1. Figure 15.1 Conventional Cryptography
KEY
ENCRYPT
DECRYPT
SIGNER
RECIPIENT
PLAINTEXT
CIPHERTEXT
PLAINTEXT

2. Figure 15.2 Asymmetric Cryptography
PUBLIC KEY
PRIVATE KEY
ENCRYPT
DECRYPT
SIGNER
RECIPIENT
PLAINTEXT
CIPHERTEXT
PLAINTEXT

3. + Figure 15.3 Message Digest HASH FUNCTION DIGEST DIGEST SAME?
PLAINTEXT
PLAINTEXT
PLAINTEXT
DIGEST
HASH
FUNCTION

4. Encrypt Decrypt Figure 15.4 Digitally Signed Document Plaintext
Function
One-way Hash
Step 4
Plaintext
Step 1
One-way Hash
Function
Message Digest
Step 6
Verify?
Message Digest
Message Digest
Signature
Encrypt
Decrypt
Step 2
Step 3
Step 5
PUBLIC KEY
PRIVATE KEY

5. Step 1: Signer uses one-way hash function to create message digest from plaintext.
Step 2: Singer encrypts message digest with private key to create signature.
Step 3: Signer sends plaintext and signature to recipient.
Step 4: Recipient uses one-way has function to create message digest from plaintext.
Step 5: Recipient decrypts signature with public key to create message digest.
Step 6: Recipient compares message digest generated by one-way hash function to
message digest generated by public key.

6. Figure 15.5 Certificate Authority
Signer
Step 2
Certificate Authority
PUBLIC KEY
Request
Certificate
Step 3
Issue
CA Certificate
PRIVATE KEY
This is signer’s
public key
Step 1
PUBLIC KEY
Sign
(Private Key)
Isl Certificate Authority
Step 4
Step 6
Verify?
Step 5
Signature
Signature + +
Plaintext
Plaintext

7. Step 1: Signer creates its own public key and private key.
Step 2: Signer requests certificate from certification authority (CA).
Step 3: CA issues a certificate of signer’s public key, signed by CA’s private key.
Step 4: Singer uses one-way hash function to create message digest from plaintext (Step 1 from
Diagram 14.4) and encrypts message digest with private key to create signature (Step 2
from Diagram 15.4).
Step 5: Signer sends plaintext and signature to recipient (Step 3 form Diagram 15.4).
Step 6: Recipient uses one-way hash function to create message digest from plaintext (Step 4
from Diagram 15.4), decrypts signature with public key to create message digest (Step
5 from Diagram 15.4), and compares the two message digests (Step 6 from Diagram
15.4).

8. CA 1 2 3 4 Figure 15.6 SSL Consumer Web Merchant Root CA
Cert installed
in browser
CA cert for
Merchant
Sig 3
Merchant Cert to Consumer
Browser
Consumer
Web
Merchant 4
Symmetric key encrypted
with Merchant public key
to encrypt communications

9. Figure 19.1 Sight Draft for Documentary Collection
At Sight Any City, Ks May 2, 1997
Pay to the order of Seller
Ten Thousand and no/100 U.S. Dollars
Through Banco di Roma
Buer Seller
Any City, Italy
Exporter

10. Figure 19.3 Issuing the Letter of Credit
Issuing Bank
Beneficiary’s
Bank
3. Issues Letter of Credit
2. Applies
for Letter of
Credit
4. Informs Seller
Letter of Credit
Has Been Issued
5. Goods
Applicant/
Purchaser
Beneficiary/
Seller
1. Contract Calling
for Payment by
Letter of Credit

11. Figure 19.4 Payment by Letter of Credit
Issuing Bank
Beneficiary’s
Bank
3. Documents Evidencing Shipment
4. Payment
2. Documents
Evidencing
Shipment
6. Payment
5. Reimbursement
Applicant/
Purchaser
Beneficiary/
Seller
1. Shipment of Goods

12. Figure 27.1 Direct Presentment
Payor Bank
Step 2
Step 3
Step 1
Payee
Payee
Step 1: Payee provides goods and services to payor; payor gives
check to payee.
Step 2: Payee presents check to payor bank; payor bank gives cash to
payee.
Step 3: Payor bank removes funds from payor’s account.

13. Figure 27.2 Clearinghouse Collection
Step 3
Step 3
Bank 1
Clearinghouse
Bank 2
Step 2
Step 2
Step 4
Step 1
Step 1
Step 4
Bank 1 Customer
Bank 2 Customer
Step 1: Customers deposit checks at their banks. Their banks credit their accounts.
Step 2: Banks send to the clearinghouse checks they have received for deposit.
Clearinghouse credits banks for those checks.
Step 3: Clearinghouse sends to banks checks drawn on them. Clearinghouse debits banks
for those checks.
Step 4: Banks debit customer accounts for checks received from clearinghouse.

