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The invading future of online electronic payment
THE concept of electronic commerce relates to selling goods or services over the internet. An integral part of e-commerce is to make electronic payments over the internet. Payment represents all non-cash financial transactions, which take place between two or more parties. The exchange of value is facilitated through one bank — where the two parties share the same banker, however it is more common for two parties exchanging value to hold accounts with alternative banks, in which case both banks become parties to the payment.
To a consumer, an electronic payment system is a convenient way of making a purchase or paying for a service without holding cash or without having to go through the process of completing a cheque and producing some form of acceptable identification. This parting of wealth can be achieved with a plastic card.
Banking network
Given below are four elements of online commerce and their relationship to the banking network
1. The consumer and the associated browser to interact with the consumer
2. The merchant system residing on an on-line Web server with a connection to web browsers over the Internet
3. An on-line shopping mall that may help direct5 consumers to the merchant server
4. The background banking network to support on-line payments from consumer to merchants
Online commerce
1. Consumer and browser: A consumer interacts with the on-line commerce system through a Web browser. Typically, the consumer first accesses a shopping mall sand then uses the hyperlinks from the mall to access the merchant’s home page.
2. Shopping mall: A shopping mall is where most consumers first visit for a shopping spree. The connections between the shopping mall and a merchant’s storefronts are shown above. There will be several shopping malls and it may pay to enlist with one or more well-known malls. Typically, a merchant should be listed with several on-line shopping malls.
3. Merchant system: A merchant system consists of a home page and related software to manage the business.
4. Banking network: The banking network consists of several components. First, there is a bank that processes the on-line financial transactions for the given merchant. This bank maintains the accounts for the merchant, authorizes and processes the payments. The merchant bank also maintains a link with the consumer’s bank for verifying the transactions. The link between the merchant and its bank is often real-time so as to allow an online authorization of consumer payments. The consumer’s bank typically has an off-line link to the consumer, for example, via postal mail or email.
In short, for a complete transaction, the following steps need to be executed in a complete transaction as shown above.
1. The consumer accesses the shopping mall and selects a shop for purchasing certain items.
2. The shopping mall server accesses the merchant system for the selected shop.
3. The merchant system presents the store’s home page to the consumer. It also includes information on the various goods available from this store.
4. The consumer selects the desired goods, interacts with the merchant’s system and makes the payments using a plastic card.]
5. The merchant system accesses its bank for authorization of the consumer payment. Assume that the payment is authorized.
6. The merchant system informs the consumer that the payment is accepted and the transaction is complete. At a later time, the merchant’s bank obtains payment from the consumer’s bank.
7. The consumer bank informs the consumer of the money transfer through mail.
E-cash
Electronic cash, e-cash, digital money or digital cash provides the means to transfer money between parties over a network such as the internet. Electronic cash transactions take place in three distinct and independent phases shown below. Online shopping malls are not shown for simplicity.
I. Obtaining e-cash: This phase is depicted in steps 1 to 3.
1. The consumer requests his/her bank to transfer money to the e-mint to obtain e-cash.
2. The consumer bank transfers money from the consumer’s account to the e-mint.
3. The e-mint send e-cash to the consumer. The consumer saves the e-cash on a hard drive or a smart card.
II. Purchasing with electronic cash: This phase is shown in steps 4 to 5.
4. The consumer selects the goods and transfers the e-cash to the merchant.
5. The merchant provides the goods to the consumer.
E-cash system
III: Redeeming cash by the merchant: This phase is shown in
6. The merchant transfers the e-cash to the e-mint. Alternatively, the merchant may send the e-cash to his bank and the bank in turn redeems the money from the e-mint.
7. The e-mint transfers money to the merchant’s bank for crediting the merchant’s account.
A similar scheme can be devised to transfer money between two individuals or institutions or businesses.
Security schemes
The electronic cash system must be capable of generating electronic cash including unique identifiers such as serial numbers on currency notes. A customer buys the e-cash from a bank by drawing money from his/her chequeing account. The customer’s computer also generates and sends random binary number(s) of 64-bits or higher. The bank removes the encryption envelope from the customer, cheques and records the number(s) and digitally signs and sends it to the customer. The message includes the customer’s binary numbers and each number represents a certain amount of cash. The customer can send this e-cash to any vendor in order to purchase goods. The vendor can then go to the bank, where the serial number of the customer’s e-cash is checked. If the serial numbers are verified, the vendor receives the money.
1. Authenticity: To e-cash is digitally signed by the private key of the e-mint. The receiver uses the e-mint’s public key to decrypt the e-cash. in this way the receiver is assured that the electronic cash was signed by the owner of the private key which should be an authorized e-mint.
2. Transporting electronic cash: For transportation, e-cash must be secured and reliably transported. E-cash can be secured by encrypting it. The integrity of the e-cash can be preserved by computing and attaching an encrypted message digest. In this way, it can be ensured that the e-cash was not tampered during transmission.
To transport the data reliably, the end-to-end protocols need to allow for recovery from loss of packets, for example, cash that has been lost to failure of a node in the Internet. Then the end nodes should be capable of retransmitting the packet and should avoid duplicate receipts of the packet and dual existence of e-cash on the Internet. TCP/IP protocols address some of the reliability issues.
Storage of e-cash
Finally another security concern with e-cash relates to securing the electronic cash file. When an e-cash file is lost, you may potentially lose the money. The users and the banks must have a secure way of storing the e-cash so that it cannot be stolen. Given that all the transactions are conducted on-line, it is conceivable to track and decline payments when stolen cash is being used. Another approach to address this concern s for users to carry smart cards that carry electronic cash.
Smart cards are credit-card sized cards that can be carried in a wallet. These cards have a processor and memory on the cards. In this way, digital cash and private keys can be stored on the cards and can be carried around by the customer. These are also referred to as PCMCIA cards.
The writer regularly contributes IT-based articles to Sciencedotcom
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