This document discusses online payment systems. It begins by describing traditional payment methods and their limitations for online transactions. Then it introduces various types of online payment systems, including payment cards, electronic checks, electronic cash, and smart card-based systems. It covers encryption/decryption, electronic funds transfer, and factors for success like security, reliability and standards. Overall it provides a comprehensive overview of online payment options and considerations.

1. SESSION- 2014
TOPIC:- ONLINE PAYMENT SYSTEM
SUBMITTED TO: SUBMITTED BY:
PROF. ALKA RAGHUNATH MADHULIKA GOYAL
UPASANA PACHAURI
Sec-”B”

2.  Traditional Payment System
 Introduction to Online Payment System
 Online Payment Scheme
 Encryption and Decryption
 Electronic Fund Transfer
 Types Of Online Payment System
 Payment Through Cards
 Electronic Cheque System
 Electronic Cash System
 Smart Card Based Electronic Payment System
 Critical Factors for success of Online Payment System
 Future Prospect.

3.  Must have two fundamental assumptions:
1. The transacting parties, i.e., buyer and seller at some time be
in each other’s physical presence.
2. There will be sufficient delay in the payment process for
detection of fraud, overdraft and other problems to be
identified and corrected.

4. Few traditional payment methods are:
1. Cash
2. Cheque
3. Money Orders
4. Barter System
5. Bank Drafts
6. Tokens etc.

6. 1. Cheques and cash cannot be exchanged in real time.
2. Lack of security.
3. Lack of Coverage.
4. Lack of eligibility.
5. Lack of support for micro transactions.

7.  E-commerce requires payment methods that are:
–Widely used by consumers and accepted by
merchants and banks.
–Real time, i.e. transactions are completed
when consumer hits the pay button
–Provide support for micropayments.

8.  E-Payment is the subset of an e-commerce transaction to
include electronic payment for buying and selling goods
or services offered through the internet.

10.  Encryption is the process of encoding messages or
information in such a way that only authorized parties
can read it.
 Decryption is the process of transforming data that
has been rendered unreadable through encryption
back to its unencrypted form.

11.  Electronic funds transfer (EFT) is the electronic exchange,
transfer of money from one account to another, either within a
single financial institution or across multiple institutions,
through computer-based system.
 ACH stands for the Automated Clearing House, a federally
regulated network for the processing of electronic payments.
 ACH and EFT are terms that can be used interchangeably.
 Both ACH and EFT electronically transfer money directly in
and out of bank accounts. Many of us use this when we pay
bills online. We simply enter our account and routing numbers,
and the payment is deducted from our bank account on a
specified date.

12. These covers a number of different concepts;
 Cardholder-initiated transactions, using a payment card such
as a credit or debit card
 Direct deposit payment initiated by the payer
 Direct debit payments, sometimes called electronic checks,
for which a business debits the consumer's bank accounts for
payment for goods or services
 Electronic bill payment in online banking, which may be
delivered by EFT or paper check
 Transactions involving stored value of electronic money,
possibly in a private currency stems.

13. In general, the EFT process can take up to 3 business days.
Listed below is an example of how an EFT payment reaches
your payee.
Monday: Payment is issued and the EFT process initiates. The
payment leaves your Payment Outbox and can be viewed as a
report.
Tuesday: Your account is debited via ACH (Automated
Clearing House). ACH is the national standard for debiting a
funding account.
Wednesday: Payment is sent to your payee via RPPS
(Mastercard Remote Payment and Presentation Service).
Thursday/Friday: Depending on your payee's "back-end
processes," the payment may post to your account.

15. Benefits of making EFT payments:
 allows you to pay your taxes automatically from your bank
account.
 eliminates the need to write checks.
 simplifies the payment of taxes.
 saves you time and money on postage and mailing checks.
 ensures timely tax payments.
 eliminates the risk of your payments being lost in the mail.
 ensures that payments can be located.
 provides security and confidentiality for all transactions.

16. Broadly it is of following types:
1. Payment Through Cards.
2. Electronic Cheque System
3. Electronic Cash System and
4. Smart Card based Electronic Payment
System

17.  These payment system is widely accepted by the customers
and merchants.
 The term payment card describes all types of plastic cards
used to make purchases.
1.Credit card
-Has a spending limit based on a user’s credit history
2.Debit card
-Removes an amount from a cardholder’s bank account
-Transfers it to the seller’s bank account

18. Steps followed once a merchant receives a consumer’s
payment card information:
Merchant authenticates payment card
Merchant checks with payment card issuer
 To ensure that credit or funds are available
 Puts a hold on the credit line or the funds needed
to cover the charge
Settlement of balance with the issuer

20.  Pay anyone, anywhere via email
 Draws funds from user’s bank account, places credit hold on
credit card for guarantee
 Based on automated clearing house
 Withdraw funds anytime, or send to someone else
 Mobile payments (WAP)

21.  Advantages:
◦ Widespread acceptance
◦ Usually have built-in security for merchants
 Disadvantage:
◦ Payment card service companies charge merchants per-
transaction fees and monthly processing fees

22.  The e-cheque system was deliberately created to work in much
the same way as conventional paper cheque. An account
holder will issue an electronic document that contains the
name of the financial institution, the payer’s account number,
the name of payee and amount of cheque. Most of the
information is in encoded form.
 Electronic cheques are generated and exchanged online.
 Digital signatures (based on public key cryptography) replace
handwritten signatures.

