Electronic payment systems

Presented by :
Salman Touheed

Tariq Rashid

Faizan Zafar

Anas Khan
 Electronic payment systems
 Payments over the Net

 An integral part of E-commerce is to

make electronic payments over the
Internet
 Payments over the Net

 These payments represent all non-

cash financial transactions
 which take place between two or

more parties
 Exchange of value is often facilitated

through one bank

where the two parties share the same banker
 Payments over the Net
 Electronic payments represent an efficient
means of:
 Changing funds and cash flows
 Offering improved security
 Minimizing manual intervention
 Reducing costs
 Simplifying record storage and handling
 Electronic payment systems (Consumers)
 An electronic payment system is a convenient
way of making a purchase or paying for a
service without holding cash.
 (Or) Having to go through the process of
completing a check and producing some form
of acceptable identification.
 Electronic payment systems (Consumers)
 This parting of wealth can be achieved with a
token (plastic card).

 Authenticating an EFT (Electronic Funds

Transfer) post transaction to pay for groceries
is an electronic payment.
 Electronic payment system
(Suppliers)
 To a supplier of goods or services an electronic
payment is the receipt or outward movement of
funds.
 perhaps linked to an inventory management,
 ordering or accounting system,
 eliminating need for large cash holdings,
 time consuming clerical activities
 offering easier management of cash flows.
 Electronic payment systems (Suppliers)

 These payments may be from

 Consumers as bill and fee payments,

 Outgoing payments to suppliers for materials

 Employees as salary payments

Electronic payment systems (Banks)
 For an account/payment manager or Bank, an
electronic payment is a series of processes by
which value exchange is secured.
 Banking network
 The consumer and the associated browser to
interact with the consumer.
 The merchant system residing on an on-line
Web server with a connection to Web browsers
over the Internet.
 An on-line shopping mall that may help direct
consumers to the merchant server.
 Background banking network to support on-line
payments from the consumer to the merchant.
Faizan
 Consumer and the browser
 Consumer interacts with the on-line commerce
system through a Web browser.
 The consumer first accesses a shopping mall
and then uses the hyperlinks from the mall to
access the merchant’s home page.
 The graphical display for the consumer should
closely emulate the real shopping environment.
 Shopping mall
 A shopping mall is where most consumers first
visit for a shopping spree.
 The connections between the shopping malls
and a merchant’s storefront are evident.
 A merchant should be listed with several on-
line shopping malls.
 Financial Transactions
 The banking network consists of several
components.
 First, there is a bank that processes the on-line
financial transactions for the given merchant.
 This bank maintains the accounts for the
merchant, authorizes and processes the
payments.
 Financial Transactions
 The merchant’s bank also main­tains a link with
the consumer’s bank for verifying the
transactions.

 The link between the merchant and his bank is

often real-time so as to allow on-line
authorization of consumer payments.
 Electronic cash
 Electronic cash (e-cash), digital money or
digital cash provides the means to transfer
money between parties over a network such as
the Internet.
 Electronic cash must satisfy some general
properties of digital money.
 Following are the general properties of digital
money:
 Electronic cash
 Independence:
Electronic cash must not depend on its
existence in any given computer system or
location.
 Non-reusability:
It should not be reusable.
For example, if you get electronic cash for $50
and spend it to buy a shirt, then you cannot
spend this money again.
 Electronic cash
 Anonymity:
Electronic cash cannot provide information
that can be used to trace the previous owner of the
cash.

If you buy a product, there should be nothing

associated with the electronic cash that traces it to
you.
 Electronic cash
 Transferability:
It should be easily transferable from
one person or party to another.

 Secure storage:
It should be available in such a way so
that it can be securely stored at the consumer’s
hard drive or on a smart card
Tariq
 Electronic cash
 Electronic cash system:

 Assume that there is an electronic cash-issuing

bank (e-mint) that generates electronic cash.
 The e-mint signs the electronic cash as the
issuer.
 It may use a digital signature.
 Electronic cash system
 The e-mint issues the electronic cash based on
the funds provided to it by the customer.

 The payer (customer) can use this electronic

cash to purchase items over the Internet.

 Electronic cash transactions take place in three

distinct and independent phases:
 Electronic cash system
Phase I: Obtaining e-cash:
 The consumer requests his/her bank to transfer

money to the e-mint to obtain electronic cash.

 The consumer bank transfers money from the

consumer’s account to the e-mint.

