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Learn more about Interac e-Money services; a simple, convenient, and secure way to send and receive money directly from one bank account to another. This can help you to develop a series of white label financial services, all benefiting from our clear legal framework. See mre at https://www.skylinecollege.com/
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E-Business - 5 E-Money Getting the online money
E-Money • Is an electronic medium of making money. • E-money may be of : • Identified: • Contain information that makes it possible to identify the person who withdrew the money from the bank • Process generate an audit trail • Anonymous: • Works like paper money and leaves on trail • Online • Each transaction is verified and approved by the issuing institution before payment is made • Off-line • Require no validation
For any kind of online money transaction these two test should be considered • The ACID Test • THE ICES Test
ACID Test • Atomicity: • A transaction must occur completely or not at al • Consistency: • All parties involved in the transaction must agree to the exchange • Isolation: • Each transaction must be independent of any other and be treated as a stand alone episode • Durability: • It must always be possible to recover the last consistent state or reverse the facts of the exchange
ICES Test • Interoperability • Ability to move back and for the between different system • Conservation • How easy money is to store and access • Economy • Processing transaction should be inexpensive and affordable • Scalability • Ability of a system to handle multiple system user at the same time
The SET (Secure Electronic Transaction) Protocol • Authenticates cardholder and merchant identity through use of digital certificates • An open standard developed by MasterCard and Visa • Transaction process similar to standard online credit card transaction, with more identity verification • Thus far, has not caught on much, due to costs involved in integrating SET into existing systems, and lack of interest among consumers
Four Important Goal • Confidentiality of payment as it is processed electronically • Integrity of transmitting data: data will not be corrupted during transmission or processing • Authentication • Interoperability across network providers
Credit Card • Represents an account that extends credit to consumers, permitting consumers to purchase items while deferring payment, and allows consumers to make payments to multiple vendors at one time • Issuing banks – Issue cards and process transactions • Processing centers (clearinghouses) – Handle verification of accounts and balances
How an Online Credit Card Transaction Works • Processed in much the same way that in-store purchases are • Major difference is that online merchants do not see or take impression of card, and no signature is available • Participants include consumer, merchant, clearinghouse, merchant bank (acquiring bank) and consumer’s card issuing bank
How an Online Credit Transaction Works Secure Sockets Layer, a protocol developed by Netscape for transmitting private documents via the Internet.
Limitations of Online Credit Card Payment Systems • Security – neither merchant nor consumer can be fully authenticated • Cost – charges merchant pays for online transactions. The average charges for a transactions is from 2 – 5% • Social equity – many people do not have access to credit cards
Digital Payment Systems • Digital Credit Card Payment Systems • Digital Check Payment Systems • Digital Cash • E-Wallets
Digital Credit Card • Extend the functionality of existing credit cards for use as online shopping payment tools • Focus specifically on making use of credit cards safer and more convenient for online merchants and consumers • Example: eCharge
Digital Checks On the Internet a check can be replaced with a digitally signed message: • payer uses a secure processor in the form of a PC card, to generate a digitally payment instruction or check; • check is transmitted to the merchant, where it is endorsed digitally; • check is sent to the merchant’s bank where it is cleared using an ACH - Automated Clearing House
How Digital Checking Works: eCheck Merchant’s bank send E-check for clearance
Digital Cash • One of the first forms of alternative payment systems • Not really “cash” – rather, are forms of value storage and value exchange that have limited convertibility into other forms of value, and require intermediaries to convert • Many of early examples have disappear; concepts survive as part of P2P payment systems
Advantages and Disadvantages of Electronic Cash • Advantages of electronic cash • Transactions are more efficient • Transfer on the Internet costs less than processing credit card transactions • Disadvantages of electronic cash • Use provides no audit trail • Problem of money laundering arises • Susceptible to forgery
Digital Wallets • Hold credit card numbers, electronic cash, owner identification and contact information • Give consumers the benefit of entering their information just once • Make shopping more efficient • Provide functionality of traditional wallet • Most important functions: • Authenticate consumer through use of digital certificates or other encryption methods • Store and transfer value • Secure payment process from consumer to merchant
Two major categories: • Server-side electronic wallet • Stores customer’s information on a remote server belonging to a particular merchant or wallet publisher • MSN Wallet • Client-side electronic wallet • Stores consumer’s information on his or her own computer • Gator.com, MasterCard Wallet
Online Stored Value Systems • Permit consumers to make instant, online payments to merchants and other individuals based on value stored in an online account • Rely on value stored in a consumer’s bank, checking or credit card account
Smart Cards as Stored Value Systems • Stored-value cards • Can hold private user data, such as financial facts • Can store about 100 times more information than a magnetic strip plastic card • Safer than conventional credit cards • See eg. American Express Blue, Mondex, Visa...
TYPES OF SMART CARD • contact smart cards: to read information on smart cards and update information, contact smart cards need to be placed in a smart card reader • contactless smart cards: have both a coiled antenna and a computer chip inside, enabling the cards to transmit information
Mondex • Smart card that holds and dispenses electronic cash • Introduced in 1990 and now part of MasterCard International • Can accept electronic cash directly from a user’s bank account • Card carries real cash in electronic form
Steps in using a Mondex card to transfer electronic cash from buyer to seller • Card user inserts Mondex card into reader • Merchant’s terminal requests payment • Customer’s card checks merchant’s digital signature • Merchant’s terminal checks customer’s just-sent digital signature for authenticity • Once electronic cash is deducted from the cardholder’s card. Same amount is transferred into the merchant’s electronic cash account