Internet Usage (as of November 1, 2011)

Transcription

1 ebusiness Chapter 11 Online Payment Systems Internet Usage (as of November 1, 2011) United States Population: 312,521,655 Internet users: 245,000,000 (78.4% of population) Facebook users: 151,350,260 (61.8% of Internet users) South Korea Usage Population: 48,754,657 Internet users: 39,440,000 (81% of population) Facebook users: 3,697,020 (9.4% of Internet users) Indonesia: Largest users of Facebook in Asia Population: 245,613,043 Population: Internet users: 39,600,000 (16.1% of population) Facebook users: 38,860,460 (98.1% of Internet users) France: 3rd largest users of Facebook in Europe 22,713,240 (50% of all Internet users in France) 1

2 Ever Purchased Frequency of Purchases 2

3 Shopping Influence Items Purchased 3

4 Method of Payment Transaction Processing Occurs when shopper proceeds to virtual h k t t checkout counter Click checkout button User must submit payment information User pays for product or service Seller provides product or service 4

5 Online Payment Basics E commerce Exchange money for goods or services Important function: handling Internet payments B2B payment transactions Electronic funds transfers (EFTs) B2C payment transactions Evolving and competing for dominance Customer convenience, saves companies money Bill mailed by mail costs $1.00 to $1.50 Internet billing cost: 50 cents Online Payments Types Credit Cards Visa, Mastercard, etc Debit Cards Issued by bank Similar to credit card Withdraws money directly from bank account Electronic cash Exchange system handled by a third party entity 5

6 Credit Cards Spending limit based on user s credit history Charge purchases against credit line Options for user billing cycle payments Pay off entire credit card balance; pay minimum amount Card issuers charge unpaid balance interest Accepted worldwide, 30 day dispute period Card not present transactions Cardholder not present during transaction Requires extra security Debit Cards Removes sales amount from cardholder s bank account Transfers sales amount to seller s bank account Issued by cardholder s bank Carries major credit card issuer name 6

7 Payment Acceptance & Processing General steps in payment card transactions Merchant receives payment card information Merchant authenticates payment Merchant ensures funds are available and puts hold on credit line or funds to cover charge Settlement occurs (few days after purchase); funds travel between banks and are placed into merchant s account Payment Acceptance & Processing Open and closed loop systems Closed loop systems Card issuer pays merchant directly Does not use intermediary American Express, Discover Card Open loop systems (three or more parties) Third party (intermediary bank) processes transaction Visa, MasterCard: notissueddirectly directly to consumers Credit card associations: operated by association member banks Customer issuing banks: member banks 7

8 Payment Acceptance & Processing Electronic Cash Electronic cash (e cash, digital cash) Describesany value storage and exchange system created by private (nongovernmental) entity Does not use paper documents or coins Can serve as substitute for government issued physical currency Readily exchanged for physical cash on demand Problem No standard among all electronic cash issuers Not universally accepted 8

9 Electronic Cash Small purchases not profitable for merchants Bank kfees greater than profits Factors in favor of electronic cash Potentially significant market for electronic cash Market for Internet small purchases (below $10) Most of world s population does not have credit cards Electronic cash: solution to paying for online purchases Idea of electronic cash refuses to die Despite failures Micropayments & Small Payments Micropayments Internet tpayments for items Costing few cents to a dollar Small payments All payments of less than $10 No company has gained broad acceptance of its system despite industry observers seeing such a need No company devoted solely to offering micropayment services 9

10 Electronic Cash Unique security problems of electronic cash Possible to spend only once Not counterfeit; used in two different transactions Anonymous use Prevents sellers from collecting information Advantages of electronic cash Independent Unrelated to any network or storage device Ideally pass transparently across international borders; converted automatically to recipient country s currency Portable Freely transferable between any two parties Credit and debit cards: not portable or transferable How Electronic Cash Works Consumer opens account with electronic cash issuer Presents proof of identity Consumer withdraws electronic cash using issuer s Web site Presents proof ofidentity Digital certificate issued by certification authority Combination of credit card number and verifiable bank account 10

