Electronic Payment Systems
and Security
Learning Objectives
Describe typical electronic payment systems for EC
Identify the security requirements for safe electronic
payments
Describe the typical security schemes used to meet
the security requirements
Identify the players and procedures of the
electronic credit card system on the Internet
Discuss the relationship between SSL and SET
protocols
Discuss the relationship between electronic fund
transfer and debit card
Describe the characteristics of a stored value
card
Classify and describe the types of IC cards used
for payments
Discuss the characteristics of electronic check
systems
SSL Vs. SET: Who Will Win?
A part of SSL (Secure Socket Layer) is available
on customers’ browsers
it is basically an encryption mechanism for order taking, queries and other applications
it does not protect against all security hazards
it is mature, simple, and widely use
SET ( Secure Electronic Transaction) is a very
comprehensive security protocol
it provides for privacy, authenticity, integrity, and, or repudiation
it is used very infrequently due to its complexity and the need for a special card reader by the user
Payments, Protocols and Related Issues
SET Protocol is for Credit Card Payments
Electronic Cash and Micropayments
Electronic Fund Transfer on the Internet
Stored Value Cards and Electronic Cash
Security requirements
Payments, Protocols and Related Issues
(cont.)
Authentication: A way to verify the buyer’s identity
before payments are made
Integrity: Ensuring that information will not be
accidentally or maliciously altered or destroyed, usually during transmission
Encryption: A process of making messages
indecipherable except by those who have an authorized decryption key
Non-repudiation: Merchants need protection
against the customer’s unjustifiable denial of placed orders, and customers need protection against the merchants’ unjustifiable denial of past payment
Security Schemes
Secret Key Cryptography (symmetric)
Scrambled Message Original Message Sender Internet Scrambled Message
Keysender (= Keyreceiver)
Encryption Original Message Receiver Keyreceiver Decryption
Public Key Cryptography
Sender Original Message Scrambled Message Scrambled MessagePublic Keyreceiver
Original Message Receiver Private Keyreceiver
Internet
Security Schemes
(cont.)
Message Sender Original Message Scrambled Message Scrambled Message
Private Keysender
Original Message Receiver Public Keysender
Internet
Digital Signature
Digital Signature
A digital signature is attached by a sender to a message
encrypted in the
receiver’s public key
The receiver is the only one that can read the
message and at the same time he is assured that the message was indeed sent by the sender
Sender encrypts a message with her private key
Any receiver with senders public key can read it
Security Schemes
(cont.)
Certificate
Name : “Richard” key-Exchange Key : Signature Key : Serial # : 29483756 Other Data : 10236283025273 Expires : 6/18/96Signed : CA’s Signature
Security Schemes
(cont.)
Identifying the holder of a public key (Key-Exchange)
Certificate Authority
- e.g. VeriSignRCA BCA GCA
CCA MCA PCA
RCA : Root Certificate Authority BCA : Brand Certificate Authority
GCA : Geo-political Certificate Authority CCA : Cardholder Certificate Authority MCA : Merchant Certificate Authority PCA : Payment Gateway
Certificate Authority
Hierarchy of Certificate Authorities
Certificate authority needs to be verified by a government or well trusted entity ( e.g., post office)
Security Schemes
(cont.)
Public or private, comes in levels (hierarchy)
A trusted third party services
Issuer of digital certificates
Verifying that a public key indeed belongs to a certain individual
Electronic Credit Card System
on the Internet
The Players
Cardholder Merchant (seller)Issuer (your bank)
Acquirer (merchant’s financial institution, acquires the sales slips)
The process of using credit cards offline
A cardholder requests the issuance of a card brand (like Visa and MasterCard) to an issuer bank in which the
cardholder may have an account.
Electronic Credit Card System
on the Internet
(cont.)
The authorization of card issuance by the issuer bank, or its designated brand company, may require
customer’s physical visit to an office.
A plastic card is physically delivered
to the customer’s address by mail. The card can be in effect as the
cardholder calls the bank for
initiation and signs on the back of the card.
