Electronic Payment System

Unit-III
 History of Money
• Barter System
• Tokens (precious stones and shells)
• Coins (precious metal)
• Token
• Notational Money (cheques)
• Credit cards – credit based system
 Real – World Cash
Money is known as –
• a medium of exchange to simplify transactions
• a standard of value to make it easier to decide
on the worth of goods
• a store of value to facilitate the concept of
saving
 Real – World Cash…
Features of Cash :
1. Convenience
2. Wide acceptance
3. Anonymity
4. No cost of use
5. No audit trail
 The ACID test
• Atomicity : a transaction must occur completely
or not at all.
• Consistency : all parties involved in the
transaction must agree to the exchange.
• Isolation : each transaction must be
independent of any other transaction and be
treated as a stand-alone episode.
• Durability : to recover the last consistent state
or reverse the facts of the exchange.
 ICES TEST
• Interoperability
– Ability to move between system
• Conservation
– Temporal consistency and durability
• Economy
– Cost of use
• Scalability
– Multiple users
 Electronic Payment System
Electronic Payment is a financial exchange that
takes place online between buyers and sellers. The
content of this exchange is usually some form of
digital financial instrument (such as encrypted
credit card numbers, electronic cheques or digital
cash) that is backed by a bank or an intermediary,
or by a legal tender. The various factors that have
lead the financial institutions to make use of
electronic payments are:
• Decreasing technology cost
• Reduced operational and processing cost
• Increasing online commerce
 Characteristics of EPS
• Acceptability : the payment infrastructure should
not only be robust, but also available and
accessible to a wide range of consumers and
sellers of goods and services.
• Convertibility : the electronic currency should be
interoperable and exchangeable with the other
forms of electronic cash, paper currencies,
deposits in bank accounts, bank notes or any
other financial instruments.
• Flexibility : payment systems should be in a
position to accept several forms of payments
rather than limiting the users to a single form of
currency.
 Characteristics of EPS…
• Reliability : the payment system should ensure
and infuse confidence in users.
• Efficiency : it refers mainly to the cost overheads
involved in the operation of digital payments. The
cost of payment per transactions should be ideally
close to zero.
• Security : digital currency should be stored in a
form that is resistant to replication,
double-spending, and tampering. At the same
time. It should offer protection from the intruders
trying to tap it and put it to unauthorized use,
when transmitted over the internet.
 Characteristics of EPS…
• Usability : the user of the payment mechanism
should be able to use it as easily as real currency.
This requires that the payment system should be
well integrated with the existing applications and
processes that acquire the role of transacting
parties in electronic commerce.
• Scalability : it should be able to offer the same
performance and cost per transactions overheads
with a growing number of customers and
transactions.
 Based on the size of payment, all payment
transactions can be classified in the following three
categories :
• Micro Payments
• Consumer Payments
• Business Payments

Three distinct types of payment systems :

• Pre paid
• Instant paid
• Post paid
 Advantages of E-Payment
• Increased Speed and convenience
• Eliminates the security risks
• Competitive advantage to business
• Time saving
• Environment Friendly
 Disadvantages of E-Payment
• Security Concerns
• Disputed Transactions
• Increased business costs
• The lack of anonymity
• The necessity of internet access
 Electronic Money (E-Money)
• E-money is an electronic medium for making
payments
– Credit cards
– Smart cards
– Debit cards
– Electronic funds transfer, etc
• Identified e-money (digital cash) is a notational money
system that generates an audit trail and can be traced.
E.g. Credit Cards.

• Anonymous e-money is a notational money system

that cannot be traced. Paper money.

