Electronic Payment Systems-Final
Electronic Payment Systems-Final
Electronic Payment Systems-Final
Presentation Outline
- Introduction to electronic payment systems - Requirements of electronic payment - Classification of electronic payment and protocols - Account-Based Payment and Example - Electronic Check Payment and Example - Micro-Payment and Example systems
What is a payment system? E-commerce application systems must provide payment processing and transaction service to buyers and sellers. A payment system, as a part of E-commerce application system, is a such system which support secured payment processes by providing reliable, secured, and efficient transaction services between sellers and buyers. The basic requirements of a payment system:
Provide secured and confidential transaction processes. Conduct authentication and authorization for all involved parties. Ensure the integrity of payment instructions for goods and services. Availability, cost-effective, efficiency and reliability. Global access and international useful
Disadvantages: High risks and security challenges due to: - Unlike paper, digital documents can be copied perfectly and arbitrarily often. - Digital signatures can be produced by anybody who knows the secret cryptographic key. - A buyers name can be associated with every payment.
SET Electronic Check Payment Protocols CyberCash iKP Digital Cash Payment Protocols FV SEPP NetBill Micro-Payment Protocols DigiCash FSTC NetCash Millicent Mondax PayWord CyberCoin SubScrip Cafe
Card Association
CardHolder
Merchant
- Transaction cost: high transaction cost compared with other approaches - Performance: slower performance due to the authentication and account validation using the existing banking systems - Privacy: consumer loss of the privacy of their transactions
CyberCash Server Registration Card binding Customer Wallet Web Browser CyberCash Payment Model Purchase Shopping
log transaction
Header:
Transport: It contains the order information in a purchase, transaction ID, date, and the key ID to the encrypt the opaque part. Opaque: The encrypted part of a message. Trailer: the end of a CyberCash message.
Merchants must set up merchant accounts to accept payment cards Law prohibits charging payment card until merchandise is shipped Payment card transaction requires:
Merchant to authenticate payment card Merchant must check with card issuer to ensure funds are available and to put hold on funds needed to make current charge Settlement occurs in a few days when funds travel through banking system into merchants account
17
10/22/2012
10/22/2012
18
Banks and other financial institutions serve as brokers between card users and merchants -- no other institution is involved American Express and Discover are examples Transaction is processed by third party Visa and MasterCard are examples
10/22/2012
19
10/22/2012
20
Jointly designed by MasterCard and Visa with backing of Microsoft, Netscape, IBM, GTE, SAIC, and others Designed to provide security for card payments as they travel on the Internet
Contrasted with Secure Socket Layers (SSL) protocol, SET validates consumers and merchants in addition to providing secure transmission SET specification Uses public key cryptography and digital certificates for validating both consumers and merchants Provides privacy, data integrity, user and merchant authentication, and consumer nonrepudiation
10/22/2012
21
The SET protocol coordinates the activities of the customer, merchant, merchants bank, and card issuer. [Source: Stein] 10/22/2012 22
Consumer makes purchase by sending encrypted financial information along with digital certificate Merchants website transfers the information to a payment card processing center while a Certification Authority certifies digital certificate belongs to sender Payment card-processing center routes transaction to credit card issuer for approval Merchant receives approval and credit card is charged Merchant ships merchandise and adds 10/22/2012 23 transaction amount for deposit into merchants
All parties hold certificates signed directly or indirectly by a certifying authority. [Source: Stein] 10/22/2012 24
SET Protocol
Extremely secure
Fraud reduced since all parties are authenticated Requires all parties to have certificates
So far has received lukewarm reception 80 percent of SET activities are in Europe and Asian countries Problems with SET
Not easy to implement Not as inexpensive as expected Expensive to integrated with legacy applications Not tried and tested, and often not needed Scalability is still in question
10/22/2012
25
Payment Cards
Open and closed loop systems will accept and process payment cards. A merchant bank or acquiring bank is a bank that does business with merchants who want to accept payment cards. Software packaged with your electronic commerce software can handle payment card processing automatically.
Key participants in processing credit card payments online include the following: Acquiring bank
Credit card association Customer Issuing bank Merchant Payment processing service Processor
30
10/22/2012
10/22/2012
31
10/22/2012
32
Fraud screens and decision models Negative files Card association payer authentication services
10/22/2012
33
10/22/2012
34
Stored-Value Cards
A stored-value card can be an elaborate smart card or a simple plastic card with a magnetic strip that records the currency balance.
