Professional Documents
Culture Documents
ON
SUBMITTED BY
SUPERVISOR
Ms NEELAM CHADHA
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CANDIDATE’S DECLARATION
I hereby declare that the major project which is presented in this report entitled
STUDY OF E-SECURITY AND E-PAYMENT submitted in the partial
fulfillment of the requirements for the award of the Post Graduate Diploma in
business management to the YMCA NEW DELHI is an authentic record of my
own work carried out at IMS YMCA campus. The material embodied in this
project work has not been submitted to any other university or institution for the
award of any degree.
Place:
Date:
This is to certify that above statement made by the candidates are correct to best
of my knowledge.
SUPERVISOR
NEELAM CHADHA
Approved by:
NEELAM CHADHA
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ACKNOWLEDGEMENT
I express our gratitude to the YMCA, NEW DELHI for giving me the opportunity
to work on the major project during our final semester of post graduate diploma
in business management. There are many who helped me during this project
work, and I want to thank them all.
I specially appreciate the help and guidance of all those teachers who have directly
or indirectly helped me making my project a success.
ARCHIT MALHOTRA
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Preface
The early Internet was used by computer experts, engineers, scientists, and
librarians. There was nothing friendly about it. There were no home or
office personal computers in those days, and anyone who used it, whether
a computer professional or an engineer or scientist or librarian, had to learn
to use a very complex system.
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INDEX
TITLE PG NO.
1. Candidate’s declaration 2
2. Acknowledgement 3
3. Preface 4
4. Table of content 5-6
5. Executive summary 7
6. Introduction 8
7. History of internet 9
8. What makes the internet so powerful? 10-12
9. Why establish a business on the internet? 13-15
10. The advantages of internet 16-17
11. E-business and company a global mix 18-19
12. What does online customer seek? 20
13. Essential of E-business 21-22
14. Ways to make E-business successful 23-24
15. The devils is in detail 25
16. E-money 26-27
17. Issues 28
18. E-payment system 29-31
19. Electronic bill presentment and payment 32-33
20. Why to use E-payment? 34-35
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21. Problems in E-payment 36
22. Method of payment 37-38
23. Properties of digital cash 39-40
24. Requirement of E-payment 41-45
25. Processing of E-payment 44-46
26. Model of E-payment 47-48
27. Storage methods 49-50
28. E-cash 51-54
29. E-cash issues 55-57
30. Advantages & Disadvantages of E-money 58-59
31. E-wallets 60-68
32. Smart cards 69-70
33. Credit cards 71-72
34. Benefits of E-payment 73
35. Working Procedure for E-payment 74-79
36. SET Protocol 80-83
37. Factors before selecting E-payment method 84
38. Case study 85-97
39. Conclusion 98
40. Bibliography 99
Executive summary
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21st century the era of internet, the global ruler being internet which not
only provide solutions for every problem but now can also prove to be
fruitful to provide you the product in desired quantity at desired place at
your desired amount and that too sitting at your place. Human fingers were
never so powerful as it is now days with a single click we can purchase
anything from anywhere in the world and that’s only possible because of
internet.
It would be very bias to only list the positive influence of the internet. Here
in my project I tried to cover all the possible options fro e payment and the
system available also laying equal emphasis on the pros and cons of each
payment options.
My data collection was based on the study of two best companies when it
comes to E-payment and E-security. A case study which showed the face
of these companies and its influence on the world and here in India
INTRODUCTION
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In the emerging global economy, e-business have increasingly become a necessary
component of business strategy and a strong catalyst for economic development. The
integration of information and communications technology (ICT) in business has
revolutionized relationships within organizations and those between and among
organizations and individuals. Specifically, the use of ICT in business has enhanced
productivity, encouraged greater customer participation, and enabled mass
customization, besides reducing costs.
On another plane, developing countries are given increased access to the global
Marketplace, where they compete with and complement the more developed
economies. Most, if not all, developing countries are already participating in e-
commerce, either as sellers or buyers. However, to facilitate e-commerce growth in
these countries, the relatively underdeveloped information infrastructure must be
improved.
HISTORY OF INTERNET
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In the 50’s and early 60’s, prior to the widespread inter-networking that led to the
Internet, most communication networks were limited by their nature to only allow
communications between the stations on the network. Some networks had gateways or
bridges between them, but these bridges were often limited or built specifically for a
single use. One prevalent computer networking method was based on the central
mainframe method, simply allowing its terminals to be connected via long leased lines.
This method was used in the 1950s by Project RAND to support researchers such as
Herbert Simon, in Pittsburgh, Pennsylvania, when collaborating across the continent
with researchers in Santa Monica, California, on automated theorem proving and
artificial intelligence. The Internet system was developed and ready in the Late 1980s,
but The Cold War held up the progress. When it ended in 1992, the internet slowly
became main stream. By the end of the decade, millions were using it for business,
education and pleasure.
The Internet was designed in part to provide a communications network that would
work even if some of the sites were destroyed by nuclear attack. If the most direct route
was not available, routers would direct traffic around the network via alternate routes.
The early Internet was used by computer experts, engineers, scientists, and librarians.
There was nothing friendly about it. There were no home or office personal computers
in those days, and anyone who used it, whether a computer professional or an engineer
or scientist or librarian, had to learn to use a very complex system.
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WHAT MAKES THE INTERNET SO POWERFUL?
The Internet is the lowest cost system ever developed to communicate with a
potential audience of hundreds of millions of people all over the world. Even
locally, the cost of a simple Web site is usually less than the cost of a modest ad in a
business telephone directory. A Web site can also give more information than a
telephone directory ad, including color photos, detailed descriptions of products and
services, and price information that can be changed at any moment, for any reason,
instead of waiting for a printed directory's next publication cycle.
As a news medium, the Internet is faster and more flexible than a newspaper or
magazine. A story can be added to a Web site instantly at any time of the day or
night. There are no deadlines (except self-imposed ones) for Internet news. The
"printing press" is always on, you might say. Even television news, aside from a
few 24-hour news channels, must usually wait for scheduled news broadcast times
instead of breaking into entertainment programming whenever a new story comes
along. Television is also constrained by its necessarily linear information delivery
format. It must tell a story, then another story, then take a break for advertising,
then tell another story, and so on, in sequence. A viewer cannot choose to view only
a few stories that he or she finds interesting, which may occupy only five minutes
out of a 30-minute newscast. On the Internet, a reader is free not only to choose to
view just those stories in which he or she is most interested, but also gets to choose
the order in which he or she sees them. If sports scores are the highest item on
today's agenda, click and there's the sports section, as easy as turning a newspaper
page. Another click and there's the score from the game that just ended, possibly
with video highlights only one more click away.
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Corrections, changes, and updates to a story published on the Internet can be made
as fast as they come in without waiting for a printing press to roll. Breaking news
alerts can be sent instantly by email to subscribers who request this service, and a
reader can instantly communicate with an online publication's editors via email or,
if the publication has this facility, post his or her comments on a "message board"
for other readers to see right away, without waiting for a fax or mail to get through
and an editor to look the message over and perhaps include it in the "letters to the
editor" section several days after the original story ran.
An online publication can also offer an advertiser something that is not available in
any other medium: ads that link directly, with one click, to a Web page full of
compelling reasons to buy the advertised product or service. Even if only a fraction
of one percent of all people who see a Web ad click on it, that is still an infinitely
higher percentage than can click on a magazine ad or TV spot for additional
information—or even to buy a product directly from the advertiser right now. Even
if few readers click on an individual online ad and buy right now, a Web ad still has
the same branding and general "get the name out" effect as advertising in other
media. If the cost of an online ad is similar to the cost of one in another medium, it
represents a better value because of the ability it gives an advertiser to give an
interested person an entire Web site full of information right away, only one click
removed from the online publication in which that ad is running.
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But the most direct way to make money online, no matter how a merchant gets
traffic to his or her Web site, is to sell over the Internet. E-commerce has had its
ups and downs, but the overall trend is upward, and it is likely to stay that way
for many years to come. Putting up a "catalog" Web site is far less expensive
than printing and mailing paper catalogs, and the Web site can have "instant"
ordering and credit card acceptance built right into it, whereas a paper catalog
can generate only phone orders that require a horde of (expensive) live
operators to process or mail-in order forms that a customer must fill out.
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WHY ESTABLISH A BUSINESS ON THE INTERNET?
When it comes to business, most people confuse their personal opinions with facts.
