E Payment and E Securtity

MAJOR PROJECT REPORT ON

STUDY OF E-SECURITY AND E-PAYMENT

SUBMITTED TO YMCA NEW DELHI IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF

POST GRADUATE DIPLOMA IN (BUSSINESS MANAGEMENT)

SUBMITTED BY

ARCHIT MALHOTRA

BM-A-03

SUPERVISOR

Ms NEELAM CHADHA

INSTITUTE OF MANAGEMENT STUDIES

YMCA, NEW DELHI 2010

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CANDIDATE’S DECLARATION I hereby declare that the major project which is presented in this report entitled STUDY OF E-SECURITY AND E-PAYMENT submitted in the partial fulfillment of the requirements for the award of the Post Graduate Diploma in business management to the YMCA NEW DELHI is an authentic record of my own work carried out at IMS YMCA campus. The material embodied in this project work has not been submitted to any other university or institution for the award of any degree. ARCHIT MALHOTRA

BM-A-03

Place: Date:

This is to certify that above statement made by the candidates are correct to best of my knowledge. SUPERVISOR

NEELAM CHADHA

Approved by: NEELAM CHADHA

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ACKNOWLEDGEMENT I express our gratitude to the YMCA, NEW DELHI for giving me the opportunity to work on the major project during our final semester of post graduate diploma in business management. There are many who helped me during this project work, and I want to thank them all. We would like to thank Dr. SUBASH GUPTA, Principal, Institute of management studies YMCA, NEW DELHI for his kind support. Our special thanks to Ms NEELAM CHADHA my project guide for his invaluable guidance throughout my project work and endeavor period has provided me with the requisite motivation to complete my project successfully. I specially appreciate the help and guidance of all those teachers who have directly or indirectly helped me making my project a success.

ARCHIT MALHOTRA

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Preface In the emerging global economy, e-business have increasingly become a necessary component of business strategy and a strong catalyst for economic

development.

The

integration

of

information

and

communications technology (ICT) in business has revolutionized relationships within organizations and those between and among organizations and individuals. Specifically, the use of ICT in business has enhanced productivity, encouraged greater customer participation, and enabled mass customization, besides reducing costs. On another plane, developing countries are given increased access to the global Marketplace, where they compete with and complement the more developed economies. Most, if not all, developing countries are already participating in e-commerce, either as sellers or buyers. However, to facilitate

e-commerce

growth

in

these

countries,

the

relatively

underdeveloped information infrastructure must be improved. The early Internet was used by computer experts, engineers, scientists, and librarians. There was nothing friendly about it. There were no home or office personal computers in those days, and anyone who used it, whether a computer professional or an engineer or scientist or librarian, had to learn to use a very complex system.

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INDEX TITLE

PG NO.

1. Candidate’s declaration

2

2. Acknowledgement

3

3.

Preface

4

4.

Table of content

5-6

5.

Executive summary

7

6. Introduction

8

7. History of internet

9

8. What makes the internet so powerful?

10-12

9. Why establish a business on the internet?

13-15

10. The advantages of internet

16-17

11. E-business and company a global mix

18-19

12. What does online customer seek?

20

13. Essential of E-business

21-22

14. Ways to make E-business successful

23-24

15. The devils is in detail

25

16. E-money

26-27

17. Issues

28

18. E-payment system

29-31

19. Electronic bill presentment and payment 20.

Why to use E-payment?

5

32-33 34-35

21. Problems in E-payment

36

22. Method of payment

37-38

23. Properties of digital cash

39-40

24. Requirement of E-payment

41-45

25. Processing of E-payment

44-46

26. Model of E-payment

47-48

27. Storage methods

49-50

28. E-cash

51-54

29. E-cash issues

55-57

30. Advantages & Disadvantages of E-money

58-59

31. E-wallets

60-68

32. Smart cards

69-70

33. Credit cards

71-72

34. Benefits of E-payment

73

35. Working Procedure for E-payment

74-79

36. SET Protocol

80-83

37. Factors before selecting E-payment method

84

38. Case study

85-97

39. Conclusion

98

40. Bibliography

99

Executive summary 6

21st century the era of internet, the global ruler being internet which not only provide solutions for every problem but now can also prove to be fruitful to provide you the product in desired quantity at desired place at your desired amount and that too sitting at your place. Human fingers were never so powerful as it is now days with a single click we can purchase anything from anywhere in the world and that’s only possible because of internet. The Word E is in trend now, be it be shopping transactions or any other stuff it has eliminated all the barriers and shrunk the world into one global village. E-marketing brought along with E-payment options, E-security and various other issues. But, now we can shop from anywhere around the world and that too eliminating the barriers of currency and language. It would be very bias to only list the positive influence of the internet. Here in my project I tried to cover all the possible options fro e payment and the system available also laying equal emphasis on the pros and cons of each payment options. My data collection was based on the study of two best companies when it comes to E-payment and E-security. A case study which showed the face of these companies and its influence on the world and here in India

INTRODUCTION 7

In the emerging global economy, e-business have increasingly become a necessary component of business strategy and a strong catalyst for economic development. The integration of information and communications technology (ICT) in business has revolutionized relationships within organizations and those between and among organizations and individuals. Specifically, the use of ICT in business has enhanced productivity,

encouraged

greater

customer

participation,

and

enabled

mass

customization, besides reducing costs. With developments in the Internet and Web-based technologies, distinctions between traditional markets and the global electronic marketplace such as business capital size, among others-are gradually being narrowed down. The name of the game is strategic positioning, the ability of a company to determine emerging opportunities and utilize the necessary human capital skills (such as intellectual resources) to make the most of these opportunities through an e-business strategy that is simple, workable and practicable within the context of global information and new economic environment. With its effect of leveling the playing field, e-commerce coupled with the appropriate strategy and policy approach enables Small and medium scale enterprises to compete with large and capital-rich businesses. On another plane, developing countries are given increased access to the global Marketplace, where they compete with and complement the more developed economies. Most, if not all, developing countries are already participating in ecommerce, either as sellers or buyers. However, to facilitate e-commerce growth in these countries, the relatively underdeveloped information infrastructure must be improved.

HISTORY OF INTERNET 8

In the 50’s and early 60’s, prior to the widespread inter-networking that led to the Internet, most communication networks were limited by their nature to only allow communications between the stations on the network. Some networks had gateways or bridges between them, but these bridges were often limited or built specifically for a single use. One prevalent computer networking method was based on the central mainframe method, simply allowing its terminals to be connected via long leased lines. This method was used in the 1950s by Project RAND to support researchers such as Herbert Simon, in Pittsburgh, Pennsylvania, when collaborating across the continent with researchers in Santa Monica, California, on automated theorem proving and artificial intelligence. The Internet system was developed and ready in the Late 1980s, but The Cold War held up the progress. When it ended in 1992, the internet slowly became main stream. By the end of the decade, millions were using it for business, education and pleasure. The Internet was designed in part to provide a communications network that would work even if some of the sites were destroyed by nuclear attack. If the most direct route was not available, routers would direct traffic around the network via alternate routes. The early Internet was used by computer experts, engineers, scientists, and librarians. There was nothing friendly about it. There were no home or office personal computers in those days, and anyone who used it, whether a computer professional or an engineer or scientist or librarian, had to learn to use a very complex system.

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WHAT MAKES THE INTERNET SO POWERFUL?  The Internet is the lowest cost system ever developed to communicate with a potential audience of hundreds of millions of people all over the world. Even locally, the cost of a simple Web site is usually less than the cost of a modest ad in a business telephone directory. A Web site can also give more information than a telephone directory ad, including color photos, detailed descriptions of products and services, and price information that can be changed at any moment, for any reason, instead of waiting for a printed directory's next publication cycle.  As a news medium, the Internet is faster and more flexible than a newspaper or magazine. A story can be added to a Web site instantly at any time of the day or night. There are no deadlines (except self-imposed ones) for Internet news. The "printing press" is always on, you might say. Even television news, aside from a few 24-hour news channels, must usually wait for scheduled news broadcast times instead of breaking into entertainment programming whenever a new story comes along. Television is also constrained by its necessarily linear information delivery format. It must tell a story, then another story, then take a break for advertising, then tell another story, and so on, in sequence. A viewer cannot choose to view only a few stories that he or she finds interesting, which may occupy only five minutes out of a 30-minute newscast. On the Internet, a reader is free not only to choose to view just those stories in which he or she is most interested, but also gets to choose the order in which he or she sees them. If sports scores are the highest item on today's agenda, click and there's the sports section, as easy as turning a newspaper page. Another click and there's the score from the game that just ended, possibly with video highlights only one more click away.

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 Corrections, changes, and updates to a story published on the Internet can be made as fast as they come in without waiting for a printing press to roll. Breaking news alerts can be sent instantly by email to subscribers who request this service, and a reader can instantly communicate with an online publication's editors via email or, if the publication has this facility, post his or her comments on a "message board" for other readers to see right away, without waiting for a fax or mail to get through and an editor to look the message over and perhaps include it in the "letters to the editor" section several days after the original story ran.  An online publication can also offer an advertiser something that is not available in any other medium: ads that link directly, with one click, to a Web page full of compelling reasons to buy the advertised product or service. Even if only a fraction of one percent of all people who see a Web ad click on it, that is still an infinitely higher percentage than can click on a magazine ad or TV spot for additional information—or even to buy a product directly from the advertiser right now. Even if few readers click on an individual online ad and buy right now, a Web ad still has the same branding and general "get the name out" effect as advertising in other media. If the cost of an online ad is similar to the cost of one in another medium, it represents a better value because of the ability it gives an advertiser to give an interested person an entire Web site full of information right away, only one click removed from the online publication in which that ad is running.

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 But the most direct way to make money online, no matter how a merchant gets traffic to his or her Web site, is to sell over the Internet. E-commerce has had its ups and downs, but the overall trend is upward, and it is likely to stay that way for many years to come. Putting up a "catalog" Web site is far less expensive than printing and mailing paper catalogs, and the Web site can have "instant" ordering and credit card acceptance built right into it, whereas a paper catalog can generate only phone orders that require a horde of (expensive) live operators to process or mail-in order forms that a customer must fill out.

