2. Major Trends in E-Commerce
Payments 2013–2014
• Payment by credit and/or debit card remains the
dominant form of online payment.
• Mobile retail payment.
• PayPal remains the most popular alternative
payment method online.
• Start-up Square begins to gain traction with a
smartphone app, credit card reader, and credit
card processing service that permits anyone to
accept credit card payments.
3. Major Trends in E-Commerce
Payments 2013–2014
• Google introduces Google Wallet, a mobile
payment system based on near field
communication (NFC) chips; Apple continues to go
its own way, releasing iPhone 5S with fingerprint
sensing technology but without NFC chips.
6. Online stored value payment
system
• Online stored value payment system permits
consumers to make instant, online payments to
merchants and other individuals based on value
stored in an online account
7. Near field communication (NFC)
• Near field communication (NFC) a set of short-
range wireless technologies used to share
information among devices
8. Digital cash
• Digital cash an alternative payment system in
which unique, authenticated tokens represent cash
value
9. Virtual currencies
• Virtual currency typically circulates within an
internal virtual world community or is issued by a
specific corporate entity, and used to purchase
virtual goods
10. Electronic billing presentment and
payment
• Electronic billing presentment and payment (EBPP)
systems are systems that enable the online
delivery and payment of monthly bills.
11. Bitcoin
• In recent years, a number of countries around the
world have experienced banking crises, eroding
trust in the system.
• As globalization has continued and the world’s
banking systems have grown more unified, the
debt crises of individual nations have had a ripple
effect on the rest of the world, more so than in the
past.
12. Bitcoin
• Bitcoin, a form of electronic currency that does not
exist in physical form and can be transferred from
one person to another via peer-to-peer networks,
without the need for a bank or other financial
institution as intermediary.
• Bitcoin is more complicated than traditional
currencies, but is accepted by a growing number of
merchants, some reputable, and some not.
14. Tools used to establish secure
Internet communications channels
• Secure Sockets Layer (SSL)/Transport Layer
Security (TLS)—This is the most common form of
securing channels. The SSL protocol provides data
encryption, server authentication, client
authentication, and message integrity for TCP/IP
connections.
• Virtual private networks (VPNs)—These allow
remote users to securely access internal networks
via the Internet, using PPTP, an encoding
mechanism that allows one local network to
connect to another using the Internet as the
conduit.
15. Tools used to establish secure
Internet communications channels
• WPA2—the most current wireless security
standard uses the AES algorithm for encryption
and CCMP, a more advanced authentication code
protocol
16.
17. Tools to protect networks, the
servers, and clients
• Firewalls—software applications that act as filters
between a company’s private network and the
Internet itself, preventing unauthorized remote
client computers from attaching to your internal
network.
• Proxies—software servers that act primarily to limit
access of internal clients to external Internet
servers and are frequently referred to as the
gateway.
18. Tools to protect networks, the
servers, and clients
• Intrusion detection and prevention systems
(IDS/IDP)—an IDS examines network traffic,
watching to see if it matches certain patterns or
preconfigured rules indicative of an attack, while an
IPS has all of the funcationality of an IDS with the
additional ability to take steps to prevent and block
suspicious activities.
19. Tools to protect networks, the
servers, and clients
• Operating system controls—built-in username and
password requirements that provide a level of
authentication. Some operating systems also have
an access control function that controls user
access to various areas of a network.
• Anti-virus software—a cheap and easy way to
identify and eradicate the most common types of
viruses as they enter a computer, as well as to
destroy those already lurking on a hard drive.
20. Traditional payment systems
include
• Cash, whose key feature is that it is instantly
convertible into other forms of value without the
intermediation of any other institution.
• Checking transfers, which are funds transferred
directly through a signed draft or check from a
consumer’s checking account to a merchant or
other individual; these are the second most
common forms of payment.
21. Traditional payment systems
include
• Credit card accounts, which are accounts that
extend credit to a consumer and allow consumers
to make payments to multiple vendors at one time.
• Stored value systems, which are created by
depositing funds into an account and from which
funds are paid out or are withdrawn as needed.
Stored value payments systems include debit
cards, phone cards, and smart cards.
• Accumulating balance systems, which accumulate
expenditures and to which consumers make
periodic payments.