A smart card is better suited for Internet payment transactions because it has limited processing capability.
Smart Cards
Plastic card containing an embedded microchip Available for over 10 years So far not successful in U.S., but popular in Europe, Australia, and Japan Smart cards gradually reappearing in U.S.; success depends on:
Critical mass of smart cards that support applications Compatibility between smart cards, card-reader devices, and applications
36
10/22/2012
Ticketless travel
Seoul bus system: 4M cards, 1B transactions since 1996 Planned the SF Bay Area system
Authentication, ID Medical records Ecash Store loyalty programs Personal profiles Government
Licenses
10/22/2012
Advantages:
1. 2. 3. 4. 5.
Atomic, debt-free transactions Feasible for very small transactions (information commerce) (Potentially) anonymous Security of physical storage (Potentially) currency-neutral Low maximum transaction limit (not suitable for B2B or most B2C) High Infrastructure costs (not suitable for C2C) Single physical point of failure (the card) Not (yet) widely used
Disadvantages:
1. 2. 3. 4.
10/22/2012
38
Holds and dispenses electronic cash (Smart-card based, stored-value card) Developed by MasterCard International Requires specific card reader, called Mondex terminal, for merchant or customer to use card over Internet Supports micropayments as small as 3c and works both online and off-line at stores or over the telephone Secret chip-to-chip transfer protocol Value is not in strings alone; must be on Mondex card Loaded through ATM
ATM does not know transfer protocol; connects with secure device at bank
10/22/2012
39
10/22/2012
40
Mondex transaction
Here's what happens "behind the scenes" during a Mondex transaction between a consumer and merchant. Placing the card in a Mondex terminal starts the transaction process:
1.
2.
3.
Information from the customer's chip is validated by the merchant's chip. Similarly, the merchant's card is validated by the customer's card. The merchant's card requests payment and transmits a "digital signature" with the request. Both cards check the authenticity of each other's message. The customer's card checks the digital signature and, if satisfied, sends acknowledgement, again with a digital signature. Only after the purchase amount has been deducted from the customer's card is the value added to the merchant's card. The digital signature from this card is checked by the customer's card and if confirmed, the transaction is complete.
10/22/2012
41
Disadvantages
Card carries real cash in electronic form, creating the possibility of theft No deferred payment as with credit cards -cash is dispensed immediately Active and dormant security software Security methods constantly changing ITSEC E6 level (military) VTP (Value Transfer Protocol) Globally unique card numbers Globally unique transaction numbers Challenge-response user identification Digital signatures MULTOS operating system firewalls on the chip 42
Security
10/22/2012
Smart Cards
smart card An electronic card containing an embedded microchip that enables predefined operations or the addition, deletion, or manipulation of information on the card
Smart Cards
Smart Cards
smart card reader Activates and reads the contents of the chip on a smart card, usually passing the information on to a host system smart card operating system Special system that handles file management, security, input/output (I/O), and command execution and provides an application programming interface (API) for a smart card
Smart Cards
Smart cards store or provide access to either valuable assets or to sensitive information Because of this, they must be secured against theft, fraud, or misuse The possibility of hacking into a smart card is classified as a class 3 attack, which means that the cost of compromising the card far exceeds the benefits
E-Cards (cont.)
Stores 4MB of data; once written, data cannot be changed or removed Ideal for keeping records (medical files) Require expensive card readers Contact cardinsert in smart card reader Contactless cardembedded antenna read by another antenna (mass-transit applications)
E-Cards (cont.)
Chip with an operating system to run applications Programming language to write applications Multipurpose cards use new operating systems
Embedded chip
Source: Visa.
Smart Cards
Retail Purchases e-purse Smart card application that loads money from a card holders bank account onto the smart cards chip Common Electronic Purse Specification (CEPS) Standards governing the operation and interoperability of e-purse offerings Transit Fares E-Identification
Smart Cards
Transit Fares
To eliminate the inconvenience of multiple types of tickets used in public transportation, most major transit operators in the United States are implementing smart card fare-ticketing systems
E-Identification
Because they have the capability to store personal information, including pictures, biometric identifiers, digital signatures, and private security keys, smart cards are being used in a variety of identification, access control, and authentication applications
Electronic Cheques
Leverages the check payments system, a core competency of the banking industry. Fits within current business practices Works like a paper check does but in pure electronic form, with fewer manual steps. Can be used by all bank customers who have checking accounts Different from Electronic fund transfers
Exactly same way as paper Check writer "writes" the echeck using one of many types of electronic devices Gives" the echeck to the payee electronically. Payee "deposits" echeck, receives credit, Payee's bank "clears" the echeck to the paying bank. Paying bank validates the echeck and "charges" the check writer's account for the check.
