computer subject related
Electronic payment systems overview of basic concepts credit-card based systems (MOTO, SSL, SET) electronic cash systems (DigiCash) micropayment schemes (PayWord, probabilistic schemes)
Overview of basic concepts brief history of money traditional forms of payment
– cash
– payment through bank
– payment cards
Overview of basic concepts
electronic payment systems
– security requirements
– basic classification
© Levente Buttyán
2
1
A brief history of money barter – most primitive form of payment
– still used in primitive economies or under exceptional conditions
– problem: “double coincidence of wants”
• you want to change food for a bicycle
• you need to find someone who is hungry AND has a spare bicycle
commodity money
– physical commodities which have recognized value
Overview of basic concepts
e.g., salt, gold, corn, …
– desirable properties
• portability
• divisibility
gold and silver coins became the most commonly used
© Levente Buttyán
3
A brief history of money (cont’d) commodity standard
– ~ 19th century
– use of tokens (e.g., paper notes) which are backed by deposits of gold and silver held by the note issuer
– more comfortable and more SECURE !
fiat money
Overview of basic concepts
– tokens have value by virtue of the fact that a government declares it to be so AND this assertion is widely accepted
– this works only if
• the economy is stable
• the government is trusted
electronic money
– ~ end of 20th century
– paper tokens and metal coins are replaced by electronic representations of money
– made possible by progress in computing and networking technology
© Levente Buttyán
4
2
Cash most commonly used form of payment today
– ~80% of all transactions
– average transaction value is low
advantages of cash
– easy to transport and transfer
– no transaction costs (no third party is involved directly)
– no audit trail is left behind (that’s why
Overview of basic concepts brief history of money traditional forms of payment
– cash
– payment through bank
– payment cards
Overview of basic concepts
electronic payment systems
– security requirements
– basic classification
© Levente Buttyán
2
1
A brief history of money barter – most primitive form of payment
– still used in primitive economies or under exceptional conditions
– problem: “double coincidence of wants”
• you want to change food for a bicycle
• you need to find someone who is hungry AND has a spare bicycle
commodity money
– physical commodities which have recognized value
Overview of basic concepts
e.g., salt, gold, corn, …
– desirable properties
• portability
• divisibility
gold and silver coins became the most commonly used
© Levente Buttyán
3
A brief history of money (cont’d) commodity standard
– ~ 19th century
– use of tokens (e.g., paper notes) which are backed by deposits of gold and silver held by the note issuer
– more comfortable and more SECURE !
fiat money
Overview of basic concepts
– tokens have value by virtue of the fact that a government declares it to be so AND this assertion is widely accepted
– this works only if
• the economy is stable
• the government is trusted
electronic money
– ~ end of 20th century
– paper tokens and metal coins are replaced by electronic representations of money
– made possible by progress in computing and networking technology
© Levente Buttyán
4
2
Cash most commonly used form of payment today
– ~80% of all transactions
– average transaction value is low
advantages of cash
– easy to transport and transfer
– no transaction costs (no third party is involved directly)
– no audit trail is left behind (that’s why