11 How Electronic Cash Works After consumer identity is verified: Electronic cash amount is issued Amount deducted from consumer s account Issuer may charge small processing fee Consumer stores electronic cash In electronic wallet On his or her computer On stored value card Consumer can authorize issuer to make thirdparty payments From electronic cash account Electronic Cash Double Spending Double spending Neither detected nor prevented with truly anonymous electronic cash Anonymous electronic cash Cannot be traced back to person who spent it Tracing electronic cash Attach serial number to each electronic cash transaction Cash positively associated with particular consumer Does not solve double spending problem 11

12 Electronic Cash Double Spending Single issuing bank can detect when two deposits of sameelectronic cash are about to occur of same electronic cash are about to occur Impossible to ascertain fault (consumer or merchant) Electronic cash contains serial numbers No longer anonymous One reason to acquire electronic cash Raises privacy issues The use of serial numbers to track consumers spending habits Electronic Cash Systems More successful in Europe and Japan Consumers prefer to use cash (does not work well for online transactions) Electronic cash fills important need Not successful in United States Consumers have payment cards and checking accounts PayPal handles electronic cash 12

13 Pay Pal Payment processing services to businesses, individuals Earns profit from float Money deposited, not used immediately Charges transaction fee Businesses using service to collect payments Peer to peer (P2P) payment system Free payment clearing service for individuals Payments from one type of entity to another of the same type Pay Pal Eliminates writing and mailing checks or payment cards Send money instantly and securely to anyone with an e mail address Convenient for auction bidders to pay for purchases Convenient for auction sellers Eliminates risks posed by other online payment types Transactions clear instantly Redemption PayPal check Direct deposit to checking accounts 13

14 Pay Pal Merchants and consumers first register for PayPal account No minimum amount account balance Add money by authorizing checking accounts transfer, using credit card Merchants need PayPal accounts to accept PayPal payments Payment collects payments for merchant Transfers money collected into account Good for accumulating many small transaction fees Electronic Wallet Concerns of consumers when shopping online Entering dtild detailed shipping i and payment information for each online purchase Filling out forms Solution Electronic commerce sites allows customer to store name, address, credit card information on the site Problem Consumers must enter information at each site 14

15 Electronic Wallet Electronic wallet (e wallet) Holds credit card numbers, electronic cash, owner identification, owner contact information Provides information at electronic commerce site checkout counter Benefit: consumer enters information once More efficient shopping Server side electronic wallet Stores customer s information on remote server of merchant or wallet publisher No download time or installation on user s computer Electronic Wallet Store shipping and billing information Consumer s s first and last names, street address, city, state, country, postal code Hold credit card names, numbers Offers consumer choice of credit cards at online checkout Hold electronic cash from various providers Electronic wallet used by business companies Example: MasterCard Most abandoned efforts Current major browsers include feature to remember names, addresses, other commonly requested information 15

16 Phishing Attacks Technique for committing fraud against online businesses customers Launched against all online business types Particular concern to financial institutions Customers expect high degree of personal information security Trick users into giving up personal information Two elements in phishing Collectors: collect information Cashers: use information Require different skills Phishing Attack Structure Basic structure Attacker sends e mail message Large number of recipients Account at targeted Web site E mail message tells recipient account is compromised Recipient must log on to account to correct problem E mail message includes link Appears to be Web site login page Actually disguised perpetrator s Web site Recipient enters login name, password Perpetrator captures and uses information to access account: Makes purchases, withdraws funds, etc. 16

17 Phishing Example Spear Phishing Phishing expedition that is carefully designed to target tparticular person or organization Requires considerable research Increases chance of e mail being opened Example: 2008 government stimulus checks Phi hi il d i hi k f Phishing e mails appeared within one week of passage 17

18 Type of Useful Information for Theives Phishing Attack Countermeasures Change protocol Improve e mail recipients ability to identify message source Reduce phishing attack threat Educate Web site users Contractwith consulting firms specializing in anti phishing work Monitor online chat rooms used by criminals 18

19 The Future Mobile Payments Direct Mobile Billing Mobile uses already exist Used for taking the bus or subway Must address security concerns Stolen or lost phone Others can use for payment Must create better mobile security Summary Online stores payment forms Credit & debit Ubiquitous, convenient, easy to use Electronic cash advantages and potential uses Making micropayments PayPal Convenience of electronic wallets Concerns: phishing expeditions, identity theft 19