EU-Pay: A Multi-Channel EU Wide Payment System

Transcription

1 EU-Pay: A Multi-Channel EU Wide Payment System Shaun TOPHAM 1, Paolo BOSCOLO 2 1 Sheffield City Council, Town Hall, Sheffield, S1 1JU, UK Tel: , Fax: , Shauntopham@ukonline.co.uk 2 Comune di Prato, Piazza del Comune 2, Prato,59100, Italy Tel: , Fax: , , p.boscolo@comune.prato.it Abstract: EU-Pay is a project aiming to bring together and manage many kinds of payments, coming from a wide variety of different channels. In addition to showing the advantages of such a system to the recipients of these payments, the paper also outlines the need to ensure that all citizens and not just the PC literate are involved. The paper describes the channels and technology utilised to bring a joined-up service for use by public administrations and other organisations to benefit from. Simple payment methods such as through a supermarket barcode or online terminal are accepted using a complex architecture to allow seamless accounting for these transactions. It covers some of the difficulties faced and the results achieved. This paper shows the preliminary results of the EU-Pay Project which is trying to create, at a European level, a large-scale system to manage many kinds of payments using different channels of interaction at the user side. These range from traditional face-to-face interactions in a large number of different service points to the use of advanced payment methods using, for example, credit/debit cards, on-line pages or mobile terminals. Technologies will range from the newest available to existing well established ways, such as using barcodes at a supermarket check-out in order to make payments to the Local Authority. The project partners are all experienced practitioners of egovernment and recognised as producing Best Practice by the EU. They have a long history of co-operation. Many European public administrations are trying to experiment with specialised payment services supporting their e-government plans. The availability of the EU-Pay system can help administrations to reduce their investments in ancillary services (like those related to payments) and to encourage service management automation and on-line provisioning. It will furthermore provide European citizens with a useful instrument supporting their need for mobility, as it will be possible, by using the proposed system, to pay a bill with an entity located in another country, from another temporary location located in another EU member state. Electronic payments have become a very developed sector in the past few years. A number of emerging technologies have been adopted in order to implement new payment systems to be offered to the market. The main focus of the services that have been already proposed remain however based on the usage of on-line instruments to support financial transactions and the support of credit/debit cards as electronic money. 1.1 Advantages for the citizen It is especially targeted at citizens who do not have credit cards, banking standing order mechanisms or access to the Internet. For example, it will allow citizens to pay bills from

2 public authorities when shopping at the supermarket, or when using a mobile phone. The work in Sheffield takes this aspect further. Imagine a scenario where a comfortably well-off and computer literate elderly lady can use her PC and credit card to purchase a book online to have delivered to a grandchild in Australia at a low cost. Take the same scenario with a more disadvantaged lady, where a bus trip becomes necessary, to purchase a more expensive book with cash, and then having to post it. Mechanisms are being put in place to ensure those without bank accounts and PCs can still join in the information society. 1.2 Current Position At present, the project partners as already terminated the process of integrating some selected services to use the same EU-Pay payment infrastructure. The basic approach has thus been extended and applied to different services in different localities across the EU. What we are trying to achieve is to show how it can evolve into a Pan European service, with different services being offered in different locations to different sets of users. Many of the services are specific to one region of Europe, such as the payment of a specific local tax, but the approach is common and widely applicable to different services in different local realities. This is key. The final aim of the project is also to demonstrate the sustainability of the designed new business at EU level. Having terminated the system implementation phase the project is now in the piloting phase in which the reaction of identified and involved users is collected in order to be analysed ate the end of the project. A number of different payment channels and candidate service are then already available at the partner sites. 1. Objectives The main objective of this paper is to show the innovation stemming from the work undertaken in the EU-Pay project, the initial purpose of which is to provide a simple, multichannel payment collection mechanism for public authorities. But, there are many ongoing initiatives and our intention is to join-up these initiatives and make the outcome more significant than the sum of the parts. What is paramount in this work is to keep in mind that the outcome is aimed at benefitting the citizen with an objective of furthering Access for All and reducing the digital divide. [1] Whilst there are a lot of similar payment mechanisms already active on the web, the innovative objectives for EU-Pay are based on the following key points: Support of a multi-channel payment system in which the management of different payment channels are integrated in the same IT infrastructure. Interaction, when appropriate, with the existing back-office IT resources of a payment beneficiary, in order to make them updated in real time. Introduction of an innovative billing philosophy for the payment network, that can allow many different schemes for sharing the service costs among the different stakeholders. Implementation of a centralised system for payments transfer, aiming to reduce, as much as possible, the banking costs of transactions. Co-operation with third party networks of points of presence for face-to-face payment, ranging from single commercial shops to chains of supermarkets. Implementation of a complex system architecture, supporting the payment network, allowing multinational cooperation among different entities, facilitating access whilst reducing costs.