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WHY ESTABLISH A BUSINESS ON THE INTERNET? Fact versus Opinion On techniques we have practised. We will be sharing with you the methods we have used to establish our own internet business rather than harping on about theories. You will be reading a real success story written by real people. Everything you will find here can be verified and put into practice by you. There is no denying that the internet has brought about a revolution. Never before have people been able to interact in such a cost effective and comfortable way. The Internet with its multiple communication channels also changes the world of business. Now it is possible for you to establish your own company with a very small financial investment or in some cases even without any start-up capital at all. The majority of people in any country in the world do not really like their regular jobs. Nevertheless they get up early every morning to go to work and when they return home tired and frustrated they switch on the TV to forget all about their problems. They often dream about a life that gives them the freedom to do what they really like with people who are friendly, intelligent, understanding and supportive. When it comes to business, most people confuse their personal opinions with facts. They believe in fact that they know something when in reality they don't have all the data to support their beliefs.In this document section you will find factual information that is based on our experiences and our experiences Now with the Internet available in almost every household in any developed country, it is possible to achieve the type of lifestyle you have always dreamed about. The following facts will show why you really should consider establishing your own internet company :

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Downsizing: Let's face it — a computer is more productive than a human in business. areas such as accounting, administration, data management, calculating, statistics and many more activities. Whatever industry you name — new technologies increase productivity which, in turn, often leads to fewer jobs. To be sure new technologies also create new jobs but these require a much higher level of qualification and knowledge. A person who has been working in the same sort of job for several years is often not capable of acquiring all the skills and qualifications needed for a job in a new workplace.

Globalization: The world is becoming more and more interconnected. Even, or maybe especially after September 11, international travel activities have been increasing and this pattern will continue into the future. The number of companies that operate on a multinational scale is constantly rising because they need new market places. In Europe nations have agreed on a uniform single currency — the EURO, enabling the European Community to develop into a strong economic entity. The same sort of thing is taking place in Asia with China, Taiwan, South Korea and Japan forming a powerful economic alliance.

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Information: More than 500 million people worldwide are using the internet on a regular basis, with email and search engines as the most popular services. Information is power. People are able to influence, direct, convince, educate and manipulate others through one single tool: The distribution of information. Email and discussion forums allow people to share their thoughts, ideas and experiences with other people from all corners of the world.

Cost Effectiveness : The internet is by far the most cost effective communication tool. If you want to send a letter via conventional or so-called snail mail it will cost at least around $1 (assuming you restrict yourself to two single sheets of paper). Sending the same amount of information via email will be up to 100 times cheaper with immediate delivery.

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THE ADVANTAGES OF THE INTERNET Never have the chances for setting up and running your own successful business been easier than they are today:  While traditional industries like manufacturing are shrinking, new industries are growing especially the «information industries  You can use the internet to find your customers and business partners worldwide  Your customers and partners can find you on the internet.  You can use the internet to build a strong relationship with your customers especially via email.  You can use the internet to market your products and services.  You can use the internet to acquire all the information, training and qualifications you need for your business.  You can set up a business with a very small marketing budget, something almost impossible in the real world. You can certainly list even more reasons why it is possible for anybody with a computer and access to the Internet to establish their own business. At the same time the reality is that only a very small percentage of people who do have a computer and access to the Internet, establish and run their own business. Why is this? The answer is very simple. Most people anywhere in the world, spend too much time thinking about things they do not want, instead of thinking about things they do want. As a result there are only a few people who have their own company and they usually earn more money than somebody with a regular job. Owners of comapines usually have more personal and financial freedom than people with regular jobs. But what exactly do you need in order to own a company? Money? A University degree? The right friends? Well, maybe some of these things can help you with your business but then they are not essential and are no guarantee of success. We have analyzed a number of successful online business people and here is a list of important characteristics all of them 16

possessed. We know that the following qualities are essential for success as a businessperson so you should take the time to go through them and check whether or not you have them. All the information about how to set up a website, how to run an email newsletter, how to get a high ranking at Google, how to generate huge traffic to your website etc. will be worth nothing if you don't have most of the following skills and qualities.

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E-BUSINESS AND COMPANY A GLOBAL MIX The goal is to digitize transactions, which are simply defined as exchanges of information. The number of opportunities is limited only by your creativity, cost, and good business sense. The best advice is to determine the best opportunities for payback and address them first. Make sure the benefit will pay back or exceed the cost. The following is a summarized list of functions and activities where e-business applications are becoming embedded into the typical business model. Visualize, if you can, a business where each of these business activities is completely integrated with the others, to form a completely integrated e-business.  After sales service; ie. billing, demand planning, engineering, inventory planning, purchasing, receivables. 

Business analytics; ie. financial performance, marketing, workforce, production, enterprise management

 Consultant management  Customer relationship management; ie. account management, customer self-service, contact management & communications, promotions, surveys, quality, help desk, field service  E-procurement  E-store/e-exchange/product catalog; ie. delivering b2b and b2c e-commerce,  Finance; ie. asset management, accounting, budgets, invoicing, payables & receivables, investments, government tax returns & payments, payroll administration

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 Grant & donation management  Human Resources Management; ie. resource planning, benefits administration, reward programs, recruiting & hiring, workforce management, pension administration  Investor relations  Marketing and sales activities; ie. products, technical information, sales support, product life cycle management, corporate resume, portfolio, customer lists, customer service  Materials management  Order management & customer fulfillment  Project management  Public Relations  Strategic partner collaboration

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WHAT DO ONLINE CUSTOMERS SEEK? Consumer attitudes of those who shop and purchase online are significantly different from the habits and preferences of consumers who visit stores. Their purchase decisions are driven and based on a different set of factors tied to the characteristics of the e-space environment. For an e-commerce business to survive, it is absolutely necessary to establish and maintain an intimate understanding of the customers, their behavior, and the factors that drive purchase decisions. In the current e-commerce environment, online consumers are highly sensitive to the following characteristics:  Quick page download time, 8-10 seconds  Fast navigation, 2-3 page views to get to the consumer’s objective  Logical and understandable first page view; purpose of site, company’s mission, organization of site  Quality user-friendly web site, easy to read and view with interesting graphics  Immediate customer service, a human to contact to ask questions while browsing  Complete product descriptions, price and other charges, and pictures  Contact information, company address, store locations, telephone numbers, email address  Confidentiality regarding use or sharing of consumer information  Opt-out, or permission-given privacy policies for consumer data entered on the site  Security arrangements for online transactions  Convenient return policies and options  Order acknowledgement & ability to check shipping status  Site stability, similar look and feel for each successive visit

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ESSENTIALS OF E-BUSINESS You can’t just open an online store and expect customers to flock to it. Find out if your niche market is one that you can reach through a website. How? Does your niche market have an identifiable need for your web offering? Do they have the wherewithal to pay for it? Is the niche group sizeable, i.e., will it provide enough business to produce the income you need? If the answers are yes, you have found a good niche. Now dig deep within that niche to understand the consumer behaviors that drive it. Every e-commerce operator should assume that his or her customers are sophisticated shoppers who demand prompt delivery of a product that is exactly as portrayed on their website. The most common mistake made by inexperienced web operators is to fail to be responsive to their customers’ order processing and fulfillment needs. But those services are the very underpinnings of all successful e-commerce ventures — neglect those areas and you have a business catastrophe. To help in the follow-through, you and your customers must be able to track the status of each purchase. Most new e-commerce businesses, however, fail to integrate this necessary backend support. Another “must” is to make certain that your customers know that your web-based business will not only deliver a value online that cannot be found offline, but that it is just as responsive with customer service issues as the most wellregarded offline business. By keeping customer service and product fulfillment as an immediate priority you can build a valuable relationship with your customer. In doing so, you earn that customer’s loyalty. That helps to stem the natural flow of attrition as customers who pursue the lowest price find that the trade-off is a void in the cut-rate business’s customer service department.

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Another common problem for new e-commerce businesses is misinterpreting the power of the Web. Yes, a website with the right infrastructure can economically automate transactions. However, the real power of the Web is its role as a relationship-building magnet — through its ability to provide numerous opportunities for interactivity. If you are careless with automated processes — this very real advantage will vanish. Use your website to provide not only useful and interesting information about your products/services, but also about your entire niche market. The group that makes up a niche market always yearns for more information. They will return time and again to your website if they are appealed to on the basis of their special interests — detailed articles and content-rich advertising specifically targeted to them. The dot-com bust of 2000 was a failure of business plans; the concept itself has not failed. And while numerous news articles over the last few years detail how various websites lost sales and customer confidence due to inadequate prelaunch planning, there have also been many successes, especially in the small business arena.

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WAYS TO MAKE YOUR BUSINESS SUCCESSFUL THROUGH INTERNET Internet the way we do business today. It has broken physical boundaries and has provided each small, big and mega businesses a global business opportunity. Your online presence, your website provides you an equal opportunity to have your presence felt. The irony those among the millions of websites ruling the internet world only thousands are successful. As they say you not only need a quality product or service, you need to package and most importantly sell it. That leads us to the question how to get successful online? Simple answer packages your website and makes people aware of it..The basic rules of business apply here too with the difference that here you cater to a global market. The internet offers you with a variety of tools which applied correctly can make the winning difference. So where do you start? Your website needs a design and for this you need a web designer. Correct web design, colours and correct placement of web elements on your web page are important aspects for your site to succeed. Remember to maintain a contact page which mentions your contact details on the site have a sitemap and design the site for users. It is of utmost importance that you keep search engine optimisation factors in mind. Have your pages titled. For more on this contact a web designer. If you are in business retail or manufacturing a good idea is to have your site e-com enabled. You must have shopped on the internet, if not you are among the chosen few. If you have you must be aware of the shopping cart on the e-commerce site. The shopping cart enables your visitors to manage their shopping well. You will need a payment

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gateway and a merchant account to receive money for sales. To test out your site integrate it with Paypal and try out the shopping experience. 1. So your site seems to be ready now. Next step. Make your site presentable and make it known. So we are now into advertising and marketing of your website. Here note this that 95% of websites gets visitors from referred from search engines. These search sites work like a gateway to the internet world. 2. Your next step towards making your site known to others is to follow the search engine optimisation tips offered by the search engines while making your site. You should look for the terms people use to search your type of service or product and create your site around it. As in the advertising world headings for your pages should be catchy. Internet visitors scan web pages for information instead of reading through them, so all the rules of advertising world which helps in writing the content for the advertisement apply here. Do it yourself, get to know what the inverted pyramid style of writing is or hire a web designer, see specialist to do it for you. 3. With pay per click, the internet advertising world has revolutionized. It offers you advertising opportunities on the net for a few shillings. Check out Google Adsense or Overture PPC campaigns. These are offered by mostly the leading search engines and your advertisements are displayed on the search result pages of these sites for keywords you choose. If controlled optimally you can benefit from these. Use PPC to get visitors to your site during the launching period. Dual benefits. One you get visitors though your site is too new and second due to advertising, your site gets noticed. If you are not aware of this, use the services of a PPC management company to do this for you. 4. So what else to look out for? Interaction. Give reasons to your visitors to come back to your site. Start a newsletter campaign. Offer your visitors something free. Give them tips. Start a blog. Make your visitors come back to your site 5. Give them options to sign up for your newsletter free. You get their emails and use a mailer program to send out regular mails to them.

