Submitted to
Mrs.Hardeep kaur Mrs.Harpreet kaur
Submitted By Miss.Jaspreet kaur
1
Certificate This is to certified certified that Miss. Jaspreet kaur D/o Student of Class +2 Commerce Roll No ………….... Guru Nanak Khalsa Girls Girls Sr. Sec. School has done done the e-bussines Project her self under the supervision of class teachers .
2
Acknowledgement
I am highly indebt to my esteemed learned E-business Teachers for their rich Knowledge and experience, invaluable guidance constant supervision and constructive suggestions, which they had been patiently imparting to me and without whose help the completion of the present work would not have possible. Jaspreet kaur +2 commerce.
3
E paym paymen entt is a subs subset et of an e-co e-comm mmerc erce e trans transac acti tion on to incl include ude electronic payment for buying and selling goods or services offered through the Internet. Generally we think of electronic payments as referrin referring g to online online transac transactio tions ns on the interne internet, t, there there are actual actually ly many forms of electronic payments. As technology developing, the range of devices and processes to transact electronically continues to incr increa ease se whil while e the the perc percen enta tage ge of cash cash and and chec check k tran transa sact ctio ions ns continues to decrease. In the US, for example, checks have declined from from 85% 85% of nonnon-ca cash sh paym paymen ents ts in 1979 1979 to 59% 59% in 2002 2002,, and and electronic payments have grown to 41%. The Intern Internet et has the the pote potent ntia iall to become become the the most most acti active ve trade trade inte ntermedi ediary
within hin
a
decad ecade. e.
Also,
Inte nterne rnet
shop hoppin ping
may
revolutionize retailing by allowing consumers to sit in their homes and buy an enormous variety of products and services from all over the worlds. Many businesses and consumers are still wary of conducting extensive business electronically. However, almost everyone will use the form of E Commerce in near future. This This site site will will disc discus uss s the the e comm commerc erce e devel developi oping ng proc proced edure ure in natio national nal leve levell espec especia iall lly y on e paym paymen entt syst system em.. Also Also stra strate tegy gy for for 4
fostering increased business and consumer confidence in the use of electronic networks for commerce and payment system.
5
The following types of electronic payments are most common today. That That said said,, it is impor importa tant nt to reali realize ze that that new paymen paymentt types types are are continu continual al being being discov discovered ered and there there are additio additional nal methods methods that that exist or are being developed continuously. Cards Credit cards, debit cards and prepaid cards currently represent the most common form of electronic payments. For all 3 types of cards the the cons consum umer er or the the busi busine ness ss most most ofte often n uses uses a plas plasti tic c card card,, commonly with a magnetic stripe. The cardholder gives his or her card or card number to a merchant who swipes the card through a terminal or enters the data to a PC. The terminal transmits data to his or her bank, the acquirer. The acquirer transmits the data through a card association to the card issuer who makes a decision on the transaction and relays it back to the merchant, who gives goods or services to the cardholder. Funds flow later for settlement with credit cards and are debited immediately for debit or pre-paid cards. Along with magn magnet etiic strip ripe cards rds, smart cards are are and will increa increasi singl ngly y be used used for for paym payment ents. s. Smar Smartt cards cards are at prese present nt 6
overwhelmingly plastic credit cards with an embedded computer chip. Until recently, many smart cards operated using proprietary rather than common standards. A standard set of specifications, EMV, has been developed and is being used increasingly so that the chips on smart cards are interoperable. interoperable. Korea and Japan are among the most advanced countries in Asia for smart card payments, with Malaysia catching up fast due to government mandates for banks to issue smart cards. Most credit and debit cards are expected to be issued or reissued as smart cards by 2008 or earlier. Over time, the chip for payment can be expected to move onto other devices. A “smart card” might then become the computer chip in a phone, PDA or other device that can perform the same function as chip in a plastic plastic card, eliminating eliminating the need for the actual plastic plastic card. Smart cards could thus evolve into “smart phones”, “smart PDAs” or other “smart” devices. Internet Online payments involve the customer transferring money or making a purchase online via the internet. Consumers and businesses can transfer money to third parties from the bank or other account, and
7
hey can also use credit, debit and prepaid cards to make purchases online. Curr Curren entt est estimat imates es are are that that over over 80% 80% of pay payment ments s for for onli online ne purchases are made using a credit card or debit card. At present, most online transactions involve payment with a credit card. While other forms of payment such as direct debits to accounts or pre-paid accounts and cards are increasing, they currently represent a less developed transaction methodology. Mobile Payments Mobile phones are currently used for a limited number of electronic transactions. However, the percentage seems likely to increase as mobile phone manufacturers enable the chip and software in the phone for easier electronic commerce. Consumers can use their mobile phone to pay for transactions in several ways. Consumers may send an SMS message, transmit a PIN number, use WAP to make online payments, or perform other segments of their transaction with the phone. As phones develop further, consumers are likely to be able to use infrared, Bluetooth and