3 2. Methodology It can be seen that all the necessary basic modules to set-up the channels of the integrated payment system to be validated are available and running either as prototypes or for other purposes. The necessary adaptation work which had to be carried out can be summarised as follows: Lightly modifying the core part of the payment in the commercial shops systems, in order to transform its actual payment repository into a general purpose payment repository. This repository is now accessible, by the other payment modules, via web services that are mostly already existing. Some new specialised web services had to be implemented or adapted. Some new web pages had to be developed, with very light programming efforts and using all the already available basic tools in the on-line payment system to access the centralised payment repository. Similarly the existing kiosk pages had to be integrated with the previously mentioned repository. The call centre supporting software and systems had to be configured in order to provide the call centre operators with the ability to help citizens to perform their payments via a phone call. The centralised payment repository will easily support a unified identification system for all the payments contained inside. The payment identification code will be used as a key element to pay via the GSM phone system and via supermarket checkouts. Some minor and ordinary changes in the supermarket checkouts will be made in order to accept the bar code data used as a unique payment identifier, similarly to the other item codes. The information concerning the performed payments will be collected on a regular basis in the supermarket IT central database and sent to the centralised service repository for registration. No new complicated hardware and software modules have been developed. The only necessary actions have been: proper configuration of existing modules and instruments, new versions of web pages in existing services; minor structural modifications of existing services and systems; localisation of existing modules, translating into local languages content and user interfaces; adaptation of the existing modules to the different regulations in force in the different involved countries. 3. Technology Description The following chart illustrates the general scenario of the EU-Pay payment circuit. The EU-Pay central IT infrastructure will manage all the necessary data concerning payments to be performed as specified by the different beneficiaries (that is the providers of the services). Each payment can be made through any channel among those supported by the system no matter where the payment system counter (real or virtual) is located. Thanks to the flexible architecture, the number and typology of channels can vary and increase over time. The payment channels supported by the system prototype are those referred to above. The communication platform over which the whole service is based is the Internet. All communications between the different parts of the system will take place through secure Internet connections.

4 A central payment engine provides the on-line services necessary to manage all the payments Where, in the service usage, the adoption of stronger technologies for user authentication is necessary, a PKI infrastructure is used to release all the necessary digital certificates. The services will be offered over the Internet, and the base technology is a set of dedicated web servers protected by a firewall and the use of secure transfer protocols. The identity of the service users, when necessary, will be verified via strong authentication mechanisms. The technologies used to implement the front ends of each implemented channel will depend on the specific needs of those channels. The chart on the right illustrate the organisation of the components of the mentioned EU-Pay central architecture. All the reported modules are strongly based on the usage of Open Sourced instruments. 4. Developments The system is being developed to support different methodologies for payment lifecycle management: Unplanned off-line payments Planned off-line payments Planned on-line payments The term unplanned, used above, refers to the fact that the end user can perform a payment, for which he knows all the details, in favour of an entity that is supported by the system, without the prior necessity of data preloading by the interested entity.

5 The term planned, used above, indicates when the end user can perform a payment in favour of an entity supported by the system, only after the necessary payment details are preloaded into the system. The two kinds of payment management, described above, offer the possibility to support, through the system, a large variety of payments. While the first approach is that most similar to that adopted in current payment systems, the second one offers the possibility to provide strong support to the payer in order to avoid errors and to reduce the need for laborious data input. The term on-line/off-line refers to the fact that the performed payment will be immediately notified to the payment beneficiary via a direct (on-line) interaction between the centralised IT system of EU-Pay and the back-office systems of the entity receiving the payment Issues Faced Several problematic areas have to be faced. It is clear that for each payment performed by the proposed service, a legal proof of payment is needed. To solve this problem, a specific technological solution has been set up in the running prototypes of the service. In particular, when a payment is performed, a receipt is printed or a text message is produced acting as receipt. Both the message and the paper receipt contain an anti-forging code that is calculated using the mathematical principles of a PKI, and using specific secret keys that are maintained by the system components. This code is a one-way code generated using the key payments details. Using the payment details and the anti forging code, verification of the correctness of the receipt can be performed using a specific on-line service. If necessary any subject who wants to verify a receipt released by one of the service channels can do it directly on-line. However, the necessity of receipt verification is structurally mitigated by the nature of the proposed service. In fact, the payment event is notified to the payment beneficiary IT infrastructure in very short time (for some channels in real time). This notification often will avoid to verify the traditional receipt because the status of the payment is directly reported by the back-office SW procedure payment beneficiary. For some kind of payments the system must face the problem of allowing instalment payments. When the problem is directly managed by the back-office IT infrastructure of the payment beneficiary, the interface to the payment circuit will allow to notify all the details of the possible instalments. At the selected payment channel, the citizen will specify which portion of the debt he wants to pay according with the rules accepted by the beneficiary. Another issue is that of scalability. The structural architecture of the IT infrastructure necessary to implement the service is simple in principle. Nevertheless, the potential market offers a very high number of payments that could be approached by the service. So, it is crucial that the architecture of the system ensure a good scalability and modularity in order to allow tuning of the supported throughput according to the stack of payments stored in the system and to the level of usage by the final users. Further consideration had to be given to the legal framework in which we are operating, in particular to issues arising from the European Directives 2000/12/EC[1] and 2000/46/EC[2] in the area of financial services and electronic payment mechanisms. The first directive controls the banking sector, while the second controls electronic payments with particular reference to the instruments of payment, such as credit and debit cards or similar. To understand whether the EU-Pay project can be classified in one of the two categories, it is necessary to clarify the payment mechanism which is the basis of the proposed service: The citizen does not deposit money in the proposed EU-Pay payment mechanism, which only makes a virtual transfer equivalent to the amount that corresponds to thirdparty service fees (the so-called Beneficiaries mentioned in the proposal)