They believe in fact that they know something when in reality they don't have all the
data to support their beliefs.In this document section you will find factual information
that is based on our experiences and our experiences Now with the Internet available in
almost every household in any developed country, it is possible to achieve the type of
lifestyle you have always dreamed about. The following facts will show why you really
should consider establishing your own internet company :
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Downsizing:
Let's face it — a computer is more productive than a human in business. areas such as
accounting, administration, data management, calculating, statistics and many more
activities. Whatever industry you name — new technologies increase productivity
which, in turn, often leads to fewer jobs. To be sure new technologies also create new
jobs but these require a much higher level of qualification and knowledge. A person
who has been working in the same sort of job for several years is often not capable of
acquiring all the skills and qualifications needed for a job in a new workplace.
Globalization:
The world is becoming more and more interconnected. Even, or maybe especially after
September 11, international travel activities have been increasing and this pattern will
continue into the future. The number of companies that operate on a multinational scale
is constantly rising because they need new market places. In Europe nations have
agreed on a uniform single currency — the EURO, enabling the European Community
to develop into a strong economic entity. The same sort of thing is taking place in Asia
with China, Taiwan, South Korea and Japan forming a powerful economic alliance.
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Information:
More than 500 million people worldwide are using the internet on a
regular basis, with email and search engines as the most popular services. Information
is power. People are able to influence, direct, convince, educate and manipulate others
through one single tool: The distribution of information. Email and discussion forums
allow people to share their thoughts, ideas and experiences with other people from all
corners of the world.
Cost Effectiveness :
The internet is by far the most cost effective communication tool. If you want to send a
letter via conventional or so-called snail mail it will cost at least around $1 (assuming
you restrict yourself to two single sheets of paper). Sending the same amount of
information via email will be up to 100 times cheaper with immediate delivery.
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THE ADVANTAGES OF THE INTERNET
Never have the chances for setting up and running your own successful business been
easier than they are today:
While traditional industries like manufacturing are shrinking, new industries are
growing especially the «information industries
You can use the internet to find your customers and business partners
worldwide
Your customers and partners can find you on the internet.
You can use the internet to build a strong relationship with your customers
especially via email.
You can use the internet to market your products and services.
You can use the internet to acquire all the information, training and
qualifications you need for your business.
You can set up a business with a very small marketing budget, something
almost impossible in the real world.
You can certainly list even more reasons why it is possible for anybody with a
computer and access to the Internet to establish their own business. At the same time
the reality is that only a very small percentage of people who do have a computer and
access to the Internet, establish and run their own business. Why is this? The answer is
very simple. Most people anywhere in the world, spend too much time thinking about
things they do not want, instead of thinking about things they do want. As a
result there are only a few people who have their own company and they usually earn
more money than somebody with a regular job. Owners of comapines usually have
more personal and financial freedom than people with regular jobs. But what exactly do
you need in order to own a company? Money? A University degree? The right friends?
Well, maybe some of these things can help you with your business but then they are not
essential and are no guarantee of success. We have analyzed a number of successful
online business people and here is a list of important characteristics all of them
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possessed. We know that the following qualities are essential for success as a
businessperson so you should take the time to go through them and check whether or
not you have them. All the information about how to set up a website, how to run an
email newsletter, how to get a high ranking at Google, how to generate huge traffic to
your website etc. will be worth nothing if you don't have most of the following skills
and qualities.
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E-BUSINESS AND COMPANY A GLOBAL MIX
After sales service; ie. billing, demand planning, engineering, inventory planning,
purchasing, receivables.
Business analytics; ie. financial performance, marketing, workforce, production,
enterprise management
Consultant management
Customer relationship management; ie. account management, customer self-service,
contact management & communications, promotions, surveys, quality, help desk,
field service
E-procurement
E-store/e-exchange/product catalog; ie. delivering b2b and b2c e-commerce,
Finance; ie. asset management, accounting, budgets, invoicing, payables &
receivables, investments, government tax returns & payments, payroll administration
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Grant & donation management
Human Resources Management; ie. resource planning, benefits administration,
reward programs, recruiting & hiring, workforce management, pension administration
Investor relations
Marketing and sales activities; ie. products, technical information, sales support,
product life cycle management, corporate resume, portfolio, customer lists, customer
service
Materials management
Order management & customer fulfillment
Project management
Public Relations
Strategic partner collaboration
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WHAT DO ONLINE CUSTOMERS SEEK?
Consumer attitudes of those who shop and purchase online are significantly different
from the habits and preferences of consumers who visit stores. Their purchase decisions
are driven and based on a different set of factors tied to the characteristics of the e-space
environment. For an e-commerce business to survive, it is absolutely necessary to
establish and maintain an intimate understanding of the customers, their behavior, and the
factors that drive purchase decisions. In the current e-commerce environment, online
consumers are highly sensitive to the following characteristics:
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ESSENTIALS OF E-BUSINESS
You can’t just open an online store and expect customers to flock to it. Find out if your
niche market is one that you can reach through a website. How? Does your niche market
have an identifiable need for your web offering? Do they have the wherewithal to pay for
it? Is the niche group sizeable, i.e., will it provide enough business to produce the income
you need? If the answers are yes, you have found a good niche. Now dig deep within that
niche to understand the consumer behaviors that drive it. Every e-commerce operator
should assume that his or her customers are sophisticated shoppers who demand prompt
delivery of a product that is exactly as portrayed on their website. The most common
mistake made by inexperienced web operators is to fail to be responsive to their
customers’ order processing and fulfillment needs. But those services are the very
underpinnings of all successful e-commerce ventures — neglect those areas and you have
a business catastrophe.
To help in the follow-through, you and your customers must be able to track the status of
each purchase. Most new e-commerce businesses, however, fail to integrate this
necessary backend support. Another “must” is to make certain that your customers know
that your web-based business will not only deliver a value online that cannot be found
offline, but that it is just as responsive with customer service issues as the most well-
regarded offline business.
By keeping customer service and product fulfillment as an immediate priority you can
build a valuable relationship with your customer. In doing so, you earn that customer’s
loyalty. That helps to stem the natural flow of attrition as customers who pursue the
lowest price find that the trade-off is a void in the cut-rate business’s customer service
department.
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Another common problem for new e-commerce businesses is misinterpreting the power
of the Web. Yes, a website with the right infrastructure can economically automate
transactions. However, the real power of the Web is its role as a relationship-building
magnet — through its ability to provide numerous opportunities for interactivity. If you
are careless with automated processes — this very real advantage will vanish.
Use your website to provide not only useful and interesting information about your
products/services, but also about your entire niche market. The group that makes up a
niche market always yearns for more information. They will return time and again to
your website if they are appealed to on the basis of their special interests — detailed
articles and content-rich advertising specifically targeted to them.
The dot-com bust of 2000 was a failure of business plans; the concept itself has not
failed. And while numerous news articles over the last few years detail how various
websites lost sales and customer confidence due to inadequate prelaunch planning, there
have also been many successes, especially in the small business arena.
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WAYS TO MAKE YOUR BUSINESS SUCCESSFUL THROUGH
INTERNET
Internet the way we do business today. It has broken physical boundaries and has
provided each small, big and mega businesses a global business opportunity. Your online
presence, your website provides you an equal opportunity to have your presence felt.
The irony those among the millions of websites ruling the internet world only thousands
are successful. As they say you not only need a quality product or service, you need to
package and most importantly sell it. That leads us to the question how to get successful
online? Simple answer packages your website and makes people aware of it..The basic
rules of business apply here too with the difference that here you cater to a global market.
The internet offers you with a variety of tools which applied correctly can make the
winning difference.
Remember to maintain a contact page which mentions your contact details on the site
have a sitemap and design the site for users. It is of utmost importance that you keep
search engine optimisation factors in mind. Have your pages titled. For more on this
contact a web designer.
If you are in business retail or manufacturing a good idea is to have your site e-com
enabled. You must have shopped on the internet, if not you are among the chosen few. If
you have you must be aware of the shopping cart on the e-commerce site. The shopping
cart enables your visitors to manage their shopping well. You will need a payment
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gateway and a merchant account to receive money for sales. To test out your site
integrate it with Paypal and try out the shopping experience.
1. So your site seems to be ready now. Next step. Make your site presentable and
make it known. So we are now into advertising and marketing of your website.
Here note this that 95% of websites gets visitors from referred from search
engines. These search sites work like a gateway to the internet world.
2. Your next step towards making your site known to others is to follow the search
engine optimisation tips offered by the search engines while making your site.
You should look for the terms people use to search your type of service or product
and create your site around it. As in the advertising world headings for your pages
should be catchy. Internet visitors scan web pages for information instead of
reading through them, so all the rules of advertising world which helps in writing
the content for the advertisement apply here. Do it yourself, get to know what the
inverted pyramid style of writing is or hire a web designer, see specialist to do it
for you.
