Chapter 6.docx

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Information Technology Management
ITM 350
Franklyn Prescod

Chapter 6 – Billing and Payment Systems Introduction  More on pg 114-115 Characteristics of Traditional Payment Systems Electronic Data Interchange (EDI)  EDI is a way to conduct transactions including payment transactions in electronic form o Persons using EDI must be signatories to an EDI agreement & must have their information systems configured to be able to recognize & process the transactions  EDI used VAN as platform for operation initially  Value-added networks (VANs) are privately owned networks that are rented to users, along with a package of related services, to operate their EDI systems by providing an environment within which they can work & by connecting them to their customers & suppliers  EDI was mostly used in large companies & was expensive o EDI has moved from VANs to the web & web is a more cost-effective platform for EDI transactions o This streamlined payment systems for B2B commerce Cash  Cash is widely accepted by almost everyone o It is portable cuz it can be carried easily by a person o Widely accepted by stores, other companies & other people  Cash has 4 characteristics o Portability  Electronic cash payment can be transported from one place to another over the internet o Acceptance  Acceptance of cash depends on the strength of the economy, the stability of the currency & the extent to which it is used  On internet, acceptance of electronic cash has not been easy to achieve except in the form of prepaid money cards that can be loaded on the internet but are spent at retail stores o Anonymity  The anonymity provided by cash is of particular interest in web-based transactions & may be the most important attribute due to widespread concerns about the privacy of personal information on the web o Instant Transfer of Value  Cash has instant transfer of value unlike credit cards Digital Cash  ECash developed by DigiCash is the closest to approximating the attributes of real cash o ECash was built on the basis of public key cryptography involving the use of a private key to sign messages & a public key to verify signatures (ex. on pg 117- 118) Digital Cheques  Cheques are most useful for dealing with long-term, regular customers  Digital environment also attempted to use cheques as a method of payment, for instance NetCheck o NetCheck makes use of cryptography to provide the signatures & endorsements that are used in processing paper-based cheques o They operate the same way as paper-based cheques & can be used with existing chequing accounts & contain all the same information  FSTC (Financial Services Technology Consortium) has done some work on carrying out research & development of technology-based solutions to meet financial services industry needs mainly electronic payment systems, ecommerce & information delivery (ex. of projects on pg 118) eCheck  eCheck website says that its digital cheques (more on pg 119)  eChecks work in exactly the same way as paper cheques do except for the electronic part (ex. of process on pg 119-120)  eChecks are based on Financial Services Markup Language (FSML) (a variation of HTML) o FSML includes  Digital signatures  Digital certificates  Other encryption-based features  An electronic cheque under the FSTC approach would be created by a smart card “chequebook” that would include a digital signature for the cheque along with all the information that would be included on a normal cheque o Smartcard provides a degree of security cuz the smartcard is not connected to computer system & has its own password system  Another project taken by the FSTC on cheque imaging involves the creation of a digitized image of a cheque by the payee’s bank at the time of deposit o The bank then sends the digital image through the payment clearing system o Purpose is to speed up the payment process & reduce the opportunity for fraud o Problems with cheque imaging  Large file size requires very high bandwidth  Legal system has not recognized imaged cheques Credit Cards  Companies want to provide customers with secure websites to process credit card transactions as o Customers do want their CC information made public o Customers do not want their personal information passed without their permission o Companies want to safeguard their customers’ interests o Companies want to avoid possibility of lawsuit being brought against the company if a web customer’s CC or personal information is illegally used  Most companies that accept credit cards online have adopted measures such as encryption using SSL/HTTPS protocols o SSL/HTTPS protocols are protocols for sending encrypted data from a web browser to a server  Credit card online fraud is triple the rate of bricks-and-mortar fraud  Secure electronic transaction (SET) protocol is a method of securing credit card transactions using encryption & authentication technology  Other than credit card fraud, there is also the issue of transaction costs o Merchant accounts offered by
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