Online Security & Payment Systems

Discussion Questions
• What practices can provide effective e-commerce security?
• What are the different layers of an e-commerce security
environment?
• Describe Customer and Merchant Perspectives on the different
perspectives of E-commerce security
• What values normally conflict with security?
• What are the common Security threats in the E-commerce
Environment?
• How can the threats be mitigated?
• What are the three main components of managing risks in e-
commerce?
• What are the components of a security plan in e-commerce?
• What are the different e-commerce payment systems?
 The E-commerce Security Environment

• Overall size and losses of cybercrime unclear

– Several incidents are never reported

• 2008 CSI survey: 49% respondent firms

detected security breach the previous year

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Types of Attacks
Against Computer
Systems
(Cybercrime)

Figure 5.1, Page 267

Source: Based on data from Computer
Security Institute, 2009.
Copyright © 2010 Pearson Education, Inc. Slide 5-4
 What is Good E-commerce Security?
• To achieve highest degree of security
– New and constantly updated technologies
– Organizational policies and procedures
– Industry standards and government laws e.g.
computer misuse in Uganda
• Other factors
– Time value of money
– Cost of security vs. potential loss
– Security often breaks at weakest link
Copyright © 2010 Pearson Education, Inc.
 The E-commerce Security Environment

Figure 5.2, Page 270

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Table 5.2, Page 271
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The Tension Between Security and Other Values

• Security vs. ease of use

– The more security measures added, the more
difficult a site is to use, and the slower it becomes

• Security vs. desire of individuals to act

anonymously
– Use of technology by criminals to plan crimes or
threaten national security
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 Security Threats in the E-commerce
Environment
• Three key points of vulnerability:

1. Client
2. Server
3. Communications pipeline

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A Typical
E-commerce
Transaction

SOURCE: Boncella, 2000.

Figure 5.3, Page 273
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 Vulnerable Points in an
E-commerce Environment

SOURCE: Boncella, 2000.

Figure 5.4, Page 274
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 Most Common Security Threats in the
E-commerce Environment
• Malicious code
– Viruses
– Worms
– Trojan horses
– Bots, botnets
• Unwanted programs
– Browser parasites
– Adware
– Spyware

Copyright © 2010 Pearson Education, Inc. Slide 5-12

 Most Common Security Threats
• Phishing
– Deceptive online attempt to obtain confidential information
– Social engineering, e-mail scams, spoofing legitimate Web sites
– Use information to commit fraudulent acts (access checking accounts), steal identity
• Hacking and cyber vandalism
– Hackers vs. crackers
– Cyber vandalism: intentionally disrupting, defacing, destroying Web site
– Types of hackers: white hats, black hats, grey hats

• Black hat hacker, also known as a cracker, someone who uses his computer knowledge in
criminal activities in order to obtain personal benefits
• A white hat hacker does it with no criminal intention in mind. Companies around the
world, who want to test their systems, contract white hat hackers
• A grey hat hacker is someone who is in between these two concepts. He may use his
skills for legal or illegal acts, but not for personal gains. Grey hat hackers use their skills
in
order to prove themselves that they can accomplish a determined feat, but never do it in
order to make money out of it.
Slide 5-13
 Most Common Security Threats
• Credit card fraud/theft
– Fear of stolen credit card information deters online purchases
– Hackers target merchant servers; use data to establish credit under
false identity
– Online companies at higher risk than offline
• Spoofing: misrepresenting self by using fake e-mail address
• Pharming: spoofing a Website
– Redirecting a Web link to a new, fake Web site
• Spam/junk Web sites
 Most Common Security Threats
• Denial of service (DoS) attack
– Hackers flood site with useless traffic to overwhelm network
• Distributed denial of service (DDoS) attack
– Hackers use multiple computers to attack target network
• Sniffing
– Eavesdropping program that monitors information traveling over a
network

• Insider jobs
– Single largest financial threat

• Poorly designed server and client software

Copyright © 2010 Pearson Education, Inc. Slide 5-15

 Technology Solutions

• Protecting Internet communications

(encryption)
• Securing channels of communication (SSL,
S-HTTP, VPNs)
• Protecting networks (firewalls)
• Protecting servers and clients

Slide 5-16
Tools Available to
Achieve Site
Security

Copyright © 2010 Pearson Education, Inc. Slide 5-17

 Encryption
• Encryption
– Transforms data into cipher text readable only by
sender and receiver
– Secures stored information and information
transmission
– Provides 4 of 6 key dimensions of e-commerce
security:
1. Message integrity
2. Nonrepudiation
3. Authentication
4. Confidentiality

Slide 5-18
 Symmetric Key Encryption
• Sender and receiver use same digital key to
encrypt and decrypt message
• Requires different set of keys for each transaction
• Strength of encryption
– Length of binary key used to encrypt data
• Advanced Encryption Standard (AES)
– Most widely used symmetric key encryption

Copyright © 2010 Pearson Education, Inc. Slide 5-19

 Public Key Encryption
• Uses two mathematically related digital keys
1. Public key (widely disseminated)
2. Private key (kept secret by owner)
• Both keys used to encrypt and decrypt message
• Once key used to encrypt message, same key
cannot be used to decrypt message
• Sender uses recipient’s public key to encrypt
message; recipient uses his/her private key to
decrypt it
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 Public Key Cryptography—A Simple Case

Figure 5.8, Page 290

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 Digital Certificates and
Public Key Infrastructure (PKI)
• Digital certificate includes:
– Name of subject/company
– Subject’s public key
– Digital certificate serial number
– Expiration date, issuance date
– Digital signature of certification authority (trusted third
party institution) that issues certificate

