ELECTRONIC PAYMENT SYSTEM

1. Electronic Payment system
(DR.SELVAMOHANA.K)

2. • Electronic Payment system - Introduction
• Online payment systems – E- cash, E- cheque,
Smart Card, Credit Card , Debit Card
• Security issues on electronic payment system
• Biometrics
• Types of biometrics.

3. Electronic Payment system - Introduction
• Electronic payment system is a way of paying
for a goods or services electronically, instead of
using cash or a cheque, in person or by mail.
• An example of an electronic payment system is
Pay Pal, credit card, debit card .
• An e-commerce payment system facilitates the
acceptance of electronic payment for online
transactions.
• Also known as a subcomponent of electronic data
interchange. Mobile banking, internet banking
facilitates EPS.

4. ElectronicPayment Methods
• One of the most popular payment forms online
are credit and debit cards.
• Besides them, there are also alternative
payment methods, such as bank transfers,
electronic wallets, smart cards or bitcoin wallet
(bitcoin is the most popular cryptocurrency).
• E-payment methods could be classified into
two areas, credit payment systems and cash
payment systems.

5. 1. Credit Payment System
• Credit Card — A form of the e-payment system
which requires the use of the card issued by a
financial institute to the cardholder for making
payments online or through an electronic device,
without the use of cash.
• E-wallet — A form of prepaid account that stores
user’s financial data, like debit and credit card
information to make an online transaction easier.
• Smart card — A plastic card with a
microprocessor that can be loaded with funds to
make transactions; also known as a chip card.

6. 2. Cash Payment System
• Direct debit — A financial transaction in which the account
holder instructs the bank to collect a specific amount of
money from his account electronically to pay for goods or
services.
• E-check — A digital version of an old paper check. It’s an
electronic transfer of money from a bank account, usually
checking account, without the use of the paper check.
• E-cash is a form of an electronic payment system, where a
certain amount of money is stored on a client’s device and
made accessible for online transactions.
• Stored-value card — A card with a certain amount of
money that can be used to perform the transaction in the
issuer store. A typical example of stored-value cards are gift
cards

7. participants of electronic payment transaction
• The cardholder is identified as the consumer
who purchases a product or service online.
• The merchant is the person or business that
sells the product or service to the cardholder.
• The issuer is the financial institution that
provides the cardholder with the payment card.
This is usually the cardholder’s bank.

8. • The acquirer, or merchant’s bank, is the
financial institution that establishes an account
with the merchant.
• The payments processor handles the official
transaction between the cardholder and
merchant.
• The payment gateway processes merchant
payment messages and uses security protocols
and encryptions to ensure transaction safety.

9. Types of E-payment transactions
Two types
i) One-time vendor payments :A cardholder types in the
card or banking information on a checkout page and
simply clicks to purchase.
ii)Recurring customer vendor payments: used when the
cardholder is paying for a product or service regularly.
• Customers enter their information once and then opt in
for a recurring billing option with a set date for the
payment to go through.
• This is often used by car insurance agencies, loan
management companies.

10. Pros and Cons of Usingan E-payment System
Benefits of EPS
• Reaching more clients from all over the world,
which results in more sales.
• More effective and efficient transactions — It’s
because transactions are made in seconds
(with one-click), without wasting customer’s
time. It comes with speed and simplicity.
• Convenience. Customers can pay for items on an
e-commerce website at anytime and anywhere.
They just need an internet connected device.

11. • Lower transaction cost and decreased
technology costs.
• Expenses control for customers, as they can
always check their virtual account where they
can find the transaction history.
• Today it’s easy to add payments to a website,
so even a non-technical person may implement
it in minutes and start processing online
payments.
• Payment gateways and payment providers
offer highly effective security and anti-fraud
tools to make transactions reliable.

12. Drawbacks of EPS
• E-commerce fraud is growing at 30% per year.
• when a merchant chooses a payment system
which is not highly secure, there is a risk of
sensitive data breach which may cause identity
theft.
• The lack of anonymity — For most, it’s not a
problem at all, but we need to remember that
some of our personal data is stored in the database
of the payment system.
• The need for internet access —If the internet
connection fails, it’s impossible to complete a
transaction, get to our online account, etc.

