Secure Electronic Payments or SET

Daily report of security breaches, extortion, identity theft and general havoc to dog e-commerce and drive away large proportions of the buying public. To partially answer these concerns, the banking associations – Visa and MasterCard – jointly issued Secure Electronic Transactions (SET) as a specification to implement the business services needed for worldwide processing of credit, debit and charge card transactions over open channels like the internet.

SET is an open specification for handling credit card transactions over a network, with emphasis on the Web and Internet. Secure transactions are critical for electronic commerce on the internet.

Merchants must automatically and safely collect and process payment from internet clients, therefore, a secure protocol is required to support the activities of the credit card companies.

SET is also being used to provide the better quality of service. Most business transactions involve the payment and settlement process. Electronic payment systems have become necessary to enable the Internet commerce.

The requirements of payment transactions include confidentiality, security, integrity, non-repudiation and authentication. One of the main bottlenecks in the growth of E-commerce is lack of suitable payment instrument and corresponding electronic payment system.

When a person makes an online purchase on the internet, the credit card information is vulnerable to interception by network sniffers. Software that easily recognizes credit card number formats. In this case, several basic security measures are being used to solve the security problems:
*Encrypt (code and scramble) the data passing between the customer and merchant
*Encrypt the data passing between customer and the company authorizing the credit card transaction
*or Take sensitive information offline

For example many companies use the Secure Socket Layer (SSL) security method developed by Netscape Communications that automatically encrypts data passing between your Web browser and a merchant’s server.

In person, it is easy to check for matching signature on a card or to ask a person for an ID. On the internet, it is virtually impossible. Authentication thus can only occur through cryptography, SET uses a robust set of digital certificates to accomplish the identification and authentication activity.

SET is expected to eventually become dominant standard for secure electronic payments in the internet. However, SET has been stalled by the reluctant of companies to incur its increased hardware, software and cost requirement.
Secure Electronic Payments or SET

CyberCash payment system

CyberCash Inc. was founded in 1994 and is performing secure credit card presentations since April 1995. CyberCash provides a range of commerce solutions from credit card based DPSs to account based small payment systems.

Its product and services are free to merchants and customers. CyberCash collects fees from the banks processing their credit cards.

CyberCash operates payment servers and gateways that connect the web based to external financial networks. The company business model is as a payment service provider, with free based on transaction, rather than as a software vendor.

CyberCash’s Secure Internet Payment system does use cryptography to protect the transaction data. CyberCash provides a protocol; similar to SSL to secure purchases over the web.

The system contains a back-end credit card architecture that protects confidentiality and authenticity of the user who in many cases is a merchant.

In October 1997 the German subsidiary Cyber Cash Gmbh was founded. The basic CyberCash is based on secure credit card resp. account detail presentation. The so-called electronic direct debit is a special CyberCash GmbH service.
CyberCash payment system

Google Wallet

Google Wallet is a mobile payment Android app that transforms a phone onto a wallet. This app utilizes the Near Field Communication (NFC) technology that allows its users to pay for purchased items and redeem offers.

The Google Wallet has been available to Android users for many years. As mobile commerce is becoming a part of people everyday lives. Google Wallet enables the customers to make purchases easily using a mobile device.

With Google Wallet shoppers can easily pay for their purchases by interfacing with the app on their smartphones.

Both brick and mortar and online stores can use the Google Wallet feature to account payments from their customers.

This is an easy way for customers to carry credit cars and coupon offers and to make payments.

Merchants set up a merchant account with Google Wallet and input the account information of where they want their payment to be deposited. When customers go to pay for something, they sign in to Google Wallet using their existing Google Accounts, or they may create a Google account if they do not already have one.

Google Wallet can also be used for customer loyalty programs, A customer loyalty program rewards customers when they spend a certain amount of money with a merchant.
Google Wallet

What is Micropayment System?

Other electronic payments systems include micropayment systems like Cybergold and Qpass.

Some of these technologies create electronic scrip or digital cash, sometimes called e-cash, for making payments that are too small for credit card transactions.

