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Electronic Payment Systems                    Presented by-                     Nishank jain                  B Tech 3rd ...
Introduction  • It is the the mechanism of transferring money    over the Internet and technology used in this    transfe...
• To transfer money over the Internet• Efficient means of exchanging funds and cash  flows• Increase in remote payments (o...
Requirements for e-payment• Atomicity    – Money is not lost or created during a transfer•   Acceptability•   Reliability...
Desirable Properties of Digital Money •   Universally accepted •   Transferable electronically •   Divisible •   Non-forg...
Cash Transaction                           CENTRAL                            BANK            4. SELLER’S BANK-2. CENTRAL...
Types of E-payments• Instant paid or cash     - electronic cash or e-cash• Debit or prepaid      - smart card,electronic ...
Electronic Cash• The two distinctive characteristics for cash   – Anonymity and transferability• Ecash was developed by D...
Electronic Cash Issues   • E-cash must allow spending only once   • Must be anonymous, just like regular     currency    ...
E-cash Concept         Merchant                      1. Consumer buys e-cash from Bank                      2. Bank sends...
Basic Operation of E-  cash system                       Customer                                  Bank                  ...
Electronic Cash Storage• Two methods   – On-line     • Individual does not have possession personally of       electronic...
Advantages and Disadvantages ofElectronic Cash • Advantages    – More efficient, eventually meaning lower prices    – Low...
Electronic Cash Security• Complex cryptographic algorithms prevent  double spending  – Anonymity is preserved unless doub...
E-cheque• It is same as paper cheue• Contain the name of payer’s bank,payer’s  account number,the name of payee,amount• I...
E-cheque system scenarioBuyers Bank                                                        Sellers Bank                  ...
Electronic Wallets• Electronic Wallet Contents  – Credit cards  – Electronic Cash  – Owner identification  – Owner addres...
Credit Cards•   The most expensive ePayment mechanism•   Currently the most convenient method•   Used for the majority of...
Parties to a Credit Card Transaction                              CARD,                           TELEPHONE,             ...
Types of credit cards• Payments using plain credit card• Payments using encrypted credit card details• Payment using thir...
Types of Fraud  • Mail Non-Receipt    – Theft of mail containing a replacement card  • Chargeback Fraud    – Bank notifie...
Number System• The first digit in your credit-card number signifies the system:   –   3 - travel/entertainment cards (Ame...
Fraud Prevention• Card-Present  – Signed receipt that    matches signature on    back of the credit    card  – Show photo...
Fraud Prevention• Card Not Present• Telephone or on-line  purchases  – Fax copies of the credit    card along with photo ...
Smart Cards• Plastic card containing an embedded  microchip  – Can contain cash  – Over 100 times more information storag...
Smart Cards• Magnetic stripe   – 140 bytes, cost $0.20-0.75• Memory cards   – 1-4 KB memory, no processor, cost $1.00-2.5...
Smart Cards• Available for over 10 years• So far not successful in U.S., but popular in  Europe, Australia, and Japan• Un...
Types of Smart cards• Memory smart card or Electronic purses or  Debit Card     ─store monetary value on chip     ─ less ...
Smart Card Applications  •   Ticketless travel       – Seoul bus system: 4M cards, 1B transactions since 1996       – Pla...
Smart Card Processing                         30
Secure Electronic Transaction (SET) •   Developed by Visa and MasterCard •   Designed to protect credit card transactions...
Secure Electronic Transaction (SET) Protocol • Jointly designed by MasterCard and Visa    – backed by Microsoft, Netscape...
Key Technologies of SET • Confidentiality of information: DES • Integrity of data: RSA digital signatures with   SHA-1 ha...
SET Transactions                    34
References •   http://www.cybercash.com •   http://www.setco.org •   http://www.echeck.org •   http://www.netcheque.org •...