3. With pay per click, the internet advertising world has revolutionized. It offers you
advertising opportunities on the net for a few shillings. Check out Google
Adsense or Overture PPC campaigns. These are offered by mostly the leading
search engines and your advertisements are displayed on the search result pages
of these sites for keywords you choose. If controlled optimally you can benefit
from these. Use PPC to get visitors to your site during the launching period. Dual
benefits. One you get visitors though your site is too new and second due to
advertising, your site gets noticed. If you are not aware of this, use the services of
a PPC management company to do this for you.
4. So what else to look out for? Interaction. Give reasons to your visitors to come
back to your site. Start a newsletter campaign. Offer your visitors something free.
Give them tips. Start a blog. Make your visitors come back to your site
5. Give them options to sign up for your newsletter free. You get their emails and
use a mailer program to send out regular mails to them.
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THE DEVIL IS IN THE DETAILS
You’ve chosen your e-commerce model and found the perfect products/services to offer
on your e-commerce site. You’ve also thoughtfully planned your website. Using your
blueprint and storyboards you’ve completed the design of your website. It is now time to
extend everything to the Web.
Add to this list: acquiring a domain name, a merchant account, and a digital certificate,
and you are in the e-commerce business.
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ELECTRONIC MONEY
Many systems will sell their electronic currency directly to the end user, such
as Gogopay, Paypal, WebMoney and Wirex, but other systems, such as Liberty Reserve,
sell only through third party digital currency exchangers.
In the case of Octopus Card in Hong Kong, deposits work similarly to banks'. After
Octopus Card Limited receives money for deposit from users, the money is deposited into
banks, which is similar to debit-card-issuing banks redepositing money at central banks.
Some community currencies, like some LETS systems, work with electronic
transactions. Cyclos Software allows creation of electronic community currencies.
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Ripple monetary system is a project to develop a distributed system of electronic money
independent of local currency.
In the use of off-line electronic money, the merchant does not need to interact with the
bank before accepting a coin from the user. Instead he can collect multiple coins Spent by
users andDeposit them later with the bank. In principle this could be done off-line, i.e. the
merchant could go to the bank with his storage media to exchange e-cash for cash.
Nevertheless the merchant is guaranteed that the user's e-coin will either be accepted by
the bank, or the bank will be able to identify and punish the cheating user. In this way a
user is prevented from spending the same coin twice (double-spending). Off-line e-cash
schemes also need to protect against cheating merchants, i.e. merchants that want to
deposit a coin twice (and then blame the user).
Using cryptography, anonymous ecash was introduced by David Chaum. He used blind
signatures to achieve unlinkability between withdrawal and spend transactions.[1] In
cryptography, e-cash usually refers to anonymous e-cash. Depending on the properties of
the payment transactions, one distinguishes between on-line and off-line e-cash. The first
off-line e-cash system was proposed by Chaum and Naor.[2] Like the first on-line scheme,
it is based on RSA blind signatures.
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Issues
Although digital cash can provide many benefits such as convenience and privacy,
increased efficiency of transactions, lower transaction fees, new business opportunities
with the expansion of economic activities on the Internet, there are many potential issues
with the use of digital cash. The transfer of digital currencies raises local issues such as
how to levy taxes or the possible ease of money laundering. There are also potential
macro-economic effects such as exchange rate instabilities and shortage of money
supplies (total amount of digital cash versus total amount of real cash available, basically
the possibility that digital cash could exceed the real cash available). Another issue is
related to computer crime, in which computer criminals may actually alter computer
databases to steal digital cash or by reducing an account's amount of digital cash. One
way to resolve these issues is by implementing cyberspace regulations or laws that
regulate the transactions and watch for signs of fraud or deceit.
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E-PAYMENT SYSTEM
OVERVIEW
There are numerous different payments systems available for online merchants. These
include the traditional credit, debit and charge card but also new technologies such
as digital-wallets,e-cash, mobile payment and e-checks. Another form of payment system
is allowing a 3rd party to complete the online transaction for you. These companies are
called Payment Service Providers (PSP), a good example is Paypal or WorldPay.
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An e-commerce payment system facilitates the acceptance of electronic
payment for online transactions. Also known as Electronic Data Interchange (EDI), e-
commerce payment systems have become increasingly popular due to the widespread use
of the internet-based shopping and banking. In the early years of B2C transactions, many
consumers were apprehensive of using their credit and debit cards over the internet
because of the perceived increased risk of fraud. Recent research shows that 30% of
people in the United Kingdom still do not shop online because they do not trust online
payment systems. However, 54% do believe that it is safe to shop online which is an
increase from 26% in 2006 .
There are numerous different payments systems available for online merchants. These
include the traditional credit, debit and charge card but also new technologies such
as digital-wallets,e-cash, mobile payment and e-checks. Another form of
payment system is allowing a 3rd party to complete the online transaction for you.
These companies are called Payment Service Providers (PSP), a good example
is Paypal or WorldPay.
Over the years, credit cards have become one of the most common forms of payment for
e-commerce transactions. In North America almost 90% of online B2C transactions were
made with this payment type. Turban et al. goes on to explain that it would be difficult
for an online retailer to operate without supporting credit and debit cards due to its
widespread use. Increased security measures such as the use of the card verification
number (CVN) which detects fraud by comparing the verification number on the printed
on the signature strip on the back of the card with the information on file with the
cardholder's issuing bank .Also online merchants have to comply with stringent rules
stipulated by the credit and debit card issuers (Visa and Mastercard) this means that
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merchants must have security protocol and procedures in place to ensure transactions are
more secure.
Despite this widespread use in North America, there are still a large number of countries
such as China, India and Pakistan that have some problems to overcome in regard to
credit card security. In the meantime, the use of smartcards has become extremely
popular.
There are companies that enable financial transactions to transpire over the internet, such
as PayPal.
Many of the mediaries permit consumers to establish an account quickly, and to transfer
funds into their on-line accounts from a traditional bank account (typically
via ACH transactions), and vice versa, after verification of the consumer's identity and
authority to access such bank accounts. Also, the larger mediaries further allow
transactions to and from credit cardaccounts, although such credit card transactions are
usually assessed a fee (either to the recipient or the sender) to recoup the transaction fees
charged to the mediary.
The speed and simplicity with which cyber-mediary accounts can be established and used
have contributed to their widespread use, although the risk of abuse, theft and other
problems—with disgruntled users frequently accusing the mediaries themselves of
wrongful behaviour—is associated with them.
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ELECTRONIC BILL PRESENTMENT AND PAYMENT
Electronic bill presentment and payment (EBPP) is a fairly new technique that allows
consumers to view and pay bills electronically. There are a significant number of bills
that consumers pay on a regular basis, which include: power bills, water, oil, internet,
phone service, mortgages, car payments etc. EBPP systems send bills from service
providers to individual consumers via the internet. The systems also enable payments to
be made by consumers, given that the amount that appears on the e-bill is correct. Banks
in Canada have been offering these on-line payment services for some time now, and are
growing in popularity. This service is in addition to the original EBPP method of a direct
withdrawal from a bank account through a bank such as Scotiabank.
The biggest difference between EBPP systems and the traditional method of bill
payment, is that of technology. Rather than receiving a bill through the mail, writing out
and sending a check, consumers receive their bills in an email, or are prompted to visit a
website to view and pay their bills.
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Three broad models of EBPP have emerged. These are:
Consolidation, where numerous bills for any one recipient are made available at one
Web site, most commonly the recipient's bank. In some countries, such as Australia,
New Zealand and Canada, the postal service also operates a consolidation service.
The actual task of consolidation is sometimes performed by a third party, and fed to
the Web sites where consumers receive the bills. The principal attraction of
consolidation is that consumers can receive and pay numerous bills at the one
location, thus minimising the number of login IDs and passwords they must
remember and maintain.
Biller Direct, where the bills produced by an organisation are made available through
that organisation's Web site. This model works well if the recipient has reasons to
visit the biller's Web site other than to receive their bills. In the freight industry, for
example, customers will visit a carrier's Web site to track items in transit, so it is
reasonably convenient to receive and pay freight bills at the same site.
Direct email delivery, where the bills are emailed to the customer's In Box. This
model most closely imitates the analog postal service. It is convenient, because
almost everyone has email and the customer has to do nothing except use email in
order to receive a bill. Email delivery is proving especially popular in the B2B market
in many countries.
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enabling major billers to have all their bills, paper and electronic, processed through the
one service. Niche service providers in many countries provide one or two of these
models, but generally do not integrate with paper bill production.
Electronic Payment is a financial exchange that takes place online between buyers and
sellers. The content of this exchange is usually some form of digital financial instrument
(such as encrypted credit card numbers, electronic cheques or digital cash) that is backed
by a bank or an intermediary, or by a legal tender. The various factors that have lead the
financial institutions to make use of electronic payments are:
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We began E-Commerce with EDI, this was primarily for large business houses not for the
common man. Many new technologies, innovations have lead to use of E-Commerce for
the common man also. We will now briefly enumerate these innovations based on whom
they affected:
Affecting Companies:
The payment mechanisms that a bank provides to a company have changed drastically.