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THE DEVIL IS IN THE DETAILS You’ve chosen your e-commerce model and found the perfect products/services to offer on your e-commerce site. You’ve also thoughtfully planned your website. Using your blueprint and storyboards you’ve completed the design of your website. It is now time to extend everything to the Web. The basic e-commerce website should :  Store any number of products that have been selected by the customer prior to the actual processing of the purchase. This system is normally referred to as a “shopping cart,” processing is usually referred to as “check out.”  Provide a secure server with SSL encryption for transactions, email transmission, and storage.  Accept credit cards and offer automatic, real-time processing. But offline processing via an encrypted email form is also a viable option if you choose to forego the following options.  Allow the customer to leave the site, return at a later time, and still find past items in their shopping cart.  Allow cross selling, i.e.; offers a similar product to the one that the customer is interested in, if the chosen product is unavailable.  Provide processing status though a numbered tracking system.

Add to this list: acquiring a domain name, a merchant account, and a digital certificate, and you are in the e-commerce business.

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ELECTRONIC MONEY Electronic

money (also

known

as e-currency, e-money, electronic

cash, electronic

currency, digital money, digital cash or digital currency) refers to money or scrip which is exchanged only electronically. Typically, this involves the use of computer networks, the internet and digital stored value systems. Electronic Funds Transfer (EFT) and direct deposit are all examples of electronic money. Also, it is a collective term for financial cryptography and technologies enabling it. Technically electronic or digital money is a representation, or a system of debits and credits, used to exchange value, within another system, or itself as a stand alone system, onlinen principle this could be done off-line The term electronic money is also occasionally used to refer to the provider itself. A private currency may use gold to provide extra security, such asdigital gold currency. Some private organizations, such as the US military use independent currencies such as Eagle Cash. Many systems will sell their electronic currency directly to the end user, such as Gogopay, Paypal, WebMoney and Wirex, but other systems, such as Liberty Reserve, sell only through third party digital currency exchangers. In the case of Octopus Card in Hong Kong, deposits work similarly to banks'. After Octopus Card Limited receives money for deposit from users, the money is deposited into banks, which is similar to debit-card-issuing banks redepositing money at central banks. Some community

currencies,

like

some LETS systems,

work

with

electronic

transactions. Cyclos Software allows creation of electronic community currencies.

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Ripple monetary system is a project to develop a distributed system of electronic money independent of local currency.

In the use of off-line electronic money, the merchant does not need to interact with the bank before accepting a coin from the user. Instead he can collect multiple coins Spent by users andDeposit them later with the bank. In principle this could be done off-line, i.e. the merchant could go to the bank with his storage media to exchange e-cash for cash. Nevertheless the merchant is guaranteed that the user's e-coin will either be accepted by the bank, or the bank will be able to identify and punish the cheating user. In this way a user is prevented from spending the same coin twice (double-spending). Off-line e-cash schemes also need to protect against cheating merchants, i.e. merchants that want to deposit a coin twice (and then blame the user). Using cryptography, anonymous ecash was introduced by David Chaum. He used blind signatures to achieve unlinkability between withdrawal and spend transactions.[1] In cryptography, e-cash usually refers to anonymous e-cash. Depending on the properties of the payment transactions, one distinguishes between on-line and off-line e-cash. The first off-line e-cash system was proposed by Chaum and Naor.[2] Like the first on-line scheme, it is based on RSA blind signatures.

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Issues Although digital cash can provide many benefits such as convenience and privacy, increased efficiency of transactions, lower transaction fees, new business opportunities with the expansion of economic activities on the Internet, there are many potential issues with the use of digital cash. The transfer of digital currencies raises local issues such as how to levy taxes or the possible ease of money laundering. There are also potential macro-economic effects such as exchange rate instabilities and shortage of money supplies (total amount of digital cash versus total amount of real cash available, basically the possibility that digital cash could exceed the real cash available). Another issue is related to computer crime, in which computer criminals may actually alter computer databases to steal digital cash or by reducing an account's amount of digital cash. One way to resolve these issues is by implementing cyberspace regulations or laws that regulate the transactions and watch for signs of fraud or deceit.

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E-PAYMENT SYSTEM OVERVIEW An e-commerce

payment

system facilitates

the

acceptance

of electronic

payment for online transactions. Also known as Electronic Data Interchange (EDI), ecommerce payment systems have become increasingly popular due to the widespread use of the internet-based shopping and banking. In the early years of B2C transactions, many consumers were apprehensive of using their credit and debit cards over the internet because of the perceived increased risk of fraud. Recent research shows that 30% of people in the United Kingdom still do not shop online because they do not trust online payment systems. However, 54% do believe that it is safe to shop online which is an increase from 26% in 2006 .  The availability of appropriate e-payment method is a crucial element of e-business.  Basic Assessment for the e-business owner/ management.  Which methods of e-payment will the business be ready for – credit card, e-check, ecash?  Will traditional payment methods i.e cash, paper checks be accepted?  Or will a combination of both traditional and e-payment method be accepted?

There are numerous different payments systems available for online merchants. These include the traditional credit, debit and charge card but also new technologies such as digital-wallets,e-cash, mobile payment and e-checks. Another form of payment system is allowing a 3rd party to complete the online transaction for you. These companies are called Payment Service Providers (PSP), a good example is Paypal or WorldPay.

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An e-commerce payment system facilitates the acceptance of electronic payment for online transactions. Also known as Electronic Data Interchange (EDI), ecommerce payment systems have become increasingly popular due to the widespread use of the internet-based shopping and banking. In the early years of B2C transactions, many consumers were apprehensive of using their credit and debit cards over the internet because of the perceived increased risk of fraud. Recent research shows that 30% of people in the United Kingdom still do not shop online because they do not trust online payment systems. However, 54% do believe that it is safe to shop online which is an increase from 26% in 2006 . There are numerous different payments systems available for online merchants. These include the traditional credit, debit and charge card but also new technologies such as digital-wallets,e-cash, mobile

payment and e-checks.

Another

form

of

payment system is allowing a 3rd party to complete the online transaction for you. These companies are called Payment Service Providers (PSP), a good example is Paypal or WorldPay.

Over the years, credit cards have become one of the most common forms of payment for e-commerce transactions. In North America almost 90% of online B2C transactions were made with this payment type. Turban et al. goes on to explain that it would be difficult for an online retailer to operate without supporting credit and debit cards due to its widespread use. Increased security measures such as the use of the card verification number (CVN) which detects fraud by comparing the verification number on the printed on the signature strip on the back of the card with the information on file with the cardholder's issuing bank .Also online merchants have to comply with stringent rules stipulated by the credit and debit card issuers (Visa and Mastercard) this means that

30

merchants must have security protocol and procedures in place to ensure transactions are more secure.

Despite this widespread use in North America, there are still a large number of countries such as China, India and Pakistan that have some problems to overcome in regard to credit card security. In the meantime, the use of smartcards has become extremely popular. There are companies that enable financial transactions to transpire over the internet, such as PayPal. Many of the mediaries permit consumers to establish an account quickly, and to transfer funds

into

their

on-line

accounts

from

a

traditional bank

account (typically

via ACH transactions), and vice versa, after verification of the consumer's identity and authority to access such bank accounts. Also, the larger mediaries further allow transactions to and from credit cardaccounts, although such credit card transactions are usually assessed a fee (either to the recipient or the sender) to recoup the transaction fees charged to the mediary. The speed and simplicity with which cyber-mediary accounts can be established and used have contributed to their widespread use, although the risk of abuse, theft and other problems—with disgruntled users frequently accusing the mediaries themselves of wrongful behaviour—is associated with them.

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ELECTRONIC BILL PRESENTMENT AND PAYMENT Electronic bill presentment and payment (EBPP) is a fairly new technique that allows consumers to view and pay bills electronically. There are a significant number of bills that consumers pay on a regular basis, which include: power bills, water, oil, internet, phone service, mortgages, car payments etc. EBPP systems send bills from service providers to individual consumers via the internet. The systems also enable payments to be made by consumers, given that the amount that appears on the e-bill is correct. Banks in Canada have been offering these on-line payment services for some time now, and are growing in popularity. This service is in addition to the original EBPP method of a direct withdrawal from a bank account through a bank such as Scotiabank. The biggest difference between EBPP systems and the traditional method of bill payment, is that of technology. Rather than receiving a bill through the mail, writing out and sending a check, consumers receive their bills in an email, or are prompted to visit a website to view and pay their bills.

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Three broad models of EBPP have emerged. These are:  Consolidation, where numerous bills for any one recipient are made available at one Web site, most commonly the recipient's bank. In some countries, such as Australia, New Zealand and Canada, the postal service also operates a consolidation service. The actual task of consolidation is sometimes performed by a third party, and fed to the Web sites where consumers receive the bills. The principal attraction of consolidation is that consumers can receive and pay numerous bills at the one location, thus minimising the number of login IDs and passwords they must remember and maintain.  Biller Direct, where the bills produced by an organisation are made available through that organisation's Web site. This model works well if the recipient has reasons to visit the biller's Web site other than to receive their bills. In the freight industry, for example, customers will visit a carrier's Web site to track items in transit, so it is reasonably convenient to receive and pay freight bills at the same site.  Direct email delivery, where the bills are emailed to the customer's In Box. This model most closely imitates the analog postal service. It is convenient, because almost everyone has email and the customer has to do nothing except use email in order to receive a bill. Email delivery is proving especially popular in the B2B market in many countries. Major providers of outsourced bill production services have developed facilities to process bills through consolidation, biller direct and email delivery services, thus

33

enabling major billers to have all their bills, paper and electronic, processed through the one service. Niche service providers in many countries provide one or two of these models, but generally do not integrate with paper bill production.

