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Web Security and Commerce by Gene Spafford, Simson Garfinkel

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Internet-Based Payment Systems

Although most purchases made on the Internet today are made with credit cards, increasingly merchants and consumers are turning their attention to other kinds of Internet-based payment systems.

In contrast to credit cards, these new systems hold out a number of possible advantages:

Reduced transaction cost

Credit card charges cost between 25 cents and 75 cents per transaction, with a hefty two to three percent service fee on top of that. New payment systems might have transaction costs in the pennies, making them useful for purchasing things that cost only a quarter.

Anonymity

With today’s credit card systems, the merchant needs to know the consumer’s name, account number, and frequently the address as well. Some consumers are hesitant to give out this information. Some merchants believe that their sales might increase if consumers were not required to give out this information.

Broader market

Currently, there are many individuals in the world who use cash because they are not eligible for credit cards. Payment systems that are not based on credit might be usable by more people.

From the consumer’s point of view, all electronic payment systems consist of two phases. The first phase is enrollment : the consumer needs to establish some sort of account with the payment system and possibly download necessary software. The second phase is the actual purchase operation. Some payment systems have a third phase, settlement , in which accounts are settled among ...

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