The Company can now directly deposit money into its employee’s bank account. These
transfers are done through Automated Transfer Houses.
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PROBLEMS
There are also many problems with the traditional payment systems that are leading to its
fade out. Some of them are enumerated below:
• Lack of Convenience:
Traditional payment systems require the consumer to either send paper cheques by snail-
mail or require him/her to physically come over and sign papers before performing a
transaction. This may lead to annoying circumstances sometimes.
• Lack of Security:
This is because the consumer has to send all confidential data on a paper, which is not
encrypted, that too by post where it may be read by anyone.
• Lack of Coverage:
When we talk in terms of current businesses, they span many countries or states. These
business houses need faster transactions everywhere. This is not possible without the
bank having branch near all of the companies offices. This statement is self-explanatory.
• Lack of Eligibility:
Not all potential buyers may have a bank account.
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Many transactions done on the Internet are of very low cost though they involve data
flow between two entities in two countries. The same if done on paper may not be
feasible at all.
METHODS OF PAYMENT
We will now focus attention on the various ways available to pay online these methods of
payment are still new even when seen as a technology. Each has its own benefits and
shortcomings:
Electronic Tokens:
An electronic token is a digital analog of various forms of payment backed by a bank or
financial institution. There are two types of tokens:
Real Time: (or Pre-paid tokens) - These are exchanged between buyer and
seller, their users pre-pay for tokens that serve as currency. Transactions
are settled with the exchange of these tokens. Examples of these are
DigiCash, Debit Cards, Electronic purse etc.
Post Paid Tokens – are used with fund transfer instructions between the
buyer and seller. Examples – Electronic cheques, Credit card data etc.
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• Cash is a legal tender i.e. payee is obligatory to take it.
• It is negotiable i.e. can be given or traded to someone else.
• It is a bearer instrument i.e. possession is proof of ownership.
• It can be held & used by anyone, even those without a bank certificate.
• It places no risk on part of acceptor.
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Properties of Digital Cash
Should not be easy to copy or tamper with while it is being exchanged. This is
achieved by using the following technologies, these are nothing but new and very
efficient versions of the old art of cryptography.
39
Purchase of digital cash from an online currency server (or bank) involves 2 steps:
Establishment of an account in this step we are given a unique digital number which also
becomes our digital signature. As it is a number known only to the customer and the
bank, forgery, which may be done in paper cheques becomes very difficult.
Maintenance of sufficient money in the account is required to back any purchase.
Electronic Cheques
The electronic cheques are modeled on paper checks, except that they are initiated
electronically. They use digital signatures for signing and endorsing and require the use
of digital certificates to authenticate the payer, the payer’s bank and bank account. They
are delivered either by direct transmission using telephone lines or by public networks
such as the Internet.
They can serve corporate markets. Firms can use them in more cost-effective
manner.
40
REQUIREMENTS FOR ELECTRONIC PAYMENT SYSTEM
Electronic payment system is the alternative to the coin or paper based cash payment
system to easy the user to make payment for their purchased goods or services over the
network or internet and in absence of the physical (entity) presence. Initially cheque in
bank payment systems are used to serve the purpose of the same but now in the era of
internet and e-commerce paying securely over the internet is important task for the
electronic payment system. Currently credit card are also in use for the payments over the
network but still users are doubting about trustworthy and the security of their money
because of the increase in the frauds which ultimately causes loss of value(money) either
of users, merchant or participating banks.
Present electronic payment system are to far from ideal payment system because of the
higher transaction cost, more fraudulent activities, and multiple parties are involved in the
payment processing simultaneously lacks users acceptance, proper application plans and
incompatible standards/specifications. The good payment system should satisfy the user’s
acceptance and merchants in the mass scale.
Present electronic payment system can be divided in two group electronic cash and
credit/debit system or token based and account based system. Tokens or electronic cash
41
are like the physical cash which represent the value and credit/debit or account based
system does not carry value but a message to transfer value.
Characteristics of electronic payment system are looked from various points of view as
technology, user, market and more.
Applicability: acceptance of the user where he/she can use the method to buy goods
or services.
Easy to use: the system should not be complex particularly in Indian context a user
from the remote area should be able to use the system.
Trust: degree of the confidence that the money and the personal information is safe
42
Convertibility: money conversion may be possible from one method to another like
loyalty point convertible to the money
Traceability: traceability of the money in the system who and when it occurs with
anonymity cause to built trust.
Authorization type: whether offline or online transactions can be made in same way.
43
PROCESSING OF ELECTRONIC PAYMENT SYSTEM
Marketing:
Marketing is not a new term, to sell anything companies have to market it. But to use the
Internet, as a medium of marketing is new as the bandwidth is still limited so no
commercials can be shown as on T.V. Internet marketing has a different approach. We
market things on the net by showing small banner ads that everyone who surfs the net is
familiar. Also web sites like Amazon pay other web sites if someone from their web site
comes to Amazon’s web site by clicking on a banner ad or a link. The whole business on
the web is sticky the term refers to the fact that the customer has to be sold a product and
also the web site should be so attractive that the customer keeps coming back to it for
further buying. This is done by sending attractive offer mails and referrals.
Customer/Visitor:
Here we have to make distinction between the type of commerce web site. There actually
exist three broad types of commerce web sites:
B2C – These web sites provide business to consumer. These are micro-payment based
web sites. They have to attractive and should be able to show the products properly. As
44
an example, you may visit www.fabmart.com and www.firstandsecond.com to see the
feel of a B2C site.
B2B – These are web sites that provide business to the business, that is their function is
similar to the stock exchanges, i.e. they are meeting points for a buyer and a seller. These
do not focus on content but rather on service. Functions of such web sites are online order
processing, tender filling, tracking of orders etc.
Auction Sites – These are sites that let you auction or sell something online it may be an
old motorcycle or bed or books. To see this site go to www.ebay.com
Product Browsing:
A user will typically browse through departments and then various products; he/she may
be attracted by sowing blinking new offers and other discounts.
Shopping Basket:
Shopping basket is a term taken straight from regular shopping, as in a store the user adds
the items of need to a basket the online store also implement a shopping basket, in which
we can keep on adding items o our need.
Checkout:
Once we have added all items we need to the basket the web site lists all the items that
we intend to purchase, we also have to fill in all the billing related information here. We
45
enter the credit card numbers here. Other things such as gift-wrapping etc. are also
specified here.
Payment:
This is the most important part of the purchasing online. The user is presented with a list
of all the items purchased, and a total of the payments he has to make then he has to
decide on the mode of payment whether by credit card or cash on delivery etc.
Receipt:
Once an order has been placed and confirmed, we may want to place a copy of the order
with the user. This may be done either by snail mail or e-mail.
Process Order:
At this stage the consumer leaves the picture, we now begin to check the credit card
number and other data. This may be done online or offline, then the product is made and
prepared for shipping to the customer.
Fulfill Order:
Once the order has been processed it has to be fulfilled duly. Even though 90% of the
transactions are online but the product has to reach the consumer physically and in well
shape.
Ship Order:
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Once we have processed the order fully it is ready to be sent to the consumer it is then
shipped to the consumer.
User a payers always spends the money and the merchant receives the money for the
goods or the services he has given to users. In traditional system user spends his own
physical money and merchant receives direct physical money no third party come in
between transaction but in electronic payment system variety of models are specified by
different organization / researchers, which are summarized here. Ahmad-Reza Sadeghi &
Markus Schneider, in Electronic Payment Systems, presented four types of payment
systems electronic cash, Cheque or credit card, Remittance and Debit orders base system.
In cash base transaction users withdraw his e-cash or an electronic token, from the bank
where he has his account for this bank debit same amount from users account. User does
purchase it as per his requirements and the need by using this e-cash. Merchant receives
the e-cash and deposit in bank on his own account. Afterward its merchant bank, who
sends the request to user’s bank for transfer of money and deposit in merchant account.
In Cheque and credit card payment system user stage 1 withdrawal is not present,
merchant deposit cheque or credit card slip to bank settlement between banks transfer
value in respective merchant account
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In other two types user and merchant give payment order to their respective banks for
transfer of money . User bank and merchant banks are called Issuer and Acquirer
respectively in .
MasterCard and Visa international have derived the standards for the global application
of smart card in payment system. Initially started with EMV specification in 1996 and
subsequently updated with latest version EMV2000, This specifies the specification for
Card based on the ISO 7816 compliance, and further specification needed for electronic
payment/purse. It also specifies the security criteria for the and authentication methods.
