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Ecommerce Chap 08


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Ecommerce Chap 08

  1. 1. Chapter 8Electronic Payment Systems and Security © Prentice Hall, 2000 1
  2. 2. Learning ObjectivesDescribe typical electronic payment systems for ECIdentify the security requirements for safe electronicpaymentsDescribe the typical security schemes used to meetthe security requirementsIdentify the players and procedures of theelectronic credit card system on the InternetDiscuss the relationship between SSL and SETprotocols © Prentice Hall, 2000 2
  3. 3. Learning Objectives (cont.)Discuss the relationship between electronic fundtransfer and debit cardDescribe the characteristics of a stored valuecardClassify and describe the types of IC cards usedfor paymentsDiscuss the characteristics of electronic checksystems © Prentice Hall, 2000 3
  4. 4. SSL Vs. SET: Who Will Win?A part of SSL (Secure Socket Layer) is availableon customers’ browsers it is basically an encryption mechanism for order taking, queries and other applications it does not protect against all security hazards it is mature, simple, and widely useSET ( Secure Electronic Transaction) is a verycomprehensive security protocol it provides for privacy, authenticity, integrity, and, or repudiation it is used very infrequently due to its complexity and the need for a special card reader by the user it may be abandoned if it is not simplified/improved © Prentice Hall, 2000 4
  5. 5. Payments, Protocols and Related Issues SET Protocol is for Credit Card Payments Electronic Cash and Micropayments Electronic Fund Transfer on the Internet Stored Value Cards and Electronic Cash Electronic Check Systems © Prentice Hall, 2000 5
  6. 6. Payments, Protocols and Related Issues (cont.) Security requirements Authentication: A way to verify the buyer’s identity before payments are made Integrity: Ensuring that information will not be accidentally or maliciously altered or destroyed, usually during transmission Encryption: A process of making messages indecipherable except by those who have an authorized decryption key Non-repudiation: Merchants need protection against the customer’s unjustifiable denial of placed orders, and customers need protection against the merchants’ unjustifiable denial of past payment © Prentice Hall, 2000 6
  7. 7. Security Schemes Secret Key Cryptography (symmetric) Keysender (= Keyreceiver) KeyreceiverOriginal Scrambled Scrambled Original InternetMessage Message Message MessageSender Encryption Decryption Receiver © Prentice Hall, 2000 7
  8. 8. Security Schemes (cont.) Public Key Cryptography Public Keyreceiver Private Keyreceiver Original Scrambled Scrambled OriginalMessage Message Internet Message Message Message Sender Receiver Private Keysender Public Keysender Digital Original Scrambled Scrambled Original InternetSignature Message Message Message Message Sender Receiver © Prentice Hall, 2000 8
  9. 9. Security Schemes (cont.)Digital Signature Analogous to handwritten signature Sender encrypts Any receiver with a message with senders public key her private key can read it The receiver is the onlyA digital signature is one that can read theattached by a sender message and at the sameto a message time he is assured thatencrypted in the the message was indeedreceiver’s public key sent by the sender © Prentice Hall, 2000 9
  10. 10. Security Schemes (cont.)Certificate Identifying the holder of a public key (Key- Exchange) Issued by a trusted certificate authority (CA) Name : “Richard” key-Exchange Key : Signature Key : Serial # : 29483756 Other Data : 10236283025273 Expires : 6/18/96 Signed : CA’s Signature © Prentice Hall, 2000 10
  11. 11. Security Schemes (cont.) Certificate Authority - e.g. VeriSign Public or private, comes in levels (hierarchy) A trusted third party services Issuer of digital certificates Verifying that a public key indeed belongs to a certain individual RCA : Root Certificate Authority RCA BCA : Brand Certificate Authority BCA GCA : Geo-political Certificate Authority CCA : Cardholder Certificate Authority GCA MCA : Merchant Certificate Authority PCA : Payment Gateway CCA MCA PCA Certificate Authority Hierarchy of Certificate AuthoritiesCertificate authority needs to be verified by a government or well trusted entity ( e.g., post office) © Prentice Hall, 2000 11
  12. 12. Electronic Credit Card System on the InternetThe Players Cardholder Merchant (seller) Issuer (your bank) Acquirer (merchant’s financial institution, acquires the sales slips) Brand (VISA, Master Card) © Prentice Hall, 2000 12
  13. 13. Electronic Credit Card System on the Internet (cont.) The process of using credit cards offlineA cardholder requests the issuance of acard brand (like Visa and MasterCard) The authorization of card issuanceto an issuer bank in which the by the issuer bank, or its designatedcardholder may have an account. brand company, may require customer’s physical visit to an office.A plastic card is physically deliveredto the customer’s address by mail. The card can be in effect as the cardholder calls the bank forThe cardholder shows the card to a initiation and signs on the back ofmerchant to pay a requested the card.amount. Then the merchant asksfor approval from the brand Upon the approval, the merchantcompany. requests payment to the merchant’s acquirer bank, and pays fee for theThe acquirer bank requests the service. This process is called aissuer bank to pay for the credit “capturing process”amount. © Prentice Hall, 2000 13