13. Online payment systems
• Credit Card ,
• Debit Card
• E- cash,
• E- cheque,
• Smart Card,

14. CREDIT CARD
• A credit card is a type of bank card that lets
you borrow money – credit – before paying it
back with interest.
• They work as a type of loan, but instead of
getting money in an account you get credit that
you spend via the card, before paying back
what you owe each month.

15. Importance - CREDIT CARD
• Spreading purchases out: with a credit card we
will be able to spread out the cost of a large
purchase, such as a home appliance, over several
monthly payments.
• This can be useful for emergency situations where
you might struggle to pay immediately for
something you need
• Buying now to pay later: it can also be a more
convenient option to use a credit card, as it can let
buy a product or service but not pay for it until
payday rolls around.

16. • Getting an interest free loan: some credit
cards offer a 0% interest period that effectively
lets to borrow for free.
• Getting benefits and rewards: many credit
cards also come with varying benefits and
incentives that can be useful to pick the right
ones.
• For example if we are a keen shopper we
might find a cash back or store credit card to
be ideal, while if we’re often flying from
country to country we might prefer an airline
credit card

17. • Cutting down debt: with a balance transfer credit
card we’ll be able to transfer existing debts on to one credit
account – usually with lowered or no interest.
• This means borrower reduce the amount of money to pay on
interest, letting borrower pay off the debt quicker
• Boosting credit rating: if we have a poor or limited credit
report, credit builder credit cards can offer a way to
improve your financial situation and create better borrowing
habits.
• As they’re aimed at people with a poor credit rating, they
can often charge higher rates of interest, but as long as we
make repayments in full each month we won’t have to pay
any interest.
• Consistently paying off balance leads to slowly build credit
report up as to show that he/she able to borrow money
responsibly over a long period of time

18. Insurance
• Most credit cards automatically come with consumer
protections that people don't even realize they have,
such as rental car insurance, travel insurance, and
product warranties that may exceed the
manufacturer's warranty.
Universal Acceptance
• Certain purchases are difficult to make with a debit
card.
• When we want to rent a car or stay in a hotel room, we
will almost certainly have an easier time if we have a
credit card.
• Rental car companies and hotels want customers to pay
with credit cards because it makes it easier to charge
customers for any damage they cause to a room or a
car.

19. Grace Period
• When we make a debit card purchase, money
is gone right away.
• When we make a credit card purchase, our
money remains in our checking account
until paying credit card bill.
• Hanging on to funds for this extra time can be
helpful in two ways. First, the time value of
money, will add to wealth.
• Postponing payment makes purchase that
much cheaper.

20. Safety
• Paying with a credit card makes it easier to avoid
losses from fraud.
• When our debit card is used by a thief, the money
is missing from account instantly.
• Legitimate expenses for which we've scheduled
online payments or mailed checks may bounce,
triggering insufficient funds fees and making your
creditors unhappy.
• Even if not our fault, these late or missed
payments can also lower our credit score. It can
take a while for the fraudulent transactions to be
reversed and the money restored to our account
while the bank investigates.

21. Cash Back
• The cash back credit card was first popularized in
the United States by Discover, and the idea was
simple:
• Use the card and get 1% of our balance refunded
regardless of what we bought or where we bought
it.
• Today, the concept has grown and matured. Now,
some cards now offer 2%, 3% or even as much as
6% back on selected purchases.
• Some cards, like the Fidelity Rewards card, offer
a higher rate of cash back rewards but we must
deposit our cash directly into an investment
account.

22. Payment using credit card
• When a customer purchases a product via credit card,
credit card issuer bank pays on behalf of the customer
and customer has a certain time period after which
he/she can pay the credit card bill.
• It is usually credit card monthly payment cycle.
Following are the actors in the credit card system.
• The card holder − Customer
• The merchant − seller of product who can accept
credit card payments.
• The card issuer bank − card holder's bank
• The acquirer bank − the merchant's bank
• The card brand − for example , visa or Mastercard.

