ELC 200 Day 26
ELECTRONIC COMMERCE
From Vision to Fulfillment
Third Edition
Elias M. Awad
Agenda
• Assignment Averages posted
– Includes forum discussion points
– 6 A’s, 5 B’s, 2 C’s, 2 D’s and 2 F’s
• Assignment 9 Posted (optional)
– Due May 1
– May only increase your average
• Quiz 4 on May 1
– Chapters 12 16
– 20 M/C and 4 short essay
– 70 Mins
– Extra Credit on last quiz
• First example of paper money (world)
• First example of paper money in USA
• First Digital Cash Company and its founder
• ECommerce Initiative Frameworks
– Guidelines
– Due MAY 7 @ 10 AM
• discussion on “Getting the money”
End of days? (subject to change)
• April 28 • May 7 @ 10 AM
– Chap 15 getting the – 9 days away!
money – eCommerce
– Optional Assignment 9 frameworks due
• Due May 1 – Student presentations
• May 1 • 5 Mins!
– Quiz 4 – Upload papers and
– Chapters 12 16 power points in
– 20 M/C and 4 short essay Blackboard prior to 10
AM
Getting the Money
ELECTRONIC COMMERCE
From Vision to Fulfillment
Third Edition
Elias M. Awad
The focus of this chapter is on
several learning objectives
• Real-world and electronic cash and their unique
features and uses
• The key requirements for Internet-based
payments
• The many ways people pay to purchase goods
and services on the Internet
• Business-to-business methods of payment
• Paying for goods and services via the mobile
phone
• Issues and implications behind electronic money
transactions and payments
BRIEF HISTORY OF MONEY
• Barter
• Medium of Exchange
– Tokens
– Notational Money
– Credit System
Real-World Cash
• Money
– Medium of exchange to simplify transactions
– Standard of value
– Store of value to facilitate the concept of saving
• Cash continues to be the most widely used form of payment
– Convenience
– Wide acceptance
– Anonymity
– No cost of use
– No audit trail
Electronic Money (E-Money)
• E-money is an electronic medium for making
payments
– Credit cards
– Smart cards
– Debit cards
– Electronic funds transfer
• Identified e-money (digital cash) is a notational
money system that generates an audit trail and
can be traced
• Anonymous e-money is a notational money
system that cannot be traced
• Types of e-money
– Identified and online (+I+L)
– Identified and off-line (+I-L)
– Anonymous and online (-I+L)
– Anonymous and off-line (-I-L)
Properties Of Money
• Online/offline represents risk
– Online is on the spot validated transaction
– An offline transactions is validated later
• Identified and Online (+I+L)
– Credit cards and debit cards
• Identified and Offline (+I-L)
– Checks, Money orders
• Anonymous and Online (-I+L)
– Cash payments
• Anonymous and Offline (-I-L)
– Electronic cash (but not real cash)
ACID TEST
• Atomicity
– All or nothing
• Consistency
– All agree
• Isolation
– Doesn’t effect other transactions
• Durability
– Can go back to previous state (i.e. reversible)
ICES TEST
• Interoperability
– Ability to move between system
• Conservation
– Temporal consistency and durability
• Economy
– Cost of use
• Scalability
– Multiple users
US Cash
• Largest US bill is $100
• $1,000,000 weighs 20 pounds and is 643 cubic
inches (8”X6”X13”)
• One ton of $100 dollars bill is one billion dollars
• The US Federal Deficit is $10,691,863,753,491.41
– http://www.brillig.com/debt_clock/
– This is equal to 21 Million pounds of $100 dollar
bills
– It would require 2675 tractor trailers to hold all
the cash it would require to pay off the federal
debt (35 miles of trucks parked bumper to
bumper!)
TRANSACTION
PROPERTIES
Token
Atomicity
Consistency
Isolation
Durability
Interoperability
Conservation
Economy
Scalability
Cash Y Y Y Y Y Y N Y Y
Check N Y Y N Y N Y N Y
Credit Card N N Y N Y N - N Y
Postal ? ? ? ? ? ? ? ? ?
