Chapter 7Learning ObjectivesLearning Objectives (Cont.)The Basics of Electronic Payment SystemsElectronic CashElectronic Cash (Cont.)Slide 7Online and Offline CashAdvantages of Electronic CashDisadvantages of Electronic CashHow Electronic Cash WorksProviding Security for Electronic CashElectronic Cash SystemsCheckFreeClickshareDigiCash (eCash)eCoin.NetInternetCashMilliCentPayPalLoyalty and Rewards SystemsBeenzFloozElectronic WalletsElectronic Wallets (Cont.)Slide 26eWalletMicrosoft PassportThe W3C Proposed StandardThe ECML StandardStored-Value CardsWhat is a Smart Card?Mondex Smart CardCredit and Charge CardsAdvantages and Disadvantages of Payment CardsPayment Acceptance and ProcessingSecure Electronic Transaction (SET) ProtocolSlide 381Chapter 7Electronic Payment Systems2Learning ObjectivesIn this chapter, you will learn about:•Distinct methods to collect payments from customers•The history and near-term future for electronic cash•The implementation of electronic cash systems•Electronic wallets and how they work3Learning Objectives (Cont.)•The role of smart cards in electronic commerce•Credit and debit card processing for electronic commerce transactions•The most popular electronic payment systems•The SET protocol and how it protects credit card transactions4The Basics of Electronic Payment Systems•Electronic commerce involves the exchange of some form of money for goods and services.•Implementation of electronic payment systems is in its infancy and still evolving.•Four technologies to be used: electronic cash, software wallets, smart cards, and credit/debit cards.5Electronic Cash•Electronic cash is attractive in two arenas:–in the sale of goods and services of less than $10–in the sale of higher-priced goods and services to those without access to credit cards•Internet payments for items costing from a few cents to approximately $10 are called micropayments.•Companies offer micropayment systems include iPin, eChange, Qpass, 1ClickBrands, and PayPal.com.6Electronic Cash (Cont.)•Concerns about electronic payment methods include:–privacy and security–independence–portability–divisibility–convenience7Electronic Cash (Cont.)•Electronic cash should have two important characteristics in common with real currency:–it must be possible to spend electronic cash only once–electronic cash ought to be anonymous•Beenz is a kind of scrip that consumers can earn and exchange for goods and services.8Online and Offline Cash•Two approaches to holding cash: online storage and offline storage.•Online cash storage means that an online bank is involved in all transfers of electronic cash.•Offline cash storage is the virtual equivalent of money you keep in your wallet. However, it must prevent double or fraudulent spending.9Advantages of Electronic Cash•Electronic cash transactions are more efficient and less costly than other methods.•The distance that an electronic transaction must travel does not affect cost.•The fixed cost of hardware to handle electronic cash is nearly zero.•Electronic cash does not require that one party have any special authorization.10Disadvantages of Electronic Cash•The concept of an Internet tax poses many problems and questions.•Because true electronic cash is not traceable, money laundering is a problem.•Electronic cash is susceptible to forgery.•Electronic cash, so far, is a commercial flop.11How Electronic Cash Works•To establish electronic cash, a consumer goes in person to open an account with a bank.•The consumer uses a digital certificate to access the bank through the Internet to make a purchase.•Consumers can spend their electronic cash at sites that accept electronic cash for payment.•The electronic cash must be protected from both theft and alteration.12Providing Security for Electronic Cash•To prevent double spending, the main security feature is the threat of prosecution.•A complicated two-part lock provides anonymous security that also signals when someone is attempting to double spend cash.•One way to trace electronic cash is to attach a serial number to each electronic cash transaction.13Electronic Cash Systems•Compaq Computer’s electronic cash technology allows users to use its NetCoin electronic cash.•CyberCash created CyberCoin for micropayments.•No standards were ever developed for the entire electronic cash system.14CheckFree•CheckFree provides online payment processing services to both large corporations and individual Internet users.•CheckFree permits users to pay all their bills with online electronic checks.•CheckFree signed an agreement with Yahoo! to provide Yahoo! customers the option of paying directly from the Yahoo! site.15Clickshare•Clickshare is an electronic cash system aimed at magazine and newspaper publishers.•Users with an ISP that supports Clickshare are automatically registered with Clickshare.•Clickshare tracks users with the standard HTTP Web protocol.16DigiCash (eCash)•DigiCash was a trailblazer in the electronic cash field.•DigiCash made software products that allowed users to purchase goods and services on the Internet and pay for them using anonymous electronic cash.17eCoin.Net•ECoins are electronic tokens issued by eCoin.net.•Consumers can use the tokens to pay for online goods.•The electronic cash is stored in an eCoin wallet on the consumer’s computer.•The eCoin system uses a three-link chain consisting of a consumer, a merchant, and the eCoin server.18InternetCash•InternetCash provides electronic currency that is very similar to traditional cash.•Customers must first purchase an InternetCash card from stores such as Circle K.•Customers then go online and activate their cards by entering a 20-digit code and creating a PIN.•Once their card is activated, customers can pay for purchases using the InternetCash card at any site accepting them.19MilliCent•MilliCent is an electronic scrip system that does not issue one standard currency.•Each participating merchant creates and sells its own scrip to a broker at discount.•Consumers register with one broker and buy broker scrip in bulk.•Paying for an item involves simply transferring a merchant’s scrip to the merchant in exchange for a purchased item.20PayPal•PayPal.com is a free service that earns a profit on the float, which is money that is deposited in PayPal account.•PayPal is very popular with eBay auction customers.•PayPal allows