23. Credit Card Payment Process

25. Smart Cards
• A smart card, chip card, or integrated circuit
card (ICC) is a physical electronic authorization device,
used to control access to a resource.
• It is typically a plastic credit card sized card with an
embedded integrated circuit.
• Many smart cards include a pattern of metal contacts to
electrically connect to the internal chip. Others
are contactless, and some are both.
• Smart cards can provide personal
identification, authentication, data storage, and application
processing. Applications include identification, financial,
mobile phones (SIM), public transit, computer security,
schools, and healthcare.
• Smart cards may provide strong security authentication
for single sign-on (SSO) within organizations. Several
nations have deployed smart cards throughout their
populations.

26. Examples of smart cards
• Payment cards, including debit or
credit cards issued by commercial
credit card companies and banks.
• Electronic benefits transfer (EBT) cards, which
are used for distribution of government benefits
such as the U.S. Supplemental Nutrition
Assistance Program.
• Ration card.
• These cards are used by banks, shops, educational
institutions, offices etc to carry out different
transaction purposes.

27. Importance - Smart Cards
Flexibility
• Smart cards have a lot of flexibility. They can
store multiple types of information including
identification, credit cards, business and family
contacts.
Cost and Availability
• Smart card readers are expensive to produce.
These readers are not available in all locations
and may have compatibility issues due to the
differences of each smart card brand.

28. Security
• Smart cards are individually encrypted and can
only be accessed by pin number.
• However, there is concern about privacy and
whether or not information on the card could
be accessed or used illegally by the
government or other third-party sources.
Data Integrity
• Information on a smart card cannot be erased
or removed accidentally by any electrical or
magnetic means.

29. Smart Card Uses
• Smart cards are useful for setting limits on
expenses, customizing customer loyalty
programs and accessing critical health care
information.
• Smart cards save users from having to
remember multiple usernames and passwords.

30. Secure
Smart card readers are more secure than their
counterparts as they use encryption and authentication
technology.
• This is more secure than previous methods associated
with payment cards.
Adaptable
Smart card readers can be plugged into machines using
a USB supported system, which can operate seamlessly
with sales and inventory software.
• They also allow an easier time tracking customer
purchases if we’re interested in starting a loyalty
program.
• Smart credit card readers can be linked to customer
databases to do research on customer purchases and
help figure out what items are the most popular in sales.

31. Debit card/ATM - IMPORTANCE
1. Easy and faster cash withdrawal
2. Reduce Workload on Bankers
3.Helps solving cash problems of un foreseen
circumstances
4. Easy Cash Payment(Access of ATM)
Some companies, hospitals, or stores make
provision for the ATM machine within their
vacinity,

32. others
1 Save time
2 Convenient 24×7 Banking
3 Withdraw Cash
4 Universally Accepted
5 Security features
7 Helpful Budgeting Tool

33. E-cash
• In providing a simple definition of eCash, also known
as electronic cash,
• It is a digital money product that provides a way to pay for
products and services without resorting to paper or coin
currency.
• The offline form of e-cash involved a digitally encoded
card that replaced paper money.
• eCash was a digital-based system that facilitated the
transfer of funds anonymously.
• A pioneer in cryptocurrency, its goal was to secure the
privacy of individuals that use the Internet for
micropayments.
• eCash was created by Dr. David Chaum under his company,
DigiCash, in 1990.

34. • E-CASH; e-cash provides the means of
transferring money between parties on a
network such as a internet.
• DIGI CASH; it is a another electronic
payment system based on digital tokens or
digital coins . it has same functions of
money/cash.
• NET CASH; net cash system is based on
distributed currency servers where e-cheques
can be exchanged for e-cash .

35. • In many instances, electronic money can be
converted into paper currency quite easily.
• This is possible because e-cash is commonly
held in an account that can be accessed in
several ways.
• For example, many have debit cards that can
be used at an automated teller
machine (ATM).
• Electronic cash is usually easily converted to
another currency, making traveling and
international business substantially easier.

36. The Advantages and Disadvantagesof Electronic Cash
Theft
• Electronic cash protects its user against theft.
• If a customer has to enter her credit card number
into a merchant's website, and the website stores
the credit card information, a thief can break into
the website and run up additional charges.
• With electronic cash, the customer does not need
to provide financial information that can be used
to incur additional, unauthorized charges.

37. Bank Regulation
• Many companies that offer electronic cash
services are not licensed to operate as banks,
according to the Internal Revenue Service.
• These electronic cash providers are not subject
to all of the regulations that govern banks, and
federal deposit insurance may not apply to the
balance of an electronic cash account.

