Online Payment And Security Of E Commerce Information Technology Essay

With the era of information technological advancement, electronic commerce is gradually leading the distribution of the business areas. Online electronic payments are an important part of e-commerce, and also the basis for electronic commerce which able to successfully develop. Without the corresponding real-time coordination of electronic payment, e-commerce is just only practical significance of the “virtual business”, it cannot achieve a true network transactions.

The reason that I choose this title as my seminar title is because it related to my final year project. As my final year project is regarding to online payment method, so I would like to share about online payment method and the risk of online payment, what are the risk can be taken, what are the step to prevent data lost, the security strategic to prevent any privacy or confidential information fraud, and what are the pros and cons about the online payment method.

Online payment is the core of e-commerce development, is an important step to complete the transaction on internet, and also the bottleneck of the domestic network application development. Every firms or companies which run the business on internet must provide the online payment method to maintain their company flow.

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Introduction

1.1 What is online payment?

Online payment, also known as electronic payment, it refers to the money which exchanged electronically. Broadly speaking, online payment refers to the transaction exchanged the funds on internet, typically involves computer network, internet and digital stored value system. It makes e-payment may at any time, via the internet directly to the transfer, settlement, and forms of e-commerce environment.

1.2 How online payment basic process?

Online payment may seem to be very easy and fast, but it consist of the confidential and security for the card info. In order to make sure that the process is work correctly, the merchant must connect to the network with the Issuing bank, processor, and others financial institution, so that the information that provided by the customer can be routed reliable and secure. As highly sensitive payment information, trust and confidence is an essential element of any payment transactions. This means that payment processing services should be provided by a wealth of experience in payment processing and security.

1.3 What is electronic commerce?

Electronic commerce refers to the goods and services which exchange over the internet, commonly known as e-commerce. All major retail organization also have an online presence, however, e-commerce also apply between business to business (B2B) transactions. It can open to all interested parties, or even limited participants. For example like Amazon.com, the selling and buying transaction is completed electronically and interactively in real-time. Besides that, e-commerce system also associated with the service industry, such as online banking, transfer funds, or even pay the credit card bill.

1.4 Security of e-commerce

Along with the e-commerce continue to broaden, protection of individual treatment over the internet, and make your customers feel secure is the primary factors and necessary. In order to perform a secure and good service, internet security plays an important role to be enhancing in this situation. The objective is to establish rules and measure to use against attacks over the Internet. Internet information exchange on behalf of the invasion led to unsafe or high risk of fraud.

For any expert in internet security will tell, e-commerce is actually much more secure than real world commerce. For example like when you leaved your credit card receipt in the shop, or accidentally give your credit card number to someone else, you are actually accepting the risk that the order which not order from you will appear on the next month’s credit card bill. However, when you enter a credit card number of e-commerce site, you are sent through a secure connection to a server access only to authorized personnel and protected against even the most determined intruders.

Although some of the people believe that transactions over the internet are in fact safer than offline transactions, there are still a number of people believe that offline transactions are always better than online payment. For example like protecting the credit card detail, company need to prevent the card info from customer or the privacy of the customer found by a third party. Typically, this involves the company network security and how the company provide a strong and secure system on the internet.

2 Common Online Payment Systems

Online payment system is to help the consumer more convenience and it is the key issue to ensure that the consumer are fast and secure. There are several types of common online payment systems:

2.1 E-cash internet payment system

E-cash, also known as electronic cash or electronic money, it is a form of data which exchanged electronically through the network computer or internet, these is electronic cash currency. It can be converted to cash value of the family of cryptographic sequences, and then use these sequences to show the value of all sizes. There are few characteristic are as follows: an agreement between the enterprises and banks and authorization, can be transfer, can be kept, used to exchanged value within another system.

As e-cash is what we can imagine as “cash” China’s purchase of small general merchandise payment habits features, it is likely to become an important means of online payment in China, but China has not officially started. There are many foreign companies to provide electronic cash market. If unconditionally anonymous electronic money digital cash net cash market can provide an anonymous e-money market.

2.2 E-purse Internet Payment System

E-purse, also known as electronic purse, it is a type of smart card which embedded with the microchip. To use e-purse shopping, the first is the user must transfer certain amount of personal bank account, then in the corresponding of website to download electronic wallet service system free software and install an electronic wallet, to apply online and access the cardholder “electronic safety certificate. When users want to purchase something through the internet, just need to click on the “electronic wallet” icon, and follow the corresponding information that the user need to provided, such as password and user name to complete the transaction on the internet.

