cards Carries no spending limit
Amount charged to cards is due at end of billing period
Do not involve lines of credit (信用贷款的最高额 度) and do not accumulate (累计) interest charges

12. Single-use Cards (一次性卡)
Customers have concerns about providing payment card numbers to vendors online
Single-use cards
provided by payment card companies and have disposable numbers
give consumers unique card number valid for one transaction only
Prevent an unscrupulous (不道德的) vendor from using card number to complete unauthorized transactions or selling card number to others

13. Advantages and Disadvantages of Payment Cards
Worldwide acceptance
Built-in security for merchants
Disadvantage
Payment card service companies charge merchants per-transaction fees and monthly processing fees

14. Payment Acceptance and Processing
Steps followed once merchant receives consumer’s payment card information
Merchant authenticates (验证) payment card
Merchant checks with payment card issuer
To ensure that credit or funds are available
Puts a hold (冻结) on credit line or the funds needed to cover the charge
Settlement (清算) occurs

15. Open and Closed Loop System
Closed loop systems (封闭系统)
Card issuer pays merchants that accept the card directly and does not use an intermediary
Open loop systems (开放系统)
Involve three or more parties
Systems using Visa or MasterCard are examples

16. Merchant Accounts (商家帐户)
To process payment cards for Internet transactions
Online merchant must set up merchant account
New merchant must supply
Business plan (业务计划)
Details about existing bank accounts
Business and personal credit history (信用历史)

17. Merchant Accounts Cont’d
Type of business also influences bank’s likelihood of granting account
Bank assesses level of risk in business based on type of business and credit information provided
Chargeback(扣款) occurs when card holder successfully contests a charge
One problem facing online businesses is level of fraud in online transactions much higher than in-person or telephone transactions

18. Processing Payments Online
InternetSecure
Provides secure payment card services
Supports payments with Visa and MasterCard for Canadian and U.S. accounts
Provides risk management and fraud detection
Handles transactions from online merchants using existing, bank-approved payment card processing infrastructure, secure links, and firewalls
Ensures that transactions it processes are credited to the correct merchant’s account

19. Processing Payments Online (Cont’d)
First Data
Provides merchant payment card processing services with the following programs
ICVERIFY, PCAuthorize, and WebAuthorize
Banks connect to an Automated Clearing House (ACH) through
Highly secure, private leased telephone lines

20. Processing a Payment Card Transaction

21. Electronic Cash (电子现金)
Term that describes any value storage (资金存储) and exchange system (交换系统) created by a private entity that
Does not use paper documents or coins
Can serve as a substitute for government-issued physical currency (货币)
Show particular promise in two applications:
Sale of goods and services of less than $10
Sale of higher-priced goods and services to those without credit cards

22. Micropayments and Small Payments
Internet payments for items costing from a few cents to approximately a dollar
Small payments (小额支付)
Payments of less than $10
Two companies (Yaga and BitPass) offer products for handling small payments that use credit cards as alternative

23. Privacy and Security of Electronic Cash
Concerns about electronic payment methods include
Privacy and security (隐私与安全）
Independence (独立性)
Portability (便携性)
Convenience (方便)
Advantages of electronic cash
Independent and portable

24. Holding Electronic Cash: Online and Offline Cash
Online cash storage (在线现金存储)
Trusted third party is involved in all transfers of electronic cash
Holds consumers’ cash accounts
Offline cash storage (离线现金存储)
Virtual equivalent of money kept in a wallet
No third party is involved in the transaction
Double-spending (重复消费)
Spending electronic cash twice

25. Advantages and Disadvantages of Electronic Cash
Transactions are more efficient and therefore less costly
Transfer on the Internet costs less than processing credit card transactions
Transfers occur on existing infrastructure – the Internet – and through existing computer systems, thus, the additional costs for users of electronic cash being nearly zero

26. Advantages and Disadvantages of Electronic Cash (Cont’d)
Use provides no audit trail (跟踪检查)
Problem of money laundering (洗钱) arises
Susceptible (易受外界感染的) to forgery

27. How Electronic Cash Works
A consumer
Opens an account with an electronic cash issuer and presents proof of identity
Then withdraws by accessing the issuer’s website and presents proof of identity
Receives specific amount of electronic cash after verification and the same amount is deducted from his/her account
Stores the cash in electronic wallet or stored-value card
Authorizes issuer to may payment to third parties

28. Providing Security for Electronic Cash
Cryptographic (密码的) algorithms
Keys to creating tamperproof (防止篡改的) electronic cash that can be traced back to its origins
A two-part lock (双锁) provides anonymity security that also signals when one is attempting to double-spend cash

29. Providing Security for Electronic Cash (Cont’d)
Double spending can neither be detected nor prevented with truly anonymous electronic cash
Anonymous electronic cash
Electronic cash that cannot be traced back to the person who spent it
Creating truly anonymous electronic cash
Requires bank to issue electronic cash with embedded serial numbers

