Electronic payment

Introduction
 Electronic payment system

payment(EFT , e-cash ,e check , e-

wallet,micropayment)
Virtual
customer businessma
n

product or service
1.Electronic payment system is a financial exchange
that takes place online between buyers and sellers
2.There are different methods to pay electronically
like credit cards , electronic cash etc.
 Traditional payment scheme
• PAYMENT(CREDIT CARD ,CASH , CHECK)

customer businessman
• PRODUCE OR SERVICE

 In earlier days ,conventional cash were most

popular because they were the only payment type
available
 However with time banks cane into existence and
the society underwent a financial revolution.
 But all these modes of the conventional payment
and settlement process act as a bottleneck in the
fast moving electronic commerce environment
 Problems in traditional payment system
 Lack of convenience
 Lack of security
 Lack of coverage
 Lack of eligibility
 Lack of support for micro transactions
 PAYMENT CARDS

 CREDIT CARDS
 DEBIT CARDS
 CHARGE CARDS
 SMART CARDS
 CREDIT CARDS
 Two of credit cards on the market.
 Credit cards issued by credit companies(e.g.
Master card, visa) and major banks (SBI, HDFC
etc.).
 Credit cards issed by the departmental stores(e.g.
Boygner) , oil companies(e.g. Shell).
 DEBIT CARDS

 Plastic card with a unique number.

 Requires a bank account.
 No interest charges related to this card.
 CHARGE CARDS

 Are similar to credit cards except they have no

revolving credit line so they have make payments
every month.
 SMART CARDS

It similar to credit card and debit card in appearance

bt it has a small microprocessor chip embedded in it.
 ELECTRONIC CASH

 In case of e-cash, both customer and merchant have

to sign up with the bank or company issuing e-cash.
 Enables transactions between customers without the
need of banks.
 E-WALLETS
 E-WALLET IS A CARD WITH MICROCHIP.
R E P L A C E S C A S H & C O I N S F O R S M A L L T I C K E T P U R C H A S E S
LIKE ROAD/BRIDGES TOLLS, PAY PHONES.
I T I S C O N V E N I E N T & S A F E W A Y T O C A R R Y L E S S C A S H .
E X A M P L E M I C R O S O F T W A L L E T .
How to access e-wallets

USER POST JOB IN

SEE PROPOSAL
REGISTRATION WORKROOM

PUT MONEY APPROVE

INTO E- ACCEPT JOB PAYMENT
WALLET REQUEST

RELAESE
FUNDS TO
PROJECT FROM
WALLET
 MICRO-PAYMENT SYSTEM
 small payments on web like billing by
bank, financial institute etc.
 Universal acceptance
 comprehensive security.
 Allows vendors to sell content,
information. .
 PEER-2-PEER PAYMENTS

 Online financial transfer

through e-mail address.
 Reduces risk of fraud &
overdrawn a/c.
 Example PayPal services.
 E-PAYPAL SYSTEM

 It enables the merchants or individuals to withdraw

cash from their PayPal accounts.
 Allows customers to send their transaction money
quickly & safe to anyone.
 To use it one should must get registered themselves .
 E-CASH
 Online payments via debit cards, credit cards or
smart card are the examples of e-money
transactions.
 E Cash is transferred directly from customer’s
desktop to the merchant’s site.
HOW TYPICAL E-CASH SYSTEM
WORKS?
 E-CHEQUE

 E-Cheque is the result of co-operation between

several banks, government entities, technology
companies and e-commerce organizations.
 These can be used for small and large organizations
E-CHEQUE WORKING
 ELECTRONIC FUND TRANSFER

 It is one of the oldest methods to transfer money.