• With the online option, each transaction is verified

and approved by the issuing institution (such as bank)
before payment is made. Credit/Debit Cards

• Off-line eMoney requires no validation. eWallets

 Online Payment Systems
• Credit Cards
• Debit Cards
• Smart Cards
• Digital Wallets
• UPI Apps
• AEPS
• USSD
• EFT
• Ecash
 Credit Cards
• A credit card is part of a system of payments after
the small plastic card issued to users of the system.
• It is a small plastic card with a unique number linked
with an account.
• It has also a magnetic strip embedded in it which is
used to read credit card via card readers.
• It is a card entitling its holder to buy goods and
services based on the holder's promise to pay for
these goods and services.
• The issuer of the card grants a line of credit to the
consumer (or the user) from which the user can
borrow money for payment to a merchant or as a
cash advance to the user.
• Generally credit card dues are settled on monthly
basis.
• The parties involved in the credit card payment
are:
– The card holder – Customer
– The Merchant – seller of product who can accept
credit card payments
– The Card issuer bank – card holder’s bank
– The acquirer bank – the merchant’s bank
– The card brand – for example, Visa or Master Card
 Credit Card Payment Process
• Step 1 : Bank issues and activates a credit card to
customer on his/her request.
• Step 2 : Customer presents credit card information to
merchant site or to merchant from whom he/she
wants to purchase a product/service.
• Step 3 : Merchant server asks for approval from card
brand company for credit authorization of customer’s
credit card number and the amount of purchase.
• Step 4 : Card brand company authenticates the credit
card and informs the merchant whether to proceed.
Merchant informs the customer whether the
transaction has been completed. Merchant keeps the
sales slip.
• Step 5 : Merchant submits the sales slip to
acquirer banks.
• Step 6 : Acquirer bank requests the card brand
company to clear the credit amount and gets
the payment.
• Step 7 : Now card brand company asks to clear
amount from the issuer bank and amount gets
transferred to card brand company.
 Advantages of Credit Cards
• Incentives : eg loyalty points and cashbacks.
• Flexible Credit : interest free short term credit in case
the balance is cleared in full by the due date.
• Purchase power and ease of purchase : no need to
carry large amount of cash.
• Building a credit line : good credit history is important
when applying for loans, rental applications, or even
some jobs.
• Cash withdraws : through ATMs.
• Record Keeping : consolidating purchases into a single
statement.
 Disadvantages of Credit Cards
• Disputed Transactions : in case the credit card is misused by
someone else, it is very difficult to receive a refund. Using a
credit card, especially remotely, introduces an element of
risk as the card details may fall into the wrong hands
resulting in fraudulent purchases on the card. Fraudulent or
unauthorized charges may take months to dispute,
investigate, and resolve.
• The lack of anonymity : The information about all the
transactions, including the amount, time and recipient are
stored in the database of the payment system. The
intelligence agency and tax authorities can have access to
this information.
• Credit card charges : Credit card provider companies charge
fee for issuing credit cards. They also levy penalty if
payment is not made within due dates.
• Budget overruns : encourage people to spend
money that they do not have. The card holder
may become an impulsive buyer and tend to
overspend because of the ease of using credit
cards.
• Lost or stolen cards
• High interest rates
Credit Cards…

1. Issuing bank logo

2. EMV chip on "smart
cards"
3. Hologram
4. Credit card number
5. Card brand logo
6. Expiration Date
7. Card Holder Name
8. contactless chip
 Credit card numbering

❖ The card number's prefix, called the Bank

Identification Number, is the sequence of digits at
the beginning of the number that determine the
bank to which a credit card number belongs.
❖ This is the first six digits for MasterCard and Visa
cards.
❖ The next nine digits are the individual account
number.
❖ And the final digit is a validity check code.
❖ In addition to the main credit card number, credit
cards also carry issue and expiration dates (given
to the nearest month), as well as extra codes such
as issue numbers and security codes. Not all credit
cards have the same sets of extra codes nor do
they use the same number of digits.
 Credit card
numbering

An example of the reverse side of a

typical credit card:

1. Magnetic Stripe

2. Signature Strip

3. Card Security Code

 Debit Cards
• A debit card (also known as a bank card or check
card) is a plastic card that provides the cardholder
electronic access to his or her bank account(s) at a
financial institution.
• Unlike credit cards, the funds paid using a debit
card are transferred from the bearer's bank
account, instead of having the bearer pay back the
money at a later date.
• Debit cards can be used with or without a personal
identification number (PIN) almost everywhere –
retail stores, gasoline stations, restaurants, and pay
phones.
 Debit Cards…
• When used without a PIN (called an offline
transactions), the merchant’s terminal reads
the card and identifies it as a debit card that
creates a debit against the cardholder’s bank
account.
• When a debit card is used with a PIN (called
an online transaction), the cardholder simply
inserts the card in the machine, enters the PIN
number, and proceeds as when using an ATM
card.
 Advantages/Disadvantages of Debit
Cards
According to the National Consumer’s League, here is
what consumers need to know about debit cards:
• Using a debit card frees you from having to carry cash
or a chequebook. You don’t have to carry traveler’s
cheques, show identification, or give out personal
information at the time of the transaction.
• Debit cards are more readily accepted by merchants
than are cheques, especially in countries where
cheque cashing and cheque processing are not widely
used.
• It is generally easier to get a debit card than a credit
card. You can get a debit card the moment you have a
checking or a savings account.
 Debit Cards…
• The debit card is a quick pay now process. No
grace period is given as for credit card payments.
• Debit cards can be used to withdraw cash from
ATMs.
• Debit card holder cannot spend more than what
the card holder has in his/her bank account. This
helps in preventing accumulation of new debts.
• Unlike credit cards, the card holder of debit card
cannot build up credit score. That means that card
holder’s good habits or track records go unnoticed
by credit lenders.
• Bank may charge fee for using debit cards.
• Lack of anonymity and has audit trail.
 Smart Cards
• A smart card, first produced in 1977 by Motorola, is a
thin, credit card-sized piece of plastic that contains a
half-inch-square area that serves as the card’s
input/output system.
• A smart card contains a programmable chip, a
combination of RAM and ROM storage, and an
operating system of sorts, all embedded in the plastic.
• It encrypts digital cash on a chip and can be refilled by
connecting to a bank.
• A smart card carries more information than can be
accommodated on a card with a magnetic stripe.
Infact, it is the chip’s ability to store information in its
memory that makes it smart.
 Smart Cards…
Types of Smart Cards
• Contact Card : A smart card containing a small
gold plate on the face that when inserted in a
smart card reader makes contact and passes
data to and from the embedded microchip.
• Contactless (proximity) Card : A smart card with
an embedded antenna, by means of which data
and applications are passed to and from a card
reader unit or other device without contact
between the card and the card reader.
 Smart Cards…
Applications of Smart Cards:
• For toll payment
• Universities and schools
• Authentication
• Telephone industry
• Ticketing
• Loyalty cards
• Health insurance
 Advantages
• No credit check
• Cannot go in debt
• Sets the spending limit
• Identification
• Flexibility
• Data storage
• Cash withdraws
• Acts as a type of bank account
 Disadvantages

• Loss of sensitive data

• Easy to loose and steal
• Hackers
• Acceptance
 E-Wallet
• E-wallet or mobile wallet is the digital version
of your physical wallet with more
functionality. You can keep your money in an
E-wallet and use it when needed. It is
password protected and can be used to make
e-commerce and other online transactions
comfortably and instantly.
 Advantages
• Time Saving : consumers can make online
payment without entering the card details.
• Security : password protected
• Incentives : discounts and cash backs
• Convenient : eliminate the need of carrying
physical wallets
• Competitive Advantage : consumers prefer to deal
with those companies that facilitate this
technology and companies employing it enjoy the
competitive advantage.
 Disadvantages
• International Restrictions : E-wallets obtained in one
country cannot be used in some other country.
• Limited Merchants : Amazon does not offer e-wallets.
• E-wallets are dependent on the devices : you need
smart phones, tablets etc with connectivity.
• Danger of losing money : These apps do not ask for
any PIN or password when you perform a transaction
using your wallet money as in the case of debit or
credit cards. So, if your phone is stolen, anybody can
use wallet money. If e-wallet is password protected,
password can be easily cracked.
 Applications
• Online grocery store
• Utility bills payment
• E-wallet on mobile : eg airtel money
• Buying online
• Recharging mobile phones and DTH
connections
 UPI apps
• UPI or unified payment interface is a payment mode which is used
to make fund transfers through the mobile app. You can transfer
funds between two accounts using UPI apps. You will have to
register for mobile banking to use UPI apps.