The cardholder shows the card to a merchant to pay a requested
amount. Then the merchant asks for approval from the brand
company. Upon the approval, the merchant requests payment to the merchant’s acquirer bank, and pays fee for the service. This process is called a
“capturing process” The acquirer bank requests the
issuer bank to pay for the credit amount.
Cardholder Merchant
credit card
Card Brand Company
Payment authorization, payment data Issuer Bank Cardholder Account Acquirer Bank Merchant Account
account debit data payment data
Credit Card Procedure (offline and online)
14 payment data
amount transfer
Secure Electronic Transaction (SET)
Protocol
1. The message is hashed to a prefixed length of message digest.
2. The message digest is encrypted with the sender’s private
signature key, and a digital signature is created.
3. The composition of message, digital signature, and Sender’s
certificate is encrypted with the symmetric key which is
generated at sender’s computer for every transaction. The result is an encrypted message. SET protocol uses the DES algorithm instead of RSA for encryption because DES can be executed much faster than RSA.
4. The Symmetric key itself is encrypted with the receiver’s public
key which was sent to the sender in advance. The result is a digital envelope.
15
Sender’s Computer Sender’s Private Signature Key Sender’s Certificate + + Message + Digital Signature Receiver’s Certificate Encrypt Symmetric Key Encrypted Message Receiver’s Key-Exchange Key Encrypt Digital Envelope Message Message Digest 16
5. The encrypted message and digital envelope are transmitted to receiver’s computer via the Internet.
6. The digital envelope is decrypted with receiver’s private
exchange key.
7. Using the restored symmetric key, the encrypted message can
be restored to the message, digital signature, and sender’s certificate.
8. To confirm the integrity, the digital signature is decrypted by sender’s public key, obtaining the message digest.
9. The delivered message is hashed to generate message digest.
10. The message digests obtained by steps 8 and 9 respectively,
are compared by the receiver to confirm whether there was any change during the transmission. This step confirms the integrity.
Receiver’s Computer
Secure Electronic Transaction (SET)
Protocol
(cont.)
Receiver’s Computer Decrypt Symmetric Key Encrypted Message Sender’s Certificate + + Message compare Digital Envelope Receiver’s Private Key-Exchange Key Decrypt Message Digest Digital Signature Sender’s Public Signature Key Decrypt Message Digest 18
Entities of SET Protocol in Cyber Shopping
IC Card Reader
Customer x Customer y With Digital Wallets
Certificate Authority
Electronic Shopping Mall Merchant A Merchant B Credit Card Brand Protocol X.25 Payment Gateway 19
SET Vs. SSL
Secure Electronic Transaction (SET) Secure Socket Layer (SSL)
Complex Simple
SET is tailored to the credit card payment to the merchants.
SSL is a protocol for general-purpose secure message
exchanges (encryption).
SET protocol hides the customer’s credit card information from
merchants, and also hides the order information to banks, to protect privacy. This scheme is called dual signature.
SSL protocol may use a certificate, but there is no payment gateway. So, the
merchants need to receive both the ordering information and credit card information, because the capturing process should be initiated by the merchants.
Electronic Fund Transfer (EFT)
on the Internet
An Architecture of Electronic Fund Transfer on the Internet
Internet Payer Cyber Bank Bank Cyber Bank Payee Automated Clearinghouse VAN Bank VAN Payment Gateway Payment Gateway
Debit Cards
A delivery vehicle of cash in an electronic
form
Mondex, VisaCash applied this approach
Either anonymous or onymous
CyberCash has commercialized a debit card
named CyberCoin as a medium of
micropayments on the Internet
Financial EDI
It is an EDI used for financial transactions
EDI is a standardized way of exchanging messages
between businesses
EFT can be implemented using a Financial EDI system
Safe Financial EDI needs to adopt a security
scheme used for the SSL protocol
Extranet encrypts the packets exchanged between
senders and receivers using the public key
Electronic Cash and Micropayments
Smart Cards
The concept of e-cash is used in the non-Internet environment
Plastic cards with magnetic stripes (old technology)
Includes IC chips with programmable functions on them which makes cards “smart”
One e-cash card for one application
Recharge the card only at designated locations, such as bank office or a kiosk. Future: recharge at your PC
Mondex Makes Shopping Easy
Shopping with Mondex
Adding money to the card
Payments in a new era of electronic
shopping
Electronic Money
DigiCash
The analogy of paper money or coins
Expensive, as each payment transaction must
be reported to the bank and recorded
Conflict with the role of central bank’s bill issuance
Legally, DigiCash is not supposed to issue more than an electronic gift certificate even though it may be accepted by a wide number of member stores
Stored Value Cards
Electronic Money
(cont.)