 It is the groundwork of groundless and cheque-less
culture, it is used to transfer money without any
paper money changing hands.
 Benefits of EFT

 Simplified accounting
 Improved efficiency
 Reduced administrative costs
 Improved security
ENTITIES
 PAYER AND PAYEE

PAYER-A Payer is a person who makes the

payment.
PAYEE- A Payee is a person who receives
payment.
 FINANCIAL INSTITUTE AS
ISSUER OR ACQUIRER

The financial institution participates in

payment protocols in two roles- as an issuer
and as an acquirer. The issuer holds payer
s’ account and acquirer holds payee s’
account and assets. The payee deposits the
payment received during a transaction with
the acquirer.
 Trustee or Arbiter
Other parties that may be present in a
payment protocol include a Trustee who is
an entity that is independent from all parties
. Trustee is asked to adjudicate any disputes
between payer and payee.
 PAYMENT GATEWAY
Payment Gateways are the entities that act
as a medium for transaction processing
between the entities ( e.g. mastercard visa)
and Certification authorities (CA) . They
issue public key certificates to entities.
PHASES IN E-PAYMENT
 REGISTRATION
 The payee must register themselves with the
site of online service providers.
 By filling a form and creating user ID.
 A Payee can access subscribed billing
information and payments, simply by login
his ID.
 Invoicing
In this phase, payee obtains an invoice for
payment from the payor .
PAYMENT SELECTION AND PROCESSING

In this the payer selects type of payment (card

based, e-cash,e-cheque) based on the type of
payment payee accepts.
 AUTHORISATION AND
CONFIRMATION

In this, the acquirer on

receiving payment details
from the payee authorises the
payment and issues a receipt
containing the success or
failure of payment.
 BENEFITS OF
ELECTRONIC PAYMENT
SYSTEM
BENEFIT
BENEFITS
TO
TO SELLERS
BUYERS
1. Convenience • Electronic payment methods provide a wide range of payment options and
of global enhanced financial management tools through which individuals can pay
for numerous different types of transactions ranging from parking
acceptance payments to travel tickets pr payments in foreign currency.

2. Universal • With electronic payment methods payments can be made over the phone,
acceptance on the internet, and through the post and accepted everywhere.

3. Greater • Electronic payment system is safe and secure as it follows strict encrypted
secure system for making payments keeping buyer’s identity and details
security completely confidential and reduced liability for stolen or misused cards.
4. Consumer • The electronic payment system provides additional
insurance by facilitating disputes resolution in the case of
protection unsatisfactory receipt of goods and services .

4. • E-payment system allow consumers to transfer funds,

Accessibility purchase stocks, and offer a variety of other services
to immediate without having to handle physical cash. Using credit card
it is very easy to make payments.
credit

6. Better • Electronic payment also provides the ability to control

payment for goods and services over time by allowing
control over buyers to pay at will whenever they want or have
payments sufficient funds to make payments.
 BENEFITS TO SELLERS
1. Speed and • EPS ensure faster processing of transaction from
verification and authorization to clearing and
security settlement . It reduces the visibility of information.

• EPS provides companies freedom from more costly

2. Reduces cost labour, materials and accounting services hat are
require in paper based processing.

• It leads to better management of cash flow,

3. Efficiency inventory and financial planning due to swift bank
payment.

• When used properly the electronic aspects of

4. Better control purchasing and prepaid cards can increase internal
controls over high volumes .
 TYPES OF TRANSACTIONS IN
EPS
1. A ONE TIME • It is used when you shop online at an e-
CUSTOMER TO
VENDOR PAYMENT commerce site, such as Amazon .

• It is used when you pay a bill through a

2. RECURRING regularly scheduled direct debit from your
CUSTOMER TO
VENDOR PAYMENT checking account or an automatic charge to
your credit card.

3. AUTOMATIC • In this, your bank offer a service called

BANK TO VENDOR
PAYMENT
online bill pay.
 SECURITY ISSUES

1. Confidential 4. Authenticity

2. Integrity 5. Encryption

3. Availability 6. Audit ability

7. Non – Rejection
 SECURE EPS INFRASTRUCTURE

 SECURE ELECTRONIC FUNDS TRANFER IS CRUCIAL

TO E-COMM.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,
PUBLICKEYCRYPTOGRAPHY, DIGITAL SIGNATURES,
CERTIFICATE,SSL, S-HTTP.
 AUTHENTICATION :

