chapter11very usefulslidespleasechapter11.ppt
- 1. E-Commerce: The Second Wave Fifth Annual Edition Chapter 11: Payment Systems For Electronic Commerce
- 2. E-Commerce: The Second Wave, Fifth Annual Edition 2 Objectives In this chapter, you will learn about: • The basic functions of online payment systems • The use of payment cards in electronic commerce • The history and future of electronic cash • How electronic wallets work • The use of stored-value cards in electronic commerce
- 3. E-Commerce: The Second Wave, Fifth Annual Edition 3 Online Payment Basics • Cash, checks, credit cards, and debit cards – Account for more than 90 percent of all consumer payments in the United States • Most popular consumer electronic transfers are automated payments of – Auto loans – Insurance payments – Mortgage payments made from consumers’ checking accounts
- 4. E-Commerce: The Second Wave, Fifth Annual Edition 4 Payment Methods for all Types of U.S. Consumer Transactions, 2005 Projections
- 5. E-Commerce: The Second Wave, Fifth Annual Edition 5 Online Payment Basics (Continued) • Scrip – Digital cash minted by a company instead of by a government – Cannot be exchanged for cash – Like a gift certificate that is good at more than one store
- 6. E-Commerce: The Second Wave, Fifth Annual Edition 6 Payment Cards • Describe all types of plastic cards used to make purchases • Credit card – Has spending limit based on user’s credit history
- 7. E-Commerce: The Second Wave, Fifth Annual Edition 7 Payment Cards (Continued) • Debit card – Removes amount from cardholder’s bank account – Transfers it to seller’s bank account • Charge card – Carries no spending limit – Amount charged is due at end of billing period
- 8. E-Commerce: The Second Wave, Fifth Annual Edition 8 Advantages and Disadvantages of Payment Cards • Advantage – Worldwide acceptance – Built-in security for merchants • Disadvantage – Payment card service companies charge merchants per-transaction fees and monthly processing fees
- 9. E-Commerce: The Second Wave, Fifth Annual Edition 9 Payment Acceptance and Processing • Steps followed once merchant receives 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 credit line or the funds needed to cover the charge – Settlement occurs
- 10. E-Commerce: The Second Wave, Fifth Annual Edition 10 Open and Closed Loop System • Closed loop systems – Card issuer pays merchants that accept the card directly and does not use an intermediary • Open loop systems – Involve three or more parties – Systems using Visa or MasterCard are examples
- 11. E-Commerce: The Second Wave, Fifth Annual Edition 11 Merchant Accounts • To process payment cards for Internet transactions – Online merchant must set up merchant account • New merchant must supply – Business plan – Details about existing bank accounts – Business and personal credit history
- 12. E-Commerce: The Second Wave, Fifth Annual Edition 12 Processing Payments Online • InternetSecure – Provides secure payment card services • First Data – Provides merchant payment card processing services with the following programs • ICVERIFY, PCAuthorize, and WebAuthorize • Banks connect to an Automated Clearing House (ACH) through – Highly secure, private leased telephone lines
- 13. E-Commerce: The Second Wave, Fifth Annual Edition 13 Processing a Payment Card Transaction
- 14. E-Commerce: The Second Wave, Fifth Annual Edition 14 Electronic Cash • Term that describes any value storage and exchange system created by a private entity that – Does not use paper documents or coins – Can serve as a substitute for government- issued physical currency • Attractive in two arenas – Sale of goods and services of less than $10 – Sale of higher-priced goods and services to those without credit cards
- 15. E-Commerce: The Second Wave, Fifth Annual Edition 15 Micropayments and Small Payments • Micropayments – Internet payments for items costing from a few cents to approximately a dollar • Small payments – Payments of less than $10
- 16. E-Commerce: The Second Wave, Fifth Annual Edition 16 Privacy and Security of Electronic Cash • Concerns about electronic payment methods include – Privacy and security – Independence – Portability – Convenience • Advantages of electronic cash – Independent and portable
- 17. E-Commerce: The Second Wave, Fifth Annual Edition 17 eCharge Home Page
- 18. E-Commerce: The Second Wave, Fifth Annual Edition 18 Holding Electronic Cash: Online and Offline Cash • Online cash storage – Trusted third party is involved in all transfers of electronic cash – Holds consumers’ cash accounts • Offline cash storage – Virtual equivalent of money kept in a wallet – No third party is involved in the transaction • Double-spending – Spending electronic cash twice
- 19. E-Commerce: The Second Wave, Fifth Annual Edition 19 Advantages and Disadvantages of Electronic Cash • Advantages of electronic cash – Transactions are more efficient – Transfer on the Internet costs less than processing credit card transactions • Disadvantages of electronic cash – Use provides no audit trail – Problem of money laundering arises – Susceptible to forgery
- 20. E-Commerce: The Second Wave, Fifth Annual Edition 20 Providing Security for Electronic Cash • Cryptographic algorithms – Keys to creating tamperproof electronic cash that can be traced back to its origins • Anonymous electronic cash – Electronic cash that cannot be traced back to the person who spent it • Creating truly anonymous electronic cash – Requires bank to issue electronic cash with embedded serial numbers
- 21. E-Commerce: The Second Wave, Fifth Annual Edition 21 Detecting Double-Spending of Electronic Cash
- 22. E-Commerce: The Second Wave, Fifth Annual Edition 22 Electronic Cash Systems • CheckFree – Largest online bill processor in the world – Provides online payment processing services • Clickshare – An electronic cash system aimed at magazine and newspaper publishers
