Internet Payment Mechanisms
Group 0229
Brad Boles Larry Solomon Linda Watson
Li Su Scott Way Eva Thomas
Introduction
The key to successful commerce is a secure and stable payment mechanism and this is a
fundamental requirement for the broad expansion of e-commerce.
History
The earliest payment systems were very simple. Since goods were bartered directly the good themselves served as a payment
mechanism.
History (continued)
As trade became more complex the concept of money/currency was introduced. In recent times cash has given way to checks and credit cards as
the principle forms of money. Today the vast majority of e-commerce in conducted with credit
cards.
Services supported by Internet payments
• Consumer bill payment
• Invoice payment
• Cash management
• Supply chain settlement
• Procurement
Two types of payment systemsIn a Payment Instruction system a stream of data is sent instructing a third party to initiate a payment. The user of this type of system never actually takes possession of anything.
In a Digital Money system a user can physically store data on an independent device that represents money that can be transferred at a later date.
UPS
Traditionally, each type of payment is handled by a different system. For
example, credit cards are handled by a POS system while EFT’s are processed
by the ACH. In the Internet environment, a universal payment system (UPS) can be developed to
support all types of payment transactions.
Old style “Internet” Banking
In this scenario the payer’s bank supports UPS but the payee’s doesn’t. Only credit card and one way EFT transactions are
supported. Validation of Payee’s funds is not done in real-time.
Current “Internet” banking
Both the payer’s and the payee’s banks support UPS. This adds support for checks, notes, real-time verification but clearing is still not done in real-time.
The goal of Internet Banking
Both the payee’s and the payer’s banks use direct connections between their UPS systems. This allows for real time clearing.
Bank Internet Payment System (BIPS)
Developed by the Financial Services Technology Consortium (FSTC)
provides a framework for UPS that maps to
existing bank processes where possible. This
system is currently being implemented at Citibank.
BIPS Supports Five Message Types
BIPS Push Payment
BIPS System Architecture
•NPP – Network Payment Protocol – XML based•EPH – Event Process Handler•PSI – Payment System Interface
BIPS Security
• Encryption from underlying transport (HTTPS , PGP, etc.)
• Authentication via digital certificates
• Public Key encryption (digital signatures)
• Event log
Future Opportunities
Micropayments
• Prices below 1 cent• Prices below the cost
of the transaction
Beyond Digital Wallets
• Third party vendor with ability to bill a user (such as ISP)
• Proxy for the transaction
• Can aggregate micro-payments
Conclusion
“Imagine Business to Consumer transactions being performed with a ‘digital wallet’ communicating with a ‘virtual cash register’ in a cyber
shop!”
BIPS Implementation
NPP Messages in BIPS
Sample BIPS Messages
Pull Payment
Sample BIPS Messages
Initiator Status Request
Sample BIPS Messages
Initiator Stop Request
Sample BIPS Messages
Feasibility Request about
a Payment
UPS Transaction Flow
Top Related