14. Figure 27.3 Direct-Send Collection
S.F. Bank
N.Y. Bank
Step 3
Step 2
Step 4
Step 2
Step 1
Step 4
S.F. Payor
N.Y. Payee
S.F. Payee
N.Y. Payor
Step 1
Step 1: Payees provide goods and services to payors. Payors give checks to payees. Because the process
proceeds simultaneously on checks in each city, it can apply when a New York payor sends a check to
a San Francisco payee and also when a San Francisco payor sends a check to a New York payee.
Step 2: Payees deposit checks (one in San Francisco and one in New York). Their banks credit their accounts.
Step 3: Each bank sends to the other the checks the first bank has received that are drawn on the other.
Specifically, the San Francisco bank sends to New York the checks that the San Francisco bank has
received that are drawn on the New York bank; the New York bank sends to San Francisco the checks
that the New York bank has received that are drawn on the San Francisco bank. Funds are transferred
to settle the difference in amount.
Step 4: Both banks remove funds from the payors’ accounts: the San Francisco bank from its customers and
the New York bank from its customers.

15. Figure 27.4 Federal- Reserve Collection
Bank
Depository
Bank
Step 3
Step 4
Payor Bank
Step 2
Step 5
Step 1
Payee
Payor
Step 1: Payee provides goods and services to payor; payor gives check to payee.
Step 2: Payee deposits check. Depositary bank credits payee’s account.
Step 3: Depositary bank sends check to the Federal Reserve bank. The Federal
Reserve bank credits the depositary bank for the check.
Step 4: The Federal Reserve bank sends the check to the payor bank and debits it for
the check.
Step 5: The payor bank debits the payor for the check.

16. Figure 28.1 POS Conversion Customer’s Bank Merchant’s Bank Customer
Step 4
Customer’s
Bank
Merchant’s
Bank
Step 3
Step 5
Step 4
Step 2
Step 1
Customer
Merchant
Step 1: The Customer gives a check to the Merchant. The Merchant runs the check through a
reader (capturing the information on the MICR line of the check) and returns the paper
check to the Customer.
Step 2: The Merchant sends to its bank a message including both the amount of the transaction
and the data from the check about the Customer’s bank account.
Step 3: The Merchant’s Bank sends an ACH debit entry to the Customer’s Bank.
Step 4: The Customer’s Bank responds to that entry by removing funds from the Customer’s account
and sending them to the Merchant’s Bank (through the ACH network).
Step 5: The Merchant’s Bank credits the Merchant’s account.

17. Figure 28.2 ACH “Checks” Customer’s Bank Merchant’s Bank ACH Provider
Step 4
Customer’s
Bank
Merchant’s
Bank
Step 3
ACH
Provider
Step 4
Step 5
Step 1
Step 1
Customer
Merchant
Step 2
Step 1: The Customer sends payment information to the ACH Provider (probably through a link at the merchant’s
website). The information should include the information from the MICR line of Customer’s check (the
ABA routing number of the Customer’s Bank and the Customer’s account number at the bank).
Step 2: Based on the commitment to pay represented by that information, the Merchant completes the
transaction. It might ship the goods at that time, or it might wait a few days to receive payment.
Step 3: The ACH Provider sends the ACH debit entry to the Customer’s Bank.
Step 4: The Customer’s Bank responds to that entry by removing funds form the Customer’s account and
sending them to the Merchant’s Bank (through ACH network).

18. Figure 31.1 Bill Aggregators
Biller
Step 1
Customer
Step 2
Step 4
Customer’s
Bank
Aggregator
Step 5
Step 3
Step 1
Biller
Step 1: Billers send bills to Aggregator (perhaps through intermediary service providers).
Step 2: Aggregator advises Customer of bills
Step 3: Customer views bills and authorizes payment.
Step 4: Aggregator directs Customer’s Bank to pay bills.
Step 5: Customer’s Bank pays Billers (directly or through a financial institution.

19. Figure 32.1 Using Stored-Value Cards
Merchant’s
Bank
Operator
Step 4
Step 3
Step 1
Step 2
Customer
Merchant
Step 1: Cardholder obtains card and stores value on it.
Step 2: Cardholder transfers transaction data to Merchant and receives goods or services.
Step 3: Merchant sends transaction data to Operator.
Step 4: Operator sends funds to account at Merchant's Bank. In accountable systems, Operator
deducts funds from Cardholder’s shadow balance.

20. Figure 32.2 Using Electronic Money
Step 5
Merchant’s
Bank
Issuer
Step 3
Step 1
Step 2
Customer
Merchant
Step 4
Step 1: Customer opens account and creates ecoins.
Step 2: Customer sends coins to Merchant.
Step 3: Merchant confirms authenticity of coins by communication with Issuer.
Step 4: Merchant releases product to Customer.
Step 5: Issuer sends funds to account at Merchant’s Bank.

21. Figure 34.1 Software Leasing
Financier
Payments over time
One-time payment
Software License
Licensor
User

22. Figure 34.2 Article 9 View of General Intangibles
Financier/
Secured Party
Promissory Note $
Licensor/
Account Debtor
Software License
User/
Debtor

23. Figure 34.3 Finance Licensing
Software
License
Sublicense
Licensor
Financier
User
One-time
payment
Payments
over time

24. Figure 38.1 Account-Based Lending Systems
Step 1: Borrower deposits assets with Intermediary.
Step 2: Lender arranges with Intermediary to have control of assets.
Step 3: On default, Lender takes assets or directs Intermediary to dispose
of them on Lender’s behalf.