E commerce

1. Comp2513Comp2513
E-Payment MethodsE-Payment Methods
Daniel L. Silver, Ph.D.Daniel L. Silver, Ph.D.

2. 2001 Daniel L. Silver 2
OutlineOutline
 Trandition Payment MethodsTrandition Payment Methods
 E-Payment MethodsE-Payment Methods

3. 2001 Daniel L. Silver 3
Traditional Payment MethodsTraditional Payment Methods
Payment:Payment: The transfer of money from oneThe transfer of money from one
individual or legal entity to anotherindividual or legal entity to another
 CashCash
 Personal ChequesPersonal Cheques
 Money orders (Bank note)Money orders (Bank note)
 Credit cardsCredit cards
 Debit cardsDebit cards

4. 2001 Daniel L. Silver 4
Credit CardsCredit Cards
 A very common method of paymentA very common method of payment
 Cards are issued by a bankCards are issued by a bank
 Unique 16-digit number (including checkUnique 16-digit number (including check
digits) and an expiration datedigits) and an expiration date
 Third party authorization companies verifyThird party authorization companies verify
purchasespurchases

5. 2001 Daniel L. Silver 5
Requirements ofRequirements of
E-Payment MethodsE-Payment Methods
 Enable an honest customer to convince a seller toEnable an honest customer to convince a seller to
accept paymentaccept payment
 Prevent a dishonest customer from makingPrevent a dishonest customer from making
unauthorized or fraudulent paymentsunauthorized or fraudulent payments
 Ensure the privacy of honest participantsEnsure the privacy of honest participants
 Scalable to very large numbers of customersScalable to very large numbers of customers
 Integrate with existing and evolving systemsIntegrate with existing and evolving systems
NOT EASY!NOT EASY!

6. 2001 Daniel L. Silver 6
E-Payment Pros/ConsE-Payment Pros/Cons
 Pros:Pros:
– Potential for great flexibilityPotential for great flexibility
– Low transaction costsLow transaction costs
– Rapid and diverse purchase powerRapid and diverse purchase power
 Cons:Cons:
– Perfect copying of transactions is possiblePerfect copying of transactions is possible
– Vulnerability to world-wide attackVulnerability to world-wide attack
– Lack of secrecy, potential for privacy intrusionLack of secrecy, potential for privacy intrusion

7. 2001 Daniel L. Silver 7
Various E-Payment MethodsVarious E-Payment Methods
 Credit and Debit cardCredit and Debit card
 Digital CurrencyDigital Currency
 E-WalletsE-Wallets
 Peer-to-Peer MethodsPeer-to-Peer Methods
 Smart cardSmart card
 Micro-paymentsMicro-payments
 B2BB2B

8. 2001 Daniel L. Silver 8
Use of Credit Card on the WebUse of Credit Card on the Web
InternetInternet
Browser
Database
Server
Client 1
Server A
URL
HTTP
Server
App.
Server
index.html
prog.jsp
3rd
Party
Authorization
System
cybercash.com
Customer
Bank
System
EFT
Store’s
Bank
System
Authorization

9. 2001 Daniel L. Silver 9
Credit Card FraudCredit Card Fraud
 A major problem for E-commerceA major problem for E-commerce
 The merchant has no legal proof of purchaseThe merchant has no legal proof of purchase
unless the buyer uses authentication certificateunless the buyer uses authentication certificate
 Companys such as Visa, nochargeback.com andCompanys such as Visa, nochargeback.com and
CyberCash (now VeriSign) are working to limitCyberCash (now VeriSign) are working to limit
fraud:fraud:
– Visa has established high risk business models and bestVisa has established high risk business models and best
practices info for merchantspractices info for merchants
– Nochargeback.com has lists of fraudlent cards, e-mailNochargeback.com has lists of fraudlent cards, e-mail
addresses and postal addressesaddresses and postal addresses
– VeriSign/CyberCashVeriSign/CyberCash has employed AI to catch fraudershas employed AI to catch frauders