Money Order
Requirements for Internet-based
Payments
• Electronic payments are financial transactions
made without the use of paper documents such
as cash or checks
• Internet-based Payment Systems Models
– Electronic currency is the network equivalent of cash
– Credit and debit cards are the electronic equivalent of
checks
• Properties important to an electronic payment
system:
– Acceptability
– Ease of integration
– Customer base
– Ease of use and ease of access
Electronic Transaction Systems
• CyberCash
– http://www.cybercash.com/
– Bought by Verisign, then by PayPal
• Netbill
– http://www.netbill.com/
– No longer active
• First Virtual
– No longer in internet payment systems
• Paypal
– www.paypal.com
Active payment systems (2008)
• http://www.paysimple.com/
• http://www.mypaynet.com
• http://checkout.google.com/sell?promo=sha2
• http://www.authorize.net/
• http://www.worldpay.com/
• https://www.paypal.com/
• http://www.westernunion.com
• https://www.ikobo.com/
• https://www.xoom.com/
How PayPal Works
How Would You Like to Pay?
• Types of electronic payment media
– Trusted third-party type
– Notational fund transfer-related type
– Digital cash or electronic money
Paying with Credit Cards
• A merchant must accept credit cards
• You must first open a merchant account with your
bank (or use a third party service provider at
aditional cost)
• Charges the merchant pays for online
transactions are equivalent to the charges for
phoning in the transaction
• The Web merchant needs some form of secure
and encrypted line, usually (SSL)
• The merchant needs a shopping cart program that
allows users to collect their purchases
Secure Internet Credit Card Payment
Classical Flow of a SET Transaction
Debit Cards
• Look exactly like credits cards, except they
directly tap your checking account every time you
make a purchase or a withdrawal
• Using a debit card frees you from having to carry
cash or a checkbook
• Debit cards are more readily accepted by
merchants than are checks
• It is generally easier to get a debit card than a
credit card
• Use of PIN creates identified & online transaction
– Hard to dispute!
Debit Cards (Cont’d)
• Returned debit card purchases are treated just
like returns for items purchased by cash or check
• The debit card is a quick pay now process
• Using a debit card may mean less protection for
items that are never delivered, for defective items,
or for items that were mis-represented
• Cardholders might overspend their limit before
anyone finds out
Smart Cards
• Uses for Smart Cards
– Provides users with the ability to make a purchase
– Holds cash, ID information, and a key to a house or
an office
– Three categories of applications
• Authenticate an individual’s claim of personal
identification
• Authorization for things like drug prescription
fulfillment and voting purposes
• Transaction processing
– Provides encryption and decryption of
messages to ensure security, integrity, and
confidentiality
– Acts as a carrier of value
Smart Card Applications
• Government
• Identification
• Health care
• Loyalty
• Telecommunications
• Transportation
• Financial
DigiCash, E-Cash and E-Wallet
• Digital cash leaves no audit trail
• From a regulatory point of view, digital cash is not
any different from any other kind of electronic
financial payment medium
• PayPal.com combines e-mail and the credit card
network to send real cash
• E-wallet is an electronic payment system that
operates like a carrier of e-cash and information in
the same way a real-world wallet functions
• Amazon.com’s 1-Click system,
http://www.Amazon.com
Electronic Funds Transfer and Automated
Clearinghouse
• Electronic fund transfer (EFT) is a computer-
based system that facilitates the transfer of
money or the processing of financial transactions
between two financial institutions
• Automated Clearinghouse (ACH) is where bank
transactions, involving more than one institution,
are routed to debit and credit the correct accounts
ACH - Generic Life Cycle of Check
Clearance
Check Numbers
http://en.wikipedia.org/wiki/Demand_draft
http://www.qchex.com/
Mobile-specific
Transaction Architecture
General Guide to E-Payment
• Use a secure Web browser
• Read the Web site’s privacy policy carefully
• Determine the merchant’s refund policies in
advance of the final purchase
• Investigate the trustworthiness of the merchant
before you initiate a purchase
• Keep a record of all online transactions and check
e-mail and other contacts regularly
• Review your credit card statements line-by-line to
ensure authenticity
Issues Regarding Electronic Payment
Methods and Methodologies
• Consumer needs
• Corporate processes
• Corporate strategy
• Regulation of competition
• Economic and social processes