THIS IS THE PROCESS OF VERIFICATION OF THE

AUTHENTICITY OF A PERSON AND OR A
TRANSACTION. THERE ARE MANY TOOLS
AVAILABLE TO CONFIRM THE AUTHENTICITY OF A
USER. FOR INSTANCE, PASSWORDS AND ID
NUMBERS ARE USED TO ALLOW A USER TO LOG
ONTO A PARTICULAR SITE
 PUBLIC KEY CRYPTOGRAPHY

 PUBLIC KEY CRYPTOGRAPHY USES TWO KEYS,ONE

PUBLIC AND ONE PRIVATE,TO ENCRYPT AND DECRYPT
DATA, RESPECTIVELY.CRYPTOGRAPHY IS THE PROCESS
OF PROTECTING THE INTEGRITY AND ACCURACY OF
INFORMATION BY ENCRYPTING DATA INTO AN
UNREADABLE FORMAT, CALLED CIPHER TEXT. PUBLIC
KEY CRYPTOGRAPHY USES A PAIR OF KEYS, ONE
PRIVATE AND ONE PUBLIC. IN CONTRAST, PRIVATE KEY
CRYPTOGRAPHY USES ONLY ONE KEY FOR ENCRYPTION .
THE ADVANTAGE OF THE DUAL-KEY TECHNIQUE IS
THAT IT ALLOWS THE BUSINESSES TO GIVE AWAY THEIR
PUBLIC KEYTO ANY ONE WHO WANTS TO SEND A
MESSAGE. THE PRIVATE KEY IS NOT PUBLICLY KNOWN.
 DIGITAL SIGNATURE

 RATHER THAN AWRITTEN SIGNATURE THAT CAN BE USED BY

AN INDIVIDUAL TO AUTHENTICATETHE IDENTITY OF THE
SENDER OF A MESSAGE OR THE DOCUMENT;A DIGITAL
SIGNATURE IS AN ELECTRONIC ONE. E-CHEQUE TECHNOLOGY
ALSO ALLOWS DIGITAL SIGNATURE TO BE APPLIED TO
DOCUMENTBLOCKS, RATHER THAN TO THE ENTIRE
DOCUMENT. THIS LETS PART OF A DOCUMENT TO BE
SEPARATED FROM THE ORIGINAL,WITHOUT COMPROMISING
THE INTEGRITY OF THE DIGITAL SIGNATURE. THIS
TECHNOLOGY WOULD ALSO BE VERY USEFUL FOR BUSINESS
CONTRACTS AND OTHER LEGAL DOCUMENTS TRANSFERRED
OVER THE WEB.
 THE FOLLOWING ARE SOME FUNCTION OF DIGITAL
SIGNATURE;1 THE AUTHENTICATION FUNCTION:
THE TERM DIGITAL SIGNATURE IN GENERAL IS
RELEVANT TO THE PRACTICE OF ADDING A STRING
OF CHARACTERS TO AN ELECTRONIC MESSAGE
THAT SERVES TO IDENTIFY THE SENDER OR THE
ORIGINATOR OF A MESSAGE.2THE SEAL FUNCTION:
SOME DIGITAL SIGNATURE TECHNIQUES ALSO
SERVE TO PROVIDE A CHECK AGAINST ANY
ALTERATION OF THE TEXT OF THE MESSAGE AFTER
THE DIGITAL SIGNATURE WAS APPENDED.3THE
INTEGRITY FUNCTION: THE FUNCTION IS OF GREAT
INTEREST IN CASES WHER LEGAL DOCUMENTS ARE
CREATED USING SUCH DIGITAL SIGNATURE.
 CERTIFICATE

A DRIVER”S LICENSE IS ACCEPTED BY NUMEROUS

ORGANIZATION BOTH PUBLIC AND PRIVATE AS A
FORM OF IDENTIFICATIN DUE TO THE LEGITIMACY
OF THE ISSUER, WHICH IS A GOVT AGENCY. SINCE
ORG UNDERSTAND THE PROCESS BY WHICH
SOMEONE CAN OBTAIN A DRIVER LICENSE THEY CAN
TRUST THAT THE ISSUER VERIFIED THE IDENTITY
OF THE INDIVIDUAL TO WHOM THE LICENSE WAS
ISSUED. A CERTIFICATE PROVIDES A MECHANISM
FOR ESTABLISHING CONFIDENCE IN THE
RELATIONSHIP BETWEEN A PUBLIC KEY AND THE
ENTITY THAT OWNS THE CORRESPONDING PRIVATE
KEY.
 CERTIFICATE AUTHORITIES