E-Checking
Electronic checkbook
Counterpart of electronic wallet To be integrated with the accounting information system of business buyers and with the payment server of sellers To save the electronic invoice and receipt of payment in the buyers and sellers computers for future retrieval Example : SafeCheck Used mainly in B2B
E-Checking (cont.)
Enhance security through use of public key cryptography Push a payment to the payee and not pull funds from general account of the U.S. Leverage Internet for its strength as ubiquitous communication vehicle Increase payment choices for U.S. Treasury payees
E-Checking
It reduces the merchants administrative costs by providing faster and less paper-intensive collection of funds It improves the efficiency of the deposit process for merchants and financial institutions It speeds the checkout process for consumers It provides consumers with more information about their purchases on their account statements It reduces the float period and the number of checks that bounce because of insufficient funds (NSFs)
Network
Bank
NetBill Server
1 2 3 4 5 8
Customer
NetBill Server
6
7
1. Consumers application send a price quote request to the merchants application through a checkbook library. 2. Merchants application sends back the price quote the consumers application. 3. Consumer accepts the price quote, and then sends a purchase request through the Checkbook library. 4. Merchants application sends to the consumers Checkbook encrypted in a one-time key. 5.Consumer sends a electronic payment order (EPO) to merchants application. 6. The merchants application sends the endorsed EPO to the NetBill server. 7. NetBill server verifies that the consumer and merchant signatures are valid. Then, return the merchant a digitally signed receipt with a decryption key. 8. The merchants application forward the NetBill servers receipt to the Check book.
Security Server
Transaction Server
DB
Micro-Payment Systems
- Objectives: ---> Micro-payment situations: Although micro-payment systems share the similar requirements of other payment systems, they focus on special markets, where: - Low-value transactions involved less than the value of smallest coin. - Non-tangible and network-deliverable merchandise examples: archived magazines, journals, CD, software, - Special requirements:
Fast and low cost payment transactions. Very small amount of value Reduced the number of involved parties High scalable
The issues of other payment systems: - Account-based systems have high transaction costs. - Transaction speed in electronic checking systems is slow. - Electronic money systems involve more parties, have low transaction speed, and cause poor scalability.
Micro-Payment Protocols
- Objectives: ---> Micro-payment situations: Although micro-payment systems share the similar requirements of other payment systems, they focus on special markets, where: - Low-value transactions involved less than the value of smallest coin. - Non-tangible and network-deliverable merchandise examples: archived magazines, journals, CD, software, - Special requirements: Fast and low cost payment transactions. Very small amount of value Reduced the number of involved parties High scalable
The issues of other payment systems: - Account-based systems have high transaction costs. - Transaction speed in electronic checking systems is slow. - Electronic money systems involve more parties, have low transaction speed, and cause poor scalability.
Micro-payment Protocols:
- Millicent, developed by Digital Equipment Corp. in 1995. - SubScrip, developed at the University of Newcastle, - PayWord, developed by Ron Rivest (MIT) and Adi Shamir. - MicroMint, developed by Ron Rivest and Adi Shamir. - iKP micropayment protocol
Australia.
Micro-payment systems do not available in conventional commerce. They open many new areas of business. Examples: - Millicent payment system - Micro Payment Transfer Protocol (MPTP) based on PayWord.
Micro-Payment Systems
- Major factors on transaction costs: Payment methods Complexity of security mechanisms The number of involved parties Transaction model (on-line/off-line)
Business market: electronic publishing, software and game industries. Performance: 14,000 pieces of Scrip can be produced per second. 8,000 payments can be validated per second, with change Scrip being produced. A public trial of the Millicent system was scheduled for the summer of 1997.
3
Internet
Broker
Electronic Cash
Electronic cash is a general term that describes the attempts of several companies to create a value storage and exchange system that operates online in much the same way that government-issued currency operates in the physical world.
To establish electronic cash, a consumer goes in person to open an account with a bank. The consumer uses a digital certificate to access the bank through the Internet to make a purchase. Consumers can spend their electronic cash at sites that accept electronic cash for payment.
