ims 6485: e-commerce security & payment systems 1 dr. lawrence west, mis dept., university of...
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IMS 6485: E-Commerce Security & Payment Systems
1Dr. Lawrence West, MIS Dept., University of Central [email protected]
Topics
• Payments in the Value Chain
• Payment Processing—old and new
• Market Spaces—This space for rent
• Desirable properties of payment systems
• A laundry list of payment options—pros & cons
• Three 900 lb Gorillas
• PayPal
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IMS 6485: E-Commerce Security & Payment Systems
2Dr. Lawrence West, MIS Dept., University of Central [email protected]
Chapter Topics
• Two versions of this book past had payment systems and security in their own chapters
• Why do you think that the authors chose to combine them in this edition?
– What do the two have in common?
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IMS 6485: E-Commerce Security & Payment Systems
3Dr. Lawrence West, MIS Dept., University of Central [email protected]
Security Threats
• What are the categories of security threats identified in the chapter (12 pages worth)?
• If you are a firm engaged in e-commerce what is your relationship to the threat?
– Victim (if so, how)?
– Innocent bystander?
– Are your customers victims (if so how)?
– Do your customers perceptions of threats affect their dealings with you?
• What actions are in your decision space?
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IMS 6485: E-Commerce Security & Payment Systems
4Dr. Lawrence West, MIS Dept., University of Central [email protected]
Dimensions of Security
• Map the threats identified in the chapter to the six dimensions of e-commerce security (Which dimension(s) can each threat impact?)
– Integrity − Confidentiality
– Nonrepudiation − Privacy
– Authenticity − Availability
• How does the threat impact your business?(What is the mechanism through which you lose money)?
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IMS 6485: E-Commerce Security & Payment Systems
5Dr. Lawrence West, MIS Dept., University of Central [email protected]
Security Remediation/Counter Measures
• Encryption—what are the tradeoffs?
– What are the network effects?
• Securing communication channels—what are the options and tradeoffs
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IMS 6485: E-Commerce Security & Payment Systems
6Dr. Lawrence West, MIS Dept., University of Central [email protected]
Security Planning
• Will you base your firm's security plan on the three pages of content at the beginning of Section 5.4?
• So what should you do?
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IMS 6485: E-Commerce Security & Payment Systems
7Dr. Lawrence West, MIS Dept., University of Central [email protected]
Security Tradeoffs
• What are the examples of tradeoffs between security measures and usability?
• Can you give examples of common "tensions" associated with security implementation?
• Who makes the decisions when improved security requires decreased usability?
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IMS 6485: E-Commerce Security & Payment Systems
8Dr. Lawrence West, MIS Dept., University of Central [email protected]
Public Policy
• How might public policy, including regulatory requirements, affect your e-commerce business?
• How might public attitudes regarding Internet security affect your business?
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IMS 6485: E-Commerce Security & Payment Systems
9Dr. Lawrence West, MIS Dept., University of Central [email protected]
Payments Occur Throughout the Value Chain
TRANS-PORTATIONCOMPANY
BROKER
INFORMATION FLOWS(SELLERS TO BUYERS)
FLOW OF GOODS
ADVERTISING .
INVOICE .
ORDER INFORMATION .
INFORMATION FLOWS(BUYERS TO SELLERS)
REQUEST INFORMATION .
PLACE ORDER .
MAKE PAYMENTS .
Animal
Vegetable
Mineral
INVENTORY
INVENTORY
INVENTORY
FACTORYWHOLE-SALER
INTERMEDIATE
GOODS
WHOLE-SALER
RETAILER
Where did the majorityof the chapter's focus
apply?
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IMS 6485: E-Commerce Security & Payment Systems
10Dr. Lawrence West, MIS Dept., University of Central [email protected]
Audiences for Payment Processing
• Who have been the traditional participants in payment processing (prior to eCommerce)?
• Who are the new participants in eCommerce payment processing?
• How have traditional participants entered the new market space?
• Have new participants integrated into traditional market spaces?
• What decisions does each participant make
– (And what are the implications for you?)
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IMS 6485: E-Commerce Security & Payment Systems
11Dr. Lawrence West, MIS Dept., University of Central [email protected]
Market Spaces
• What specific market spaces did the chapter discuss?
– PayPal case?
• What market spaces were created with the advent of eCommerce?
• Which has been the most troublesome to fill?
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IMS 6485: E-Commerce Security & Payment Systems
12Dr. Lawrence West, MIS Dept., University of Central [email protected]
Market Spaces (cont.)
• What are the limitations of existing payment systems when used on the web?
– Cash
– Checks
– Credit Cards
• Do these limitations create new market spaces (or opportunities)?