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STORAGE METHODS
• On-line
– Individual does not have possession personally of electronic cash
– Trusted third party, e.g. online bank, holds customers’ cash accounts
• Off-line
– Customer holds cash on smart card or software wallet
49
– Fraud and double spending require tamper-proof encryption
E-payment
Information
online
offline
$
Products/services
50
Desirable Properties of Digital Money
• Universally accepted
• Transferable electronically
• Divisible
• Non-forgeable, non-stealable
• Private (no one except parties know the amount)
• Anonymous (no one can identify the payer)
• Work off-line (no on-line verification needed)
Types of E-payments
• E-cash
• Electronic wallets
• Smart card
• Credit card
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E cash
E-cash Concept
Merchant
5
4
Bank 3
2
1
Consumer
52
While many different companies are rushing to offer digital money products, currently e-
cash is cash is represented by two models. One is the on-line form of e-cash (introduced
by DigiCash) which allows for the completion of all types of internet transactions. The
other form is off-line; essentially a digitially encoded card that could be used for many of
the same transactions as cash. This off-line version (which also has on-line capabilities) is
being tested by Mondex in partnership with various banks.
The primary function of e-cash is to facilitate transactions on the Internet. Many of these
transactions may be small in size and would not be cost efficient through other payment
mediums such as credit cards. Thus, WWW sites in the future may charge $0.10 a visit,
or $0.25 to download a graphics file. These types of payments, turning the Internet into a
transaction oriented forum, require mediums that are easy, cheap (from a merchants
perspective), private (see Privacy), and secure (see Security). Electronic Cash is the
natural solution, and the companies that are pioneering these services claim that the
products will meet the stated criteria. By providing this type of payment mechnism, the
incentives to provide worthwhile services and products via the Internet should increase.
Another prospective beneficiary from these developments would be Shareware providers,
since currently they rarely receive payments. To complete the digital money revolution
an offline product is also required for the pocket money/change that most people must
carry for small transactions (e.g. buying a newspaper, buying a cup of coffee, etc...).
The concept of electronic money is at least a decade old. [Hewitt 1994] demonstrates that
check writing is a pre-cursor to E-cash. When one person writes a check on his bank
account and gives the check to another person with an account at a different bank, the
banks do not transfer currency. The banks use electronic fund transfer. Electronic money,
removes the middleman. Instead of requesting the banks to transfer the funds through the
mechnism of a check, the E-cash user simply transfers the money from his bank account
to the account of the receiver.
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The reality of E-cash is only slightly more complicated, and these complications make
the transactions both secure and private. The user downloads electronic money from his
bank account using special software and stores the E-cash on his local hard drive. To pay
a WWW merchant electronically, the E-cash user goes through the software to pay the
desired amount from the E-cash "wallet" to the merchants local hard drive ("wallet") after
passing the transaction through an E-cash bank for authenticity verification. The
merchant can then pay its bills/payroll with this E-cash or upload it to the merchant's hard
currency bank account. The E-cash company makes money on each transaction from the
merchant (this fee is very small, however) and from royalties paid by banks which
provide customers with E-cash software/hardware for a small monthly fee. Transactions
between individuals would not be subject to a fee.
E-cash truly globalizes the economy, since the user can download money into his cyber-
wallet in any currency desired. A merchant can accept any currency and convert it to
local currency when the cybercash is uploaded to the bank account.
To the extent a user wants E-cash off-line, all that is necessary is smart card technology.
The money is loaded onto the smartcard, and special electronic wallets are used to
offload the money onto other smartcards or directly to an on-line system. Smartcards
have been used successful in other countries for such transactions as phone calls for a
number of years. The money could also be removed from a smartcard and returned to a
bank account. Visa is developing a related product, the stored value card. This card
comes in a variety of denominations, but functions more like a debit card than E-cash.
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In essence, E-cash combines the benefits of other transaction mediums. Thus, it is similar
to debit/credit cards, but E-cash allows individuals to conduct transactions with each
other. It is similar to personal checks, but it is feasible for very small transactions. While
it appears superior to other forms, E-cash will not completely replace paper currency. Use
of E-cash will require special hardware, and while most people will have access, not all
will. However, E-cash presents special challenges for the existing "middlemen" of the
current paper currency society. More and more, banks and other financial intermediaries
will serve simply as storehouses for money, lenders, and processing/verifying electronic
transactions. Personal interaction with a teller, or even visits to a bank ATM will become
obsolete. All one will have to do is turn on his computer.
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Electronic Cash Issues
• E-cash must allow spending only once
• Must be anonymous, just like regular currency
– Safeguards must be in place to prevent counterfeiting
– Must be independent and freely transferable regardless of nationality or
storage mechanism
• Divisibility and Convenience
• Complex transaction (checking with Bank)
– Atomicity problem
Security
Security is of extreme importance when dealing with monetary transactions. Faith in the
security of the medium of exchange, whether paper or digital, is essential for
the economy to function.
There are several aspects to security when dealing with E-cash. The first issue is the
security of the transaction. How does one know that the E-cash is valid? Encryption and
special serial numbers are suppose to allow the issuing bank to verify (quickly) the
authenticity of E-cash. These methods are suseptible to hackers, just as paper currency
can be counterfeited. However, promoters of E-cash point out that the encryption
methods used for electronic money are the same as those used to protect nuclear weapon
systems. The encryption security has to also extend to the smartcard chips to insure that
they are tamper resistant. While it is feasible that a system wide breach could occur, it is
highly unlikely. Just as the Federal Government keeps a step ahead of the counterfeiters,
cryptography stays a step ahead of hackers.
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Physical security of the E-cash is also a concern. If a hard drive crashes, or a smartcard is
lost, the E-cash is lost. It is just as if one lost a paper currency filled wallet. The industry
is still developing rules/mechanisms for dealing with such losses, but for the most part, E-
cash is being treated as paper cash in terms of physical security. Companies are making
some exceptions when it comes to a software/hardware failure, but these are supposed to
be rare. To help customers get used to this concept, most companies are limiting E-cash
wallets to $500, reflecting the primary use of E-cash for low value transactions. There is
a benefit to E-cash in the area of theft, however. A mugger or pickpocket would not be
able to make use of another's smartcard without the appropriate password. Merchants
should also lose less cash to employee theft, since the electronic cash will be inaccessible
(or, at a minimum, traceable).
The ultimate area of security is faith in the currency. This, however, would still be the
responsibility of the Federal Government on a systemic basis.
E-Cash Privacy
Transactions involving paper currency are difficult to trace. If digital money is to replace
paper currency, it must retain certain aspects of this quality.
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DigiCash claims it has developed a system that provides privacy for the user without
sacraficing security for the receiver. If a system is completely private, the merchant has
no way of verifying the validity of the electronic money. The user would also be unable
to have a receipt for the transaction. However,
DigiCash utilizes a one-sided signiture. Basically, the user keeps record of payments
made, but the merchant only receives enough information to allow his bank to verify the
authenticity of the E-cash.
This signiture process is also suppose to deter the criminal element of cash transactions.
Since a record of the transaction is created and kept (by the payee), extortion, bribes, or
other illegal transactions should occur less frequently.
E-Cash Regulation
A new medium of exchange presents new challenges to existing laws. Largely, the laws
and systems used to regulate paper currency are insufficient to govern digital
money.
The legal challenges of E-cash entail concerns over taxes and currency issuers. In
addition, consumer liability from bank cards will also have to be addressed (currently $50
for credit cards). E-cash removes the intermediary from currency transactions, but this
also removes much of the regulation of the currency in the current system.
The more daunting legal problem is controling a potential explosion of private currencies.
Large institutions that are handling many transactions may issue electronic money in their
own currency. The currency would not be backed by the full faith of the United States,
but by the full faith of the institution. This is not a problem with paper currency, but until
the legal system catches up with the digital world, it may present a problem with
cybercash.
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Advantages of E-Money
1) Anonymity and untraceability can be maintained: User Id's are kept highly
confidential.
2) No issues regarding "Double spending": Real-time checking of all transactions makes
the possibility of multiple expenditures negligible.
3) No requirement of additional secure hardware: Existing POS (point of sale)
hardwares can be updated and used.
3) Detection of Double Spender: The bank can effectively detect a double spender.
4) Frequent synchronizations are not required: The bank doesn't need to synchronize
its servers very often. This is mostly done via batch updates.
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Disadvantages of E Money
2) Massive Databases: The bank will have to maintain a detailed and confidential
database.
3) Synchronization: The bank needs to synchronize its server every time transaction is
made. It would be insanely impractical to maintain.