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  1. 1. Electronic Payment Systems Presented by- Nishank jain B Tech 3rd yr IT Roll no-28 1
  2. 2. Introduction • It is the the mechanism of transferring money over the Internet and technology used in this transfer is called as EFT. • Methods of traditional payment – Check or cash • Methods of electronic payment ─ Electronic cash, software wallets, smart cards, and credit/debit cards • Increased security 2
  3. 3. • To transfer money over the Internet• Efficient means of exchanging funds and cash flows• Increase in remote payments (on the Internet)• Drive to reduce cost, efficiency (and inconvenience) of conventional payment systems• New services requiring new charging mechanisms 3
  4. 4. Requirements for e-payment• Atomicity – Money is not lost or created during a transfer• Acceptability• Reliability• Security• Efficiency• Non-repudiation – No party can deny its role in the transaction – Digital signatures 4
  5. 5. Desirable Properties of Digital Money • Universally accepted • Transferable electronically • Divisible • Non-forgeable, non-stealable • Private (no one except parties know the amount) • Anonymous (no one can identify the payer) • Work off-line (no on-line verification needed) 5
  6. 6. Cash Transaction CENTRAL BANK 4. SELLER’S BANK-2. CENTRAL BANK ISSUES SENDS CASH TO FIDUCIARY MONEY CENTRAL BANK (ANTI-FORGERY) + (SERIAL NUMBERS) 3. SELLER’S BANK CREDITS SELLER’S BANK ACCOUNT-1. CENTRAL BANK SELLS CASH TO BUYER’S BANK BUYER’S SELLER’S BANK BANK 2. SELLER DEPOSITS CASH IN SELLER’S0. BUYER’S BANK ALLOWS THE VISIBLE TRANSACTION BANK ACCOUNT BUYER TO DRAW CASH FROM BUYER’S ACCOUNT BUYER SELLER 1. BUYER PHYSICALLY GIVES CASH TO SELLER 6
  7. 7. Types of E-payments• Instant paid or cash - electronic cash or e-cash• Debit or prepaid - smart card,electronic purse or e-wallet• Credit or postpaid - credit card,electronic cheques 7
  8. 8. Electronic Cash• The two distinctive characteristics for cash – Anonymity and transferability• Ecash was developed by DigiCash and is now provided by ecashtechnologies (http://www.ecashtechnologies.com)• Its founder David Chaum is a well known expert in the area of digital cash.• Ecash allows anonymous and secure electronic cash payment over the Internet.• Ecash is based on an innovative blind signature method. • Advantageous for microPayments. 8
  9. 9. Electronic Cash Issues • E-cash must allow spending only once • Must be anonymous, just like regular currency – Safeguards must be in place to prevent counterfeiting – Must be independent and freely transferable regardless of nationality or storage mechanism • Divisibility and Convenience 9
  10. 10. E-cash Concept Merchant 1. Consumer buys e-cash from Bank 2. Bank sends e-cash bits to consumer (after 5 charging that amount plus fee) 4 3. Consumer sends e-cash to merchant 4. Merchant checks with Bank that e-cash Bank 3 is valid (check for forgery or fraud) 5. Bank verifies that e-cash is valid 6. Parties complete transaction: e.g., merchant 2 present e-cash to issuing back for deposit 1 once goods or services are delivered Consumer 10
  11. 11. Basic Operation of E- cash system Customer Bank VBS (Merchant)  Send the blinded coins to the bank Generate the blinded coins coins  Debit the account and sign the blinded coins  Return the signed blinded coins signed  Unblind the coins  Pay by the coins  Check the validity of the coins and whether they have  Deposit the coins been spent and credit the account accordingly  Confirm the deposit Ship goods or perform the service 11
  12. 12. Electronic Cash Storage• Two methods – On-line • Individual does not have possession personally of electronic cash • Trusted third party, e.g. online bank, holds customers’ cash accounts – Off-line • Customer holds cash on smart card or software wallet • Fraud and double spending require tamper-proof encryption 12
  13. 13. Advantages and Disadvantages ofElectronic Cash • Advantages – More efficient, eventually meaning lower prices – Lower transaction costs – Anybody can use it, unlike credit cards, and does not require special authorization – Secured transaction • Disadvantages – Tax trail non-existent, like regular cash – Non divisibility – Susceptible to forgery 13
  14. 14. Electronic Cash Security• Complex cryptographic algorithms prevent double spending – Anonymity is preserved unless double spending is attempted• Serial numbers can allow tracing to prevent money laundering – Does not prevent double spending, since the merchant or consumer could be at fault 14
  15. 15. E-cheque• It is same as paper cheue• Contain the name of payer’s bank,payer’s account number,the name of payee,amount• It provide authentication of customer with by using digital signature of payer and payer’s bank 15
  16. 16. E-cheque system scenarioBuyers Bank Sellers Bank rd 5.Fo o rwa e rwar 4.F equ cheq d ch ue 6 .T r r a s fe mon nsfer an ey Accounting .Tr ney 7 o Server m 3.ForwardAccount E-cheque toupdate bank 1.Access and Browse Buyer’s 2.Select goods,transfer e-cheque Seller’s Server Browser 16