6 The EU-pay service will not provide any credit or debit cards or electronic wallet or similar. The citizen who uses the EU-pay service will however be able to utilise any existing cards provided by other agencies and any existing service agreements will be unchanged. In other words, the EU-Pay circuit, the users and beneficiaries are simple users of existing electronic payment mechanisms. It is clear from the above that the EU-Pay service is not a Credit Institution. It could however possibly be classified as a Financial Institution that carries out payment services. In the Directive, activities related to those of Credit Institutions require explicit authorisations from specific entities in the various member states, while these are not foreseen, at a European level, for the other category of Financial Institution. Similarly, in terms of the Electronic Money services Directive, EU-Pay falls under neither of the two situations of either being an Electronic Money Institution or of issuing Electronic Money Therefore the proposed system is simply a service for payment beneficiaries, to allow collection of dues but this does not mean that at the level of single member states there may not be particular limitations on the kind of services proposed by EU-Pay and that barriers may arise when considering the Trans-European Dimension. A new directive [4], near to be approved by EU on payments services, will definitively assign a legal profile to the EU- Pay offered service. 5. Results The result seen from the eyes of the citizen is that the scenario they are now faced with is better. The citizen asks for the service and the service provider is able to calculate the cost due. The service provider (e.g. a Public Administration) provides to the EU-Pay system all the details of the payment that is due. These details will be maintained in the central EU- Pay database and will be available for any channel supported by the system, no matter where it is located. At this time, for each payment, a unique identification code is generated in order to allow easy identification of the payment at different payment channels. This unique ID will be reported on each document (bill or reminder) that will be sent to the user that requested the service. This ID will be reported on the mentioned document also using a bar code. This will allow the implementation of payment channels like supermarket checkouts that require automated and quick payment identification. The citizen selects the preferred channel to perform the payment. This could be for example paying what is owed while doing the shopping at the supermarket. The payment is regulated using the payment instrument supported by the channel (Banknotes, credit/debit card, etc.). The amount is collected at the specific selected EU-Pay point of presence. The identification of the payment to be performed will depend on the selected channel. At supermarket checkouts, the bar code of payment ID will be automatically read. In a shop, the implemented interface will allow the shop owner, using some key data provided by the citizen, to search the desired payment in the system. In all the other simpler channels, the communication of the numeric payment ID will clearly identify the payment to be performed. Interaction at the selected channel enables information about the payment is updated in the centralised database of EU-Pay. Information about the payment is transferred to the final beneficiary of the payment. The back-office database of the beneficiary is immediately updated. The total amount due by each EU-Pay point of presence to each beneficiary of the service will be transferred on a regular base. Thus it can be seen that the channels supported by EU-Pay are many and varied and cover a large range of possibilities and the result for the citizen is greater flexibility, simpler payment operations and a saving in time. In short, it is more convenient.