- 23. E-Commerce: The Second Wave, Fifth Annual Edition 23 Electronic Cash Systems (Continued) • InternetCash – Provides electronic currency that is very similar to traditional cash – Customers must first purchase an InternetCash card from a store • PayPal – Provides payment processing services to businesses and to individuals – Peer-to-peer (P2P) payment system • Free payment clearing service for individuals
- 24. E-Commerce: The Second Wave, Fifth Annual Edition 24 PayPal Payment Method Search Option on eBay Main Search Page
- 25. E-Commerce: The Second Wave, Fifth Annual Edition 25 Electronic Wallets • Hold credit card numbers, electronic cash, owner identification and contact information • Give consumers the benefit of entering their information just once • Make shopping more efficient
- 26. E-Commerce: The Second Wave, Fifth Annual Edition 26 Electronic Wallets (Continued) • Server-side electronic wallet – Stores customer’s information on a remote server belonging to a particular merchant or wallet publisher • Client-side electronic wallet – Stores consumer’s information on his or her own computer
- 27. E-Commerce: The Second Wave, Fifth Annual Edition 27 Microsoft .NET Passport • An electronic wallet operated by Microsoft • Passport consists of four integrated services – Passport single sign-in service (SSI) – Passport Wallet service – Kids Passport service – Public profiles
- 28. E-Commerce: The Second Wave, Fifth Annual Edition 28 Microsoft .NET Passport Home Page
- 29. E-Commerce: The Second Wave, Fifth Annual Edition 29 Yahoo! Wallet • An electronic wallet offered by the Web portal site Yahoo! • Lets users store information about several major credit and charge cards • Many industry observers and privacy rights activist groups are concerned about electronic wallets
- 30. E-Commerce: The Second Wave, Fifth Annual Edition 30 W3C Micropayment Standards Development Activity • Common Markup for Micropayment Per-Fee- Links – Standards developed by W3C Electronic Commerce Interest Group (ECIG) – Provide extensible and interoperable way to embed micropayment information in Web page • Extensible system – One that developers can add to (or extend) without voiding any earlier work on the system
- 31. E-Commerce: The Second Wave, Fifth Annual Edition 31 W3C Proposed Micropayment HTML Tags
- 32. E-Commerce: The Second Wave, Fifth Annual Edition 32 The ECML Standard • Electronic Commerce Modeling Language (ECML) – Users can enter credit card and address information once into an ECML-capable electronic wallet – Any existing wallet can be redesigned to follow the ECML standard – Users control access to their ECML electronic wallets
- 33. E-Commerce: The Second Wave, Fifth Annual Edition 33 Stored-Value Cards • Can be an elaborate smart card with a microchip that records currency balance • Common stored-value cards – Prepaid phone, copy, subway, and bus cards
- 34. E-Commerce: The Second Wave, Fifth Annual Edition 34 Magnetic Strip Cards • Cannot send or receive information • Cannot increment or decrement value of cash stored on the card • Processing must be done on a device into which card is inserted • Smart card – Better suited for Internet payment transactions
- 35. E-Commerce: The Second Wave, Fifth Annual Edition 35 Smart Cards • Stored-value cards • Can hold private user data, such as financial facts • Can store about 100 times more information than a magnetic strip plastic card • Safer than conventional credit cards
- 36. E-Commerce: The Second Wave, Fifth Annual Edition 36 Octopus Smart Card Information on the Hong Kong Citybus Site
- 37. E-Commerce: The Second Wave, Fifth Annual Edition 37 Smart Cards (Continued) • Smart Card Alliance – Promotes benefits of smart cards – Promotes widespread acceptance of multiple- application smart card technology – Members include companies in banking, financial services, computer technology, and healthcare – Promotes compatibility among smart cards, card reader devices, and applications
- 38. E-Commerce: The Second Wave, Fifth Annual Edition 38 Mondex • Smart card that holds and dispenses electronic cash • Introduced in 1990 and now part of MasterCard International • Can accept electronic cash directly from a user’s bank account • Card carries real cash in electronic form – Risk of theft may deter users from loading it with very much money
- 39. E-Commerce: The Second Wave, Fifth Annual Edition 39 Mondex (Continued) • Steps in using a Mondex card to transfer electronic cash from buyer to seller 1. Card user inserts Mondex card into reader 2. Merchant’s terminal requests payment 3. Customer’s card checks merchant’s digital signature
- 40. E-Commerce: The Second Wave, Fifth Annual Edition 40 Steps in using a Mondex Card to Transfer Electronic Cash from Buyer to Seller (Continued) 4. Merchant’s terminal checks customer’s just- sent digital signature for authenticity 5. Once electronic cash is deducted from the cardholder’s card • Same amount is transferred into the merchant’s electronic cash account
- 41. E-Commerce: The Second Wave, Fifth Annual Edition 41 Mondex Smart Card Processing
- 42. E-Commerce: The Second Wave, Fifth Annual Edition 42 Summary • Most popular forms of payment on the Internet – Credit card – Debit card – Charge cards (payment cards)
- 43. E-Commerce: The Second Wave, Fifth Annual Edition 43 Summary • Electronic cash – Form of online payment – Slow to catch on in the United States – Especially useful for making micropayments – Advantages • Portable, anonymous, and usable for international transactions
- 44. E-Commerce: The Second Wave, Fifth Annual Edition 44 Summary • Electronic wallets – Provide convenience to online shoppers – Eliminate need to reenter payment card and shipping information at site’s electronic checkout counter • Stored-value cards – Physical devices that hold information • Smart cards – Intended to replace collection of plastic cards people now carry