Payment Systems

Classification

• Pre-payment
  Like phone cards
• Instant paid
  Like direct debit from bank account
• Post-paid
  Like credit card

Pre-payment

• DigiCash
• NetCash
• CyberCoins
• MilliCent
• SmartCards e.g. Mondex, VisaCash

Instant payment

• Requires direct access to banking system
• Preferred by business as it is often cheaper

Post-paid

• Credit card
• Invoices (business to business, once trust is established)
• Internet cheques e.g. NetCheque, PayNow, eCheck
• COD (delivery should collect money, or no delivery takes place)

Classification

• Micro-payments
  Less than US$5
• Consumer payments
  US$5 - US$500
• Business payments
  More than US$500

Micro-payments

• None successful yet
• Need to hold cost of transaction down
• Security/loss not so important
• Typical example: Millicent

Credit card payments

• Estimate is that 30% of credit card transactions are fraudulent
• Algorithms for generating credit card numbers are common
• Should check that syntax of credit card number is correct
• Should check that address of credit card holder is known
• Deliver to address of credit card holder only
• Check that the Card Verification Value is correct
• Some checks can be done immediately, some require access to card validation services

Credit Card Syntax Validation

• The number on each card is given by the card vendor, but must satisfy certain rules
• See e.g. http://www.beachnet.com/~hstiles/cardtype.html

Visa USA Internet Payment Gateway Service

• Typical credit card payment system
  
• See http://www.visa.com/nt/suppliers/ipgs/
• Merchant establishes an SSL connection to IPGS
• Merchant must have an X.509 certificate from VeriSign or Thawte
• Merchant may batch transactions or send them singly
• Address verification or CVV verification can be requested
• Other cards besides Visa can be processed
• Charges are set by the merchant's bank, typically 5% of the transaction

BPay

• Based on prior knowledge of customer to get a customer number
• Merchant presents invoice to customer
• Invoice has Biller code and customer reference number
• Customer contacts their own bank and adds the biller
• Details of bill are then presented to customer who pays from an account
• Details of payment are given to the merchant daily
• Advantage: credit card info is never on the wire, customer receives id and password in phone conversation