Electronic Payment Systems

Dr. Donal O’Mahony

Director,Networks & Telecommunications Research Group,

Trinity College Dublin

Introduction

Academic at Trinity College, Dublin, Ireland Author and Reseacher

in the areas of– Mobile and Wireless

Communications

– Cryptographic Applications• Electronic Payment

• Trust Building

Outline

The ‘Net Effect’ on Payment/E-Payment Impact on Developed Countries Starting point for Developing Nations New Opportunities

Conventional Payment Mechanisms in United States Approx 80% of payments in Cash

International Trade involves Wire Transfers, Letters of Credit etc.

Non-CashPayment Instrument

Trans. Volume

Trans. Value

Average Value

Check 71% 10% $1,179

C/D Card 25% 0.1% $59

C/D Transfer by ACH

2.5% 2% $2,000

Wire Transfer 0.1% 86% $4.3m

1999 – Source BIS

Retail Payments – Net Evolution

Cash – evolving (very slowly) to Internet based systems such as Paypal

Credit-Card based systems– Ideal for Internet – already a global payment method –

tradition of ‘card-not-present’

– Combined with Secure Socket Layer, it is used for almost all retail E-commerce – high fraud rate

Retail Check – being eroded by Electronic Bill Payment, electronic home banking

Trade Payments – Net Evolution Check Payments migrating to Electronic Transfers

– in the U.S. via the Automated Clearing House (ACH) networks– FSTC E-check and BIPS Projects

ACH Transfers growing in importance– European Initiatives: STEP1 (<€50K)– Global Initiatives : WATCH, CLS– Internet access to these is coming

Total trading Systems– Bolero, Tradecard

Other Aspects of Electronic Trading Electronic Trust building becoming more

common– Legislative Changes in E-Commerce in Europe,

US and Asia enable this– PKI Infrastructure being (slowly) built

• Verisign• Identrus• Wisekey

– In combination with E-payments…will enable complete transactions on-line

Conventional Payments in Developing Countries Generally less developed banking industry Credit Cards not widely available More reliance on paper Foreign Exchange transactions more

problematic Being left out of new payment initiatives

Currently19+ 1032 +

New Opportunities On the Internet

no-one knows you are a dog

Internet banking infrastructure ischeap and easy tobuild.. Opportunity toleap-frog

Open standards levelthe paying field

Must work with newstandards