The electronic cash must be protected from both theft and alteration.
To prevent double spending, the main security feature is the threat of prosecution. A complicated two-part lock provides anonymous security that also signals when someone is attempting to double spend cash. One way to trace electronic cash is to attach a serial number to each electronic cash transaction.
First person to return string to bank gets the money PROBLEMS: Cant use offline. Must verify money not yet spent. Not anonymous. Bank can record serial number. Sophisticated transaction processing system required with locking to prevent double spending.
10/22/2012
Withdrawal (Minting):
ALICE BUYS DIGITAL COINS FROM A BANK
WALLET SOFTWARE
Spending:
BOB DEPOSITS
Personal Transfer:
10/22/2012
Minting eCash
Alice requests coins from the bank where she has an account Alice sends the bank { { blinded coins, denominations }SigAlice }PKBank Bank knows they came from Alice and have not been altered (digital signature) The message is secret (only Bank can decode it) Bank knows Alices account number Bank deducts the total amount from Alices account
10/22/2012
Bank now must produce signed coins for Alice Each of Alices blinded coins has a serial# Banks public key for $5 coins is (e5, m5) (exponent and modulus). Private key is d5. Alice selects blinding factor r Alice blinds serial# by multiplying by r e5 (mod m5) (serial# r e5) (mod m5) e5 d5 = 1 (mod m5) Banks signs the coin with its private d5 key: (serial# r e5)d5 (mod m5) = (serial#)d5 r (mod m5) Alice divides out the blinding factor r. Whats left is (serial#)d5 (mod m5) = { serial# } SKBank5
Just as if bank signed serial#. But Bank doesnt know serial#.
10/22/2012
Spending eCash
Alice orders goods from Bob Bobs server requests coins from Alices wallet: payreq = { currency, amount, timestamp, merchant_bankID, merchant_accID, description }
Alice approves the request. Her wallet sends: payment = { payment_info, {coins, H(payment_info)}PKmerchant_bank } payment_info = { Alices_bank_ID, amount, currency, ncoins, timestamp, merchant_ID, H(description), H(payer_code) }
10/22/2012
Depositing eCash
Bob receives the payment message, forwards it to the bank for deposit by sending deposit = { { payment }SigBob }PKBank
Bank decrypts the message using SKBank. Bank examines payment info to obtain serial# and verify that the coin has not been spent Bank credits Bobs account and sends Bob a deposit receipt: deposit_ack = { deposit_data, amount }SigBank
10/22/2012
Alice generates payer-code before paying Bob A hash of the payer_code is included in payment_info
Bob cannot tamper with H(payer_code) since payment_info is encrypted with the banks public key The merchants bank records H(payer_code) along with the deposit If Bob denies being paid, Alice can reveal her payer_code to the bank Otherwise, Alice is anonymous; Bob is not.
10/22/2012
Lost eCash
Ecash can be lost. Disk crashes, passwords forgotten, numbers written on paper are lost. Alice sends a message to the bank that coins have been lost Banks re-sends Alice her last n batches of blinded coins (n = 16) If Alice still has the blinding factor, she can unblind Alice deposits all the coins bank in the bank. (The ones that were spent will be rejected.) Alice now withdraws new coins eCash demo
10/22/2012
E-cash Concept
Merchant
5 4 Bank 3
2 1
1. Consumer buys e-cash from Bank 2. Bank sends e-cash bits to consumer (after charging that amount plus fee) 3. Consumer sends e-cash to merchant 4. Merchant checks with Bank that e-cash is valid (check for forgery or fraud) 5. Bank verifies that e-cash is valid 6. Parties complete transaction: e.g., merchant present e-cash to issuing back for deposit once goods or services are delivered Consumer still has (invalid) e-cash
Consumer 10/22/2012 84
Does not prevent double spending, since the merchant or consumer could be at fault
10/22/2012
85
Anonymous payments
5. Deposit token at bank. If double spent reveal identity and notify police
customer
merchant 3. Send token after adding merchants identity 4. Check validity and send goods
if money actually sent to merchant: returning to bank will alert police if money not sent: not sending will lead to loss
High cost of cryptographic transformations: not suitable for micropayments Examples: Digicash
Electronic Cash
10/22/2012
88
CyberCash
Combines features from cash and checks Offers credit card, micropayment, and check payment services Connects merchants directly with credit card processors to provide authorizations for transactions in real time No delays in processing prevent insufficient e-cash to pay for the transaction Stored in CyberCash wallet, a software storage mechanism located on customers computer Used to make purchases between .25c and $10 PayNow -- payments made directly from checking accounts
CyberCoins
10/22/2012
89
DigiCash
Trailblazer in e-cash Allowed customers to purchase goods and services using anonymous electronic cash Recently entered Chapter 11 reorganization
Coin.Net
Electronic tokens stored on a customers computer is used to make purchases Works by installing special plug-in to a customers web browser Merchants do not need special software to accept eCoins. eCoin server prevents double-spending and traces transactions, but consumer is anonymous to merchant
10/22/2012
90
Electronic cash transactions are more efficient and less costly than other methods. The distance that an electronic transaction must travel does not affect cost. The fixed cost of hardware to handle electronic cash is nearly zero. Electronic cash does not require that one party have any special authorization.