  14. 14. Cardholder Merchant credit card Payment authorization, payment data Card Brand Company account debit data payment data payment data amount transfer Issuer Bank Acquirer Bank Cardholder Merchant Account Account Credit Card Procedure (offline and online) © Prentice Hall, 2000 14
  15. 15. Secure Electronic Transaction (SET) ProtocolSender’s Computer1. The message is hashed to a prefixed length of message digest.2. The message digest is encrypted with the sender’s private signature key, and a digital signature is created.3. The composition of message, digital signature, and Sender’s certificate is encrypted with the symmetric key which is generated at sender’s computer for every transaction. The result is an encrypted message. SET protocol uses the DES algorithm instead of RSA for encryption because DES can be executed much faster than RSA.4. The Symmetric key itself is encrypted with the receiver’s public key which was sent to the sender in advance. The result is a digital envelope. © Prentice Hall, 2000 15
  16. 16. Sender’s Computer Sender’s PrivateMessage   Signature Key Message Digest Digital Signature +Message +  Encrypt + Symmetric KeySender’s EncryptedCertificate Message  Receiver’s Encrypt Certificate Receiver’s Digital Key-Exchange Key Envelope © Prentice Hall, 2000 16
  17. 17. Secure Electronic Transaction (SET) Protocol (cont.)Receiver’s Computer5. The encrypted message and digital envelope are transmitted to receiver’s computer via the Internet.6. The digital envelope is decrypted with receiver’s private exchange key.7. Using the restored symmetric key, the encrypted message can be restored to the message, digital signature, and sender’s certificate.8. To confirm the integrity, the digital signature is decrypted by sender’s public key, obtaining the message digest.9. The delivered message is hashed to generate message digest.10. The message digests obtained by steps 8 and 9 respectively, are compared by the receiver to confirm whether there was any change during the transmission. This step confirms the integrity. © Prentice Hall, 2000 17
  18. 18. Receiver’s Computer Receiver’s Private Key-Exchange Key Decrypt Digital  Envelope Message   Message Digest Decrypt + Symmetric Key + Encrypted  Sender’s compare Message Certificate  Decrypt Sender’s PublicDigital Signature Message Digest Signature Key © Prentice Hall, 2000 18
  19. 19. IC Card Reader Customer y Customer x With Digital Wallets Certificate Authority Electronic Shopping MallMerchant A Merchant B Payment Gateway Protocol X.25 Credit Card BrandEntities of SET Protocol in Cyber Shopping © Prentice Hall, 2000 19
  20. 20. SET Vs. SSLSecure Electronic Transaction (SET) Secure Socket Layer (SSL)Complex SimpleSET is tailored to the credit card SSL is a protocol for general-payment to the merchants. purpose secure message exchanges (encryption).SET protocol hides the customer’s SSL protocol may use acredit card information from certificate, but there is nomerchants, and also hides the payment gateway. So, theorder information to banks, to merchants need to receive bothprotect privacy. This scheme is the ordering information andcalled dual signature. credit card information, because the capturing process should be initiated by the merchants. © Prentice Hall, 2000 20
  21. 21. Electronic Fund Transfer (EFT) on the Internet Internet Payer Payee Cyber Bank Cyber BankPayment PaymentGateway Gateway Bank Bank VAN VAN Automated ClearinghouseAn Architecture of Electronic Fund Transfer on the Internet © Prentice Hall, 2000 21
  22. 22. Debit CardsA delivery vehicle of cash in an electronicformMondex, VisaCash applied this approachEither anonymous or onymousCyberCash has commercialized a debit cardnamed CyberCoin as a medium ofmicropayments on the Internet © Prentice Hall, 2000 22
  23. 23. Financial EDIIt is an EDI used for financial transactions EDI is a standardized way of exchanging messages between businesses EFT can be implemented using a Financial EDI systemSafe Financial EDI needs to adopt a securityscheme used for the SSL protocolExtranet encrypts the packets exchanged betweensenders and receivers using the public keycryptography © Prentice Hall, 2000 23
  24. 24. Electronic Cash and Micropayments Smart Cards The concept of e-cash is used in the non-Internet environment Plastic cards with magnetic stripes (old technology) Includes IC chips with programmable functions on them which makes cards “smart” One e-cash card for one application Recharge the card only at designated locations, such as bank office or a kiosk. Future: recharge at your PC e.g. Mondex & VisaCash © Prentice Hall, 2000 24