• Public Key Infrastructure (PKI):

– CAs and digital certificate procedures that are accepted by
all parties

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 Digital Certificates and Certification Authorities

Figure 5.11, Page 294

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 Limits to Encryption Solutions

• Doesn’t protect storage of private key

– PKI not effective against insiders, employees
– Protection of private keys by individuals may be
haphazard
• No guarantee that verifying computer of
merchant is secure
• CAs are unregulated, self-selecting
organizations

Copyright © 2010 Pearson Education, Inc. Slide 5-24

 Securing Channels of Communication
• Secure Sockets Layer (SSL):
– Establishes a secure, negotiated client-server session in
which URL of requested document, along with
contents, is encrypted

• S-HTTP:
– Provides a secure message-oriented communications
protocol designed for use in conjunction with HTTP

• Virtual Private Network (VPN):

– Allows remote users to securely access internal
network via the Internet, using Point-to-Point
Tunneling Protocol (PPTP)
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 Secure Negotiated Sessions Using SSL

Figure 5.12, Page 298

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 Protecting Networks
• Firewall
– Hardware or software that filters packets
– Prevents some packets from entering the
network based on security policy
– Two main methods:
1. Packet filters
2. Application gateways

• Proxy servers (proxies)

– Software servers that handle all communications
originating from or being sent to the Internet
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 Firewalls and Proxy Servers

Figure 5.13, Page 301

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 Protecting Servers and Clients

• Operating system security enhancements

– Upgrades, patches

• Anti-virus software
– Easiest and least expensive way to prevent threats
to system integrity
– Requires daily updates

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 Management Policies, Business Procedures,
and Public Laws
• U.S. firms and organizations spend 12% of IT budget
on security hardware, software, services ($120 billion
in 2009)
• Managing risk includes
– Technology
– Effective management policies
– Public laws and active enforcement e.g.
• Computer misuse Act in Uganda

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 A Security Plan: Management Policies

• Risk assessment
• Security policy
• Implementation plan
– Security organization
– Access controls
– Authentication procedures, including biometrics
– Authorization policies, authorization management systems

• Security audit
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 Developing an E-commerce Security Plan

Figure 5.14, Page 303

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 The Role of Laws and Public Policy
• Laws that give authorities tools for identifying, tracing,
prosecuting cybercriminals:
– National Information Infrastructure Protection Act of 1996
– USA Patriot Act
– Homeland Security Act
– Uganda: Computer misuse Bill & Penal code

• Private and private–public cooperation

– CERT Coordination Center
– US-CERT
– UGCERT (http://www.ug-cert.ug/)

• Government policies and controls on encryption software

• OECD/EAC guidelines
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 Types of Payment Systems
• Cash
– Most common form of payment in terms of number of
transactions
– Instantly convertible into other forms of value without
intermediation
• Checking transfer
– Second most common payment form in terms of number of
transactions
• Credit card
– Credit card associations
– Issuing banks
– Processing centers

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 Types of Payment Systems

• Stored Value
– Funds deposited into account, from which funds are paid
out or withdrawn as needed, e.g., debit cards, gift
certificates
– Peer-to-peer payment systems
• Accumulating Balance
– Accounts that accumulate expenditures and to which
consumers make periodical payments
– E.g., utility, post paid phone, etc

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Table 5.6, Page 312
Source: Adapted from MacKie-Mason and White, 1996.
Copyright © 2010 Pearson Education, Inc. Slide 5-36
 E-commerce Payment Systems

• Credit cards
– 55% of online payments in 2009
• Debit cards
– 28% of online payments in 2009
• Limitations of online credit card payment
– Security
– Cost
– Social equity

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 How an Online Credit Transaction Works

Figure 5.16, Page 315

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 E-commerce Payment Systems
• Digital wallets
– Emulates functionality of wallet by authenticating consumer, storing and
transferring value, and securing payment process from consumer to
merchant
– Early efforts to popularize failed
– Newest effort: Google Checkout

• Digital cash
– Value storage and exchange using tokens
– Most early examples have disappeared; protocols and practices too complex
– Mobile money growing

Copyright © 2010 Pearson Education, Inc. Slide 5-39

 E-commerce Payment Systems
• Online stored value systems
– Based on value stored in a consumer’s bank, checking, or
credit card account
– PayPal, smart cards

• Digital accumulated balance payment

– Users accumulate a debit balance for which they are billed
at the end of the month

• Digital checking:
– Extends functionality of existing checking accounts for use
online
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 Wireless Payment Systems

• Use of mobile handsets as payment devices well-

established in Europe, Japan, South Korea
• Japanese mobile payment systems
– E-money (stored value)
– Mobile debit cards
– Mobile credit cards
• Not as well established yet in the United States
– Majority of purchases are digital content for use on cell phone

• Mobile Money-Popular in Africa

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 Insight on Business
Mobile Payment’s Future:
Wavepayme, Textpayme
Group Discussion

• What technologies make mobile payment

more feasible now than in the past?
• Describe some new experiments that are
helping to develop mobile payment systems.
• How has PayPal responded?
• Why haven’t mobile payment systems grown
faster? What factors will spur their growth?
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 Electronic Billing Presentment and Payment
(EBPP)
• Online payment systems for monthly bills
• 40% + of households in 2009 used some
EBPP; expected to grow significantly
• Two competing EBPP business models:
1. Biller-direct (dominant model)
2. Consolidator
• Both models are supported by EBPP
infrastructure providers
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