E-purse would be more convenient and flexible compared with checks or debit card for a smaller transaction, it always used in conjunction with the bank card to help the user complete all the small transaction process. E-purse is independent of the function of bank accounts, so it will be able to record the user as required payments are made in a checkbook greater privacy and freedom. In addition, e-purse even can provide budgeting because the user only can spend what the total amount that the card had.

2.3 Electronic check (E_check) Internet Payment System

Electronic check, also known as e-check, is a form of payment which transfers through the internet. It perform the same function as the paper check of using digital transmission to transfer money from one account to one account. Besides that, e-check provide better security features than the paper check because it is an electronic format and may proceeded in fewer steps to complete the transaction. Most common features provided by electronic checks include authentication, public key cryptography, digital signatures or personal identification numbers instead of signature and so on. There’s a simple electronic check process shown below:

1. Send Check

Payee

Payer

2. Inspect Check

5. Bill

3. Notice

4. Approve funds and transfer

Payee Bank

Accounting Server

Electronic Check-Cashing Process

E-check is an exclusive network system, the international financial institutions, with their equipment, software and hardware, an accurate and complete set if user identification, the standard messaging, data validation and other standardized data transmission agreement to make sure that the transaction are safety and security.

2.4 Digital Wallet Payment System

A digital wallet, also known as e-wallet, it is a software system that store inside the user’s computer to hold the digital cash, and a digital certificate with a digital signature. E-wallet allows users to make payment or transaction over the internet fast and safety. The function of the e-wallet is much more like a physical wallet, used to store the digital cash. After the e-cash service released, the e-wallet has evolved into a service to provide online shopping information and holds credit card data and passwords for logging into the website with a convenient way.

An e-wallet have both software and information component. The software provides the safety and security with the encryption for the actual transaction. Typically, e-wallet is store on client side, so it is easier to self-maintenance and fully compatible with most of the online payment system. In addition, the system will automatically key in the user information in the online form, it is easier for the user and reduce the time to enter all the information again and again. While for the server side, it is refers to an organization and your side to create and maintain on it server. Because of the security and the efficiency and effectiveness of the utility that provided by the server-side to the users, it become more and more popular and famous for the user with the entire process.

2.5 PayPal System Listen

Read phonetically

PayPal is an e-commerce business by allowing the user to make transaction or money transfers through the Internet. PayPal also known as electronic alternative, such as checks and money are orders with the traditional paper method. It doesn’t charge any fees to make any transaction or join the PayPal service, but they will be a fees change for those who want to receive the money from other people.

PayPal account from a bank account can be funded by electronic debit or credit card. To receive the transaction from other people, the recipient from PayPal can either request from the PayPal service, established their own PayPal account, or request from their bank account. PayPal service is much like a intermediaries or a third party who involve between the clients and the recipient that facilitates in e-commerce.

PayPal involve in several payments processing such as, online auction, online vendors, and others commercial users. It will costs some fees from the recipient for receiving money, fee included the percentage of the amount plus another additional amount. The fees is charged depend on the currency used, the option that choose by the user, the country of the sender and recipient (how far between both sender and recipient), the total amount sent by the sender and the type of account that the recipient receive it. In addition, shopping on eBay and then made the transaction by a credit card through PayPal may incur a “foreign transaction fee” if the seller is located in another country, as credit card issuers are automatically informed of the seller’s country of origin.

2.6 Critical Evaluation

According to Singh Sumanjeet1 (2009, p.24), Electronic cheque system has many advantages: (1) they do not require consumers to reveal account information to other individuals when setting an auction (2) they do not require consumers to continually send sensitive financial information over the web (3) they are less expensive than credit cards and (4) they are much faster than paper based traditional cheque. But, this system of payment also has several disadvantages. The disadvantage of electronic cheque system includes their relatively high fixed costs, their limited use only in virtual world and the fact that they can protect the users’ anonymity. Therefore, it is not very suitable for the retail transactions by consumers, although useful for the government and B2B operations because the latter transactions do not require anonymity, and the amount of transactions is generally large enough to cover fixed processing cost.