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Electronic Wallets
Using the basic concepts of Embedded Systems, an idea for changing the future of Cards
(Banking, Petro,Health, Televoice, etc.) is proposed in this paper. Requirement of a
special card reader, limited lifetime,acceptance being the main disadvantages of today’s
traditional cards, led to the design of e-Wallet. The main objective of e-Wallet is to make
paperless money transaction easier. The main idea behind this paper is to bring in a
cheaper, more versatile and much more easily usable kind of a card. Using this e-Wallet
the transaction procedure can be as simple as: the customer goes to the point of sale
(POS), does the purchasing and when it comes to the payment, the customer submits his
e-Wallet to vender who connects it to his terminal (PC).The vender displays the billing
information to the customer who finalizes it. The amount in the e-Wallet is updated
accordingly.
Later at periodic intervals, the vender intimates the bank (in case of credit cards) which
transfers the amount from the customer’(s) account to his. The advantages of e-Wallet are
its ease of use (doesn’t require a separate card reader), ease of maintenance, flexibility,
safety, being the primary ones. The designing of the card is similar to any other
embedded card. The designing cost of the card (e-Wallet) being as low as the price of a
pizza. There are ample enhancements to this application from credit cards to televoice
cards. Unlike traditional cards which are application oriented, all the applications’
software can be embedded into this e-Wallet which provides multifunctionality.
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INTRODUCTION:
With the advent of computers many technologies are taking this world by a surprise.
These include Embedded Systems (ES), Artificial Intelligence (AI), Neural Networks
(NN), Fuzzy Logic, Bluetooth and many more are upcoming. This paper deals with
Embedded Systems in a new perspective.I n easy terms, Embedded Systems can be
viewed as a combination of hardware and software components, in which the software is
implanted into the hardware to do the specific job. These ES were implemented in
various fields from Battery chargers to Aviation Systems besides Cell phones
(GSM,GPRS, CDMA, etc.). These ES are being developed in ‘leaps and bounds’. The
never- ending efforts of many scientists in the field of ES led to the evolution of Smart
Technology (ST).
Using the basic concept of ES, an idea for changing the future of Cards (Banking, Petro,
Health, Televoice, etc.) is proposed in this paper. To interpret this idea, it is first needed
to know the pros & cons of today’s ‘traditional’ cards.
• Agile Wallet
Developed by CyberCash
Allows customers to enter credit card and identifying information once, stored on a
central server
• eWallet
Developed by Launchpad Technologies
Free wallet software that stores credit card and personal information on users’
computer, not on a central server; info is dragged into payment form from eWallet
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• Microsoft Wallet
• Ease of mobility
• Ease of use
• Easy Duplication
• Requires a special card reader
• Networking problems
• No memory to hold the current balance
• Limited lifetime and acceptance
• No particular user authentication
• Unsecured remote transaction
• Vulnerable to moisture, heat, dirt etc.
a n d the list goes on…… Keeping these pros & cons in view, the Smart Technology is
introduced to develop a new class of cards. This stream of Smart Technology can be
termed as Smart Card Technology (SCT).T his smart card has a microprocessor or
memory chip embedded in it that, when coupled with a reader, has the processing power
to serve many different applications. Such cards can be referred to as e-Wallet (electronic
Wallet).
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E-Wallet:
The main objective of e-Wallet is to make paperless money transaction easier. The
electronic wallet (e-Wallet) is just like a leather wallet as it does the same, in terms of e-
cash. In today’s life where monetary value and security both, go hand in hand, it is
difficult to satisfy customers using the routine cards. The main idea behind this paper is
to bring in a cheaper, more versatile and much more easily usable kind of a card.
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Flash ROM / ROM: Flash ROM stores the instruction set for the microcontroller
unit, the necessary monitor routine programs and the application code. Here the
flash ROM is used because there are 32 available instructions sets for different
applications. But only one instruction set is used. If another instruction set is used
the card can be used for only the specific application.
EEPROM: EEPROM is used to store the processed data i.e. the balance amount in
the card. This part is of commercial importance as it holds the monetary
information of the card. Also the EEPROM sends the data to be read for
establishing transaction
RAM: It provides the workspace for both the microcontroller unit and the crypto
co-processor. It’s where the actual comparison of the stored password (original
password) and the given password for transaction to take place. Only if the given
password is the actual password, the access is given to view the details of the
card, deposition, withdrawal are allowed.
Serial Interface: It has six valid pins CS-chip select, CLK-external clock, DI-data
input, D0-data input, VOC-voltage input, GND-ground. Actually a parallel printer
port is used for interface of the card with PC. But only the six required pins of the
printer ports are activated. Thus the advantages of parallel and serial
communication are utilized. There is no need for a separate USB.
RF Interface: This unit provides establishment of transaction using Blue tooth
technology which is our future enhancement.External complexities are less.
Internal 16 Bit Address/Data Bus: This provides communication between
different units inside ASIC chip. This ASIC chip is built satisfying ISO 7816
standards.
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Operation:
1. Once the card is given the power supply all the units are activated.
2. The password is sought and the password is sent. The first bit is chip select then the
start bit, two opcode bits, 6-address bits and 16 data bits. The dedicated embedded
microcontroller looks after this process.
3. Then the given password is sent to the RAM work space.
4. The password (original password) after decryption by the crypto processor is sent to
the RAM.
5. Here the passwords are compared by the microcontroller. Only if the both the
passwords are correct, the access control unit brings the flash ROM, EEPROM units
of low impedance state.
6. Otherwise the units are kept in high impedance state.
7. The on-chip security power management unit provides the correct voltage and
correct frequency (CLK signal) for functioning of the ASIC.
8. If the password is correct, then the microcontroller fetches the instructions from the
instruction set in the FLASH ROM.
9. The balance amount can be fetched form the EEPROM, through the D0
pin of the serial interface.
10. After the transaction is over the balance amount is stored in the EEPROM
through D1 pin of the serial interface.
11. Once the transaction is over, the random word generator generates a random word
and sends it to the terminal ends and other buffers where the original password is
present.
This protects the original password from being hacked by hackers.
Thus the ASIC is designed for effective transaction with proper security to the
customers.
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FEATURES OF E–WALLET:
• Refillable
• Infinite lifetime
• Current balance can be stored and read
• User authentication is provided
• Universal access
• Maximum possible cash
• Cannot be duplicated
ADVANTAGES OF E-WALLET:
Ease of use:
Cash machines and telephones give more access points to funds in bank account
Available 24 hours / 365 days
Cash machines and telephones cannot run out of electronic cash
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Flexibility:
CONCLUSION:
With all the above mentioned features it is definite that the future of cards is definitely e-
Wallet’s. Besides
credit cards, this e-Wallet can also be extended into the following fields, namely:
Sim – card
Petro – card
Credit – card
Health – card
Intelligent web – surfing card
Insurance – card
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Access – card
ATM ( provided Reserve Bank of India adopts e – cash transactions )
Televoice
These are only the few to mention. Due to its ease of adaptability to its environment, this
e-Wallet would certainly change the way people transact (monetary transactions).
Transaction Procedure:
The e-Wallet cardholder goes to a point of sale (POS) location (normally a shop, but see
other possibilities in the next section) where the e-Wallet is accepted. Having chosen the
goods he wishes to buy, he goes to the cash desk. Here, the merchant calculates the total
value and enters it on the payment terminal using a keypad. (In many cases, this is done
via an automatic link between the cash register and the terminal.) T he terminal then
displays the amount on a small screen facing the cardholder, who confirms the amount by
pressing an "OK" button. In less than a second, the value is transferred from the e-Wallet
to the terminal, and the value remaining in the e-Wallet is adjusted. This is an off-line
transaction. A message is displayed to both the cardholder and the merchant saying that
the payment has been accepted. Periodically, the merchant connects the terminal to his
bank to do a collection that is to transfer the value collected in the terminal to his bank
account. This is an on-line transaction. The terminal sends a message for each transaction
to the e-Wallet host system, identifying the card number and issuer and the amount. The
host system debits the float account of the issuer and credits the merchant's account. This
typically takes a few seconds per transaction. Merchants can program their terminals to
automatically do collections each day, week or month, or when a specified value of
transactions is reached. If merchants have a number of terminals (e.g. a vending machine
operator, or a large supermarket) then they can use the "shuttle collection" system, where
terminals download their data onto a special collection card, which in turn then
downloads it into a central terminal, which is then used to perform an on-line collection.
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Smart Cards
A smart card, chip card, or integrated circuit card (ICC), is any pocket-sized card with
embedded integrated circuits which can process data. This implies that it can receive
input which is processed — by way of the ICC applications — and delivered as an
output. There are two broad categories of ICCs. Memory cards contain only non-volatile
memory storage components, and perhaps some specific security logic. Microprocessor
cards contain volatile memory and microprocessor components. The card is made of
plastic, generally PVC, but sometimes ABS or polycarbonate. The card may embed
a hologram to avoid counterfeiting. Using smart cards is also a form of strong security
authentication for single sign-on within large companies and organizations.