 CERTIFICATE AUTHORITIES ARE SIMILAR TO A

NOTARY PUBLIC, A COMMONLY TRUSTED THIRD
PARTY. TN THE E-COMM WORLD, CERTIFICATE
AUTHORITIES ARE THE CORRESPONDING OF
PASSPORT OFFICES IN THE GOVT THAT CONCERN
DIGITAL CERTIFICATE AND VALIDATE THE
HOLDER’S IDENTITY AND AUTHORITY.
 SECURE SOCKETS LAYER
SSL IS A PROTOCOL DEVELOPED BY NETSCAPE
CORPORATION. SSL PROVIDES A RELATIVELY
SECURE METHOD TO ENCRYPT DATA THAT ARE
TRANSMITTED OVER A PUBLIC NETWORK SUCH AS
THE INTERNET, ALSO OFFERS SECURITY FOR ALL
WEB TRANSACTION, INCLUDING FILE TRANFER
PROTOCOL AND TELNET-BASED TRANSACTIONS. IT
PROVIDES AN ELECTRONIC WRAPPING AROUND
THE TRANSACTION THAT GO THROUGH THE
INTERNET. AUTHENTICATION BEGINS WHEN A
CLIENT REUESTS A CONNECTION TO AN SSL
SERVER. THE CLIENT SENDS ITS PUBLIC KEY TO
THE SERVER,WHICH IN TURN GENERATES A
RANDOM MESSAGE FROM THE SERVER AND SENDS
 TO IMPLEMENT SSL IN A WEB SERVER, THE
FOLLOWING STEPS ARE FOLLOWED;1. CREATE A KEY
PAIR ON THE SERVER.2 DEMAND A CERTIFICATE
FROM A CERTIFICATE AUTHORITY.3 SET UP THE
CERTIFICATE.4 ACTIVATE SSL ON A SECURITY
FOLDER OR DIRECTORY. IT IS NOT A GOOD IDEA TO
ACTIVATE SSL ON ALL THE DIRECTORIES BECAUSE
THE ENCRYPTION OVERHEAD CREATED BY SSL
DECREASES SYSTEM PERFORMANCE.
 ADVANTAGES AND DISADVANTAGES OF
SSL
 AUTHENTICATION;PERMITS WEB- ENABLED
BROWSERS AND SERVER TO AUTHENTICATE EACH
OTHERS. ACCESS
LIMIT; PERMITS CONTROLLED ACCESS TO SERVERS,
DIRECTORIES, FILES, AND SERVICES. DATA
PROTECTION; GUARTEES THAT EXCHANGED DATA
CANNOT E CORRUPTED WITHOUT DETECTION.
INFORMATION SHARE; PERMITS INFORMATION TO
BE SHARED BY BROWSERS AND SERVERS WHILE
REMAINING OUT OF REACH TO THIRD PARTIES.
 DISADVANTAGES;
1.SIMPLE ENCRYPTION; THIS MIGHT INCREASE THE
CHANCES OF BEING HACED BY COMPUTER
CRIMINALS. 2.STOLEN
CERTIFICATE/KEY; ONE IMP DRAWBACK OF SSL IS
THAT SERTICATES AND KEYS THAT ORIGINATE
FROM A COMPUTER CAN BE STOLEN OVER A
NETWORK OR BY OTHER ELECTRONIC MEANS.
3.CUSTOMER’S RISK;CUSTOMERS RUN THE RISK
THAT A MERCHANT MAY EXPOSE THEIR CREDIT
CARD NUMBERS ON ITS SERVER, IN TURN, THIS
INCREASES THE CHANES OF CREDIT CARD FRAUDS.
4.MERCHANT’S RISK; MERCHANTS RUN THE RISK
THAT A CUSTOMER’S CRAD NUMBER IS FALSE OR
THAT THE CREDIT CARD WON’T BE APPROVED.
 SECURE HYPERTEXT TRANSFER
PROTOCOL