No issuance of money
Debit card — a delivering vehicle of cash in an electronic form
Either anonymous or onymous
Advantage of an anonymous card
the card may be given from one person to another
Also implemented on the Internet without employment of an IC card
Smart card-based e-cash
Can be recharged at home through the Internet
Can be used on the Internet as well as in a non-Internet environment
Ceiling of Stored Values
To prevent the abuse of stored values in money laundry
S$500 in Singapore; HK$3,000 in Hong Kong
Multiple Currencies
Can be used for cross border payments
Contactless IC Cards
Proximity Card
Used to access buildings and for paying in buses and other transportation systems
Bus, subway and toll card in many cities
Amplified Remote Sensing Card
Good for a range of up to 100 feet, and can be used for tolling moving vehicles at gates
Pay toll without stopping (e.g. Highway 91 in California)
Electronic Check Systems
Check Signature Remittance Invoice Secure Envelope Remittance Check Signature Certificate Certificate Remittance Secure Envelope Certificate Certificate Endorsement Certificate Certificate Signature “Card” Signature “Card” Workstation Mall statement E-Check line itemPayer’s Bank Debit account Payee’s Bank Credit account E- Mail WWW ACH ECP
Clear Check Deposit check
Payer Payee
Account Receivable
Electronic Checkbook
Electronic Check Systems
(cont.)
Counterpart of electronic wallet
To be integrated with the accounting information system of business buyers and with the payment server of sellers
To save the electronic invoice and receipt of
payment in the buyers and sellers computers for future retrieval
Example : SafeCheck
Payer’s checkbook agent Payee’s check-receipt agent Payer Payee Issue a check Receipt A/C DB A/C DB control agent of payer’s bank control agent of payee’s bank clearing Checkbook, screened result Request of screening check issuance present report
payer’s bank payee’s bank
Internet
Integrating Payment Methods
Two potential consolidations:
The on-line electronic check is merging with EFT
The electronic check with a designated
settlement date is merging with electronic credit cards
Security First Network Bank (SFNB)
First cyberbankLower service charges to challenge the service fees of traditional banks
Visa
VisaCash is a debit card
How Many Cards are Appropriate?
An onymous card is necessary to
keep the certificates for credit cards, EFT, and electronic checkbooks
The stored value in IC card can be delivered
in an anonymous mode
Malaysia’s Multimedia Supper Corridor project pursues a One-Card system
Relationship Card by Visa is also attempting a one card system
Five Security Tips
Don’t reveal your online Passcode to anyone. If you think
your online Passcode has been compromised, change it immediately.
Don’t walk away from your computer if you are in the
middle of a session.
Once you have finished conducting your banking on the
Internet, always sign off before visiting other Internet sites.
If anyone else is likely to use your computer, clear your
cache or turn off and re-initiate your browser in order to eliminate copies of Web pages that have been stored in your hard drive.
Bank of America strongly recommends that you use a
browser with 128-bit encryption to conduct secure financial transactions over the Internet.
Managerial Issues
Security solution providers can cultivate the opportunity of providing solutions for the secure electronic payment systems
Electronic payment system solution providers can offer various types of electronic payment systems to electronic stores and banks
Electronic stores should select an appropriate set of electronic payment systems
Banks need to develop cyberbank services to be compatible
with the various electronic payment system
Credit card brand companies need to develop an EC standard like SET, and watch the acceptance by customers
Smart card brand should develop a business model in cooperation with application sectors and banks
Certificate authority needs to identify the types of certificate to provide