Why to Use of E-payment? Electronic Payment is a financial exchange that takes place online between buyers and sellers. The content of this exchange is usually some form of digital financial instrument (such as encrypted credit card numbers, electronic cheques or digital cash) that is backed by a bank or an intermediary, or by a legal tender. The various factors that have lead the financial institutions to make use of electronic payments are:  Decreasing technology cost: The technology used in the networks is decreasing day by day, which is evident from the fact that computers are now dirt-cheap and Internet is becoming free almost everywhere in the world.  Reduced operational and processing cost: Due to reduced technology cost the processing cost of various commerce activities becomes very less. A very simple reason to prove this is the fact that in electronic transactions we save both paper and time.  Increasing online commerce: The above two factors have lead many institutions to go online and many others are following them.

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We began E-Commerce with EDI, this was primarily for large business houses not for the common man. Many new technologies, innovations have lead to use of E-Commerce for the common man also. We will now briefly enumerate these innovations based on whom they affected:  Affecting the consumers: Credit cards, Debit Cards, ATMs (Automated Teller Machines), Stored value cards, EBanking.  Enabling online commerce: Digital Cash, E-Cash, Smart cards (or Electronic Purse) and encrypted Credit cards.  Affecting Companies: The payment mechanisms that a bank provides to a company have changed drastically. The Company can now directly deposit money into its employee’s bank account. These transfers are done through Automated Transfer Houses.

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PROBLEMS There are also many problems with the traditional payment systems that are leading to its fade out. Some of them are enumerated below: •

Lack of Convenience:

Traditional payment systems require the consumer to either send paper cheques by snailmail or require him/her to physically come over and sign papers before performing a transaction. This may lead to annoying circumstances sometimes. •

Lack of Security:

This is because the consumer has to send all confidential data on a paper, which is not encrypted, that too by post where it may be read by anyone. •

Lack of Coverage:

When we talk in terms of current businesses, they span many countries or states. These business houses need faster transactions everywhere. This is not possible without the bank having branch near all of the companies offices. This statement is self-explanatory. •

Lack of Eligibility:

Not all potential buyers may have a bank account. •

Lack of support for micro-transactions:

36

Many transactions done on the Internet are of very low cost though they involve data flow between two entities in two countries. The same if done on paper may not be feasible at all.

METHODS OF PAYMENT We will now focus attention on the various ways available to pay online these methods of payment are still new even when seen as a technology. Each has its own benefits and shortcomings:  Electronic Tokens: An electronic token is a digital analog of various forms of payment backed by a bank or financial institution. There are two types of tokens:  Real Time: (or Pre-paid tokens) - These are exchanged between buyer and seller, their users pre-pay for tokens that serve as currency. Transactions are settled with the exchange of these tokens. Examples of these are DigiCash, Debit Cards, Electronic purse etc.  Post Paid Tokens – are used with fund transfer instructions between the buyer and seller. Examples – Electronic cheques, Credit card data etc.

 Electronic or Digital Cash: This combines computerized convenience with security and privacy that improve upon paper cash. Cash is still the dominant form of payment as: The consumer still mistrusts the banks. The non-cash transactions are inefficiently cleared. In addition, due to negative real interests rates on bank deposits. Now we will enumerate some qualities of cash:

37

•

Cash is a legal tender i.e. payee is obligatory to take it.

•

It is negotiable i.e. can be given or traded to someone else.

•

It is a bearer instrument i.e. possession is proof of ownership.

•

It can be held & used by anyone, even those without a bank certificate.

•

It places no risk on part of acceptor.

The following are the limitations of Debit and Credit Cards:  They are identification cards owned by the issuer & restricted to one user i.e. cannot be given away.  They are not legal tender  Their usage requires an account relationship and authorization system.

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Properties of Digital Cash



Must have a monetary value:

It must be backed by cash (currency), bank authorized credit or a bank certified cashier’s check.



Must be interoperable or exchangeable as payment for other digital cash, paper cash, goods or services, lines of credit, bank notes or obligations, electronic benefit transfers and the like.



Must be storable and retrievable:

Cash could be stored on a remote computer’s memory, in smart cards, or on other easily transported standard or special purpose devices. Remote storage or retrieval would allow users to exchange digital cash from home or office or while traveling.



Should not be easy to copy or tamper with while it is being exchanged. This is achieved by using the following technologies, these are nothing but new and very efficient versions of the old art of cryptography.



Digital cash is based on cryptographic systems called "Digital Signatures" similar to the signatures used by banks on paper cheques to authenticate a customer.

39

Purchase of digital cash from an online currency server (or bank) involves 2 steps: Establishment of an account in this step we are given a unique digital number which also becomes our digital signature. As it is a number known only to the customer and the bank, forgery, which may be done in paper cheques becomes very difficult. Maintenance of sufficient money in the account is required to back any purchase.

Electronic Cheques The electronic cheques are modeled on paper checks, except that they are initiated electronically. They use digital signatures for signing and endorsing and require the use of digital certificates to authenticate the payer, the payer’s bank and bank account. They are delivered either by direct transmission using telephone lines or by public networks such as the Internet. Benefits of electronic Cheques:  Well suited for clearing micro payments. Conventional cryptography of e-cheques makes them easier to process than systems based on public key cryptography (like digital cash).  They can serve corporate markets. Firms can use them in more cost-effective manner.  They create float and the availability of float is an important requirement of Commerce.

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REQUIREMENTS FOR ELECTRONIC PAYMENT SYSTEM Electronic payment system is the alternative to the coin or paper based cash payment system to easy the user to make payment for their purchased goods or services over the network or internet and in absence of the physical (entity) presence. Initially cheque in bank payment systems are used to serve the purpose of the same but now in the era of internet and e-commerce paying securely over the internet is important task for the electronic payment system. Currently credit card are also in use for the payments over the network but still users are doubting about trustworthy and the security of their money because of the increase in the frauds which ultimately causes loss of value(money) either of users, merchant or participating banks. Present electronic payment system are to far from ideal payment system because of the higher transaction cost, more fraudulent activities, and multiple parties are involved in the payment processing simultaneously lacks users acceptance, proper application plans and incompatible standards/specifications. The good payment system should satisfy the user’s acceptance and merchants in the mass scale. Present electronic payment system can be divided in two group electronic cash and credit/debit system or token based and account based system. Tokens or electronic cash

41

are like the physical cash which represent the value and credit/debit or account based system does not carry value but a message to transfer value.

Characteristics of electronic payment system are looked from various points of view as technology, user, market and more.  Applicability: acceptance of the user where he/she can use the method to buy goods or services.  Easy to use: the system should not be complex particularly in Indian context a user from the remote area should be able to use the system.  Security: is concerned with unforgeability of the value(money). Creation, modification and over spending of the value(money) should be protected. Integrity of the value as well as authorization for value should be spent by the concerned user only.  Reliability: Smooth running of the system.  Trust: degree of the confidence that the money and the personal information is safe  Scalability: system should be scalable by timely changes in the underlying infrastructure

42

 Convertibility: money conversion may be possible from one method to another like loyalty point convertible to the money  Interoperability: system should be operable in between multiple service providers.  Efficiency: reasonable cost of the handling micro-payment.  Anonymity: is basically privacy to protect the identity of the user  Traceability: traceability of the money in the system who and when it occurs with anonymity cause to built trust.  Authorization type: whether offline or online transactions can be made in same way.

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PROCESSING OF ELECTRONIC PAYMENT SYSTEM Marketing: Marketing is not a new term, to sell anything companies have to market it. But to use the Internet, as a medium of marketing is new as the bandwidth is still limited so no commercials can be shown as on T.V. Internet marketing has a different approach. We market things on the net by showing small banner ads that everyone who surfs the net is familiar. Also web sites like Amazon pay other web sites if someone from their web site comes to Amazon’s web site by clicking on a banner ad or a link. The whole business on the web is sticky the term refers to the fact that the customer has to be sold a product and also the web site should be so attractive that the customer keeps coming back to it for further buying. This is done by sending attractive offer mails and referrals. Customer/Visitor: Here we have to make distinction between the type of commerce web site. There actually exist three broad types of commerce web sites: B2C – These web sites provide business to consumer. These are micro-payment based web sites. They have to attractive and should be able to show the products properly. As

44

an example, you may visit www.fabmart.com and www.firstandsecond.com to see the feel of a B2C site. B2B – These are web sites that provide business to the business, that is their function is similar to the stock exchanges, i.e. they are meeting points for a buyer and a seller. These do not focus on content but rather on service. Functions of such web sites are online order processing, tender filling, tracking of orders etc.

Auction Sites – These are sites that let you auction or sell something online it may be an old motorcycle or bed or books. To see this site go to www.ebay.com Web Site Visit: Once a user visits a web site the site begins tracking him/her, by presenting him/her with products based on his/her preference. Some means of doing this are cookies, registration forms, surveys etc. Product Browsing: A user will typically browse through departments and then various products; he/she may be attracted by sowing blinking new offers and other discounts. Shopping Basket: Shopping basket is a term taken straight from regular shopping, as in a store the user adds the items of need to a basket the online store also implement a shopping basket, in which we can keep on adding items o our need. Checkout: Once we have added all items we need to the basket the web site lists all the items that we intend to purchase, we also have to fill in all the billing related information here. We

45

enter the credit card numbers here. Other things such as gift-wrapping etc. are also specified here. Tax & Shipping: Once it has been decided where the product has to go and who is going to pay for it, we now decide on various taxex and shipping routes the product may take. These become very challenging especially in international orderings as countries have different taxes and shipping rates.

Payment: This is the most important part of the purchasing online. The user is presented with a list of all the items purchased, and a total of the payments he has to make then he has to decide on the mode of payment whether by credit card or cash on delivery etc. Receipt: Once an order has been placed and confirmed, we may want to place a copy of the order with the user. This may be done either by snail mail or e-mail. Process Order: At this stage the consumer leaves the picture, we now begin to check the credit card number and other data. This may be done online or offline, then the product is made and prepared for shipping to the customer. Fulfill Order: Once the order has been processed it has to be fulfilled duly. Even though 90% of the transactions are online but the product has to reach the consumer physically and in well shape. Ship Order:

46

Once we have processed the order fully it is ready to be sent to the consumer it is then shipped to the consumer.