8
other means more frequently to transmit full account data in order to make payments securely and easily from their phone. Additionally, merchants can obtain an authorization for a credit or debit card transaction by attaching a device to their mobile phone. A conso consorti rtium um in the the US also also rece recent ntly ly annou announc nced ed Powe PowerS rSwi wipe, pe, for for example, which physically connects to a Nextel phone, weighs 3.1 ounces, and incorporates a magnetic stripe reader, infrared printing port, and pass-through connector for charging the handset battery. Financial Service Kiosks Comp Compani anies es and and serv servic ice e provi provider ders s in seve several ral count countri ries es,, incl includi uding ng Singapore and the US, have set up kiosks to enable financial and non-financial transactions. These kiosks are fixed stations with phone conn connec ecti tion ons s wher where e the the cust custom omer er usua usuall lly y uses uses a keyb keyboa oard rd and and television-like screen to transaction or to access information. At AXS stations in Singapore, for example, consumers can make electronic bill payments, send email or SMS message and make phone calls. Kiosks in the United States enable the customer to send
9
money via wire transfers, cash checks, make purchases using cash, and make phone calls. Loca Locate ted d at conv conven enie ient nt publ public ic loca locati tion ons s such such as bus bus or subwa ubway y stations, convenience stores or shopping malls, these kiosks enable electronic electronic payments by individuals individuals who may not have regular access to the internet or mobile phones. Television Set-Top Boxes and Satellite Receiver Spec Special ializ ized ed boxes boxes attac attache hed d to a tele televi visi sion on can can also also be used used for for paym paymen ents ts in some some loca locati tion ons. s. The The setset-to top p box box atta attach ches es to the the television and a keyboard or other device, and customers can make purch purchas ases es by view viewin ing g items items on the the tele televi visi sion. on. Paym Payment ent is made made electronically using a credit card or other account. While usage is presently low, it could grow substantially in countries with a strong cable or satellite television network. Biometric Payments Electronic Electronic payments using biometrics biometrics are still largely in their infancy. Trials are underway in the United States, Australia and a limited number of other countries. Most biometric payments involve using
10
fingerprints as the identification and access tool, though companies like Visa International are piloting voice recognition technology and retina scans are also under consideration. Essentially, a biometric identifier such as a fingerprint or voice could replace the plastic card and more securely identifies the person undertaking the transaction. The elec electr troni onic c payme payment nt is stil stilll char charged ged to a cred credit it card card or othe other r account account,, with with the biomet biometric ric identif identifier ier replaci replacing ng the card, card, check check or other transaction mechanism. Electronic Payments Networks Various countries have electronic electronic payments networks that consumer consumer can use to make payments electronically. ACH (Automated Clearing Hous House) e) in the US, US, domes domesti tic c EFTP EFTPOS OS netw networ orks ks in Aust Austral ralia ia and Singapore, and other networks enable electronic payments between businesses and between individuals. The consumer can go online, to a financial service kiosk or use other front-end devices to access their account and make payments to businesses or other individuals.
11
Person-to-Person (P2P) Payments P2P P2P paym paymen ents ts enab enable le one one indi indivi vidu dual al to pay pay anot anothe herr usin using g an account, a prepaid card or another mechanism that stores value. PayPal in the US, which was recently purchased by Ebay, is one of the the most most freq freque uent ntly ly used used P2P P2P mech mechan anis isms ms.. The The Towe Towerr Grou Group p estimates that the volume of P2P payments will grow from 105 million transactions in 2002 to 1.4 billion transactions by 2005. P2Ppayments can be made through a variety of means, including services like PayPal, transfers using card readers, or other. In the future other devices, such as mobile phones or PDAs, could also be used to enable P2P electronic payments.
12
13
Legal Framework
A numb number er of rece recent nt EU legal egal acts acts aim aim at fost foste ering ring elec electtroni ronic c commer commerce ce and ensu ensuri ring ng a legal legally ly safe safe and and soun sound d condu conduct ct of epayments: – E-commerce Directive – E-money Directives – E-signature Directive – Prudential supervision and related Directives Commis Commissio sion n is current currently ly consul consultin ting g the public public on a possib possible le legal legal framework for the Single Payment Area in the Internal Market
Electronic signatures, a means of verifying the identity of the user of a computer system to control access or authorize a transaction, are increasingly being used in electronic commerce. Several technologies can be used to produce electronic signatures, the most prominent being being digi digita tall signa signatu tures res,, whic which h use use cryp cryptog tograp raphi hic c techn techniq ique ues s to prov provid ide e
data data
inte integr grit ity y
and and
nonnon-re repu pudi diat atio ion. n.
Othe Otherr
legi legisl slat atio ion n
14
introduced but not enacted was intended to promote federal agency use of electronic signatures to enable electronic filing of information.