 The e-mint sends electronic cash to the

consumer, who saves the electronic cash on a

smart card.
Phase II: Buying with e-cash:
1 . This phase is executed whenever the
consumer desires to make a purchase with
electronic cash.

2 . It can take place at any time after the

consumer has obtained electronic cash from
the e-mint.
3 . The consumer selects the goods and transfers
the electronic cash to the merchant.

4 . The merchant provides the goods to the

consumer.
 Phase III: Redeeming cash:

1. This phase occurs whenever the merchant is

ready to redeem the electronic cash.

2. The merchant should be capable of converting

this electronic cash to money for the. merchant’s
bank accounts
3 . The merchant transfers the electronic cash to
the e-mint.
4 . Alternatively, the merchant may send the
electronic cash to his/her bank and the bank in
turn redeems the money from the e-mint.
5 . The e-mint transfers money to the merchant’s
bank for crediting the merchant’s account.
 Security schemes
 Authenticity:
 The electronic check may consist of a
document that is signed by the consumer’s
private key.
 The receiver uses the payer’s public key to
decrypt the digital signature.
 This key assures the receiver that the sender
had indeed signed the check.
 Storage of private keys:

 To avoid fraud, the consumer’s private key

needs to be securely stored and made available
to the consumer.

 This can be achieved by providing a smart card

that can be carried by the consumer.
 Cashier's checks :
 A cashier’s check is created by a bank and is
signed using the bank’s private key.
 The originating bank includes its public key
with the electronic check.
 The receiving bank uses the originating bank’s
public key to decrypt the digital signature.
 The receiving bank is assured that the cashier
check was indeed originated by the name of the
bank indicated on the check.
 Benefits
 Electronic credit has the following benefits :
 The credit card number and expiry date can be
prevented from disclosure to the merchant.
 The electronic credit can provide a higher level
of security.
 The electronic credit system can be designed to
obtain almost instant payments to merchants
from credit card sales.
Salman
 Electronic checks and funds transfer
 Electronic funds transfer (EFT) consists of
three forms of transactions:

 Paying fees through the ATM network.

 Paying bills through monthly bank account
deductions.
 Transfer of large sums of money among banks
across the world.
 Electronic checks
 Electronic checking pertains to the use of
networking services to issue and process
payments .
 The payer issues a digital check to the payee
and the payee deposits it in the bank to redeem
the money.
 Each transaction is carried over the Internet.
 Difference B/W Electronic checking &
electronic funds transfer
 Electronic checking differs from EFT in
several ways
 For electronic checking, electronic versions of
checks are issued, received and processed.
 So, the payee issues an electronic check for
each payment.
 For EFT, automatic withdrawals are made for
monthly bills or other fixed payments; no
checks are issued
 Steps in Electronic Checking
 An electronic check transaction consists of the
following steps:
 Phase I: Purchasing goods:

1.The consumer accesses the merchant server,

which presents its goods to the consumer.
2.The consumer selects the goods and purchases
them by sending an electronic check to the
merchant.
3.The merchant may validate the electronic
check with his/her bank for payment
authorization.

4.Assuming the check is validated, the merchant

closes the transaction with the consumer.
 Phase II: Depositing checks:

1.The merchant forwards the checks to his/her

bank electronically.

2.The merchant’s bank forwards the electronic

checks to the clearing house for being cashed.

3.The clearing house works with the consumer’s

bank.
4. Clearing house clears the check and transfers
money to the merchant’s bank, which updates
the merchant’s account.

5. At a later time, the consumer’s bank updates

the consumer with the withdrawal information.
 Electronic credit The third and final digital
economy scheme is using credit cards for e-
commerce.
 In electronic credit, conversational credit cards
may be used along with a PIN.
 The PIN is a secret code that the consumer
must enter while using the credit card on-line.
 It prevents misuse of the credit card in case it
is stolen.
  Smart cards

 Smart cards are credit-card sized cards.

 They have a processor and memory on the

card.

 Digitalcash or private keys can be stored on

these cards and can be carried in a wallet.
 There are two types of smart cards :

1. Memory cards:

 Memory cards contain space for data storage.

 These cards can be used to store passwords or

PIN.
1. Shared key cards:
 Shared-key cards can store a private key such
as those used in public key.

 The user can plug in the card to a

workstation.

 The workstation can reach the private key for

encryption or decryption.
Thank you
?