MODEL OF ELECTRONIC PAYMENT SYSTEM User a payers always spends the money and the merchant receives the money for the goods or the services he has given to users. In traditional system user spends his own physical money and merchant receives direct physical money no third party come in between transaction but in electronic payment system variety of models are specified by different organization / researchers, which are summarized here. Ahmad-Reza Sadeghi & Markus Schneider, in Electronic Payment Systems, presented four types of payment systems electronic cash, Cheque or credit card, Remittance and Debit orders base system. In cash base transaction users withdraw his e-cash or an electronic token, from the bank where he has his account for this bank debit same amount from users account. User does purchase it as per his requirements and the need by using this e-cash. Merchant receives the e-cash and deposit in bank on his own account. Afterward its merchant bank, who sends the request to user’s bank for transfer of money and deposit in merchant account. In Cheque and credit card payment system user stage 1 withdrawal is not present, merchant deposit cheque or credit card slip to bank settlement between banks transfer value in respective merchant account

47

In other two types user and merchant give payment order to their respective banks for transfer of money . User bank and merchant banks are called Issuer and Acquirer respectively in .

Payment System Standards MasterCard and Visa international have derived the standards for the global application of smart card in payment system. Initially started with EMV specification in 1996 and subsequently updated with latest version EMV2000, This specifies the specification for Card based on the ISO 7816 compliance, and further specification needed for electronic payment/purse. It also specifies the security criteria for the and authentication methods.

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STORAGE METHODS

•

•

On-line –

Individual does not have possession personally of electronic cash

–

Trusted third party, e.g. online bank, holds customers’ cash accounts

Off-line –

Customer holds cash on smart card or software wallet

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–

Fraud

and

double

spending

require

tamper-proof

E-payment Information online offline

$

Products/services

50

encryption

Desirable Properties of Digital Money •

Universally accepted

•

Transferable electronically

•

Divisible

•

Non-forgeable, non-stealable

•

Private (no one except parties know the amount)

•

Anonymous (no one can identify the payer)

•

Work off-line (no on-line verification needed)

No known system satisfies all.

Types of E-payments •

E-cash

•

Electronic wallets

•

Smart card

•

Credit card

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E cash E-cash Concept 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

Merchant

5 4 3

Bank 2 1

Consumer

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While many different companies are rushing to offer digital money products, currently ecash is cash is represented by two models. One is the on-line form of e-cash (introduced by DigiCash) which allows for the completion of all types of internet transactions. The other form is off-line; essentially a digitially encoded card that could be used for many of the same transactions as cash. This off-line version (which also has on-line capabilities) is being tested by Mondex in partnership with various banks. The primary function of e-cash is to facilitate transactions on the Internet. Many of these transactions may be small in size and would not be cost efficient through other payment mediums such as credit cards. Thus, WWW sites in the future may charge $0.10 a visit, or $0.25 to download a graphics file. These types of payments, turning the Internet into a transaction oriented forum, require mediums that are easy, cheap (from a merchants perspective), private (see Privacy), and secure (see Security). Electronic Cash is the natural solution, and the companies that are pioneering these services claim that the products will meet the stated criteria. By providing this type of payment mechnism, the incentives to provide worthwhile services and products via the Internet should increase. Another prospective beneficiary from these developments would be Shareware providers, since currently they rarely receive payments. To complete the digital money revolution an offline product is also required for the pocket money/change that most people must carry for small transactions (e.g. buying a newspaper, buying a cup of coffee, etc...). The concept of electronic money is at least a decade old. [Hewitt 1994] demonstrates that check writing is a pre-cursor to E-cash. When one person writes a check on his bank account and gives the check to another person with an account at a different bank, the banks do not transfer currency. The banks use electronic fund transfer. Electronic money, removes the middleman. Instead of requesting the banks to transfer the funds through the mechnism of a check, the E-cash user simply transfers the money from his bank account to the account of the receiver.

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The reality of E-cash is only slightly more complicated, and these complications make the transactions both secure and private. The user downloads electronic money from his bank account using special software and stores the E-cash on his local hard drive. To pay a WWW merchant electronically, the E-cash user goes through the software to pay the desired amount from the E-cash "wallet" to the merchants local hard drive ("wallet") after passing the transaction through an E-cash bank for authenticity verification. The merchant can then pay its bills/payroll with this E-cash or upload it to the merchant's hard currency bank account. The E-cash company makes money on each transaction from the merchant (this fee is very small, however) and from royalties paid by banks which provide customers with E-cash software/hardware for a small monthly fee. Transactions between individuals would not be subject to a fee. E-cash truly globalizes the economy, since the user can download money into his cyberwallet in any currency desired. A merchant can accept any currency and convert it to local currency when the cybercash is uploaded to the bank account. To the extent a user wants E-cash off-line, all that is necessary is smart card technology. The money is loaded onto the smartcard, and special electronic wallets are used to offload the money onto other smartcards or directly to an on-line system. Smartcards have been used successful in other countries for such transactions as phone calls for a number of years. The money could also be removed from a smartcard and returned to a bank account. Visa is developing a related product, the stored value card. This card comes in a variety of denominations, but functions more like a debit card than E-cash.

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In essence, E-cash combines the benefits of other transaction mediums. Thus, it is similar to debit/credit cards, but E-cash allows individuals to conduct transactions with each other. It is similar to personal checks, but it is feasible for very small transactions. While it appears superior to other forms, E-cash will not completely replace paper currency. Use of E-cash will require special hardware, and while most people will have access, not all will. However, E-cash presents special challenges for the existing "middlemen" of the current paper currency society. More and more, banks and other financial intermediaries will serve simply as storehouses for money, lenders, and processing/verifying electronic transactions. Personal interaction with a teller, or even visits to a bank ATM will become obsolete. All one will have to do is turn on his computer.

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Electronic Cash Issues •

E-cash must allow spending only once

•

Must be anonymous, just like regular currency –

Safeguards must be in place to prevent counterfeiting

–

Must be independent and freely transferable regardless of nationality or storage mechanism

•

Divisibility and Convenience

•

Complex transaction (checking with Bank) –

Atomicity problem

Security Security is of extreme importance when dealing with monetary transactions. Faith in the security of the medium of exchange, whether paper or digital, is essential for the economy to function. There are several aspects to security when dealing with E-cash. The first issue is the security of the transaction. How does one know that the E-cash is valid? Encryption and special serial numbers are suppose to allow the issuing bank to verify (quickly) the authenticity of E-cash. These methods are suseptible to hackers, just as paper currency can be counterfeited. However, promoters of E-cash point out that the encryption methods used for electronic money are the same as those used to protect nuclear weapon systems. The encryption security has to also extend to the smartcard chips to insure that they are tamper resistant. While it is feasible that a system wide breach could occur, it is highly unlikely. Just as the Federal Government keeps a step ahead of the counterfeiters, cryptography stays a step ahead of hackers.

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Physical security of the E-cash is also a concern. If a hard drive crashes, or a smartcard is lost, the E-cash is lost. It is just as if one lost a paper currency filled wallet. The industry is still developing rules/mechanisms for dealing with such losses, but for the most part, Ecash is being treated as paper cash in terms of physical security. Companies are making some exceptions when it comes to a software/hardware failure, but these are supposed to be rare. To help customers get used to this concept, most companies are limiting E-cash wallets to $500, reflecting the primary use of E-cash for low value transactions. There is a benefit to E-cash in the area of theft, however. A mugger or pickpocket would not be able to make use of another's smartcard without the appropriate password. Merchants should also lose less cash to employee theft, since the electronic cash will be inaccessible (or, at a minimum, traceable). The ultimate area of security is faith in the currency. This, however, would still be the responsibility of the Federal Government on a systemic basis. Essentially, the E-cash is merely a representation of hard currency on deposit at banks. Thus, faith in the system should not falter.

E-Cash Privacy Transactions involving paper currency are difficult to trace. If digital money is to replace paper currency, it must retain certain aspects of this quality. As information technologies expand, privacy becomes of greater concern. People are realizing that with every credit card transaction, corporate databases are becoming larger and larger. By using paper currency, people are able to exclude themselves from these databases. Therefore, for e-cash to be effective, it must maintain this privacy function.

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DigiCash claims it has developed a system that provides privacy for the user without sacraficing security for the receiver. If a system is completely private, the merchant has no way of verifying the validity of the electronic money. The user would also be unable to have a receipt for the transaction. However, DigiCash utilizes a one-sided signiture. Basically, the user keeps record of payments made, but the merchant only receives enough information to allow his bank to verify the authenticity of the E-cash. This signiture process is also suppose to deter the criminal element of cash transactions. Since a record of the transaction is created and kept (by the payee), extortion, bribes, or other illegal transactions should occur less frequently.

E-Cash Regulation A new medium of exchange presents new challenges to existing laws. Largely, the laws and systems used to regulate paper currency are insufficient to govern digital money. The legal challenges of E-cash entail concerns over taxes and currency issuers. In addition, consumer liability from bank cards will also have to be addressed (currently $50 for credit cards). E-cash removes the intermediary from currency transactions, but this also removes much of the regulation of the currency in the current system. The more daunting legal problem is controling a potential explosion of private currencies. Large institutions that are handling many transactions may issue electronic money in their own currency. The currency would not be backed by the full faith of the United States, but by the full faith of the institution. This is not a problem with paper currency, but until the legal system catches up with the digital world, it may present a problem with cybercash.

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Advantages of E-Money •

Online Electronic Money

1) Anonymity and untraceability can be maintained: User Id's are kept highly confidential. 2) No issues regarding "Double spending": Real-time checking of all transactions makes the possibility of multiple expenditures negligible. 3) No requirement of additional secure hardware: Existing POS (point of sale) hardwares can be updated and used. •

Offline Electronic Money

1) Portable: This system is fully offline and portable. 2) Anonymity unless double spending: The user is anonymous unless he commits a double expenditure. 3) Detection of Double Spender: The bank can effectively detect a double spender. 4) Frequent synchronizations are not required: The bank doesn't need to synchronize its servers very often. This is mostly done via batch updates.

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Disadvantages of E Money •

Online Electronic Money

1) Communication Overheads: Security and anonymity cost become a bottleneck of the system. This can happen at times during real-time verifications. 2) Massive Databases: The bank will have to maintain a detailed and confidential database. 3) Synchronization: The bank needs to synchronize its server every time transaction is made. It would be insanely impractical to maintain.