 ANOTHER PROTOCOL FOR TRANSMITTING DATA

SECURELY OVER THE WORLD WIDE WEB IS SECURE
WHEREAS SSLCREATES A SECURE CONNECTION
BETWEEN A CLIENT AND A SERVER, OVER ANY
AMOUNT OF DATA CAN BE SENT SECURELY, SHTTP IS
DESIGNED TO TRANSMIT INDIVIDUAL MESSAGES
SECURELY. SSL S-HTTP, THEREFORE, CAN BE SEEN AS
COMPLEMENTARY RATHER THAN COMPETING
TECHNOLOGIES.
SECURE ELECTRONIC TRANSMISSION (
SET)

 SET PROTOCOL IMITATES THE CURRENT STRUCTURE

OF THE CREDIT CARD PROCESSING SYSTEM. SET
REPLACES EVERY PHONE CALL OR TRANSACTION
SLIP OF PAPER WITH AN ELECTRONIC VERSION. THIS
CAN GENERATES A LARGE NUMBER OF DATA
PACKETS. THE SET PROTOCOLS OFFER PACKETS OF
DATA FOR ALL THESE TRANSACTION, AND EACH
TRANSACTION IS SIGNED WITH A DIGITAL
SIGNATURE. THIS MAKES SET THE LARGEST
CONSUMER OF CERTIFICATES, AND IT MAKES BANKS
BY DEFAULT ONE OF THE MAJOR DISTRIBUTORS OF
CERTIFICATES.
 THE MOST IMP PROPERTY OF SET IS THAT THE
CREDIT CARD NUMBER IS NOT OPEN TO THE
SELLER. ON THE OTHER HAND, THE SET
PROTOCOL, DESPITE STRONG SUPPORT FROM VISA
AND MASTERCARD, HAS NOT APPEARED AS A
LEADING STANDARD. THE TWO MAJOR REASONS
FOR LACK OF WIDESPREAD ACCEPTANCE ARE
FOLLOWINGS; 1. THE COMPLEXITY OF SET
2.THE NEED FOR ADDED SECURITY THAT SET
PROVIDES THOUGH,
THIS MIGHT CHANGE IN THE FUTURE AS
ENCRYPTION TECHNOLOGY BECOMES MORE
COMMONLY UTILIZED IN THE E-BUSINESS WORLD.
 ADVANTAGES AND DISADVANTAGES OF
SET
 SOME OF THE ADVANTAGES OF SET COPNTAIN THE
FOLLOWING;
1.INFORMATION SECURITY; NEITHER ANYONE
LISTENING IN NOR A MERCHANT CAN USE THE
INFORMATION PASSED DURING A TRANSACTION FOR
FRAUD. 2.CREDIT
CARD SERURITY; THERE IS NO CHANCE FOR ANYONE
TO STEAL A CREDIT CARD. 3.FLEXIBILITY
IN SHOPPING; IF A PERSON HAS A PHONE HE/SHE
CAN SHOP.
 DISADVANTAGES OF SET; SOME OF THE
DISADVANTAGES OF SET INCLUDE ITS COMPLEXITY
AND HIGH COST FOR IMPLEMENTATION. PRIVACY
CONCERNS MAKE, SOME PEOPLE SIMPLY DISLIKE
ELECTRONIC PAYMENTS. THEY FIND THE SETUP TOO
TIME-CONSUMING AND DONT WANT MORE LOGONS
AND PASWORDSTO REMEMBER. OTHERS SIMPLY
PREFER THE FAMILIARITY OF WRITING CHEQUES
AND DROPING ENVELOPES IN THE MAIL.
REGARDING OF THESE CONCERNS, ELECTRONIC
PAYMENT WILL LIKELY CONTINUE TO RISE IN
POPULARITY.