In my opinion, i strongly agree with the statement that the author mentioned about. Electronic cheque system provides several advantages than a paper based cheque such as faster speed transaction, provide a certain level of security like encryption or decryption, and so on. But there are still limits of disadvantages for electronic cheque system, like high fixed costs or development start-up costs. Besides that, electronic cheque system can be used in virtual world instead of the real world payment method. And the most important point is the security issue, because the less of face to face communication, we can’t even know the actual user as well. The possibilities that someone is try to pretend as the actual user to make transaction with us and caused identity threat

3. Strength and Weakness

3.1 Advantages of Online Payment

Online payment, what we called as online payment, is an indispensable business. This is extremely important to accept electronic payment of telecommunications service industry, because it started to use this rapidly growing economy is fully utilized.

Use of credit cards by phone or Internet is a familiar and convenient for consumers in the form of payment. It provides for immediate purchase to reduce the pain of payment delay coupling. Customers often feel more comfortable with a credit card, because they know they have the proof to the product or service if they not satisfy on it.

There are several advantages of online payment (e-payment):

3.1.1 Convenient and 24 hour’s real time transaction

Through the use of online payment system, consumer can access the web to make any transaction such as online banking, online billing or even car loan at any time (24 hours) or anywhere, as long as access to the internet. For example like consumer can check the bank details through their mobile phone no matter at where and anytime along with the network connection. In addition, consumer able to check or view the history of the previous transaction that they made or get the accurate real time information through online payment system. It may save up a lot of the paperwork as well.

3.1.2 Reduce cost and save time

With the help of online payment system, we only need to stay at home with just a click in front of the computer which connected to the network, and transaction will be done easily. Instead of go to the physical bank to make the transaction by writing the form and waiting in front of the counter. It may save up a lot of cost like transportation fees, paper workflow fees and so on.

Besides that, through online payment, the processing speed is definitely fast and rapid by following the simple instructions and entering the parameters that the system required. And user may not need to transport from one location to another, it may save up a lot of time. Compared with the real world physical offline banking system, it may spend a lot of time especially on peak season or peak hour.

3.1.3 Flexible of using e-payment

Along with the continuous improvement of e-commerce, many organizations or firms not only focusing their business on offline operation, but managing their business workflow on internet. Nevertheless, e-payment, as what we called as online payment, had become an indispensable item for the entire progress of e-business. Nowadays, there are more and more online payment service provided which linked with the organization. It is more flexible to the consumer, they can choose which type of service that they want, for example like PayPal, e-cash or which bank they prefer such as maybank2u and so on.

Besides that, majority of the online payment service are operation 24 hours, consumer can make the transaction anytime they like. In addition, they can reduce they pain of transport from one location to another and waiting in-front of the counter in the bank. Online payment service allow consumer to make any transaction on anytime or everywhere by accessing to the network. It is the flexibility of e-payment.

3.1.4 Benefit between consumer and organization

With the help of online payment, consumer and organization are benefiting in other ways like the consumer and organization are able to negotiate arrangements for the true value, and strengthen the relationship of their business.

Besides that, consumer can skip many steps or documentation for the transaction. It may easier for them to control over the timing of payment steps, and minimize the operation of the idle account balance. Consumer can eliminate the delay for the processing of transaction. For organization, they can reduce the cost of processing the paper cheque. Yet when the organizations process the paper cheque that paid from consumers, they need to spend some cost to process the paper cheque.

With the help of online payment, the organization may have the advantages as well by encouraging the consumer to pay electronically instead of pay by a paper cheque. In addition, they can receive the payment immediately without any delay, because the receipt is available immediately after consumer had made the payment.

3.1.5 Others common benefits

Below are some of the common benefits for online payment method.

Personal security

We do not need to hold so much money along with us on our premises, or even on the outside, and lead to more safety and security

Used internationally

Online payment is a common method that can be used internationally, it is important for the tourist-sector businesses or those organization who running their business or selling their goods overseas.

Reaching a wider customer base

Some of the organizations accept the online payment method like phone delivery or mail ordering for online customers; it is easier for those customers who are lack of transportation or not able to reach your premises.

Increase the sale opportunities

For some customer willing to buy the goods from the offline business shop, the may having the problem that insufficient fund, they have to leaves to get cash, it may cause them not return to the shop again.

With the help of online payment from ecommerce sector, customer can buy the goods from internet as long as the computer or devices are connected to the internet. This may lead to sale increasing.

3.2 Disadvantages of Online Payment

The transaction over the internet or the transfer of fund on internet through the electronic media is known as electronic payment, as what we called as online payment. Nowadays, online payment is a daily activity for most of the business organization. It is very common and convenient for the online transaction for those organizations focus their business over web to interact with their consumers or business partners.