Overview
Dimensions are normally credit card size. The ID-1 of ISO/IEC 7810 standard defines
them as 85.60 × 53.98 mm. Another popular size is ID-000 which is 25 × 15 mm
(commonly used in SIM cards). Both are 0.76 mm thick.
Contains a security system with tamper-resistant properties (e.g. a secure
cryptoprocessor, secure file system, human-readable features) and is capable of
providing security services (e.g. confidentiality of information in the memory).
Asset managed by way of a central administration system which interchanges
information and configuration settings with the card through the security system. The
latter includes card hotlisting, updates for application data.
Card data is transferred to the central administration system through card reading
devices, such as ticket readers, ATMs etc.
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Smart Card Applications
• Ticketless travel
– Seoul bus system: 4M cards, 1B transactions since 1996
– Planned the SF Bay Area system
• Authentication, ID
• Medical records
• Ecash
• Store loyalty programs
• Personal profiles
• Government
– Licenses
• Mall parking
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Credit Cards
Credit card provides a card holder credit to make purchase up to amount fixed by a
card issuer.
In B2C business, it continues to be the most used form of payment system given its
high convenience.
Entities that involve in the credit card payment system include
- Card holder
- Merchant (seller)
- Card Issuer (Your bank)
- Acquirer (merchant’s financial institution
- Card Association (Visa, Master Card etc)
- Third party processor
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CREDIT CARD PROCESSING
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Benefits of electronic payments
Electronic payments can benefit your business by extending your customer base;
boosting cash flow; reducing costs; enhancing customer service and improving your
competitive advantage.
Five reasons why Electronic payments improve customer service – the five ‘Cs’
1. Choice – like your competitors, you can offer a wide range of payment options
2. Convenience – they remove the need for invoices, cheques, cash and BACs
3. Credit – they may allow purchases that would otherwise be delayed
4. Concessions – small discounts to encourage online purchases improve the perception
of value
5. Competitive Edge - if you don’t offer the full range of payment options but your
competitors do, what does this say about your business?
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Five reasons why Electronic payments increase profitability
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Payment card transaction requires:
Merchant to authenticate payment card
Merchant must check with card issuer to ensure funds are available and to
put hold on funds needed to make current charge
Settlement occurs in a few days when funds travel through banking system
into merchant’s account
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Here is a picture of the components involved in an online purchase:
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A standard online shop will have an online catalogue and a shopping cart that you can get
by purchasing an e-commerce product to suit your business Your Electronic payments
solution will then be ‘plugged-in’ to this shop.
Sometimes a customer is not actually present in a shop or at the point of sale for a credit
card transaction. This may sound strange but some card transactions, like placing an
order over a phone or by mail-order do not need the customer to be present at the point of
sale.
Customer Not Present transactions take place everyday over the phone and with mail-
order firms across the globe so there is no need to worry unduly about these risks. When
you apply for your Merchant Service the Acquiring Bank will ask what percentage of
your transactions will be to customers who are not physically present. They will use this
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to calculate the cost of your service and to issue a Merchant Service ID that allows you to
conduct Customer Not Present sales.
Taking orders over the Internet means the customer is again not present. Understand the
distinction the Acquiring Bank makes so you can prepare your business appropriately and
get the right Merchant Service for your operation.
Most people have bought a product from a high street shop and used their credit or debit-
card to pay for the product. The shop uses their till to add all the goods you have
purchased and then asks to pay for you goods. If you are paying by credit or debit card
you hand over your card so that the shop can collect your card number and card expiry
date.
Up until a few years ago shops commonly used a paper sales voucher that was placed
over your card before a manual imprinter was rolled over the card to collect the details. A
shop assistant filled in the sales total and asked you to sign the voucher. These vouchers
are still used by some shops.
Recently most shops have moved to electronic machines linked by telephone directly to a
bank. Card details are collected from the magnetic strip when the card is ‘swiped’
through the machine. The shop assistant types in the sales amount and details are passed
to the bank for approval.
This simple process involves three main elements with specific names:
1. The bank that card details are passed to is the ACQUIRING BANK;
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2. The shop has a unique ID to identify themselves to the ACQUIRING BANK and
this is given to them as part of a MERCHANT SERVICE provided by the
ACQUIRING BANK;
3. The MERCHANT SERVICE will also provide the PDQ Machine that the cards
are swiped through.
sends
data
provides
Not all businesses have a Merchant Service with a bank so don’t worry if this is new to
you. A charge-back , or cancellation of puchase, is when a customer demands a refund
from their credit-card company. The rights of the consumer are quite powerful in this
area as card providers like Visa and Mastercard have set an international standard period
for charge-backs that currently stands at six months.
Banks protect themselves against charge-backs and the Merchant Service agreement you
have with your bank allows them to transfer liability for payments of charge-backs to
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you. As an additional security measure, the bank may retain the payment from the
customer for a period of time (e.g. 30 days) before crediting your account with the funds.
Many Merchant Services also need you to lodge a bond to cover any charges incurred
through fraud and charge-backs. This sum will vary depending upon your average
transaction value and monthly turnover as well as less tangible features like the time it
takes your business to fulfil orders and consequently the exposure to risk of charge-back
or fraud. (More detail on exposure to risk in the next section). You can estimate the size
of bond by discussing this with your acquiring bank. When you come to use the free
online payments comparison tool, you will find that you can adjust the size of the bond
on the "Acquiring costs" page. The tool will then assume that you have to pay interest on
this sum in its calculations. This will give you a true cost comparison between the PSP
solutions that use merchant services and the other types of solution that do not need
acquiring services.
As Internet transactions fall under the banner of Customer Not Present and because many
Internet sales are carried out ‘cross-border’ (potentially increasing the risk of fraud) there
is no way to reduce the six -month window in which a charge- back could occur.
Even the processes of Authorisation and Capture (where the Acquiring Bank approves
the card transaction) do not provide protection against charge-back, although insurance
against loss can be arranged separately through a trade body or sometimes the Payment
Gateway. Outstanding customer service is the best protection.
Having good terms and conditions on your website can limit the charge-backs you
experience but nothing beats good service. Note that your
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The SET protocol
Jointly designed by MasterCard and Visa with backing of Microsoft, Netscape, IBM,
GTE, SAIC, and others
Designed to provide security for card payments as they travel on the
InternetContrasted with Secure Socket Layers (SSL) protocol, SET validates
consumers and merchants in addition to providing secure transmission
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SET specification
Uses public key cryptography and digital certificates for validating both
consumers and merchants
Provides privacy, data integrity, user and merchant authentication, and
consumer nonrepudiation
Secure Electronic Transaction (SET) was a standard protocol for securing credit
card transactions over insecure networks, specifically, the Internet. SET was not itself
a payment system, but rather a set of security protocols and formats that enable users to
employ the existing credit card payment infrastructure on an open network in a secure
fashion. However, it failed to gain traction.
SET was developed by SETco, led by VISA and MasterCard (and involving other
companies such as GTE, IBM, Microsoft, Netscape, RSA and VeriSign) starting in 1996.
SET was based on X.509 certificates with several extensions. The first version was
finalised in May 1997 and a pilot test was announced in July 1998.
SET allowed parties to cryptographically identify themselves to each other and exchange
information securely. SET used a blinding algorithm that, in effect, would have let
merchants substitute a certificate for a user's credit-card number. If SET were used, the
merchant itself would never have had to know the credit-card numbers being sent from
the buyer, which would have provided verified good payment but protected customers
and credit companies from fraud.
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SET was intended to become the de facto standard of payment method on the Internet
between the merchants, the buyers, and the credit-card companies. Despite heavy
publicity, it failed to win market share. Reasons for this include:
• Confidentiality of information
• Integrity of data
• Cardholder account authentication
• Merchant authentication
• Extremely secure
– Fraud reduced since all parties are authenticated
– Requires all parties to have certificates
So far has received lukewarm reception
80 percent of SET activities are in Europe and Asian countries
Problems with SET
– Not easy to implement
– Not as inexpensive as expected
– Expensive to integrated with legacy applications
– Not tried and tested, and often not needed
– Scalability is still in question
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SET uses a hierarchy of trust
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Main factors when selecting e-payment method
Cost
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CASE STUDY:
A payment gateway facilitates the transfer of information between a payment portal (such
as a website, mobile phone or IVR service) and the Front End Processor or acquiring
bank. When a customer orders a product from a payment gateway enabled merchant, the
payment gateway performs a variety of tasks to process the transaction.
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PayPal is an e-commerce business allowing payments and money transfers to be
made through the Internet. PayPal serves as an electronic alternative to traditional paper
methods such as checks and money orders.On October 3, 2002, PayPal became a wholly
owned subsidiary of eBay.Currently PayPal operates in 190 markets,and it manages over
175 million accounts (70 million active accounts). PayPal allows customers to send,
receive, and hold funds in 19 currencies worldwide. PayPal operates locally in 13
countries. Residents in 190 markets can use PayPal in their local markets to send money
online.