•

Offline Electronic Money

1) Prevention may not be Immediate: Double spending may not be prevented effectively and immediately. 2) Implementation Expenditure: the required additional hardware is quite costly to install.

There is another con to consider. E-transactions depend a lot on technology. Hence, power failure, unavailability of internet connection, undependable software and loss of records could be a hindrance in your way.

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Electronic Wallets  Stores credit card, electronic cash, owner identification and address  Makes shopping easier and more efficient  Eliminates need to repeatedly enter identifying information into forms to purchase  Works in many different stores to speed checkout  Amazon.com one of the first online merchants to eliminate repeat form-filling for purchases Using the basic concepts of Embedded Systems, an idea for changing the future of Cards (Banking, Petro,Health, Televoice, etc.) is proposed in this paper. Requirement of a special card reader, limited lifetime,acceptance being the main disadvantages of today’s traditional cards, led to the design of e-Wallet. The main objective of e-Wallet is to make paperless money transaction easier. The main idea behind this paper is to bring in a cheaper, more versatile and much more easily usable kind of a card. Using this e-Wallet the transaction procedure can be as simple as: the customer goes to the point of sale (POS), does the purchasing and when it comes to the payment, the customer submits his e-Wallet to vender who connects it to his terminal (PC).The vender displays the billing information to the customer who finalizes it. The amount in the e-Wallet is updated accordingly. Later at periodic intervals, the vender intimates the bank (in case of credit cards) which transfers the amount from the customer’(s) account to his. The advantages of e-Wallet are its ease of use (doesn’t require a separate card reader), ease of maintenance, flexibility, safety, being the primary ones. The designing of the card is similar to any other embedded card. The designing cost of the card (e-Wallet) being as low as the price of a pizza. There are ample enhancements to this application from credit cards to televoice cards. Unlike traditional cards which are application oriented, all the applications’ software can be embedded into this e-Wallet which provides multifunctionality.

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INTRODUCTION: With the advent of computers many technologies are taking this world by a surprise. These include Embedded Systems (ES), Artificial Intelligence (AI), Neural Networks (NN), Fuzzy Logic, Bluetooth and many more are upcoming. This paper deals with Embedded Systems in a new perspective.I n easy terms, Embedded Systems can be viewed as a combination of hardware and software components, in which the software is implanted into the hardware to do the specific job. These ES were implemented in various fields from Battery chargers to Aviation Systems besides Cell phones (GSM,GPRS, CDMA, etc.). These ES are being developed in ‘leaps and bounds’. The never- ending efforts of many scientists in the field of ES led to the evolution of Smart Technology (ST). Using the basic concept of ES, an idea for changing the future of Cards (Banking, Petro, Health, Televoice, etc.) is proposed in this paper. To interpret this idea, it is first needed to know the pros & cons of today’s ‘traditional’ cards. •

Agile Wallet

 Developed by CyberCash  Allows customers to enter credit card and identifying information once, stored on a central server •

eWallet

 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

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•

Microsoft Wallet

 Comes pre-installed in Internet Explorer  All information is encrypted and password protected  Microsoft Wallet Merchant directory shows merchants setup to accept Microsoft Wallet The basic advantages of these cards are: • Ease of mobility • Ease of use Coming to the disadvantages of these cards, •

Easy Duplication

•

Requires a special card reader

•

Networking problems

•

No memory to hold the current balance

•

Limited lifetime and acceptance

•

No particular user authentication

•

Unsecured remote transaction

•

Vulnerable to moisture, heat, dirt etc.

a n d the list goes on…… Keeping these pros & cons in view, the Smart Technology is introduced to develop a new class of cards. This stream of Smart Technology can be termed as Smart Card Technology (SCT).T his smart card has a microprocessor or memory chip embedded in it that, when coupled with a reader, has the processing power to serve many different applications. Such cards can be referred to as e-Wallet (electronic Wallet).

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E-Wallet: The main objective of e-Wallet is to make paperless money transaction easier. The electronic wallet (e-Wallet) is just like a leather wallet as it does the same, in terms of ecash. In today’s life where monetary value and security both, go hand in hand, it is difficult to satisfy customers using the routine cards. The main idea behind this paper is to bring in a cheaper, more versatile and much more easily usable kind of a card. Salient features of e-Wallet are:  More than 40 years of data retention  Firewall encrypted security logic  Compatible with many supporting hardware.  No separate card reader is required to access our card.  Polarity reversal indicator is pre-built in our card.  Reusability of our card is unlimited.  Multiple card features are incorporated in the same card.  The random word generator unit generates a random word which replaces the password (correct password) in the buffers and other terminals with a random word after the transaction is over. Hence it is almost impossible to replicate the behavior of the ASIC and thereby obtain the encryption key or algorithm used.  On Chip Security Power Management: This unit protects the card (ASIC) against over voltage or under voltage and over frequency or under frequency of the clock signals given for operation.  Access Control: Access control unit protects the on chip memory. It provides address and data bus scrambling and detects any non-standard attempt to acquire memory access.

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 Flash ROM / ROM: Flash ROM stores the instruction set for the microcontroller unit, the necessary monitor routine programs and the application code. Here the flash ROM is used because there are 32 available instructions sets for different applications. But only one instruction set is used. If another instruction set is used the card can be used for only the specific application.  EEPROM: EEPROM is used to store the processed data i.e. the balance amount in the card. This part is of commercial importance as it holds the monetary information of the card. Also the EEPROM sends the data to be read for establishing transaction  RAM: It provides the workspace for both the microcontroller unit and the crypto co-processor. It’s where the actual comparison of the stored password (original password) and the given password for transaction to take place. Only if the given password is the actual password, the access is given to view the details of the card, deposition, withdrawal are allowed.  Serial Interface: It has six valid pins CS-chip select, CLK-external clock, DI-data input, D0-data input, VOC-voltage input, GND-ground. Actually a parallel printer port is used for interface of the card with PC. But only the six required pins of the printer ports are activated. Thus the advantages of parallel and serial communication are utilized. There is no need for a separate USB.  RF Interface: This unit provides establishment of transaction using Blue tooth technology which is our future enhancement.External complexities are less.  Internal 16 Bit Address/Data Bus: This provides communication between different units inside ASIC chip. This ASIC chip is built satisfying ISO 7816 standards.

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Operation: 1. Once the card is given the power supply all the units are activated. 2. The password is sought and the password is sent. The first bit is chip select then the start bit, two opcode bits, 6-address bits and 16 data bits. The dedicated embedded microcontroller looks after this process. 3. Then the given password is sent to the RAM work space. 4. The password (original password) after decryption by the crypto processor is sent to the RAM. 5. Here the passwords are compared by the microcontroller. Only if the both the passwords are correct, the access control unit brings the flash ROM, EEPROM units of low impedance state. 6. Otherwise the units are kept in high impedance state. 7. The on-chip security power management unit provides the correct voltage and correct frequency (CLK signal) for functioning of the ASIC. 8. If the password is correct, then the microcontroller fetches the instructions from the instruction set in the FLASH ROM. 9. The balance amount can be fetched form the EEPROM, through the D0 pin of the serial interface. 10. After the transaction is over the balance amount is stored in the EEPROM through D1 pin of the serial interface. 11. Once the transaction is over, the random word generator generates a random word and sends it to the terminal ends and other buffers where the original password is present. This protects the original password from being hacked by hackers. Thus the ASIC is designed for effective transaction with proper security to the customers.

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FEATURES OF E–WALLET: • Refillable • Infinite lifetime • Current balance can be stored and read • User authentication is provided • Universal access • Maximum possible cash • Cannot be duplicated ADVANTAGES OF E-WALLET: Ease of use:  Withdraw or deposit value by telephone  Pay the exact amount, no fiddling for change  No signature required  Immediate payment  In the future, access points may include mobile phones Accessibility and convenience:  Cash machines and telephones give more access points to funds in bank account  Available 24 hours / 365 days  Cash machines and telephones cannot run out of electronic cash

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Flexibility:  Transfer value by telephone  Pay person to person  For low or high values  Multi-currency capability  No age limit, so suitable for all the family Safety and control:  Spend only what you have  Read your balance  Load value at home  Keep track of what you have spent and where  Customer is traceable if a lost card is found

CONCLUSION: With all the above mentioned features it is definite that the future of cards is definitely eWallet’s. Besides credit cards, this e-Wallet can also be extended into the following fields, namely:  Sim – card  Petro – card  Credit – card  Health – card  Intelligent web – surfing card  Insurance – card 68

 Access – card  ATM ( provided Reserve Bank of India adopts e – cash transactions )  Televoice These are only the few to mention. Due to its ease of adaptability to its environment, this e-Wallet would certainly change the way people transact (monetary transactions). Transaction Procedure: The e-Wallet cardholder goes to a point of sale (POS) location (normally a shop, but see other possibilities in the next section) where the e-Wallet is accepted. Having chosen the goods he wishes to buy, he goes to the cash desk. Here, the merchant calculates the total value and enters it on the payment terminal using a keypad. (In many cases, this is done via an automatic link between the cash register and the terminal.) T he terminal then displays the amount on a small screen facing the cardholder, who confirms the amount by pressing an "OK" button. In less than a second, the value is transferred from the e-Wallet to the terminal, and the value remaining in the e-Wallet is adjusted. This is an off-line transaction. A message is displayed to both the cardholder and the merchant saying that the payment has been accepted. Periodically, the merchant connects the terminal to his bank to do a collection that is to transfer the value collected in the terminal to his bank account. This is an on-line transaction. The terminal sends a message for each transaction to the e-Wallet host system, identifying the card number and issuer and the amount. The host system debits the float account of the issuer and credits the merchant's account. This typically takes a few seconds per transaction. Merchants can program their terminals to automatically do collections each day, week or month, or when a specified value of transactions is reached. If merchants have a number of terminals (e.g. a vending machine operator, or a large supermarket) then they can use the "shuttle collection" system, where terminals download their data onto a special collection card, which in turn then downloads it into a central terminal, which is then used to perform an on-line collection.

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Smart Cards A smart card, chip card, or integrated circuit card (ICC), is any pocket-sized card with embedded integrated circuits which can process data. This implies that it can receive input which is processed — by way of the ICC applications — and delivered as an output. There are two broad categories of ICCs. Memory cards contain only non-volatile memory storage components, and perhaps some specific security logic. Microprocessor cards contain volatile memory and microprocessor components. The card is made of plastic, generally PVC, but sometimes ABS or polycarbonate. The card may embed a hologram to avoid counterfeiting. Using smart cards is also a form of strong security authentication for single sign-on within large companies and organizations.