In fact, there are still weaknesses of the online payment that we cannot ignore it. One of the ways is to be aware the raised awareness of privacy and security issues from the electronic online payment system. Consumers have to bear the risk such as fraud or identity threat that involved in the online transaction.

There are several disadvantages of online payment (e-payment):

3.2.1 Privacy security concerns.

In the e-commerce world, most of the online banking systems, also known as online transaction site, require the user to register as their own member with some simple input or instruction before giving the authorization for them to make the transaction. While the registration process, user need to provide the username and password, all these information implies the need of privacy protection and security. In addition, user need to maintain their account, it may be a trouble for the user.

For those organizations’ site that hosting the user account, they should follow the strict of security and privacy policies. It is very important for those organizations to protect the privacy of the user details and prevent the information being hacked by the hacker. If the username or password is susceptible to being hacked, it maybe will cause the user a serious financial loss problem from the end. All these are a potential rick of the privacy or the personal detail being hacked while using the online payment system.

3.2.2 Identity theft

Another disadvantage of using online payment is identity theft. Using the right security measure can prevent your important information being exposed by the third party. Besides that, using virus protection or firewall may very useful to protect your computer. It might a risk that you make any transaction through internet from your computer.

Another example like if you losing your smart card, unfortunately the card is fall in unsafe of person’s hand. There is a very serious or dangerous expenditure of your entire account balance. Though you will inform the authorities on card’s loss, when the time between you losing your card and informing to the authorities, the third party (unsafe person) may transfer all your money out through your card details via internet.

3.2.3 Dependency of online payment system

Along with the information technology, many organizations or firms are running their business over the internet and provide several utilities as long as online transaction. In fact, this method is indirectly effect consumers become more and more dependent on online transaction, because it speed and rapid transaction, availability 24 hours as long as connected to the internet at home or even a mobile devices.

However, there still can be disadvantages for over dependent of online transaction. For example like if the email does not send to the right destination or not working well, the sender may not know the sending error or does the email has reach the destination or not. Or like for those consumers may want to pay the bill or loan over the internet instead of the traditional ways. There might be a possibility that the online payment system down or not function well from the server side, and worst there was a way for the consumer to meet the dead line.

3.2.4 Loss human touch

In the physical bank, some of the customer may like to talk and communicate with the bank tellers, interacting with the bank manager or even the bank clients. But in the online virtual world, online banking system had taken off of these “human interactions”, all these are done by a system program, impersonal hand-off process.

Due to the lack of the “human interaction” for online payment system, some of the customer my not know about the knowledge of online payment system. These required a basic computer skill and the knowledge about internet before using the online payment system. In addition, for some of the small online banking system, they may not provide any instruction or any guideline to lead the user in the correct way. It will caused the users entering the wrong information or incorrect bank details through the online payment system.

3.2.5 High cost development for internet payment gateway

The major disadvantage for online payment method is the high cost for internet payment gateway. For those organizations or firms are running their business over the internet, the have to create an internet payment gateway or a system in-house is definitely high development cost. For those non IT companies, it is hard and difficult for them to create a system for their own. Because it wasn’t their core business, and they had to use the resource from inside the company with a little or even zero of IT knowledge to build it up. Therefore, the company have to outsource from outside to help them develop a new online payment gateway for them.

3.2.6 Others Limitation

Others common limitation of the online payment method:

May be difficult to inspect from a remote location

Limited of countries cultural and legal obstacles

The rapid changing of technologies

Hard to retaining the employee

Government regulators

Difficult to integrate the software of transaction process and the current existing database.

3.3 Critical Evaluation

Based on Olga LuÅ¡tÅ¡ik (2009, p.15-16) The main benefit from the bank customers’ point of view is significant saving of time by the automation of banking services processing and introduction of an easy maintenance tools for managing customer’s money. Private customers seek slightly different kind of benefits from e-banking. In the study on online banking drivers Aladwani (2001) has found, that providing faster, easier and more reliable services to customers were amongst the top drivers of e-banking development.

In my opinion, I definitely agree with the above statement that stated by author (Olga Luštšik). Online payment may help to reduce costs and convenience; user may stay at home to performed transaction at any time as long as connected with the network. It is fast and provides funds management, which allow user to download the history of the transaction that that had made.

