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1. Electronic payment system
Chapter # 8

2. Electronic commerce involves the exchange of some
form of money for goods and services.
Cash can’t be a medium of payment between remote
buyer and seller
Implementation of electronic payment systems is still
growing.
Electronic payments are far cheaper than the
traditional method of mailing out paper invoices and
then processing payments received
 Cost of billing a person by mail ranges from 10 to 15 Rs.
 Billing a person electronically cost about 2 Rs.
The most common internet payment method for B2B
EC is credit card.
However a concern for customer is security
Electronic payment and protocol

3. Typical electronic payment system for EC
Credit card
EFT
Debit Card
Stored value card
E-check

4. Credit cards (e.g. Visa)
Spending limit based on credit history
Interest is charged on outstanding balances not paid
off within a given time
Accepted worldwide
User protection facilitated by a 30-day period that a
purchase may be disputed
Merchant account (that accepts credit card
payments) required by the business

5. Debit cards
 The sale amount is removed from user’s account and transfers
to the sellers account
 Limited by funds in account plus overdraft (if present)
Stored Value cards (e.g. American Express)
 Are similar to prepaid card
 Can be used for Micro payment
 The amount due on the card is due at the end of the billing
period
 They do not accumulate interest payments
 Some vendors provide single-use-cards which are valid for a single
transaction
 A unique card number is issued
 This helps with card details security

6. Advantages of Payment Cards
Ease of use, no special hardware required
card holder’s liability is limited
Accepted worldwide
Currency conversion handled by card issuer
Disadvantages of Payment Cards
Service companies charge merchants per-transaction
and monthly processing fees
Price of goods for the consumer might be slightly
higher as a result

7. Electronic payment and protocol
Most commonly used protocol
Secure socket layer (SSL)
SSL allow their customer to encrypt their order at
their computer
Secure electronic transfer (SET)
SET Is designed to provide secure web credit and
transactions for both consumers and merchants.
SET require additional procedure like customer
certificate etc

8. Authentication
 A method to verify the buyers identity before payment made
Encryption
 A process of making message indecipherable (impossible to
read) except by those who have an authorized key (translator)
Integrity
 Ensuring that all information is not altered or destroyed during
transmission
Non repudiation
 Protection against customer : denial of order placed
 Protection against merchant : denial of payment made
Essential security requirements

9. Private key , also called a symmetrical key encryption
the same key is used to both encrypt and decrepit the
message. key is agreed upon and shared by both the
sender and a receiver
Public key, public key is known by all authorized users,
the sender encrypt the message with receiver public
key, receiver public key be delivered in advance, . The
message only decrypted by receivers private key
Digital signature is used for authentication of sender,
is usually attached to sent message like handwritten
signature
Security Schemes in electronic payment
System

10. Hashed (muddled ) message is called a message
digest
 Certificate is issued by a trusted third party
 Certificate authority is a body like federal postal
service. A CA may be certified by another CA
Digital envelope is the process of encryption into a
secret key
Transaction certificate: some undeniable facts of
transaction
Time stamp: digital attestation that a document was in
existence at a particular time