  25. 25. Mondex Makes Shopping Easy Shopping with Mondex Adding money to the card Payments in a new era of electronic shopping Paying on the Internet © Prentice Hall, 2000 25
  26. 26. Electronic MoneyDigiCash The analogy of paper money or coins Expensive, as each payment transaction must be reported to the bank and recorded Conflict with the role of central bank’s bill issuance Legally, DigiCash is not supposed to issue more than an electronic gift certificate even though it may be accepted by a wide number of member stores © Prentice Hall, 2000 26
  27. 27. Electronic Money (cont.)Stored Value Cards No issuance of money Debit card — a delivering vehicle of cash in an electronic form Either anonymous or onymous Advantage of an anonymous card the card may be given from one person to another Also implemented on the Internet without employment of an IC card © Prentice Hall, 2000 27
  28. 28. Electronic Money (cont.)Smart card-based e-cash Can be recharged at home through the Internet Can be used on the Internet as well as in a non- Internet environmentCeiling of Stored Values To prevent the abuse of stored values in money laundry S$500 in Singapore; HK$3,000 in Hong KongMultiple Currencies Can be used for cross border payments © Prentice Hall, 2000 28
  29. 29. Contactless IC CardsProximity Card Used to access buildings and for paying in buses and other transportation systems Bus, subway and toll card in many citiesAmplified Remote Sensing Card Good for a range of up to 100 feet, and can be used for tolling moving vehicles at gates Pay toll without stopping (e.g. Highway 91 in California) © Prentice Hall, 2000 29
  30. 30. Electronic Check SystemsProcedure of Financial Service Technology Consortium Prototype Remittance Account Payer Invoice Payee Receivable E- Mail WWWSignature Signature “Card” “Card” Remittance Workstation Remittance Check Check Signature Signature E-mail Certificate Certificate Mall statement Certificate Certificate E-Check line item Endorsement Secure Envelope Certificate Certificate ACH Secure Envelope ECP Payer’s Bank Clear Check Payee’s Bank Deposit check Debit account Credit account © Prentice Hall, 2000 30
  31. 31. Electronic Check Systems (cont.)Electronic Checkbook Counterpart of electronic wallet To be integrated with the accounting information system of business buyers and with the payment server of sellers To save the electronic invoice and receipt of payment in the buyers and sellers computers for future retrieval Example : SafeCheck Used mainly in B2B © Prentice Hall, 2000 31
  32. 32. Payer’s Payee’s checkbook check-receipt agent Issue a check agent Payer Receipt Payee Checkbook, report screened result Request of Internet screening check present issuance control control agent of agent of payer’s clearing payee’s bank bank A/C A/C DB DB payer’s bank payee’s bank© Prentice Hall, 2000 The Architecture of SafeCheck 32
  33. 33. Integrating Payment MethodsTwo potential consolidations: The on-line electronic check is merging with EFT The electronic check with a designated settlement date is merging with electronic credit cardsSecurity First Network Bank (SFNB) First cyberbank Lower service charges to challenge the service fees of traditional banksVisa VisaCash is a debit card ePay is an EFT service © Prentice Hall, 2000 33
  34. 34. How Many Cards are Appropriate? An onymous card is necessary to The stored value in keep the certificates for IC card can be delivered credit cards, EFT, and in an anonymous mode electronic checkbooks Malaysia’s Multimedia Supper Corridor project pursues a One-Card system Relationship Card by Visa is also attempting a one card system © Prentice Hall, 2000 34
  35. 35. Five Security TipsDon’t reveal your online Passcode to anyone. If you thinkyour online Passcode has been compromised, change itimmediately.Don’t walk away from your computer if you are in themiddle of a session.Once you have finished conducting your banking on theInternet, always sign off before visiting other Internetsites.If anyone else is likely to use your computer, clear yourcache or turn off and re-initiate your browser in order toeliminate copies of Web pages that have been stored inyour hard drive.Bank of America strongly recommends that you use abrowser with 128-bit encryption to conduct securefinancial transactions over the Internet. © Prentice Hall, 2000 35
  36. 36. Managerial IssuesSecurity solution providers can cultivate the opportunity ofproviding solutions for the secure electronic payment systemsElectronic payment system solution providers can offervarious types of electronic payment systems to electronic storesand banksElectronic stores should select an appropriate set of electronicpayment systemsBanks need to develop cyberbank services to be compatiblewith the various electronic payment systemCredit card brand companies need to develop an ECstandard like SET, and watch the acceptance by customersSmart card brand should develop a business model incooperation with application sectors and banksCertificate authority needs to identify the types of certificate toprovide © Prentice Hall, 2000 36