• Are there network effects associated with payment systems?
– Don't just think e-commerce
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IMS 6485: E-Commerce Security & Payment Systems
13Dr. Lawrence West, MIS Dept., University of Central [email protected]
Desirable Payment System Properties
• What are the desirable properties of an eCommerce payment system from the consumer's point of view?
• From the merchant's point of view?
• What are the differences in the list?
• Again, how do these differences create a market for new services (market spaces)?
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IMS 6485: E-Commerce Security & Payment Systems
14Dr. Lawrence West, MIS Dept., University of Central [email protected]
Consumer Preference
• What cultural/regional differences in the acceptability of payment systems did you notice in the chapter?
• Where else were consumer preferences (taste) listed as limitations on the acceptance of electronic payment services?
– Do you share these hesitations?
– Which do you think are more likely to persist?
– Which more likely to become more acceptable over time?
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IMS 6485: E-Commerce Security & Payment Systems
15Dr. Lawrence West, MIS Dept., University of Central [email protected]
Digital Cash
• Digital Cash sought to create a new medium for the Internet that avoided issues with traditional payment forms
• Previous editions of the text listed five examples of "digital cash" services
– Three are out of business
– One is under indictment
• What pressures and economic principles that we have talked about do these new cash substitutes struggle against?
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IMS 6485: E-Commerce Security & Payment Systems
16Dr. Lawrence West, MIS Dept., University of Central [email protected]
Digital Cash (cont.)
• Exercise: Research the following two companies and decide whether you would wish to be involved with them as either a customer or merchant
– E-gold
– ClearBIT
• Justify your answers
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IMS 6485: E-Commerce Security & Payment Systems
17Dr. Lawrence West, MIS Dept., University of Central [email protected]
Stored Value Systems
• What new revenue model is introduced with stored value systems?
• BitPass micropayment system ceased operations in Jan 2007—what hurdle did they need to overcome?
• Did "smart cards" really address eCommerce needs?
– Efforts by American Express and Visa in the U.S. to marry the functionality of their credit cards with that of smart cards have largely failed. (Earlier Edition)
• But why has the Octopus smart card been such a resounding success in Hong Kong?
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IMS 6485: E-Commerce Security & Payment Systems
18Dr. Lawrence West, MIS Dept., University of Central [email protected]
Digital Accumulating Balance Systems
• What traditional services have used accumulating balance systems (since well before the Internet, or even computers)?
• What market space do these systems address in the digital age?
• What implementing decisions must be made?
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IMS 6485: E-Commerce Security & Payment Systems
19Dr. Lawrence West, MIS Dept., University of Central [email protected]
Digital Credit Cards
• What market space do these cards seek to occupy?
• Go to http://www.echarge.com/index.html.
– Would you sign up with this service?
• Go to http://www.billmelater.com
– Would you sign up?
– What hidden (not very well publicized) agreement are buyers making?
– What does this site offer that few of the others did (well)?
– What revenue models are they using?
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IMS 6485: E-Commerce Security & Payment Systems
20Dr. Lawrence West, MIS Dept., University of Central [email protected]
Digital Check Payment Systems
• How many of you have used a virtual check to make a payment?
• What market space does the electronic check seek to inhabit?
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IMS 6485: E-Commerce Security & Payment Systems
21Dr. Lawrence West, MIS Dept., University of Central [email protected]
Electronic Billing Presentment & Payment
• What do you think is the driving factor behind this capability?
– Hint: Who pays and who benefits?
– What is the nature of the benefit?
• How many of you have elected paperless bills from a vendor from which you receive regular bills?
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IMS 6485: E-Commerce Security & Payment Systems
22Dr. Lawrence West, MIS Dept., University of Central [email protected]
B2B Payment Systems
• The book gives short coverage to B2B payment systems
• 75-85% of B2B payments in the U.S. still use paper checks
– Why the resistance?
– Small and mid-size firms in the U.S. reportedly spend around $14.50 to produce, deliver, collect, and report a paper invoice
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IMS 6485: E-Commerce Security & Payment Systems
23Dr. Lawrence West, MIS Dept., University of Central [email protected]
Three 900 lb. Gorillas in Payment Systems
• What have been/are/will be the impacts of these factors on the eCommerce payment market?
1. Network externalities
2. Consumer taste (preference)
3. Micropayments
• Also—what opportunities have we seen for leverage in payment systems?
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IMS 6485: E-Commerce Security & Payment Systems
24Dr. Lawrence West, MIS Dept., University of Central [email protected]
PayPal—Why has it Worked?
• PayPal does a lot of online business
• How does it work?
– What steps does user have to take to make payments?
– Receive payments?
– Who pays?
• Why does it work?