22. PayPal
• PayPal, which is an example of an online stored
value payment system that permits consumers to
make instant, online payments to merchants and
other individuals based on value stored in an online
account.
23. ACCOUNT
HOLDER A
ACCOUNT
HOLDER A’S
BANK
ACCOUNT
HOLDER X
PAYPAL
ACCOUNT A
. . .
ACCOUNT X
ACCOUNT
HOLDER X’S
BANK
ACH
PROCESSOR
ACCOUNT
HOLDER A’S
CREDIT CARD
INTERNET EMAIL
PAYPAL’S
BANK
1. A PAYS X VIA
PAYPAL (A HAS
ENOUGH IN PAYPAL
ACCOUNT)
6. PAYPAL NOTIFIES
X OF PAYMENT. X
CHOOSES PAYMENT
METHOD
2. OR: PAYPAL
CHARGES X’S
CREDIT CARD
3. OR: PAYPAL
INITIATES ACH
DEBIT
4. FUNDS ARE
DEPOSITED IN
PAYPAL’S BANK
7. OR: PAYPAL
INITIATES
ACH CREDIT
5. PAYPAL CREDITS
X’S PAYPAL ACCOUNT
8. OR: PAYPAL MAILS CHECK TO X
24. e-PAYMENT SYSTEM IN INDIA
• Ever-increasing technology changes.
• Growing Internet access and mobile subscriber
base
• Rising consumer confidence.
• Convenient delivery/payment models
• India has been one of the fastest growing country
for payment cards in the Asia-Pacific region.
• India currently has approximately 130 million cards
(both debit and credit) in circulation.
26. Processing Cards Online
• Authorization
Determines whether a buyer’s card is active
and whether the customer has sufficient funds
• Settlement
Transferring money from the buyer’s to the
merchant’s account
27. The key participants in processing
card payments online include:
• Acquiring bank
• Credit card association
• Customer
• Issuing bank
• Merchant
• Payment processing service
• Processor
28. Address Verification System (AVS)
Detects fraud by comparing the address entered on a
Web page with the address information on file with
the cardholder’s issuing bank
29. Card verification number (CVN)
• Detects fraud by comparing the verification number
printed on the signature strip on the back of the
card with the information on file with the
cardholder’s issuing bank
30. Smart Cards
• Contact card
A smart card containing a small gold plate on the face
that when inserted in a smart card reader makes
contact and passes data to and from the embedded
microchip
• Contactless (proximity) card
A smart card with an embedded antenna, by means
of which data and applications are passed to and
from a card reader unit or other device without
contact between the card and the card reader
31. Smart Cards
• Smart card reader
Activates and reads the contents of the chip on a
smart card, usually passing the information on to a
host system
• Smart card operating system
Special system that handles file management,
security, input/output (I/O), and command execution
and provides an application programming interface
(API) for a smart card
32. Stored-value card
• A card that has monetary value loaded onto it and
that is usually rechargeable
• Anyone can obtain a stored-value card without
regard to prior financial standing or having an
existing bank account as collateral
33. Automated Clearing House (ACH)
Network
• A nationwide batch-oriented electronic funds
transfer system that provides for the interbank
clearing of electronic payments for participating
financial institutions
34. Electronic Payments
• Purchasing cards (p-cards)
Special-purpose payment cards issued to a
company’s employees to be used solely for
purchasing nonstrategic materials and services up to
a preset dollar limit
• letter of credit (LC)
A written agreement by a bank to pay the seller, on
account of the buyer, a sum of money upon
presentation of certain documents
37. Check
• A written order on a bank or other financial
institution to pay money belonging to the signer to
the presenter of the check
• The most popular offline settlement method
• Good for e-commerce?
• What is a cashier’s check?
• Checks have been around how long?
38. Money Order
• An order for the payment of a specified amount of
money
• Usually issued by the post office or a bank or other
financial institution
• Popular with people who do not have bank
accounts or where checks are not acceptable
• Good for e-commerce?
39. Debit Cards
• Similar to credit card in operation from merchant’s
perspective
• Similar to a check from customer’s perspective
• Pros & Cons
40. Payment Processing Software
• Software to facilitate authorization of customer
charges to credit or debit charge account.
• Alternative is to outsource to 3rd party for a fee.
• Authorize.Net
• CyberCash
• ICVerify