cs3700 ch 10payment
TRANSCRIPT
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CS 3700: Introduction to E Commerce
10. Electronic Payment Systems
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Traditional Payment Methods
How do you pay? What are the cost and risks? Cash (20%)
Checks (60%)
o Clearinghouses
o Magnetic Ink Characters Recognition (MICR)o Costs: 1% of U.S. Gross Domestic Product
Payment cards (20%)
o Credit cards
o Cost: 2.5% to issuer, 0.16% to association, 1.34% to acquirer
o Charge cards
o Debit cards
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Electronic Payment Methods
How do you pay electronically? Payment cards: Credit cards/Debit cards
Electronic fund transfer
Smart cards
Digital cash and script E-wallets
Digital checks
Electronic billing
What are the problems with electronic payment? Many youths do not have credit or debit cards Credit cards are not prevalent outside US
Transaction fees (~4%) is not suitable for B2B
Fraud and chargeback
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What Is a Good E payment Method?
What characteristics a successful e-payment methodshould have? Independence
Interoperability and portability Security
Anonymity
Divisibility
Ease of use Transaction fees
International support
Regulations
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Processing cards online authorization
Determines whether a buyers card is active and whether
the customer has sufficient funds.
settlement
Transferring money from the buyers to the merchants
account.
Using Payment Cards Online
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Merchants use three basic configurations for processingonline payments:1. Own the payment software
2. Use a point of sale system (POS) operated by an acquirer
3. Use a POS operated by a payment service providero payment service provider (PSP)
A third-party service connecting a merchants EC systemto the appropriate acquiring bank or financial institution.PSPs must be registered with the various card associationsthey support.
Using Payment Cards Online
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Processing Card Payments
Participants in processing card payments online Acquiring bank
Credit card association
Customer Issuing bank
Merchant
Payment processing service
Processor
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Address Verification System (AVS)Detects fraud by comparing the address entered on a Web
page with the address information on file with thecardholders issuing bank.
Manual review Fraud screens and automated decision models
Card verification number (CVN)
Detects fraud by comparing the verification number printed
on the signature strip on the back of the card with theinformation on file with the cardholders issuing bank.
Card association payer authentication services
Negative lists
Key Tools Used In Combating Fraud
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Smart Cards
Smart card:An electronic card containing an embeddedmicrochip that enables predefined operations or theaddition, deletion, or manipulation of information on thecard.
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Smart Cards
Types of smart cards contact card
A smart card containing a smallgold plate on the face that wheninserted in a smart card reader
makes contact and passes data toand from the embedded microchip.
contactless (proximity) card
A smart card with an embeddedantenna, by means of which dataand applications are passed to andfrom a card reader unit or otherdevice without contact between thecard and the card reader.
Operations of Smart cards smart card reader
Activates and reads the contents ofthe chip on a smart card, usuallypassing the information on to a host
system. smart card operating system
Special system that handles filemanagement, security, input/output(I/O), and command execution andprovides an applicationprogramming interface (API) for asmart card.
Applications of smart cards
Retail purchases
Transit fares
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e-micropaymentsSmall online payments, typically under $10.
Five basic micropayment models that do not dependsolely or directly on credit or debit cards:
1. Aggregation2. Direct payment3. Stored value4. Subscriptions
5. la carte
E Micropayments
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e-checkA legally valid electronic version or representation ofa paper check.
E Checking