7 6. Business Benefits For EU-Pay, the direct users of the service will be Public and Private entities that will use EU-Pay to collect payments due to them. The service is especially targeted at local authorities who currently oblige citizens to come to public offices to pay dues such as local taxes, school fees and parking permissions. Using the existing back-office software, a civil servant issues a bill to a citizen for a particular service. This can now be collected via any channel supported by the EU-Pay system. As soon as the citizen has made the payment, independently of the selected channel, the civil servant can retrieve details of the payment using its back office software. If the Public Administration involved has selected the full service offered by the circuit, the payment will be immediately registered as done in its internal databases - otherwise the payment notification will be delivered to the beneficiary in batch mode. EU-Pay distributed services will be able to: Certify the identity, the liability and the quality of the involved players (B2B interactions) Guarantee the correctness and the legality of the provided e-services Guarantee the validity of the commercial transactions and conditions (e.g. payment receipts, etc.) (B2C interactions) Maintain trust and confidence among the nodes (infrastructural security). At the user interface level, the expected structure is based on a multi-channel approach. Most systems offered today, however, are based on a single technology and are not integrated with the back office IT infrastructures of the payment beneficiaries. Another key point to be taken into account is that the existing services are strongly based on emerging ICT technology at the user interface and this can lead to exclusion from accessing the services for those people that are not aware about new technologies. Additionally, there are often negative factors associated with the usage of electronic money instruments. Among these collateral negative effects we can mention the high cost for single transactions, Existence of ceilings per period, Security problems and the Usage of PIN and other difficult protection instruments. The EU-Pay service is particularly innovative in order to solve the mentioned problems. In fact it will allow a strong integration with the egovernment services to which it is linked, a key consideration. Moreover, the fund transfer mechanism used to transfer the dues to the beneficiaries are not necessarily based on the per-payment basis, but use a per-period philosophy in order to reduce transaction costs. Finally the channels supported by the system also include traditional, user-friendly and easy-to-use channels at the user site. Benefits of EU-Pay Service Support of a multi-channel payment system in which the management of different payment channels are integrated in the same IT infrastructure. Interaction with the existing back-office IT resources of the payment beneficiary, in order to update payment status in real time. Introduction of an innovative billing philosophy for the payment network that can allow many different schemes for sharing the service costs among the different actors of the established network. Implementation of a centralised system for payment transfers which aims to reduce, as much as possible, the banking costs of the transactions. Cooperation with third party networks of points of presence ranging from single commercial shops to large commercial networks (e.g. supermarkets). Implementation of a flexible system architecture, supporting the payment network, allowing

8 multinational cooperation among different entities. This should facilitate access to the payment network of small service providers and reduce the costs of service usage for those organizations that operate in an associated way or that use a shared IT infrastructure 7. Conclusions Much has been achieved in EU Pay. In particular, the steps taken to ensure that all citizens and not just those with bank accounts can be helped by technology. The work has also illustrated the now widespread adoption of a joined-up approach to egovernment. Lessons have been learned in particular, on how difficult it is to assume that good practice in one location can be seamlessly transferred to another. There has been a success in bringing together a range of simple payment channels into a seamless infrastructure which can be shared with others, lowering the costs involved. But the evolving digital ecosystems now need to be looked at in much broader terms as applications become less specific and more contributory to the environment in which they will be subsumed. And as with all local administration based application areas, the cost benefit analysis is not the answer to the more complex business cases required for such an initiative. The wider public values are key and are issues not normally associated with the banking and financial sector. Similarly, the legislative situation, regarding such financial services as offered by EU-Pay, has been clarified. Where EU-Pay and similar services sit with the relevant Directives has been determined. [3][4] An issue still remaining to be tackled, concerning providing the access to those the wrong side of the digital divide is the unsuitability of existing interfaces and additional work will need doing to ensure that elderly people for example, will have interfaces which they are happy with when dealing with their finances online, rather than interfaces of which professionals are proud. The economics of moving to a less cash orientated society are compelling, but not at the expense of leaving out those without the means or ability to join in. Here it is clearly widening the real economic divide as well as the digital divide if citizens are excluded from utilising more economic channels for carrying out transactions. But the successful marriage of utilising more traditional payment mechanisms and complex back-office processes is a step forward in closing the digital divide and will lead to increased take-up of the newer mechanisms as they become more familiar and normal to the users. References [1] i2010 A European Information Society for growth and employment. Communication from the Commission to the Council, the European Parliament, The European Economic and Social Committee and the Committee of the Regions. COM(2005) 229 {SEC(2005) 717} [2] Directive 2000/12/EC of the European Parliament and the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions [3] Directive 2000/46/EC of the European Parliament and the Council of 18 September 2000 regarding the taking up, pursuit of and prudential supervision of the business of electronic money [4] European Parliament legislative resolution of 24 April 2007 on the proposal for a directive of the European Parliament and of the Council on payment services in the internal market and amending Directives 97/7/EC, 2000/12/EC and 2002/65/EC (COM(2005)0603 C6-0411/ /0245(COD)) [5] DIRECTORATE FOR SCIENCE, TECHNOLOGY AND INDUSTRY - COMMITTEE FOR INFORMATION, COMPUTER AND COMMUNICATIONS POLICY ONLINE PAYMENT SYSTEMS FOR E-COMMERCE 18/4/ DSTI/ICCP/IE(2004)18/FINAL [6] EU-Pay project web site