Electronic cash provides no audit trail. Because true electronic cash is not traceable, money laundering is a problem. Electronic cash is susceptible to forgery. So far, electronic cash is a commercial flop.
Electronic Wallets
holds credit cards, electronic cash, owner identification, and owner contact information provides owner contact information at an electronic commerce sites checkout counter
Electronic wallets make shopping more efficient. Electronic wallets fall into two categories based on where they are stored:
Electronic wallets store shipping and billing information, including a consumers first and last names, street address, city, state, country, and zip or postal code.
10/22/2012
96
Electronic Wallets
Agile Wallet
Developed by CyberCash Allows customers to enter credit card and identifying information once, stored on a central server Information pops up in supported merchants payment pages, allowing one-click payment Does not support smart cards or CyberCash, but company expects to soon Developed by Launchpad Technologies Free wallet software that stores credit card and personal information on users computer, not on a central server; info is dragged into payment form from eWallet Information is encrypted and password protected Works with Netscape and Internet Explorer 97
eWallet
10/22/2012
Electronic Wallets
Microsoft Wallet
Comes pre-installed in Internet Explorer 4.0, but not in Netscape All information is encrypted and password protected Microsoft Wallet Merchant directory shows merchants setup to accept Microsoft Wallet
10/22/2012
98
10/22/2012
99
World Wide Web Consortium (W3C) is attempting to create an extensible and interoperable method of embedding micropayment information on a web page
Extensible systems allow improvement of the system without eliminating previous work
Merchants must accept several payment options to insure the widest possible Internet audience
Merchants must embed in their Web page payment information specific to each payment system This redundancy spurred W3C to develop common standards for Web page markup for all payment systems Must move quickly to prevent current methods from becoming entrenched
10/22/2012
100
Electronic Commerce Modeling Language (ECML) proposed standards for electronic wallets
Companies forming the consortium are America Online, IBM, Microsoft, Visa, and MasterCard Ultimate goal is for all commerce sites to accept ECML Unclear how this standard will incorporate privacy standards W3C set forth Electronic Commerce Modeling Language (ECML) Wallet/Merchant Standards Initiative, July 1999
10/22/2012
101
Creating a standard approach for the exchange of information will enhance the ability for digital wallets to be used at all merchant sites and therefore facilitate the growth of e-commerce ECML is a universal, open standard for digital wallets and online merchants that facilitates the seamless exchange of payment and order information to support online purchase transactions
America Online, American Express, Brodia (formerly Transactor Networks), Compaq, CyberCash, Discover, Financial Services Technology Consortium (FSTC), IBM, MasterCard, Microsoft, Novell, SETCo, Sun Microsystems, Trintech, and Visa
ECML is designed to be security protocol independent, support global implementations, and support any payment instrument
ECML does not change the look and feel of a merchants site 10/22/2012 102
Microsoft Passport Wallet comes preinstalled in Internet Explorer 4.0 and higher versions. All the personal data you enter into your Microsoft Passport, including; your name, address, and credit card information, are encrypted and password-protected. Passport consists of four integrated services: Passport single sign-in service, Passport Wallet Service, Kids Passport service, and public profiles.
The W3C Electronic Commerce Interest Group (ECIG) developed a set of standards called the the Common Markup for Micropayment Per-Fee-Links.
This standard identifies existing system micropayment types of online connections, stored-value systems, and combined online-offline systems.
Q&A
Thank You.
10/22/2012 105