38. Transportation
• According to the Internal Revenue Service,
electronic cash has the advantage of allowing
its user to transport a large sum of money
anonymously.
• In some cases across international borders.
Moving a large number of metal coins is
difficult because the coins take up a lot of
space and are heavy, and transporting a large
number of small denomination bills is also
inconvenient.

39. Fees
• Electronic cash can increase transaction costs.
The electronic cash provider may charge an
additional fee when the user transfers money
into her account with the provider.
• If the electronic cash provider is not a bank
that offers physical ATM services, the user will
have to pay an additional fee to withdraw
money directly from the electronic cash
account at an ATM.

40. Micro Payments
• Internet transactions often involve micro
payments, such as the sale of a cell phone ring
tone for 50 cents.
• Credit card companies charge a fee for each
transaction, so using a credit card to make
these small purchases may cost more than the
product itself.
• An electronic cash transaction does not need to
use a credit card network, so the customer can
avoid paying the credit card fee.

41. E-cheque
Electronic Check
• An electronic check, or e-check, is a form of
payment made via the Internet designed to
perform the same function as a conventional
paper check.
• Since the check is in an electronic format, it can
be processed in fewer steps.
• Additionally, it has more security features than
standard paper checks including
authentication, public key cryptography, digital
signatures, and encryption.

42. • One of the more frequently used versions of
the electronic check is the direct deposit
system offered by many employers.
• Generally, the costs associated with issuing an
electronic check are notably lower than those
associated with paper checks.

43. How an Electronic Check Works?

59. Security in E-payment system
• Security is an essential part of any transaction that takes
place over the internet. Customers will lose his/her faith
in e-business if its security is compromised. Following
are the essential requirements for safe e-
payments/transactions −
• Confidentiality − Information should not be accessible
to an unauthorized person. It should not be intercepted
during the transmission.
• Integrity − Information should not be altered during its
transmission over the network.
• Availability − Information should be available
wherever and whenever required within a time limit
specified.

60. • Authenticity − There should be a mechanism
to authenticate a user before giving him/her an
access to the required information.
• Encryption − Information should be
encrypted and decrypted only by an authorized
user.
• Auditability − Data should be recorded in
such a way that it can be audited for integrity
requirements.

61. Measures to ensure Security
Major security measures are following −
• Encryption − It is a very effective and practical way to
safeguard the data being transmitted over the network.
Sender of the information encrypts the data using a
secret code and only the specified receiver can decrypt
the data using the same or a different secret code.
• Digital Signature − Digital signature ensures the
authenticity of the information. A digital signature is an
e-signature authenticated through encryption and
password.
• Security Certificates − Security certificate is a unique
digital id used to verify the identity of an individual
website or user.

62. Security issues in E-payment system
1. Fraud and charge backs
• Online transactions are “card-not-present”
transactions.
• As e-commerce expands, opportunities
for fraudulent misuse of payment networks and
data theft grow right alongside.
• In addition to more obvious fraud-monitoring
tools such as the customer account, validation
services, and purchase tracking, a certified Level
payment processor’s risk management staff can
sniff out fraud before it occurs.

63. • Charge backs, in addition to being costly, can
damage business reputations; an excessive
number of charge backs can lead to closed
merchant accounts, effectively killing the
business.
• While charge backs do sometimes happen for
legitimate reasons, use of customer service
practices based on know-your-customer
principles, and merchant accessibility, can
substantially reduce or eliminate charge backs.

64. 2. Cross-border transactions
• Cross-border payments can be slow, inefficient, and
expensive, but they play an important role in global
trade.
• Typically, national banking infrastructures can’t handle
cross-border payments, resulting in independent and
non-uniform development in technologies and software
platforms that complicate or stall cross-border
transactions.
• New developments are beginning to shape cross-border
payment requirements:
• Emerging transnational systems will decrease reliance
on correspondent networks
• Government-led initiatives and mandates will begin to
regulate payments and fees

65. 3. Card data security
• Payment Card Industry Data Security Standards (PCI
DSS) certification is required for every merchant or
business accepting credit or debit cards, online or off.
• PCI DSS standards require merchants and processors to
meet 12 criteria across six security arenas:
• Build and maintain a secure network and systems
• Protect cardholder data
• Maintain a vulnerability management program
• Implement strong access control measures
• Regularly monitor and test networks
• Maintain an information security policy