In micropayment systems allow payments of low value. Low cost for transaction is the main requirement for micropayments. It serves as a convenient alternative to traditional payment arrangements.

Micropayments system involves:
*A buyer/client
*A vendor/data editor
*One or more brokers/intermediaries/billing serves

Encryption and authentication techniques are used to generate strings of data that can handled like currency for making cash payments.

For example, websites like ESPNet SportZone, Discovery Online and The Wall Street Journal Interactive Edition let the people chat with superstars, download video segments or pay for business reports by using digital cash micropayment systems.

An important factor in the evaluation of electronic payment systems is the cost of the overhead involved in collecting payments as compared to the actual amount of money being transferred.

Apart from the overhead costs incurred in the extra transactions required to implement the payment protocol, there is also another set of costs that bank may charge for their services.
What is Micropayment System?

Web Payment Process

Web payments are quite involved, flowing through a complex network of financial institutions and processes.

The technology has simplified the process, and the proper card credit authorization package provides the gateway for this process.

Most E-commerce systems on the Web involving businesses and consumers (B2C or business to consumer) depend on credit card payment processes.

But many B2B (business to business) E-commerce systems rely on more complex payment processes based on the use of purchase orders. In automatic checking house (ACH) processing directly via the internet instead of paying by paper check promises to speed online payments between businesses.

However both types of E-commerce typically use an electronic shopping cart process, which enables customer to select products from website catalog displays and put them temporarily in a virtual shopping basket for later checkout and processing. The shipping cart functionality not only allows users to add items to their virtual cart but it must follow the user as he trolls the virtual aisles of the store, always just a click away for the user to modify his order.

The payment process is transparent to user of the site, who perceives that they are paying at it. The process appears seamless when a payment is made on-line, in reality a mediating service provider ‘intercept’ payments from users, processes them and charges accounts of the owner of the site when the authorization and transaction are completed.
Web Payment Process 

PayPal payment system

An online payment service functions as a ‘middleman’ between buyers and sellers.

PayPal is a good example of the alternative to credit card payment, providing the payment link between buyers and sellers. PayPal is commonly us to settle purchases made on internet auction sites such as eBay. In recent years, PayPal ha become one of the internet’s most popular payment systems.

A user has to open an account with PayPal to be able to pay and receive money. The account then should be funded with credit or debit cards, electronic wire transfers or by other methods.

It is more economical for PayPal that the account is funded from the consumer’s bank account as it costs very little to process the transaction.

PayPal acts as a merchant in a card funded transaction and pays the merchant service commission to its acquiring bank.

PayPal made it possible; for an HTML developer to accept online credit card payments from any web page without requiring the years of programming skills necessary to install credit card processing software on a web server.
PayPal payment system

Electronic Payment System

A payment system is merely an agreed upon way value between buyers and sellers in a transaction. Payments system facilitates the exchange of goods or services in an economy.

In early 1990s the business and consumer world encountered a new way of conducting trade business which was named electronic commerce.

Payment for the products and services purchased is an obvious and vital set of processes in electronic commerce transactions.

Electronic payment systems have become necessary to enable the internet commerce.

The benefits to an economy of information technology applications in the payment system are apparent in the speed, traceability, and liquidity that the technology can provide over and above manual processing.

The requirements of payment transactions include confidentiality, security, integrity, non-repudiation and authentication.

But payment processes are not simple, because of the near anonymous electronic nature of transactions taking place between networked computer systems of buyers and sellers, and many security issues involved. Security is a major concern in the payment system.

Electronic commerce payment processes are also complex because of the wide variety of debit and credit alternatives and financial institutions and intermediaries that may be part of the processes therefore, a variety of electronic payment systems have evolved over time.

PayPal is the electronic cash payment system. PayPal eliminates the need to pay for online purchases by writing and mailing checks or using payments cards. PayPal allows consumers to send money instantly and securely to anyone with an e-mail address, including on online merchant.
Electronic Payment System