10. 2001 Daniel L. Silver 10
Digital CurrencyDigital Currency
 Digital cash accounts like traditional bankDigital cash accounts like traditional bank
accountsaccounts
 Buyers deposit cash in the account and spend it atBuyers deposit cash in the account and spend it at
E-Commerce sites (acct # is passed using secureE-Commerce sites (acct # is passed using secure
proprietary protocol)proprietary protocol)
 E-Comm merchants can feel sure of paymentE-Comm merchants can feel sure of payment
 Customers do not need a credit card and spendingCustomers do not need a credit card and spending
is limited to account balanceis limited to account balance
 www.ecash.comwww.ecash.com

11. 2001 Daniel L. Silver 11
E-WalletsE-Wallets
 Established by financial institutions inEstablished by financial institutions in
partnership with member E-Commerce sitespartnership with member E-Commerce sites
 Allows customer to submit billing andAllows customer to submit billing and
shipping info with one click at member sitesshipping info with one click at member sites
 Also can store e-Cheques, e-Cash and creditAlso can store e-Cheques, e-Cash and credit
card informationcard information
 Not as popular as originally projectedNot as popular as originally projected
 Entrypoint’s InfoGate offers an e-walletEntrypoint’s InfoGate offers an e-wallet

12. 2001 Daniel L. Silver 12
Peer-to-Peer MethodsPeer-to-Peer Methods
 Digital cash via email (eCash.com)Digital cash via email (eCash.com)
 PayPal.com – digital payment systemPayPal.com – digital payment system
– Acts as a trusted third party (e.g. auction purchase)Acts as a trusted third party (e.g. auction purchase)
– To send money:To send money:
» Sender sets up an account and requests to send paymentSender sets up an account and requests to send payment
» Sender places payment into the receivers account by credit-Sender places payment into the receivers account by credit-
cardcard
» Reciever is notified of payment via emailReciever is notified of payment via email
» Receiver can transfer funds to bank account or request aReceiver can transfer funds to bank account or request a
chequecheque
– There is also a request payment methodThere is also a request payment method
– FOR FREE .. ? What is the their business model ?FOR FREE .. ? What is the their business model ?

13. 2001 Daniel L. Silver 13
Smart CardsSmart Cards
 Cards with computer chips embedded on theirCards with computer chips embedded on their
faces – very common in Europefaces – very common in Europe
 Used for health care, transportation, ID, retail, payUsed for health care, transportation, ID, retail, pay
phones, loyalty programs, banking machinesphones, loyalty programs, banking machines
 Smart card readers interface with card and requestSmart card readers interface with card and request
user PIN for accessuser PIN for access
 Bank machines can load cards with cash and thenBank machines can load cards with cash and then
merchants can download cash from cardmerchants can download cash from card
 Returns anonymity of purchase to customerReturns anonymity of purchase to customer
 GemPlus, MasterCard are leading supplier of SCsGemPlus, MasterCard are leading supplier of SCs

14. 2001 Daniel L. Silver 14
Micro-PaymentsMicro-Payments
 Long distance phone call charge is an example ofLong distance phone call charge is an example of
a micro-paymenta micro-payment
 Digital Equipment Corporation (DEC) researchersDigital Equipment Corporation (DEC) researchers
originally envisioned MPs:originally envisioned MPs:
– Payment per newspaper article ($0.005)Payment per newspaper article ($0.005)
– Payment by stock quote ($0.001)Payment by stock quote ($0.001)
– Payment per click (Qpass, Inc)Payment per click (Qpass, Inc)
 Has not been popular, instead advertisers pay forHas not been popular, instead advertisers pay for
info, or customers pay flat rates … Why?info, or customers pay flat rates … Why?

15. 2001 Daniel L. Silver 15
B2BB2B
 B2B transactions are the fastest area of $ growthB2B transactions are the fastest area of $ growth
on the webon the web
 B2B transactions are substantially larger than B2CB2B transactions are substantially larger than B2C
 Paymantech is major provider:Paymantech is major provider:
– 24/7 availability, all manner of EFT supported24/7 availability, all manner of EFT supported
– many management tools and reporting methodsmany management tools and reporting methods
 Ecredit.com offers real-time automated creditEcredit.com offers real-time automated credit
approval and financingapproval and financing
 TradeCard offers comprehensive B2B E-TradeCard offers comprehensive B2B E-
commerce facilities on an international scalecommerce facilities on an international scale

16. THE ENDTHE END
danny.silver@acadiau.cadanny.silver@acadiau.ca