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Electronic Payment System

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E-Payment System

The term 'electronic payment' is a collective phrase for the many different kinds of electronic payment methods available (also meaning online payment), and the processing of transactions and their application within online merchants and ecommerce websites.


Special Features required in EPS


Ease of Automated Processing:
Immediacy of result
Openness and accessibility
Loss of collateral information
Globalization
New business models


Currency Server


Currency Server can load currency exchange rate data in a variety of data formats and transmission protocols, supporting major official and free data feeds, as well as commercial and subscription-based services. Automatic updates of non-exchange rate data (such as currency names and codes) are also supported, and are covered in the Currency World Monitor.


Electronic Purses


The E-wallet is another payment scheme that operates like a carrier of e-cash and other information.
The aim is to give shoppers a single, simple, and secure way of carrying currency electronically.
Trust is the basis of the e-wallet as a form of electronic payment.


Why use an electronic purse?


The development of electronic purses has been driven by commercial and technological organisations rather than by demand from consumers.
The organisations operating electronic purse systems gain from the use of the money stored on the cards. For banks, there are advantages in reducing the handling of cash and cheques which have to be transported securely and are labour intensive to handle. Electronic purses are also seen as a means to protect the bank and card holder relationship which is perceived to be important in today's competitive environment.
For the retailer, the advantages are the reduction in handling of currency and cheques. This includes reducing the delay in money being credited to the retailer's bank account. Another advantage is reducing the risk of theft.


Business Issues and Implications


High Cost of Transaction.
Need third party Intermediate
Dependent on the Internet Connectivity
Dependent on Electricity
Fraudulent mails
Hackers involving in transactions
Depends completely on electricity
Produces electronic garbage

Electronic Payment Systems

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Online transaction systems

Lack of physical tokens
Standard clearing methods won’t work
Transaction reconciliation must be intermediated
Informational tokens
Ecommerce enablers
First Virtual Holdings, Inc. model
Online payment systems (financial electronic data interchange)
Secure Electronic Transaction (SET) protocol supported by Visa and MasterCard
Digital currency
Digital currency
Non-intermediated transactions
Anonymity
Ecommerce benefits
Privacy preserving
Minimizes transactions costs
Micropayments
Security issues with digital currency
Authenticity (non-counterfeiting)
Double spending
Non-refutability

Encryption

The need for encryption in ecommerce
Degree of risk vs. scope of risk
Institutional versus individual impact
Obvious need for ecurrencies.
Public key cryptography: an overview
One-way functions
How it works
Parties to the transaction will be called Alice and Bob.
Each participant has a public key, denoted PA and PB for Alice and Bob respectively, and a secret key, denoted SA and SB respectively
Each person publishes his or her public key, keeping the secret key secret.
Let D be the set of permissible messages
Example: All finite length bit strings or strings of integers
The public key is required to define a one-to-one mapping from the set D to itself (without this requirements, decryption of the message is ambiguous).
Given a message M from Alice to Bob, Alice would encrypt this using Bob’s public key to generate the so-called cyphertext C=PB(M). Note that C is thus a permutation of the set D.
The public and secret keys are inverses of each other
M=SB(PB(M))
M=SA(PA(M))
The encryption is secure as long as the functions defined by the public key are one-way functions

Policy Issues

Privacy and verification
Transaction costs and micro-payments
Monetary effects
Domestic money supply control and economic policy levers
International currency exchanges and exchange rate stability
Market organization effects
Development of new financial intermediaries
Effects on government
Seniorage
Legal issues

E PAYMENT SYSTEM


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What is E Payment

E payment is a subset of an e-commerce transaction to include electronic payment for buying and selling goods or services offered through the Internet.
Generally we think of electronic payments as referring to online transactions on the internet, there are actually many forms of electronic payments.
As technology developing, the range of devices and processes to transact electronically continues to increase while the percentage of cash and check transactions continues to decrease. In the US, for example, checks have declined from 85% of non-cash payments in 1979 to 59% in 2002, and electronic payments have grown to 41%.

Types of E Payment

The following types of electronic payments are most common today. That said, it is important to realize that new payment types are continual being discovered and there are additional methods that exist or are being developed continuously.
Cards
Internet
Mobile Payments
Television Set-Top Boxes and Satellite Receiver
Electronic Payments Networks
Person-to-Person (P2P) Payments

Cards
 
Credit cards, debit cards and prepaid cards currently represent the most common form of electronic payments. For all 3 types of cards the consumer or the business most often uses a plastic card, commonly with a magnetic stripe. The cardholder gives his or her card or card number to a merchant who swipes the card through a terminal or enters the data to a PC.
The terminal transmits data to his or her bank, the acquirer. The acquirer transmits the data through a card association to the card issuer who makes a decision on the transaction and relays it back to the merchant, who gives goods or services to the cardholder. Funds flow later for settlement with credit cards and are debited immediately for debit or pre-paid cards.

 Internet

Online payments involve the customer transferring money or making a purchase online via the internet. Consumers and businesses can transfer money to third parties from the bank or other account, and they can also use credit, debit and prepaid cards to make purchases online.
Current estimates are that over 80% of payments for online purchases are made using a credit card or debit card. At present, most online transactions involve payment with a credit card. While other forms of payment such as direct debits to accounts or pre-paid accounts and cards are increasing, they currently represent a less developed transaction methodology.

Mobile Payments

Mobile phones are currently used for a limited number of electronic transactions. However, the percentage seems likely to increase as mobile phone manufacturers enable the chip and software in the phone for easier electronic commerce. 
Consumers can use their mobile phone to pay for transactions in several ways. Consumers may send an SMS message, transmit a PIN number, use WAP to make online payments, or perform other segments of their transaction with the phone. As phones develop further, consumers are likely to be able to use infrared, Bluetooth and other means more frequently to transmit full account data in order to make payments securely and easily from their phone.