Elec Electr tron onic ic sign signat atur ures es are are meth method ods s used used to prov provid ide e electronic authentication, a proc proces ess s of veri verify fyin ing g the the iden identi tity ty of user users s of a
compu compute terr in order order to contr control ol acce access ss or autho authoriz rize e trans transac acti tions ons.. In many states and industry sectors, electronic signatures attached to are legal legally ly recogn recogniz ized ed in the same same manne mannerr as electroni electronic c records records are handwritten signatures on paper. Electronic signatures are used to establish identity in electronic commerce, and to control access to fac facilit ilitie ies s
or
syst system ems s.
Elec lectron troniic
signa ignattures ures
are are
eith either er
bein being g
imple impleme ment nted ed or plan planned ned for for medi medica call and finan financi cial al reco records rds,, and and various various governm government ent transac transactio tions. ns. The follow following ing technol technologi ogies es are forms of electronic signatures at various levels .
•
Password or Personal Identification Number (PIN)—a (PIN) —a set of numbers or characters shared only by the system and the user, and usually encrypted if the authentication occurs over an open network
15
•
Smart card—a card—a plastic card similar to a credit card, except that it conta contain ins s a micr microp oproc roces esso sorr that that can can gener generat ate, e, store store,, and process data, and can be programmed to be activated only when the user enters a PIN or other identifier. Together with a reader reader devic device, e, smart smart cards cards are CRSCRS-2 2 used used for for tele telepho phone ne calling, electronic cash payments, access to ATMs, and to store medical or financial data for individuals, and provide greater security than a PIN, because the user must have both the card and the PIN.
•
Biometrics—technologies Biometrics —technologies for measuring and analyzing human body characteristics such as fingerprints, eye retinas and irises, voic voice e patte patterns rns,, faci facial al patt patter erns ns and and hand hand measu measurem rement ents s to authen authenti tica cate te thei theirr ident identit ity. y. read eader or
sensor,
Biom Biomet etric ric devi device ces s cons consis istt of a
software are
that
conver nvertts
the
rec receiv eived
information into digital form (i.e., a series of binary digits or bits), and if the data are analyzed, a database to store an indivi individual dual's 's known known biomet biometric ric data data with with the entered entered biometr biometric ic data. •
Digitized Digi tized signat signature ure—A —A grap graphi hica call imag image e of a hand handwr writ itte ten n signature, usually entered using a special digital pen and pad
16
input input device device.. The input input signatu signature re is automat automatica ically lly compare compared d with a stored copy of the digitized signature of the user, and authen authenti tica cate ted d if the the two two sign signat ature ures s meet meet spec specif ific icat ation ions s for similarity. •
Digital signature—an signature—an electronic signature that is produced on a message using a key that is known only by the signer, and a signature algorithm that is publicly known. The digital signature is unique to each message and key combination. It can be used to verify the identity of the signer and to provide data integrity . It can also be used to prove to a third party that the signature was in fact signed by the signatory known as non repudiation.
An overview of the electric payments systems Before proceeding to discuss the electric payments systems, let’s have a look at the conventional process of payment and settlement. In the conventional process, after a buyer decides to buy goods and services from a merchant, the merchant will transfer these goods and services to the buyer and the buyer will transfer cash or payment information (such as check, and credit card information…) back to the merchant In the cash transaction: Cash moves from the buyer’s account to the merchant’s account via face to face exchanges: The buyer buyer withdra withdraws ws a certai certain n amount amount of money money from his account
17
-
He transfers the cash to the seller.
-
The seller deposits the cash into his account.
In the non-cash transaction. The The buye buyerr will will tran transf sfer er the the pay payment ment info inform rmat atio ion n to the the merchant. Adjusting the appropriate accounts of the seller and buyer (via check or credit card) card) (If the merchant uses uses different different bank from the buyer, a payment clearing service between 2 banks will be necessary in order to adjust appropriate accounts in different bank Figure 2)
With With the the devel developm opment ent of the the Intern Internet, et, it prov provid ides es the the buyer buyer and merchant the ability to do the online transaction transaction instead of the above non-c non-cas ash h trans transact action ion proce process ss.. In this this type type of syst system em (elec (electr troni onic c check, online credit card…), the sensitive information is transferred online along with the orders through the internet. In addition, because the transaction is done online, the probability using different banks (or banks located in different countries) between the merchant and buyer is high. Therefore, the payment clearing services is added in order to adjust appropriate merchant and buyer bank’s accounts
18
When we come to the e-commerce transaction, the lack of face to face face inter interac acti tion on make makes s some some probl problem ems s about about the the secu securit rity y of the sens ensitive inform ormation and iden dentity. As a resul esultt, we need an inte interm rmed edia iary ry part party y (Pay (Paypa pal, l, goog google le chec checko kout ut…) …) to prov provid ide e the the security, identification as well as payment support. In this process, the buye buyerr don’ don’tt need need to trans transfe ferr his his sens sensit itiv ive e info informa rmati tion on to the the merchant but to the intermediary and the intermediary will confirm the identification of the buyer to the merchant (Noted that the transaction between the intermediary and the banks can be performed in another type of electronic payment or conventional process).
19
,
20