  17. 17. Electronic Wallets• Electronic Wallet Contents – Credit cards – Electronic Cash – Owner identification – Owner address information 17
  18. 18. Credit Cards• The most expensive ePayment mechanism• Currently the most convenient method• Used for the majority of Internet purchases• Has a preset spending limit• Advantage: − People can buy more than they can afford• Disadvantages: − doesn’t work for small amounts (too expensive) − doesn’t work for large amounts (too expensive) 18
  19. 19. Parties to a Credit Card Transaction CARD, TELEPHONE, INTERNET BUYER SELLER DIALUP OR U.S. MAIL! LEASED LINE BUYER’S SELLER’S BANK BANK CARD ASSOCIATION PROPRIETARY NETWORK 19
  20. 20. Types of credit cards• Payments using plain credit card• Payments using encrypted credit card details• Payment using third party verification 20
  21. 21. Types of Fraud • Mail Non-Receipt – Theft of mail containing a replacement card • Chargeback Fraud – Bank notified that illegal purchases were made and they charge payment is taken back from the merchant • Skimming – Merchant copies the magnetic strip illegally 21
  22. 22. Number System• The first digit in your credit-card number signifies the system: – 3 - travel/entertainment cards (Amer. Express & Diners Club) – 4 - Visa – 5 - MasterCard – 6 - Discover Card – Phone companies, gas companies and department stores have their own numbering systems 22
  23. 23. Fraud Prevention• Card-Present – Signed receipt that matches signature on back of the credit card – Show photo identification – Checking the last 4 digits on the card 23
  24. 24. Fraud Prevention• Card Not Present• Telephone or on-line purchases – Fax copies of the credit card along with photo identification – Card Security Code on the back of the credit card 24
  25. 25. Smart Cards• Plastic card containing an embedded microchip – Can contain cash – Over 100 times more information storage than a magnetic-striped plastic card – Information is encrypted, unlike plain credit cards which have account number on its face, making credit theft practically impossible 25
  26. 26. Smart Cards• Magnetic stripe – 140 bytes, cost $0.20-0.75• Memory cards – 1-4 KB memory, no processor, cost $1.00-2.50• Optical memory cards – 4 megabytes read-only (CD-like), cost $7.00-12.00• Microprocessor cards – Embedded microprocessor • (OLD) 8-bit processor, 16 KB ROM, 512 bytes RAM • Equivalent power to IBM XT PC, cost $7.00-15.00 • 32-bit processors now available 26
  27. 27. Smart Cards• Available for over 10 years• So far not successful in U.S., but popular in Europe, Australia, and Japan• Unsuccessful in U.S. partly because few card readers available• Smart cards gradually reappearing in U.S.; success depends on: – Critical mass of smart cards that support applications – Compatibility between smart cards, card-reader devices, and applications 27
  28. 28. Types of Smart cards• Memory smart card or Electronic purses or Debit Card ─store monetary value on chip ─ less info and processing• Intelligent or Relationsship based Smart Card ─store cardholder’s info i.e-name,birth date, Preferances,purchase record ─services such as debit,credit,stored value for e- cash 28
  29. 29. Smart Card Applications • Ticketless travel – Seoul bus system: 4M cards, 1B transactions since 1996 – Planned the SF Bay Area system • Authentication, ID • Medical records • Electronic purse • Personal profiles • Government – Licenses • Banking & Retail 29
  30. 30. Smart Card Processing 30
  31. 31. Secure Electronic Transaction (SET) • Developed by Visa and MasterCard • Designed to protect credit card transactions • Confidentiality: all messages encrypted • Trust: all parties must have digital certificates • Privacy: information made available only when and where necessary 31
  32. 32. Secure Electronic Transaction (SET) Protocol • Jointly designed by MasterCard and Visa – backed by Microsoft, Netscape, IBM, GTE, SAIC, and others • Designed to provide security for card payments as they travel on the Internet – validates consumers and merchants in addition to providing secure transmission • SET specification – Uses public key cryptography and digital certificates for validating both consumers and merchants – Provides privacy, data integrity, user and merchant authentication, and consumer nonrepudiation 32
  33. 33. Key Technologies of SET • Confidentiality of information: DES • Integrity of data: RSA digital signatures with SHA-1 hash codes • Cardholder account authentication: X.509v3 digital certificates with RSA signatures • Merchant authentication: X.509v3 digital certificates with RSA signatures • Privacy: separation of order and payment information using dual signatures 33
  34. 34. SET Transactions 34
  35. 35. References • http://www.cybercash.com • http://www.setco.org • http://www.echeck.org • http://www.netcheque.org • http://www.paypal.com • http://www.ecashtechnologies.com 35
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