• You need to download a UPI app and create a VPA or UPI ID.
There are too many good UPI apps available such as BHIM, SBI UPI
app, HDFC UPI app, iMobile, PhonePe app etc. It is not mandatory
to use the UPI app from your bank to enjoy UPI service. You can
download and use any UPI app.

• UPI apps are a faster solution to send money using VPA or

even IFSC and account number. But they have some limitations
also. If you do not have an android phone you cannot use UPI app,
It is not for you. Lack of stable internet connection can also cause
trouble for these apps.
 AEPS
• AEPS is an Aadhaar based digital payment mode. The term
AEPS stands for Aadhaar Enabled Payment Service. Customer
needs only his or her Aadhaar number to pay to any merchant.
AEPS allows bank to bank transactions. It means the money
you pay will be deducted from your account and credited to
the payee’s account directly.
• You need to link your Aadhaar number to your bank account to
use AEPS. Unlike Debit cards and USSD, AEPS does not have
any charges on transactions. You can use AEPS with the help of
PoS (Point of sale) machines. You can withdraw or deposit
cash, send money to another Aadhar linked account with it.
The good thing about AEPS is that it doesn’t need your
signature, bank account details or any password. It uses your
fingerprint as a password. No one can forge your fingerprints,
thus it is the most secure digital payment mode.
 USSD
• USSD banking or *99# Banking is a mobile banking based
digital payment mode. You do not need to have a
smartphone or internet connection to use USSD banking.
You can easily use it with any normal feature phone. USSD
banking is as easy as checking your mobile balance. You can
use this service for many financial and non-financial
operations such as checking balance, sending money,
changing MPIN and getting MMID.
• The *99# code works as a bridge between your telecom
operator’s server and your bank’s server. It uses your
registered mobile number to connect with your bank
account. Hence, dial *99# with your registered number
only. USSD banking has a transaction limit of Rs. 5000 per
day per customer. RBI has also set a maximum charge of Rs.
2.5 per operation.
 eCash
• It is a purely software based, anonymous,
untraceable, online, token based system.
• It allows for bi-directional payments. There is
no distinction between customers and
merchants with regards to payments.
• Since the system is coin based, it requires
clearing of coins by the issuing bank.
 eCash (Withdrawal)
• Two participants : the bank and the customer.
• A customer connects to an eCash issuer and purchases
electronic coins of the required value.
• These coins are generated, involving the blind
signature scheme to make the tokens anonymous.
• The customer generates the token ids, blinds them,
determines their denominations, transmits them to
the issuer that blind signs them and returns them to
the customer, who in turn unbinds them and stores
them on his PC, in a wallet.
• The messages include strings of digits, and each string
corresponds to a different digital coin, with each coin
having a denomination or value.
 eCash (Purchase)
• If the customer shows the intent to purchase a
product, he receives a payment request from the
merchant, which he has to confirm.
• His eCash software chooses coins with the desired
total value from the wallet on his hard disk.
• It then removes these coins and sends them over
the network, to the merchant’s shop.
• When it receives the coins, the merchant’s software
automatically sends them on to the bank and waits
for acceptance before sending the goods to the
customer, along with a receipt.
 eCash (Purchase)…
• To ensure that each coin is used only once, the
bank records the serial number of each coin in its
spent-coin database.
• If the coin serial number is already recorded, the
bank detects that someone is trying to spend the
coin more than once and informs the merchant.
• If no such serial number has been recorded, the
bank stores it and informs the merchant that the
coin is valid, and the deposit is accepted.
 eCash
Privacy Protection (Blind Signatures)
• The customer’s computer creates the coins itself at
random.
• It then hides the coin in a special digital envelope
and sends it off to the bank.
• The bank withdraws one dollar from the customer’s
account and makes its special ‘worth-one-dollar’
digital validation, like an embossed stamp, on the
envelope before returning it to the customer’s
computer.
• Like an emboss, the blind signature mechanism lets
the validating signature be applied through the
envelope.
 eCash
Privacy Protection (Blind Signatures)
• When the customer’s computer removes the
envelope, it has obtained a coin of its own choice,
validated by the bank’s stamp.
• When he spends the coin, the bank must honour
it and accept it as a valid payment because of the
stamp.
• But because the bank is unable to recognize the
coin, since it was hidden in the envelope when it
was stamped, the bank cannot tell who made the
payment. The bank that signed can verify that it
made the signature, but it cannot link it back to a
particular owner.
 Virtual currency - BitCoin
• It is a decentralized virtual currency scheme
with bidirectional flow and a cryptocurrency.
• Bitcoin payments can be made between
anybody with the requisite software known as
wallet on their computer, smartphone or
tablet.
• Bitcoin should not be considered to a type of
digital cash.
 Electronic Funds Transfer
• An electronic funds transfer (also known as EFT)
is a system for transferring money from one bank
to another without using paper money.
• Its use has become widespread with the arrival of
personal computers, cheap networks, improved
cryptography and the Internet.
• Since it is affected by financial fraud, the
electronic funds transfer act was implemented.
This federal law protects the consumer in case a
problem arises at the moment of the transaction.
 From Where Did It Come?
• The history of electronic funds transfer
originated from the common funds transfer of
the past. Since the 19th century, and with the
help of telegraphs, funds transfers were an
usual thing in commercial transactions. Finally,
it migrated itself to computers and became
the electronic money transfers of today.
 Where Do I Find EFT's?
• Direct Deposit: It is used by employers for
depositing their employees' salary in a bank
account.
• Automatic charge to your check or savings
account. For example, when you are paying a
mortgage, the bank will discharge the monthly
payment from a pre-accorded bank account. The
benefit is that you won't have to go to the bank
to do it. It's automatic.
• Cash Card: With this type of card you can spend a
prepaid amount of money until the balance is
zero. So, if you wish to make a gift certificate
without tying up your beneficiary with one store,
you can buy a cash card from your favorite bank.
 Where Do I Find EFT's?...
• ATM's are also used for EFT's. Since an automatic
teller machine is much cheaper than a group of
bank tellers, it has helped to bring costs down
and beneficiate the customer.
• Points of sale (also known as POS) are also part of
this group. Those little blue or dark blue
machines in which you pass your card are doing
an electronic fund transfer from your account to
the retail account. Imagine how the world
without them was. Slow, wasn't it?
Various modes of EFT in India-NEFT,RTGS,IMPS