23. The five steps in E-Cheque system are as follows:
 Step 1: a purchaser fills a purchase order form, attaches a
payment advice (electronic cheque), signs it with his private
key (using his signature hardware), attaches his public key
certificate, encrypts it using his private key and sends it to the
vendor.
 Step 2: the vendor decrypts the information using his public
key, checks the purchaser’s certificates, signature and cheque,
attaches his deposit slip, and endorses the deposit attaching his
public key certificates. This is encrypted and sent to his bank.

24.  Step 3: the vendor’s bank checks the signatures and
certificates and sends the cheque for clearance. The banks and
clearing houses normally have a private secure data network.
 Step 4: when the cheque is cleared, the amount is credited to
the vendor’s account and a credit advice is sent to him.
 Step 5: the purchaser gets a consolidated debit advice
periodically.

26. Advantages:
1.Less expensive than credit cards
2. Much faster than paper based traditional cheque.
Disadvantages:
1.Lack of authentication
2.Limited use in Virtual world.

27.  E-cash is an electronic or digital form of value storage and
value exchange that have limited convertibility into other
forms of value and require intermediaries to convert.
 E-cash presents four main characteristics
1. monetary value,
2. storability and irretrievability,
3.interoperability and
4. security.

28.  Based on the cryptographic system called as “Digital
Signature”
 Involves a pair of numeric keys that work in tandem:
- One for Locking(Encryption)
- Other for Unlocking(Decryption)
 Message encoded with one numeric key can only be decoded
with other numeric key.
 The encryption key is kept public and decryption key is made
private. `

30.  CheckFree
◦ Largest ACH (Automated Clearing House) in the world
◦ Provides online payment processing services
 Clickshare
◦ Clickshare allows a consumer to have one account at a most-
trusted website and buy from other websites without having
to pass around a credit-card number, register or give out
personal information. One ID, one account, one bill.

31. Advantages:
1.Best suited for small payments.
2.Anonymity can be preserved through blind signatures.
3.Less Expensive to others
4.Authentication is not an issue.
Disadvantages:
1.Processing Overheads due to string encryption.
2.Not suitable where security needs are high.
3.Slow for large transactions.

32.  Stored-value cards that…
◦ Can hold private user data, such as financial facts,personal
and specialized information but cannot process it.
◦ Can store about 100 times more information than a magnetic
strip plastic card
◦ Safer than conventional credit cards

34. Financial Applications
1. Credit and/or Debit Accounts, replicating what is currently
on the magnetic stripe bank card, but in a more secure
environment.
2. Securing payment across the Internet as part of Electronic
Commerce.
Communications Applications
1. The secure initiation of calls and identification of caller (for
billing purposes) on any Global System for Mobile
Communications (GSM) phone.
2. Subscriber activation of programming on Pay-TV.

35. Information Security
1. Employee access cards with secured passwords and the
potential to employ biometrics to protect access to computer
systems.
Transportation
1. Drivers Licenses.
2. Electronic Toll Collection Systems.
Student Identification
1. All-purpose student ID card (a/k/a campus card), containing
a variety of applications such as electronic purse (for
vending machines, laundry machines, library card, and meal
card).

36.  Cost
 Reliability
 Error Correction
 Storage Capacity-EEPROM:8K-128 K bit.
(Here 1K means 1000 bits,128 characters).
 Ease of Use
 Susceptibility
 Security

37. ADVANTAGES:
 The capacity provided by the on-board microprocessor and
data capacity for highly secure, off-line processing
 Adherence to international standards, ensuring multiple
vendor sources and competitive prices
 Established track record in real world applications
 Durability and long expected life span (guaranteed by vendor
for up to 10,000 read/writes before failure)
 Chip Operating Systems that support multiple applications
 Secure independent data storage on one single card

38. DISADVANTAGES:
 Relatively higher cost of smart cards as compared to magnetic
stripe cards.
 Present lack of infrastructure to support the smart card.
 Proprietary nature of the Chip Operating System. The
consumer must be technically knowledgeable to select the
most appropriate card for the target application.
 Lack of standards to ensure interoperability among varying
smart card programs.
 Unresolved legal and policy issues related to privacy and
confidentiality or consumer protection laws.

39.  Integrity: transaction data are transmitted and received
unchanged and as intended.
 Non-repudiation: transactions have the quality of non
deniable proof or receipts.
 Authentication: identities and attributes of parties engaged in
commerce are established at some tolerable level of risk.
 Authorization: individuals are established and recognized as
entitled to receive, send or view transactions.
 Confidentiality: transactions can be protected from view
except by those who are authorized.
 Reliability: probability of failure in the transaction-send,
receive, acknowledge-is low.

40.  The security risk are still present in the online payment
system so various measures can be taken to eliminate
those risk.
 The online payment system has very wide scope in
future.