VeriSign Inc. is the leading provider of digital trust services that enable everyone
everywhere to engage in commerce and communications with confidence. VeriSign’s
digital trust services create a trusted environment through four core offerings - Web
presence services,telecommunications services, security services and payment services.
Sign was founded in 1995 as a spin-off of the RSA Security certification services
business.The new company served as a certificate authority (CA) — a role it still fulfills
--and its initial mission was "providing trust for the Internet and Electronic Commerce
through our Digital Authentication services and products." VeriSign now has more than
3,000,000 certificates.It is the largest CA behind the encryption and authentication on the
Internet. According to VeriSign, its payment gateway processed over $40 billion in
payments in 2004. VeriSign is well known for the VeriSign Secured Seal, which is an
outward expression of a Web site's authentication and encryption commonly posted to
VeriSign SSL Certificate customers' Web sites.
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Auction giant eBay acquired VeriSign's payment gateway business as part of a broad
strategic alliance between the two companies.eBay's PayPal paid approximately $370
million in cash and/or eBay stock for the VeriSign unit.VeriSign's payment gateway
business merged with PayPal's merchant services platform.The combined unit is
expected with an incremental $100 million of revenue at a 20 percent pro forma operating
margin The move is likely to bolster PayPal's drive to attract more e-commerce
merchants to its payment processing services.In addition to PayPal's acquisition of
VeriSign's gateway business, eBay also agreed to a multi-year security technology
agreement that will see eBay investing in VeriSign's payment security solutions. Among
those solutions is two-factor authentication.
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Features of PAY pal
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Three types of accounts serve the purposes of different users.
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Paypal offer a Security Key System that allows the users to generate a security
key for their accounts and make it safe.One can order your security key on Paypal
and keep it with his/her key-chain. It is that small but keeps your online Paypal
account safe from theft.
The fees vary depending on whether you are USA or Non USA but are in the
region of 1.9-3.9% depending on transaction amount and a minimum charg
of approx 30 cents per transaction.
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Shopping Carts: PayPal has a free customizable built in shopping cart or integrates
with hundreds of available shopping carts if you already have one.
Subscriptions/Recurring Payments: You can set up recurring payments - ideal for
membership sites.
Donations: Probably the most commonly seen PayPal button.
Accept Multiple currencies- Accept payments in US, Australian and Canadian
Dollars, UK pounds, Yen and Euro.
Realtime notifications of payments.
Test transactions in a test environment o you are sure they work ok.
Optional PayPal Accounts: The buyer no longer need to have a PayPal account to
make a purchase. This used to be one of the main drawbacks to using PayPal. A
PayPal account is now optional and not mandatory.
Customized Payment Pages: You can add your website colors and logos to PayPal's
payment pages.
Invoicing: You can send your customers detailed email invoices. You can create and
save up to 10 customized invoices using PayPal invoice templates.
Refunds: You can give full or partial refunds to your customers up to 60 days after
the sale.
Integrated Shipping: Allows you to create packing slips for your shipments.
Includes integrated shipping and delivery tracking for buyer and seller.
Automatically send order updates and status notifications.
Mass Pay: You can send payments to large groups-like affiliates.
Auto Return: When the buyer has made the purchase on the PayPal site he is sent
back to a URL on your website. This can be used to confirm the order, a thank you
page, or a download page or simply just to make sure the buyer stays on your site.
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Website Trust Certificate Improve Coversion Rate by Improving Trust. Display a
Trust Seal Today!
Full-Text Online Journals Research online. Academic journals & books at
Questioning Library.
Certificate Authority Scalable, robust, high-security CA for high-performance
Applications
European domain names Domains for Resellers and Providers Easy through Web
Mail- XML-API
By comparison, a Verisign merchant account has much higher startup costs. There
is also a relatively high monthly fixed cost for this merchant account. The fees for a
merchant account will run around $1,000 year so long as there are less than 1,000
transactions/monthly, not including per transaction fees of .25, and something called a
discount rate. The discount rate is a percentage of each transaction, usually 2%-3% but
sometimes higher. Figuring out one’s discount rate is an involved process. One has to fill
out a long application and then practially haggle with the banks to get the best rate.
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INDIAN SCENARIO
OR
Now a days PayPal becoming more and more suitable for Indian scenario.The following
facilities are found for India
One can now transfer money from his/her PayPal account to any of bank account
( his/her) in India directly from the PayPal website.
The new e-transfer process takes less than a week to process a check.
PayPal has also scrapped the withdrawal fees for electronic transfer if the
amount withdrawn is more that Rs 7000 and a nominal Rs 50 for small transfers.
Earlier PayPal would charge $5 per transaction irrespective of the amount on the
cheque.
To get money from PayPal to a bank account in India, require bank account
number and the IFSCI code of the bank branch where the account is - call your bank
customer care service and ask for IFSC code -it’s an 11 digit code maintained by
The Reserve Bank of India.
The e-transfer facility from PayPal India is available to anyone having an account
in HDFC Bank, ICICI Bank, ING VYSYA Bank, Axis Bank (formerly UTI
Bank), Standard Chartered Bank, State Bank Of India, Bank Of India, Canara
Bank, Union Bank of India, HSBC and Citibank India.
Before you withdraw the amount from PayPal to your Indian Bank account,
ensure that name of the bank record and PayPal match character by character
else the transaction will not go through and PayPal would also charge a INR 250
processing fee.
PayPal offers another option for Indians who hold a Visa credit card or debit card
he/she can withdraw funds directly to your Visa branded credit, debit or prepaid card.
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Paypal, owned by eBay. is a well known online payment system which has dominated the
online payment system with morethan 100 million users. PayPal is well-known and
respected in our demographic.The trust factor is high.Payees have the option of using an
existing PayPal account, which our records show is a very high percentage of registrants,
or they can use a credit card or e-check. As with other payment gateways, we avoid the
liability of collecting and storing sensitive financial data. Setup was quick and simple.
VeriSign requires a comprehensive background check that takes weeks.While PayPal's
fees are higher than the alternatives, we pass them on to our customers who are willing to
pay for the convenience of using our system, so that's a non-issue.
Swift transfer of money from one end of the world to the other.
Fast and trustworthy, reduce bank commission charges
Quick, secure, easy
Free to individuals
Ideal for online auctioneers, many uses
Great in theory
Collects money owed to you
International, multi-currency, fast, cheap
Free to sign up
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Some other gateways
• ABCpayments.com
• CC Avenue
• DirecPay - Times of India
• EBS
• Easy2Pay.com
• Epayments.in
• Transecute
• payseal ICICI
• PayGateIndia
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Comparison of other gateway with PayPal & VersiSign
Currently PayPal gateway provider and their transaction and setup fees are very
reasonable. But the only thing they lack is, time to deposit the funds in our
accounts.Moreover there limit of indian customer is $2500 which is very less for some
customers.But recently paypal made some changes in their agreement like without
createing a account buyer can pay a amount $10000 (limit for credit card in whole life)
from their credit card and if create new account then takes time in verification and all.
That often create problems in taking amount from buyers. A person having account in
paypal.com, there is no need to open account in US Bank for this payment gateways.
They send you payment by DD, Cheque or Wire Transfer. They convert the amount to
INR according to current conversion rate of that day.
For selling non-tech stuff online (main services or ebooks) CCAvenue is good option.But
considering national and international level payment gateway, Paypal is best.
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Products priced in INR has to be converted to USD before sending it to paypal.This is a
major problem. If you are a seller, you may have to pay some commission if you use it as
a business account .Unwanted mails, if you forget to unclick the marketing option when
registering.Someone else is watching your financial information which can make you feel
a little uncomfortable.Paypal becomes a necessity if you want to be an ebayer.One of the
most widely attacked site for Phising and other scams.
Actually there is lot of scope for Indian payment gateways here, they can do really well
but they have to cut down their costs. High costs just does not make any sense to a small
businessman.
The problem with Indian companies is, they do not look for benefit of the customers, they
always look for making money.
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CONCLUSION
Now days online transaction are going at very high speed, be it be online shopping or
money transaction, crediting debiting account and online money management.
So demand fro a better E-payment system is of prime importance and that cant be without
considering E-security.
For any MNC company to survive in the field of E-marketing these two are most
important parameters i.e. E-payment and E-security as they always go hand in hand. If
any one is lacking behind a business would eventually vanish out as they are
interdependent on each other and directly dependent on the success of the businee.
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BIBLIOGRAPHY
www.google.com
www.scribd.com
www.paypal.com
www.verisgn.com
www.wikipedia.com
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