• NEFT-NATIONAL ELECTRONIC FUNDS TRANSFER

• RTGS-REAL TIME GROSS SETTLEMENT
• IMPS-IMMEDIATE PAYMENT SERVICE
 NEFT-NATIONAL ELECTRONIC FUNDS TRANSFER
• The National Electronic Funds Transfer is a
nation-wide money transfer system which allows
customers with the facility to electronically
transfer funds from their respective bank
accounts to any other account of the same bank
or of any other bank network

• Funds transfer through NEFT requires a

transferring bank and a destination bank.
 NEFT……..
• Before transferring funds via NEFT you
register the beneficiary, receiving funds. For
this you must possess information such as
name of the recipient, recipient’s bank name,
a valid account number belonging to the
recipient and his respective bank’s IFSC code.
• Any sum of money can be transferred using
the NEFT system with a maximum capital of
Rs. 10, 00, 000.
 RTGS-REAL TIME GROSS SETTLEMENT
• It is a real time funds transfer system which
facilitates you to transfer funds from one bank to
another in real time or on a gross basis. The
transaction isn’t put on a waiting list and cleared
out instantly.
• RTGS payment gateway, maintained by the
Reserve Bank of India makes transactions between
banks electronically. The transferred amount is
instantly deducted from the account of one banks
and credited to the other bank’s account.
 RTGS……
• The minimum value that can be transferred using
RTGS is Rs. 2 Lakhs and above. However there is no
upper cap on the amount that can be transacted.

