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Paying via the Net
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Transcript of Paying via the Net
Paying via the Net
Jan DamsgaardDept. of Informatics
Copenhagen Business Schoolhttp://www.cbs.dk/staff/damsgaard/
EBUSS Jan Damsgaard, 2004
General features of payment systems
Means to exchange value between parties Different mechanisms
– Cash– Documents (check, money orders, letters of
credit)– Means of identification and associated payment
mechanisms (debit/credit cards)
EBUSS Jan Damsgaard, 2004
General features of payment systems
Features– Identity of the transaction and the payer– Cost of the payment method– Volume, amount of payment, distance of
paying parties
EBUSS Jan Damsgaard, 2004
Requirements for digital payment systems
Flexibility (different types of payments, anonymity vs. traceability)
Usability Conversion capabilities Universal Integration with financial institutions Scalability Security of the payment
Integrity, Confidentiality, Availability Non repudiation
EBUSS Jan Damsgaard, 2004
Different types of payments
Type of Payment Features
Micro payment ( <5 $) Anonymity, usability, flexibility, conversion, scalability, very low cost
Consumer payment (5<500 $) Traceability, usability, conversion, scalability, security, integration, low cost
Business payment
(>500 $)
Traceability, security, conversion, integration,
Cost not important
EBUSS Jan Damsgaard, 2004
Four examples
The Internet Bookshop– Selling books on the net
The translation service– A freelance translator
The news agency– Delivers news on the Internet
Software Company– Sells and distribute its products on the Internet
EBUSS Jan Damsgaard, 2004
Payment methods
Pre-paid systems– digital cash, debit accounts
Instant paid systems – integration with bank accounts, digital brokers
Post paid systems – credit cards and checks
EBUSS Jan Damsgaard, 2004
Post-paid payment systems Rely on the wide use of credit cards Advantages
– Widely known– Consumer protection– Currencies– Usability
Disadvantages– Cost– Security– Anonymity– Complex
EBUSS Jan Damsgaard, 2004
Post-paid payment systems
Requires transaction completeness which cannot be guaranteed with SSL only
EBUSS Jan Damsgaard, 2004
SET: Secure Electronic Transaction Protocol
Jointly developed by VISA and MASTERCARD Backed by EU for secure transactions
EBUSS Jan Damsgaard, 2004
SET Features Involves:
– Cardholder (the buyer)– Merchant (the seller)– Payment gateway (Merchant’s bank that verifies the credit card) – Certification Authorities (authenticate cardholder to merchant
and merchant to payment gateway) Enables
– secure communication on the Internet between a merchant and a payment gateway
– information confidentiality, hide customer order information from bank since order is processed by merchant and hides card information from merchant since payment is processed by bank
EBUSS Jan Damsgaard, 2004
SET Features
Combines 3 products Cardholders wallet
– on the hard drive, contains digital certificate, or a smart card
Merchant gateway software Gateway software for payment recipient
All 3 parties need SET compliant digital certificate
EBUSS Jan Damsgaard, 2004
SET cont.
Generates two messages, one for the acquirer and one for the merchant
Each message contains only the information that is essential to that particular party in order to protect the privacy of as much information as possible
EBUSS Jan Damsgaard, 2004
SET: Secure Electronic Transaction Protocol
Features– Highly secure– Low visibility (Merchant never receives any Credit Card numbers, and is
protected despite lack of credit card imprint)
– Recognized open standards– Non repudiation– Integration to other technological solutions (smartcards
on credit cards, smart cards on mobile phones, enables easy distribution
of keys and DS’s)
EBUSS Jan Damsgaard, 2004
Examples of SSL based Instant paid systems: Direct bank connections
Available in Europe where electronic funds transfers is common
Integrates Web banking solutions with ordering and payments on the web
Instant transfer of a payment from a customers’ account to a merchants’ account
Requires move from a merchant’s side to the bank site (and back)
Good security because of the use of session passwords and other means to ensure secure transactions
EBUSS Jan Damsgaard, 2004
Instant payment
Instant visibility and transfer of money Good integration with other financial services Requires well established infrastructure and
good connections Cumbersome with moves for small payments Good for larger payments
EBUSS Jan Damsgaard, 2004
Micro payment systems
Equivalent of cash residing on the computing device (computer, mobile device or smart card)
Requires a means to prevent copying, or altering; means to restore money, means to guarantee anonymity
An “embossment” process is used to add value to a “coin” from a user’s account without recording any information linking the user to the embossed coin
Enables transferable, anonymous payments
EBUSS Jan Damsgaard, 2004
Digital Cash
Coins are purchased from the bank and stored on user’s hard drive– no accounts are required during the transaction
Encryption is used to transfer payments Spent coins are redeemed by bank
Alice
Merchant
1. Creates a blank coin
2. Place blank coin in digital
envelope
Bank
Remove $1 from Alice’saccount & “emboss” the digital envelope and blank coin with validating signature
$1$1
$1$1Removescoin from
digitalenvelope
$1$1SpendsCoin
Recognizesits own“emboss” (validatingsignature)and honorsthe coin
$1$1 Redeemcoin
Blind Signature
EBUSS Jan Damsgaard, 2004
Smart cards
Small cards which can be programmed to hold digital money
Money can be transferred between cards through readers, ATM’s or other devices (in future also mobile phones)
Can be loaded with value, stored and transferred Sometimes controlled by a PIN-code Resistant to cold, damp, electrical interference or x-
rays
EBUSS Jan Damsgaard, 2004
Paypal
You start with setting up a PayPal account at paypal.com
Any credit card or bank account will do Send money and your account is debited;
receive money and it is credited The only catch is that the person on the
other end has to have a PayPal account, too …
EBUSS Jan Damsgaard, 2004
Paypal fees
It is free to send money– Open an account – Send money – Add funds – Withdraw money to a bank account
EBUSS Jan Damsgaard, 2004
www.DANMONT.dk
Owned jointly by Danish financial institutions For use in the three largest Danish towns
– Plus in a number of company cantinas Stand alone solution
– No account– No PIN– Rechargeable
EBUSS Jan Damsgaard, 2004
Mobile Phones
Can be used to pay online SIM card and PIN code together provide
instant cash Cellular phone companies are experts in
micro payment Instant paid for consumer goods
EBUSS Jan Damsgaard, 2004
Så er der film!
Sikker Nethandel – http://www.rgtv.dk/
E-Shoppens sikkerhed– http://www.rgtv.dk/
EBUSS Jan Damsgaard, 2004
Assessment FrameworkFeature Post-paid Instant Paid Pre-paid
Acceptability High Low Low
Anonymity Low High Middle
Convertibility High High High
Efficiency Low High High
Flexibility Low Middle Low
Integration High Low-middle Middle
Reliability High High High
Scalability High High High
Security Middle High Middle