Overview A "smart card" is also characterized as follows:  Dimensions are normally credit card size. The ID-1 of ISO/IEC 7810 standard defines them as 85.60 × 53.98 mm. Another popular size is ID-000 which is 25 × 15 mm (commonly used in SIM cards). Both are 0.76 mm thick.  Contains

a

security

system

with tamper-resistant properties

(e.g.

a secure

cryptoprocessor, secure file system, human-readable features) and is capable of providing security services (e.g. confidentiality of information in the memory).  Asset managed by way of a central administration system which interchanges information and configuration settings with the card through the security system. The latter includes card hotlisting, updates for application data.  Card data is transferred to the central administration system through card reading devices, such as ticket readers, ATMs etc.

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Smart Card Applications •

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

Mall parking

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Credit Cards  Credit card provides a card holder credit to make purchase up to amount fixed by a card issuer.  In B2C business, it continues to be the most used form of payment system given its high convenience.  Entities that involve in the credit card payment system include - Card holder - Merchant (seller) - Card Issuer (Your bank) - Acquirer (merchant’s financial institution - Card Association (Visa, Master Card etc) - Third party processor

Risk in using Credit cards  Customer uses a stolen card or account number to fraudulently purchase goods or service online  Family members use bankcard to order goods/ services online, but have not been authorized to do so.  Customer falsely claims that he or she did not receive a shipment  Hackers find the ways into an e-commerce merchant’s payment processing system and then issue credits to hacker card account numbers.

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CREDIT CARD PROCESSING

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Benefits of electronic payments Electronic payments can benefit your business by extending your customer base; boosting cash flow; reducing costs; enhancing customer service and improving your competitive advantage. Five reasons why Electronic payments improve customer service – the five ‘Cs’ 1. Choice – like your competitors, you can offer a wide range of payment options 2. Convenience – they remove the need for invoices, cheques, cash and BACs 3. Credit – they may allow purchases that would otherwise be delayed 4. Concessions – small discounts to encourage online purchases improve the perception of value 5. Competitive Edge - if you don’t offer the full range of payment options but your competitors do, what does this say about your business?

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Five reasons why Electronic payments increase profitability 1. Convenience – removing administrative resources required by invoices, cheques and cash 2. Immediacy – credit cards enable instant purchasing (without delay) 3. Improved cash flow – payment at the time of purchase reduces the pressures caused by 30-day invoicing 4. Growth – open additional payment channels via the phone, mail order and Internet and increase your customer base. More customers mean more revenue. 5. Competitive advantage – match and beat the services of your competitors and gain the edge

How the Online order process works:  The customer is not present.  Customer fills online shopping cart with products and proceeds to a virtual checkout.  A PSP collects the card details and the total transaction value - you can compare PSPs using our free online payments comparison tool.  An acquiring bank then authorizes the transaction.  The card limit is temporarily reduced by the value of the transaction.  Goods are dispatched and the transaction value is then captured from card.  Small transaction costs are also charged by the PSP and acquiring bank.

Payment Acceptance and Processing  Merchants must set up merchant accounts to accept payment cards  Law prohibits charging payment card until merchandise is shipped

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 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 merchant’s account

Processing a Payment Card Order

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Here is a picture of the components involved in an online purchase: 77

A standard online shop will have an online catalogue and a shopping cart that you can get by purchasing an e-commerce product to suit your business Your Electronic payments solution will then be ‘plugged-in’ to this shop. Sometimes a customer is not actually present in a shop or at the point of sale for a credit card transaction. This may sound strange but some card transactions, like placing an order over a phone or by mail-order do not need the customer to be present at the point of sale. This situation is known as a Customer Not Present transaction. Acquiring Banksmake a distinction between customer present and Customer Not Present transactions, as there is a potential increase in fraud when the customer does not present the card or sign a sales voucher at the point of sale.

Customer Not Present transactions take place everyday over the phone and with mailorder firms across the globe so there is no need to worry unduly about these risks. When you apply for your Merchant Service the Acquiring Bank will ask what percentage of your transactions will be to customers who are not physically present. They will use this 78

to calculate the cost of your service and to issue a Merchant Service ID that allows you to conduct Customer Not Present sales. Taking orders over the Internet means the customer is again not present. Understand the distinction the Acquiring Bank makes so you can prepare your business appropriately and get the right Merchant Service for your operation. Most people have bought a product from a high street shop and used their credit or debitcard to pay for the product. The shop uses their till to add all the goods you have purchased and then asks to pay for you goods. If you are paying by credit or debit card you hand over your card so that the shop can collect your card number and card expiry date. Up until a few years ago shops commonly used a paper sales voucher that was placed over your card before a manual imprinter was rolled over the card to collect the details. A shop assistant filled in the sales total and asked you to sign the voucher. These vouchers are still used by some shops. Recently most shops have moved to electronic machines linked by telephone directly to a bank. Card details are collected from the magnetic strip when the card is ‘swiped’ through the machine. The shop assistant types in the sales amount and details are passed to the bank for approval.

This simple process involves three main elements with specific names: 1. The bank that card details are passed to is the ACQUIRING BANK;

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2. The shop has a unique ID to identify themselves to the ACQUIRING BANK and this is given to them as part of a MERCHANT SERVICE provided by the ACQUIRING BANK; 3. The MERCHANT SERVICE will also provide the PDQ Machine that the cards are swiped through.

sends data provides Not all businesses have a Merchant Service with a bank so don’t worry if this is new to you. A charge-back , or cancellation of puchase, is when a customer demands a refund from their credit-card company. The rights of the consumer are quite powerful in this area as card providers like Visa and Mastercard have set an international standard period for charge-backs that currently stands at six months.

Banks protect themselves against charge-backs and the Merchant Service agreement you have with your bank allows them to transfer liability for payments of charge-backs to

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you. As an additional security measure, the bank may retain the payment from the customer for a period of time (e.g. 30 days) before crediting your account with the funds. Many Merchant Services also need you to lodge a bond to cover any charges incurred through fraud and charge-backs. This sum will vary depending upon your average transaction value and monthly turnover as well as less tangible features like the time it takes your business to fulfil orders and consequently the exposure to risk of charge-back or fraud. (More detail on exposure to risk in the next section). You can estimate the size of bond by discussing this with your acquiring bank. When you come to use the free online payments comparison tool, you will find that you can adjust the size of the bond on the "Acquiring costs" page. The tool will then assume that you have to pay interest on this sum in its calculations. This will give you a true cost comparison between the PSP solutions that use merchant services and the other types of solution that do not need acquiring services. As Internet transactions fall under the banner of Customer Not Present and because many Internet sales are carried out ‘cross-border’ (potentially increasing the risk of fraud) there is no way to reduce the six -month window in which a charge- back could occur. Even the processes of Authorisation and Capture (where the Acquiring Bank approves the card transaction) do not provide protection against charge-back, although insurance against loss can be arranged separately through a trade body or sometimes the Payment Gateway. Outstanding customer service is the best protection. Having good terms and conditions on your website can limit the charge-backs you experience but nothing beats good service. Note that your

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The SET protocol

The SET protocol coordinates the activities of the customer, merchant, merchant’s bank, and card issuer. [Source: Stein] Secure Electronic Transaction (SET) Protocol  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 InternetContrasted with Secure Socket Layers (SSL) protocol, SET validates consumers and merchants in addition to providing secure transmission

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 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 The SET protocol Secure Electronic Transaction (SET) was a standard protocol for securing credit card transactions over insecure networks, specifically, the Internet. SET was not itself a payment system, but rather a set of security protocols and formats that enable users to employ the existing credit card payment infrastructure on an open network in a secure fashion. However, it failed to gain traction. SET was developed by SETco, led by VISA and MasterCard (and involving other companies such as GTE, IBM, Microsoft, Netscape, RSA and VeriSign) starting in 1996. SET was based on X.509 certificates with several extensions. The first version was finalised in May 1997 and a pilot test was announced in July 1998. SET allowed parties to cryptographically identify themselves to each other and exchange information securely. SET used a blinding algorithm that, in effect, would have let merchants substitute a certificate for a user's credit-card number. If SET were used, the merchant itself would never have had to know the credit-card numbers being sent from the buyer, which would have provided verified good payment but protected customers and credit companies from fraud.

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SET was intended to become the de facto standard of payment method on the Internet between the merchants, the buyers, and the credit-card companies. Despite heavy publicity, it failed to win market share. Reasons for this include: •

Network effect - need to install client software (an e-wallet).

•

Cost and complexity for merchants to offer support and comparatively low cost and simplicity of the existing SSL based alternative.

•

Client-side certificate distribution logistics.

To meet the business requirements, SET incorporates the following features: •

Confidentiality of information

•

Integrity of data

•

Cardholder account authentication

•

Merchant authentication

•

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

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SET uses a hierarchy of trust

All parties hold certificates signed directly or indirectly by a certifying authority.

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Main factors when selecting e-payment method  Availability (bank system, laws and regulations)  The consideration of size and type of business, type of a target group of consumers, types of products and services.  The ability to provide security against fraudulent activity  Being cost effective for low value transaction fees  Being protective of the privacy of the users  Easy to use, and being convenient for purchasing on the web based e-business

Concerns of e-payment mechanism  Security: Feel secured from being hijacked by unauthorized party or processes.The need to fill out credit card numbers and other personal information on the Internet creates unsecured feeling further than the current transaction.  Acceptability. A wide range of parties needs to accept payment.

 Convenience.

To make small purchase, the action required during a

transaction should minimal.  Cost

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CASE STUDY: To study about two E-payment companies

E commerce payment system An e-commerce payment system facilitates the acceptance of electronic payment for online transactions. Also known as financial electronic data interchange (FEDI), ecommerce payment systems have become increasingly popular due to the widespread use of the internet based shopping and banking. A payment gateway is an e-commerce application service provider service that authorizes payments for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar. It is the equivalent of a physical point of sale terminal located in most retail outlets. Payment gateway protects credit cards details encrypting sensitive information, such as credit card numbers, to ensure that information passes securely between the customer and the merchant and also between merchant and payment processor. A payment gateway facilitates the transfer of information between a payment portal (such as a website, mobile phone or IVR service) and the Front End Processor or acquiring bank. When a customer orders a product from a payment gateway enabled merchant, the payment gateway performs a variety of tasks to process the transaction.