30. Electronic Cash Systems
CheckFree
Largest online bill processor in the world
Provides online payment processing services
Provides infrastructure and software that permits users to pay all bills with online electronic checks

31. Electronic Cash Systems (Cont’d)
Clickshare
An electronic cash system aimed at magazine and newspaper publishers
The ability to make micropayments is only one of Clickshare’s features
Keeps track of transactions and bills the user’s ISP which already has an account relationship with the user and then bills the user
Tracks where a user travels on the Internet which does defeat anonymity

32. Electronic Cash Systems (Cont'd)
PayPal
Provides payment processing services to businesses and to individuals
Peer-to-peer (P2P) payment system
Free payment clearing service for individuals
Eliminates the need to pay for online purchases by writing and mailing checks or using payment cards
Transactions clear instantly

34. Electronic Wallets (电子钱包)
Hold credit card numbers, electronic cash, owner identification and contact information
Give consumers the benefit of entering their information just once
Make shopping more efficient

35. Electronic Wallets (Cont'd)
Server-side electronic wallet (服务器端电子钱包)
Stores customer’s information on a remote server belonging to a particular merchant or wallet publisher
Client-side electronic wallet (客户端电子钱包)
Stores consumer’s information on his or her own computer

36. Microsoft .NET Passport
An electronic wallet operated by Microsoft
Passport completes order forms automatically
All of the personal data entered into a Passport wallet is encrypted and password protected

37. Microsoft .NET Passport (Cont’d)
Passport consists of four integrated services
Passport single sign-in service (SSI) – allows to sign in at a participating website using the user’s username and password
Passport Wallet service – provides standard electronic wallet functions
Kids Passport service – helps parents protect and control their children’s online privacy
Public profiles (档案) – allows consumers to create a public page of info about themselves

38. Yahoo! Wallet
An electronic wallet offered by the Web portal site Yahoo!
Lets users store information about several major credit and charge cards
Many industry observers and privacy rights activist groups are concerned about electronic wallets

39. W3C Micropayment Standards Development Activity
Common Markup for Micropayment Per-Fee-Links (微额支付的通用注记)
Standards developed by W3C Electronic Commerce Interest Group (ECIG)
Provide extensible and interoperable way to embed micropayment information in Web page
Extensible system
One that developers can add to (or extend) without voiding (使无效) any earlier work on the system

41. The ECML Standard Electronic Commerce Modeling Language (ECML)
Users can enter credit card and address information once into an ECML-capable electronic wallet
Any existing wallet can be redesigned to follow the ECML standard
Users control access to their ECML electronic wallets

42. Stored-Value (储值) Cards
Can be an elaborate (详尽的) smart card with a microchip or a plastic card with a magnetic strip that records currency balance
Common stored-value cards
Prepaid phone, copy (复印), subway, and bus cards

43. Magnetic Strip Cards (磁卡)
Cannot send or receive information
Cannot increment or decrement value of cash stored on the card
Processing must be done on a device into which card is inserted
Smart card
Better suited for Internet payment transactions

44. Smart Cards (智能卡) Stored-value cards with embedded microchip
Can hold private user data, such as financial facts
Can store about 100 times more information than a magnetic strip plastic card
Safer than conventional credit cards

46. Smart Cards (Cont'd) Smart Card Alliance (智能卡协会)
Promotes benefits of smart cards
Promotes widespread acceptance of multiple-application smart card technology
Members include companies in banking, financial services, computer technology, and healthcare
Promotes compatibility (兼容) among smart cards, card reader devices, and applications

47. Internet Technologies and the Banking Industry
The largest dollar volume of payment today are still made using paper checks that are processed through banking systems
Other major payment forms also involve banks in one way or another

48. Check Processing
Checks were processed physically by banks and clearinghouses in the past
Another disadvantage of using paper checks is the delay that occurs between the time that a person writes a check and the time that check clears (把支票兑现) the person’s bank

49. Phishing Attacks (钓鱼攻击)
is a technique for committing fraud against the customers of online businesses
The basic structure is fairly simple
The links in phishing s are usually disguised (伪装), for example

50. Phishing Attack Countermeasures (对策)
Several groups are working on ways to improve the Internet’s mail transport protocols so that spam senders can be identified
The most important steps that companies can take today is to educate their website users
Many companies have contracted with consulting firms that specialize in anti-phishing work

51. Summary Most popular forms of payment on the Internet Credit card
Debit card
Charge cards (payment cards)

52. Summary Electronic cash Form of online payment
Slow to catch on (变得流行) in the United States
Especially useful for making micropayments
Advantages
Portable, anonymous, and usable for international transactions

53. Summary Electronic wallets Stored-value cards Smart cards
Provide convenience to online shoppers
Eliminate need to reenter payment card and shipping information at site’s electronic checkout counter
Stored-value cards
Physical devices that hold information
Smart cards
Intended to replace collection of plastic cards people now carry