• The remitting customer needs to add the beneficiary

and his bank account details prior to transacting funds
via RTGS. The details required while transferring funds
would be the beneficiary’s name; his/her account
number, receiver’s bank address and the IFSC code of
the respective bank.
 IMPS-IMMEDIATE PAYMENT SERVICE
• The National Payments Corporation of India
introduced a pilot mobile payment project also
known as the Immediate Payment Service (IMPS).
• IMPS offers instant electronic transfer service
using mobile phones. The IMPS service also
features a secure transfer gateway and an
immediate confirmation on fulfilled orders.
• IMPS is offered on all the cellular devices via
Mobile Banking or through SMS facility.
 IMPS…..
• To be able to transfer money via IMPS route
you must first register for the immediate
payment services with your bank

• Thus IMPS enables customers to use mobile

instruments as an instant money transfer
gateway, facilitating user convenience and
saving time and effort involved in other
modes of transfer.
 ADVANTAGES OF EFT…..
• Increase efficiency and productivity.
• Manage cash flow easily.
• Improve safety and control.
• Saves money.
• Less paper works.
• Eliminate the risks associated with lost, stolen,
or misdirected cheques
 ADVANTAGES………
• EFT Provides our office with the capacity to,
✔ Automate our payments.
✔ Electronically update our accounts information.
✔ Streamline our cash flow.
✔ Reduce administrative cost.
✔ Eliminate overdue accounts.
✔ Manage delayed disbursements.
✔ Get set up and add customers.
 “EFT SAVES
OUR TIME AND
MONEY’’
In short we
can say that
EFT is FAST,
SIMPLE, SAFE,
and SECURE.
 DISADVANTAGES
⚫ One of the major disadvantages of EFT is RISK OF SECURITY ISSUE.
Electronic banking largest adversary is the hackers who try to steal the
customer’s money and their information. When the account has been
compromised, money can be stolen. Hacker’s can also use the information
obtained to steal one’s identity. This could mean a lots of trouble for the
customer that can take years to fix. Ones credit accounts are opened in his
or her name it can be many years before the debts are taken care and
removed off of their credit report.

⚫ If you entered the target account number incorrectly, there is no way to

reverse the transaction since the bank would process the transaction
under the belief that the information you provided is accurate

⚫ Once an amount is transferred, the bank cannot reverse a transaction.

 What Are The Pros?
• Time: Since all the transaction is done automatically
and electronically, the bank doesn't need to pay a
person to do it, a person to drive the loans to the other
bank, the cost of the transport, the cost of the
maintenance of the transport, online auto insurance
and the gas of the transport. EFT's have revolutionized
modern banking.
• Other benefit is immediate payment, which brings an
up to date cash flow. You won't hear either about lost
checks causes by the inefficiency of normal mail and up
to date bookkeeping.
 Electronic Fund Transfer (EFT)
on the Internet

Internet
Payer Payee

Cyber Bank Cyber Bank

Payment Payment
Gateway Gateway

Bank Bank
VAN VAN
Automated
Clearinghouse
An Architecture of Electronic Fund Transfer on the Internet
 B2B Payment Methods
• B2B e-payment systems are evolving that can
save processing costs and improve the overall
efficiency of financial transactions between
businesses.
• This area is part of electronic invoice
presentment and payment (EIPP) systems.
• EIPP is the process by which companies
present invoices through the Internet and
make payments to one another.
 The B2B payment options lies within four
major categories:
• Automated Clearing House (ACH) Network
• Alternative Electronic Networks – MasterCard
RPPS and Visa ePay
• Credit Cards
• Traditional Mechanisms – Cheque and Wire
Transfer
 Automated Clearing House (ACH)
Network
• The Automated Clearing House (ACH) Network is a nationwide
electronic payments system governed by National Payments
Corporation of India (NPCI) which is an umbrella organization
for all retail payments system in India. It was set up with the
guidance and support of the Reserve Bank of India (RBI) and
Indian Banks’ Association (IBA).