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PayPal is an e-commerce business allowing payments and money transfers to be made through the Internet. PayPal serves as an electronic alternative to traditional paper methods such as checks and money orders.On October 3, 2002, PayPal became a wholly owned subsidiary of eBay.Currently PayPal operates in 190 markets,and it manages over 175 million accounts (70 million active accounts). PayPal allows customers to send, receive, and hold funds in 19 currencies worldwide. PayPal operates locally in 13 countries. Residents in 190 markets can use PayPal in their local markets to send money online.

VeriSign Inc. is the leading provider of digital trust services that enable everyone everywhere to engage in commerce and communications with confidence. VeriSign’s digital trust services create a trusted environment through four core offerings - Web presence services,telecommunications services, security services and payment services. Sign was founded in 1995 as a spin-off of the RSA Security certification services business.The new company served as a certificate authority (CA) — a role it still fulfills --and its initial mission was "providing trust for the Internet and Electronic Commerce through our Digital Authentication services and products." VeriSign now has more than 3,000,000 certificates.It is the largest CA behind the encryption and authentication on the Internet. According to VeriSign, its payment gateway processed over $40 billion in payments in 2004. VeriSign is well known for the VeriSign Secured Seal, which is an outward expression of a Web site's authentication and encryption commonly posted to VeriSign SSL Certificate customers' Web sites.

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Auction giant eBay acquired VeriSign's payment gateway business as part of a broad strategic alliance between the two companies.eBay's PayPal paid approximately $370 million in cash and/or eBay stock for the VeriSign unit.VeriSign's payment gateway business

merged with PayPal's merchant services platform.The combined unit is

expected with an incremental $100 million of revenue at a 20 percent pro forma operating margin The move is likely to bolster PayPal's drive to attract more e-commerce merchants to its payment processing services.In addition to PayPal's acquisition of VeriSign's gateway business, eBay also agreed to a multi-year security technology agreement that will see eBay investing in VeriSign's payment security solutions. Among those solutions is two-factor authentication.

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Features of PAY pal  It offers transactions in 18 currencies.  One can send and receive money through its online account and can send invoices requests of payments using Paypal.  One can use his/her credit cards to pay online through Paypal, which makes it more secure. Paypal serves around 190 markets.  One can withdraw money through checks or directly to your own bank account (available to limited countries). It is free to withdraw money in US Bank account

though transactions to other countries might involve some

fee.  Paypal outgrow every other service by providing

you free sign-up

for

using their services.  Paypal is believed to be

the safest

way for

online transactions. The

encryption system is quite good.  Paypal.com gives you a sort of online bank that handles almost all your needs for online business: whether it is shopping, selling or just transactions of money, one can rely on Paypal.com for its services.  Paypal accounts have transactional limist and also limits on the money that various types of accounts can receive and withdraw. A Paypal account holder can make a maximum single transaction of USD 10,000. If you do not have a Paypal account, you can make a one-time, single transaction of USD 4,000. There is a receiving and withdrawl limit for personal types of accounts. So you need to check what type of account would suit your needs.

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Three types of accounts serve the purposes of different users.

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

Paypal offer a Security Key System that allows the users to generate a security key for their accounts and make it safe.One can order your security key on Paypal and keep it with his/her key-chain. It is that small but keeps your online Paypal account safe from theft.



The fees vary depending on whether you are USA or Non USA but are in the region of 1.9-3.9% depending on transaction amount and a minimum charg of approx 30 cents per transaction.

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 Shopping Carts: PayPal has a free customizable built in shopping cart or integrates with hundreds of available shopping carts if you already have one.  Subscriptions/Recurring Payments: You can set up recurring payments - ideal for membership sites.  Donations: Probably the most commonly seen PayPal button.  Accept Multiple currencies- Accept payments in US, Australian and Canadian Dollars, UK pounds, Yen and Euro.  Realtime notifications of payments.  Test transactions in a test environment o you are sure they work ok.  Optional PayPal Accounts: The buyer no longer need to have a PayPal account to make a purchase. This used to be one of the main drawbacks to using PayPal. A PayPal account is now optional and not mandatory.  Customized Payment Pages: You can add your website colors and logos to PayPal's payment pages.  Invoicing: You can send your customers detailed email invoices. You can create and save up to 10 customized invoices using PayPal invoice templates.  Refunds: You can give full or partial refunds to your customers up to 60 days after the sale.  Integrated Shipping: Allows you to create packing slips for your shipments. Includes integrated shipping and delivery tracking for buyer and seller.  Automatically send order updates and status notifications.  Mass Pay: You can send payments to large groups-like affiliates.  Auto Return: When the buyer has made the purchase on the PayPal site he is sent back to a URL on your website. This can be used to confirm the order, a thank you page, or a download page or simply just to make sure the buyer stays on your site.

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 Website Trust Certificate Improve Coversion Rate by Improving Trust. Display a Trust Seal Today!  Full-Text Online Journals Research online. Academic journals & books at Questioning Library.  Certificate Authority Scalable, robust, high-security CA for high-performance Applications  European domain names Domains for Resellers and Providers Easy through Web Mail- XML-API By comparison, a Verisign merchant account has much higher startup costs. There is also a relatively high monthly fixed cost for this merchant account. The fees for a merchant account will run around $1,000 year so long as there are less than 1,000 transactions/monthly, not including per transaction fees of .25, and something called a discount rate. The discount rate is a percentage of each transaction, usually 2%-3% but sometimes higher. Figuring out one’s discount rate is an involved process. One has to fill out a long application and then practially haggle with the banks to get the best rate.

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INDIAN SCENARIO

OR Now a days PayPal becoming more and more suitable for Indian scenario.The following facilities are found for India  One can now transfer money from his/her PayPal account to any of bank account ( his/her) in India directly from the PayPal website.  The new e-transfer process takes less than a week to process a check.  PayPal has also scrapped the withdrawal fees for electronic transfer if the amount withdrawn is more that Rs 7000 and a nominal Rs 50 for small transfers. Earlier PayPal would charge $5 per transaction irrespective of the amount on the cheque.  To get money from PayPal to a bank account in India, require bank account number and the IFSCI code of the bank branch where the account is - call your bank customer care service and ask for IFSC code -it’s an 11 digit code maintained by The Reserve Bank of India.  The e-transfer facility from PayPal India is available to anyone having an account in HDFC Bank, ICICI Bank, ING VYSYA Bank, Axis Bank (formerly UTI Bank), Standard Chartered Bank, State Bank Of India, Bank Of India, Canara Bank, Union Bank of India, HSBC and Citibank India.  Before you withdraw the amount from PayPal to your Indian Bank account, ensure that name of the bank record and PayPal match character by character else the transaction will not go through and PayPal would also charge a INR 250 processing fee.  PayPal offers another option for Indians who hold a Visa credit card or debit card he/she can withdraw funds directly to your Visa branded credit, debit or prepaid card.

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Paypal, owned by eBay. is a well known online payment system which has dominated the online payment system with morethan 100 million users. PayPal is well-known and respected in our demographic.The trust factor is high.Payees have the option of using an existing PayPal account, which our records show is a very high percentage of registrants, or they can use a credit card or e-check. As with other payment gateways, we avoid the liability of collecting and storing sensitive financial data. Setup was quick and simple. VeriSign requires a comprehensive background check that takes weeks.While PayPal's fees are higher than the alternatives, we pass them on to our customers who are willing to pay for the convenience of using our system, so that's a non-issue. So according to me PayPal is more closely to Indian scenario than VeriSign.

Factors for success  Swift transfer of money from one end of the world to the other.  Fast and trustworthy, reduce bank commission charges  Quick, secure, easy  Free to individuals  Ideal for online auctioneers, many uses  Great in theory  Collects money owed to you  International, multi-currency, fast, cheap  Free to sign up

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Some other gateways •

ABCpayments.com

•

CC Avenue

•

DirecPay - Times of India

•

EBS

•

Easy2Pay.com

•

Epayments.in

•

Transecute

•

payseal ICICI

•

PayGateIndia

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Comparison of other gateway with PayPal & VersiSign Currently PayPal gateway provider and their transaction and setup fees are very reasonable. But the only thing they lack is, time to deposit the funds in our accounts.Moreover there limit of indian customer is $2500 which is very less for some customers.But recently paypal made some changes in their agreement like without createing a account buyer can pay a amount $10000 (limit for credit card in whole life) from their credit card and if create new account then takes time in verification and all. That often create problems in taking amount from buyers. A person having account in paypal.com, there is no need to open account in US Bank for this payment gateways. They send you payment by DD, Cheque or Wire Transfer. They convert the amount to INR according to current conversion rate of that day. CCAvenue seem to support a very limited number of businesses. And Website development/hosting doesn’t figure out in their list. In that respect Paypal is best…… even if it takes time for the money to reach your account, its still the cheapest and reliable way to go about. About their service - they are pretty good and quick in taking care of the customers.PayPal is the also best because its popular and lots of people use it. For selling non-tech stuff online (main services or ebooks) CCAvenue is good option.But considering national and international level payment gateway, Paypal is best.

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Products priced in INR has to be converted to USD before sending it to paypal.This is a major problem. If you are a seller, you may have to pay some commission if you use it as a business account .Unwanted mails, if you forget to unclick the marketing option when registering.Someone else is watching your financial information which can make you feel a little uncomfortable.Paypal becomes a necessity if you want to be an ebayer.One of the most widely attacked site for Phising and other scams. Actually there is lot of scope for Indian payment gateways here, they can do really well but they have to cut down their costs. High costs just does not make any sense to a small businessman. The problem with Indian companies is, they do not look for benefit of the customers, they always look for making money.

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CONCLUSION Now days online transaction are going at very high speed, be it be online shopping or money transaction, crediting debiting account and online money management. So demand fro a better E-payment system is of prime importance and that cant be without considering E-security. For any MNC company to survive in the field of E-marketing these two are most important parameters i.e. E-payment and E-security as they always go hand in hand. If any one is lacking behind a business would eventually vanish out as they are interdependent on each other and directly dependent on the success of the businee.

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BIBLIOGRAPHY

 www.google.com

 www.scribd.com

 www.paypal.com

 www.verisgn.com

 www.wikipedia.com

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