4 Ecommerce Security Elements

In the use of ecommerce, there are several factors that need to involved are: the confidentiality and privacy of the transaction need to be care between the sender and the recipient. The transaction or trading from ecommerce is directly represents to the individual, organization, or business competitor secrets. Therefore, to prevent any confidential data lost from ecommerce application, we have to make sure that the users are legitimate to access the system, and the authentication to filter which date should be show or which should not be show to the particular user.

4.1 The Integrity of the information

Due to the accident or fraud of data entry, the information of the data may result in different way. In addition, the wrong of data or information will result the duplication of transmission in different sector of the process. Therefore, the trade sector will affect the integrity of the information from the parties that involved in the transaction and the entire of the business workflow.

4.2 The validity of the information

In e-commerce world, the validity of information to individuals, organizations or even the countries are directly affected to the economic interests and reputation. Besides that, the validity of the number of time and the transaction price are very important. It is to make sure that the recipient received the data from the primary side. While for the primary side also have to make sure that the data are sent to that particular person.

4.3 The Non-repudiation of the information

Non-repudiation is refers to something like document or contract that cannot simply denied by the origin party. Typically, non-repudiation is to ensure that the contract or one party cannot deny that they communicate to sign the document or the authenticity of a message. For example like legal documents usually need a witness person to sign it, it is to ensure that the person cannot deny the document.

4.4 The Authenticity of the transaction status

Online transaction are geographical distant, we couldn’t know each other or even an organization. Organization, businessmen, client or even consumer on internet may need to consider whether the transactions between both parties are trusted. To make the transaction success, mutual understanding and trusted with each other is very important.

However, there are too many hacker or scammer in the virtual world, is hard to 100% fully trusted on the online transaction or even the in the virtual organizations.

4.5 The reliability of the system

In e-environment, the most important point for the reliability of the system is to protect the confidentiality with a powerful security system. In addition, it is to prevent hacker hack into the system and steal the sensitive information from the system. Computer errors such as system failure, software down, virus detected, network connection down or natural disasters may result from potential threat.

Therefore, prevention of the system in a good way is to ensure that the systems are security and reliability. It will affect the business workflow in the future if the reliability of the system is not fully secure.

4.6 Critical Evaluation

According to Yang Jing (2009, p.48), Using the network for the transaction, the sender and recipient need to ensure the confidentiality of information exchanged. E-commerce as a means of trading, its message directly represents individuals, corporations or commercial secrets; and the e-commerce system is based on a more open network environment promote the application of ecommerce to maintain commercial confidentiality is an important guarantee. Therefore, in order to prevent a large number of transmissions was illegal to steal information to ensure that only legitimate users will be able to see the data. Information can prevent stolen.

In my opinion, I absolutely agree with the statement that the author status above. To prevent the information lost, we have to protect it before happen. The integrity of information, the validity of information, the non-repudiation of information, The Authenticity of the Transaction Status, and The Reliability of the System, all these are the important elements which listed by the Author (Yang Jing) to prevent information lost. In fact, I believe that there are still a number of elements for information prevention which I never mentioned on top.

5 Strategic of E-commerce Security

As e-commerce security cause by many factors such as fraud, identity theft, or confidential data being steal by the hacker, all these are the problem that we might face it when in the online virtual world. So, a strategic planning for ecommerce is very important, all the strategic that came out should be line with the overall of the ecommerce business management. It must provide a very powerful protection for all the ecommerce confidential data and allow them to recover as fast as possible if any incident happen. To prevent the security problem happen, a set of variety measurement must be included:

5.1 Security Strategy

In order to ensure secure communications between both parties on internet, we must take the necessary measures to prevent them. For communication link purpose, we can use firewall or Virtual Private Network (VPN) to make the communication more safety and secure. And consumer must be very careful on some of the untrusted Proxy server. It is act like an intermediary for seeking the information, resource, or link that requested by the client. If the consumer are using the untrusted proxy server, all the data that the client provided may not be encrypted and sent to the proxy server, and proxy server may record down everything sent from the client, including the login and password.

For identification and authentication purpose, encrypted or hash function may be very useful in this situation. In ecommerce, login is a very common and the first step for the consumer before they move on the transaction step. To login to the system, the system needs to identify the user name and password before provide the authentication to the user. With the help of encryption, user password have more secure which showing the password in “*” symbol. Besides the encryption, hash function is a way to convert your password into others form and store in the s