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CHAPTER 11: ONLINE PAYMENT SYSTEMS (PAYMENT CARDS (Payment acceptance and…
CHAPTER 11: ONLINE PAYMENT SYSTEMS
BASIC FUNCTIONS
Micropayments & Small payments
Micropayments
-
Internet payment for items costing few cents to a dollar.
Small payments
-
All payments less than $10.
Methods
4 ways to purchase items:
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Cash
-
Checks
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Credit cards
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Debit cards
Electronic transfer
-
Small but growing segment
Online payments system
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Still evolving
-
Cheaper
-
Convenient for customers
-
Save company's money
Determine which choices best for company and customers
Significant environmental impact
Online payments
Importance electronic commerce site function.
Several online payment options available
PAYMENT CARDS
Disadvantages
For merchant
-Per-transaction fees, monthly processing fees.
-Good and services prices: slightly higher.
For consumers
-Annual fees.
Provide built-in security for merchants.
Card transaction steps transparent to consumers.
Entities involved in payment card processes.
Advantages
For U.S consumers
-Liability of fraudulent card use.
Worldwide acceptance.
For merchant
-Fraud protection.
Payment acceptance and Processing
Processing payment card transaction online.
Opened and closed loop systems.
U.S online stores, mail order stores.
Merchant account.
Internet payment card process make easier.
Processing payment card transactions.
Types
Charge cards
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No spending limit.
Prepaid cards
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Cards can be redeemed by anyone for future purchase.
Debit cards
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Electronic funds transfer at point of sale cards.
Single-used cards
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Cards with disposable numbers.
Credit cards
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Visa/ MasterCard
Payment cards
-
Describes all types of plastic cards used to make purchases.*
ELECTRONIC CASH
HISTORY
Electronic cash (e-cash. digital cash)
does not use paper documents or coins
can serve as subtitute for government-issued physical currency
FUTURE
potential market
purchases below $10
majority of world's population who do not have credit cards
PRIVACY AND SECURITY OF ELECTRONIC CASH
Electronic payment method concerns
privacy and security, independence,portability, convenience
privacy and security : most importance to consumer
vulnerable transactions
electronic currency :copied, reused, forged
IMPORTANT CHARACTERISTICS OF ELECTRONIS CASH
ability to spend only once
anonymous electronic cash: can't be traced to person who spend it
convinience
PRIVACY AND SECURITY OF ELECTRONIC CASH
important characteristics of electronic cash
ability to spend only once
anonymous use electronic cash- can't be traced to person who spent it
convenience
electronic payment methd concerns
privacy and security, independence, portability, convenience
privacy and security :most important to consumer
vulnerable transactions
electronic currency: copied, reused, forged
HOLDING ELECTRONIC CASH: ONLINE AND OFFLINE CASH
ONLINE CASH STORAGE
consumer has no personal possession of electronic cash
trusted third party(online bank) involved in all transfers, hold consumers' cash acccounts
ONLINE SYSTEM PAYMENT
merchants contact consumer's bank
helps prevent fraud (confirm valid cash)
resembles process of checking with consumer's bank to ensure valid credit card and matching name
CONT'D
OFFLINE CASH STORAGE
virtual equivalent of money kept in wallet
customer hold it; no third party involved in transaction
PROTECTION AGAINST FRAUD CONCERN
hardware or software safeguards needed
DOUBLE-SPENDING
spending electronic cash twice
submit same electronic currency to two different
not enough time to prevent fraudulent act
main deterrent to double-spending
threat of detection and prosecution
system must provide tamperproof electronic cash traceable back to origins
two part lock
signals an attempt to double-spend cash that is traceable
provides anonymous secyrity
electronic cash used correctly
preserves user's anoynymity
ADVANTAGES AND DISADVANTAGES OF ELECTRONIC CASH
Traditional brick and mortar billing methods
online stores have the same payment collection inefficiencies
most nline customers use credit cards to pay for purchases
CONT'D
Electronic cash system
less popular than other payment methods
provides of electronic cash transactions
advantages of electronic cash transactions
more efficient
occurs on existing infrastructure
does not require one party to obtain authorization
Disadvantages of electronic cash transactions
no audit trail
money laundering
Reasons for failure of united states electronic cash systems
elctronic cash systems implementation
number of competing technologies
interoperable software
runs transparently on variety of hardware configurations and different software systems
DIGITAL WALLETS
Consumer concerns when shopping online
filling out forms
Entering detailed shipping and payment information for each online purchase
Solution
Allows customer to store name. adress, credit card information on the site
PROBLEM- consumer must enter information at each site
DIGITAL WALLET (CONT'D)
provides information at electronic commerce site checkout counter
Benefit: cinsumer enters information once
hold credit card numbers, electronic cash, owner identification, owner contact information
Digital wallets technology elements
application- software for user interaction
Device - applicable if a specific device is used
system - infrastructure for identification
STORED-VALUE CARDS
What
Microchip smart card or magnetic strip plastic card
Charge cards
Debit cards
Driver's license
Credit cards
Employee or students identification
How they are used in electronic commerce
Magnetic strip cards
Holds rechargeable value
passive magnetic strip card cannot
processing done on
device into which card inserted.
Smart card
Smart card (stored-value card)
Plastic card with embedded microchip
Credit, debit, charge cards store limited information on magnetic strip
Information storage
Holds private user data
Financial facts, encryption keys, account information, credit card number, health insurance infrormation, medical record
Smart card alliance
Advance smart card benefits
promotes widespread acceptance of multiple-application.
Smart card technology promotes complatibility among smart cards, card reader devices, application.
HOW BANKING INDUSTRY USES INTERNET TECHNOLOGIES
Online payment systems
Offer criminals and criminal enterprises an attractive arena in which to operate
Average consumer : easy prey
Large amounts of money provide tempting tergets
Phishing expedition
Technique for committing fraud against online business customers
Particular concern to financial institutions
phishing attacks
e-mail link disguises and tricks
Example: web server ignores all characters preceding "
"
https://www.paypa.com@213.36.41/login
Link appears different in e-mail
Phony site invisible due to javascript code
Pop-up windows
Look exactly like browser address bar
Including web site graphics of financial institutions
Looks more convincing
Web sites to learn more about phishing techniques
Conferences on email and anti-spam
Anti-phishing working group (APWG)