trip report from the eighth World Wide Web conference
in toronto, canada
tutorial 5: electronic payment systems
author: clifford neuman, university of southern california
(USC), information sciences institute (ISI)
number of attendees: approx. 40
an electronic payment system is needed for compensation for
information, goods and services provided through the Internet - such as access
to copyrighted materials, database searches or consumption of system resources
- or as a convenient form of payment for external goods and services - such as
merchandise and services provided outside the Internet. it helps to automate
sales activities, extends the potential number of customers and may reduce the
amount of paperwork.
- security: payment systems are very likely to become a
target for criminal attacks.
- flexibility: different models for different situations
(anonymity, accountability, risk).
- computational efficiency: support for micropayment;
per-transaction cost must be small enough so that they are insignificant.
- secure (or non-secure) presentation: the customer provides
credit card information over a secure (or even clear) transportation means.
- customer registration: the customer gets a password or
digital signature based on a credit card (hides the credit card information
from the merchant, but still clears through the credit card).
- credit-debit instruments: similar to customer registration
but only one bill per month either through credit card or debit check.
- electronic currency: this method has potential for
anonymity but requires tamper resistant hardware.
- server scrip: the customer gets a kind of coupons from an
agent that can be spend only with one particular merchant. this reduces the
risk of double spending and allows off-line transactions.
- direct transfer: the customer initiates the transfer of
funds to the account of the merchant. this method provides no anonymity.
- collection agent: the merchant refers the customer to a
third party who collects payment using one of the methods mentioned above.
of all models, (non-)secure presentation is the only model that
has a large customer base today. all other methods require a special hardware
and/or software that most potential customers don't have.
systems available today:
- secure socket layer (SSL): client submits credit card
information using encryption based on public keys.
customer registers credit card with CyberCash and selects a signature key.
requires special software on the client, but hides credit card information from
- secure electronic transaction
(SET): the customer obtains a signature key from the card issuer.
this method requires a special software running on the client to encrypt and
sign credit card information.
- Open Market:
provides multi-mechanism collection services for web browsers.
- Mondex: provides smart-card based electronic currency.
- electronic check: provides a PC card-based credit-debit
payment instrument that can be sent across the Internet, but clears through the
existing banking network.
NetCheque: implements an on-line "checking-account"
against which payments are authorized.
- USC/ISI's NetCash: users purchase currency from the
currency server using NetCheque. with multiple currency servers, the NetCheque
system is used to clear cross-server payments.
- CMU's NetBill:
provides a payment instrument analogous to a credit card slip authenticated by
kerberos. goods are delivered to the customer encrypted, NetBill sends the key
to decrypt the good.
- first virtual: customer established an account at First
Virtual and sent account ID to merchant.
- DigiCash: required
special software on the client to implement an electronic wallet to store and
integration with banking systems:
needs to be efficient. customers can either deposit funds in
advance or pay periodic statements (electronic credit card).
risks and security:
from the customer's perspective:
- stolen payment credentials and passwords
- dishonest merchants or financial service providers
- disputes over quality of services or goods
from merchant's perspective:
- forged or copied payment instruments
- insufficient funds in customers account, especially with off-line payment
- dishonest or slow financial service providers
from the financial service provider's perspective:
- stolen customer or service credentials
- forged or copied payment instruments
- customers not paying (applies only to credit models)
the risk may be shifted in one direction or the other by using a
credit or debit model and by special agreements.
technical solutions to improve security:
- protect payment credentials with token or smart cards
- use on-line authorization to detect double spending, check for sufficient
funds and anomal spending patterns
roles of and rewards for the financial service providers (FSPs):
- they are trusted to hold our money
- they facilitate clearing of the payments
- they insure against fraudulent transactions (risk management)
- they can charge account and transaction fees
- they may benefit from currency exchange
multiple FSPs should not compete on the basis of incompatible
payment systems. to keep payment services simple, it shall be possible to clear
payments between different systems.
this was a good overview of what kind of payment services are
available today and what they do. it has become obvious that non of the methods
described above had taken off so far except of using credit cards, sometimes
over a secure connection using SSL. it will probably take at least two more
years until we will see any of these systems becoming significant.
the tutorial is available
to main document
this trip report was written on a Vadem Clio
C-1000 running Windows CE with Pocket Word. It was then transferred to a DELL
Latitude notebook and modified as needed. this document is supposed to be HTML
this page conforms with the WAG
tutorial_5.html / 17-may-1999 (ra) /