66. 4. Multi-currency and payment methods
• Global ecommerce means accepting a variety of payment
methods and currencies.
• Electronic payments such as e-wallets, mobile payments,
and credit/debit cards help online merchants compete in
international markets by allowing their customers to pay in
their native currencies.
• For merchants, multi-currency, cross-border transactions
can require new bank accounts, new business entities, and
new regulatory hurdles in each national market. Selecting
a payment service provider with the necessary infrastructure
already in place can provide effective, and immediate,
solutions to those problems.
• A merchant can easily collect payment in one currency and
credit the merchant account in its home currency.

67. 5.Technical integration
• Online payment systems run with hardware and software
platforms. Credit card-affiliated payment processors, while
more secure, can be expensive for online retailers.
• Added to the expense is the lack of interface between
processing systems—it may be difficult or impossible for a
PSP to link with other systems, resulting in processing and
payment delays, lost transactions, and expensive fees.
• In true real-time processing, a combination of features,
including integrated systems and gateways, addresses
liquidity issues and minimizes delays, while preserving
online transaction integrity.
• A payment processor that provides for immediate and
individually processed transactions can open client accounts
in more than one acquiring bank, thus avoiding the delays
often inherent in automated clearinghouse processes.

68. Biometrics
• Biometrics are biological measurements — or physical
characteristics — that can be used to identify
individuals.
• For example, fingerprint mapping, facial recognition,
and retina scans are all forms of biometric technology,
but these are just the most recognized options.
• Researchers claim the shape of an ear, the way someone
sits and walks, unique body odors, the veins in one’s
hands, and even facial contortions are other unique
identifiers. These traits further define biometrics.

69. Types of Biometrics
• While they can have other applications,
biometrics have been often used in security,
and we can mostly label biometrics into three
groups:
• Biological biometrics
• Morphological biometrics
• Behavioral biometrics

70. • Biological biometrics use traits at a genetic and
molecular level. These may include features like
DNA or your blood, which might be assessed
through a sample of your body’s fluids.
• Morphological biometrics involve the structure
of your body. More physical traits like your eye,
fingerprint, or the shape of your face can be
mapped for use with security scanners.
• Behavioral biometrics are based on patterns
unique to each person. How you walk, speak, or
even type on a keyboard can be an indication of
your identity if these patterns are tracked.

71. • Fingerprints: Fingerprint scanners have become
ubiquitous in recent years due to their widespread
deployment on smart phones.
• Any device that can be touched, such as a phone
screen, computer mouse or touchpad, or a door
panel, has the potential to become an easy and
convenient fingerprint scanner.
• Photo and video: If a device is equipped with a
camera, it can easily be used for authentication.
• Facial recognition and retinal scans are two
common approaches.

72. • Physiological recognition: Facial recognition
is the second most common type of
authentication,
• Other image-based authentication methods
include hand geometry recognition, used by 5
percent of companies, retinal scanning, palm
vein recognition, and ear recognition.
• Voice: Voice-based digital assistants and
telephone-based service portals are already
using voice recognition to identify users and
authenticate customers.

73. • Signature: Digital signature scanners are already
in widespread use at retail checkouts and in banks
and are a good choice for situations where users
and customers are already expecting to have to
sign their names.
• DNA: Today, DNA scans are used primarily in
law enforcement to identify suspects .
• In practice, DNA sequencing has been too slow
for widespread use. This is starting to change.
Last year, a $1,000 scanner hit the market that can
do a DNA match in minutes -- and prices are
likely to keep dropping.

74. Biometric Security
• Once biometric data is obtained and mapped, it is then
saved to be matched with future attempts at access. Most of
the time, this data is encrypted and stored within the device
or in a remote server.
• Biometrics scanners are hardware used to capture the
biometric for verification of identity. These scans match
against the saved database to approve or deny access to the
system.
• In other words, biometric security means your body
becomes the “key” to unlock your access.
• Biometrics are largely used because of two major benefits:
 Convenience of use: Biometrics are always with you and
cannot be lost or forgotten.
 Difficult to steal or impersonate: Biometrics can’t be
stolen like a password or key can.