• The ACH Network is a batch processing, store and forward

system. ACH transactions, or entries, that are received during
the day by financial institutions are stored and processed in a
group or batch mode. ACH transactions are accumulated and
sorted by destination for transmission during a predetermined
time period.
• This process provides significant economies of
scale and enables faster processing than is
possible for cheques, which must be physically
handled. Instead of using paper to carry
transaction information, ACH payments are
sent from one financial institution to another
via data transmission.
 Alternative Electronic Networks -
Mastercard RPPS
The MasterCard Remote Payment and
Presentment Service (RPPS), governed by
MasterCard International, is a fully electronic
solution for B2B payment processing that
provides electronic routing, posting and same day
settlement of financial transactions for
participating members. MasterCard RPPS has
been processing electronic payments for bill
payment services since 1987. In September 2000,
RPPS launched its bill presentment service to
provide complete end-to-end billing and payment
processing in an open standards environment.
The RPPS network is designed to act as a
single connection point, enabling all
participants to reach multiple endpoints. For
example, to send payments to more than one
Seller, a Buyer needs just one connection to
MasterCard RPPS. Correspondingly, through a
single connection to MasterCard RPPS, a Seller
can receive payments from multiple Buyers.
• In the MasterCard RPPS network, the
Buyer/Originator typically initiates credit
transactions; although a Receiver, or Seller,
may initiate a return as a credit transaction.
Debit transactions may be initiated by a
Buyer/Originator to reverse a payment. All
MasterCard RPPS payment transactions are
single invoice and include remittance data.
This data must be submitted in the RPPS
proprietary format.
 Internet Monetary Payment & Security
Requirements
For consumers and merchants to be able to trust one
another, prevent transmitted payment information from
being tampered with, and complete transactions with any
valid party, the following issues need to be addressed:
• Confidentiality of payment information
• Integrity of payment information transmitted via public
networks.
• Verification that an accountholder is using a legitimate
account.
• Verification that a merchant can accept that particular
account.
• Interoperability across software and network providers.
• Confidentiality of payment information :
Payment information must be secure as it
travels across the Internet. Without security,
payment information could be picked up by
hackers at the router, communication-line, or
host-level, possibly resulting in the
production of counterfeit cards or fraudulent
transactions. To provide security, account
information and payment information will
need to be encrypted.
• Payment Information Integrity : Payment
information sent from consumers to
merchants includes order information,
personal data, and payment instructions. If
any piece of the information is modified, the
transaction may no longer be accurate. To
eliminate this possible source of error or
fraud, an arithmetic algorithm called hashing,
along with the concept of digital signature is
employed.
• Account holder and merchant authentication :
Similar to the way card accounts are stolen and
used, it is possible for a person to use a stolen
account and try to initiate an electronic
commerce transaction. To protect against this, a
process that links a valid account to a customer’s
digital signature needs to be established. A way to
secure this link is by use of a trusted third party
who could validate the public key and account of
the customer. Similarly, to validate merchant’s
account also third party can be used.
• Interoperability : For electronic commerce to take
place, customers must be able to communicate
with any merchant. For this reason, security and
process standards must support any hardware or
software platform that a customer or merchant
may use and have no preference over another.
Interoperability is then achieved by using a
particular set of publicly announced algorithms
and processes in support of electronic commerce.
 Infrastructure Issues in EPS
• Secure electronic funds transfer is crucial to
e-commerce. In order to ensure the integrity and
security of each electronic transaction and other
EPSs utilize some or all of the following security
measures and technologies directly related to
EPSs:
– Authentication (using user ID and Password),
– public key cryptography,
– digital signatures,
– Digital certificates,
– certificate authorities,
– SSL, S-HTTP.
https://www.youtube.com/watch?v=hUFpmmn2nwc