MICROPAYMENT SYSTEM

INTRODUCTION A micropayment is an e-commerce transaction involving a very small sum of money in exchange for something made available online, such as an application download, a service or Web-based content. What is a micropayment? It is a non-cash transaction using mobile phones or swipe cards involving payment of less than Rs 250. The basic objective is to enable small purchases without using cash. For example, a villager buying soap worth Rs 20 should be able to pay for it from his mobile. Here is how: a user registers with a micropayment provider by sending an SMS. Post-registration, he recharges his micropayment account using a coupon. He can then go to any merchant registered with that provider, and make purchases by sending SMSes. In such transactions, the profit margin is very low, to the tune of 1.5-3 per cent, which is why companies need massive volumes to run their businesses profitably. There is a huge % of population who do not hold a bank account and can be benefited by this, especially in rural India. To make micro-payment profitable, companies should partner with FMCG companies and concentrate on rural India more than urban India, I feel. FMCG companies have a great supply chain, they reach even the remotest corners on India. This penetration should be capitalized on along with the mobile companies. Micropayments are sometimes defined as anything less than 75 cents and can be as low as a fraction of a cent. A special type of system is required for such payments, which are too small to be feasible for processing through credit card companies. Here's one scheme for micropayment: The user and seller each establish an account with a thirdparty service provider who monitors, collects and distributes micropayments. The seller encodes per-fee links inside a Web page. When the user initiates a transaction, payment goes through an Internet wallet account managed by the service provider. Micropayments accumulate until they are collected as single, larger payments. Such a system is helpful when a user wants to make one-time micropayments to multiple sellers. Seller-based accounts are more common for repeat business with an individual enterprise. Once a common micropayment standard has been established, some experts predict that streaming media sites, music and application downloads, content vendors, sports access sites and other specialized resources will make pay-per-use common online.

MICROPAYMENT - AN INDIAN PERSPECTIVE

To create a micropayments infrastructure, we need to build on what already exists. Mobile operators in India have created an amazing network of points of presence where one can buy

airtime. They know how to handle cash that users pay. (Cash remains the preferred payment mechanism given the low penetration of credit, debit and cash cards in India.) Today, mobile operators cannot use the cash balance that is there with them for purposes other than voice and data services. Besides, the high incidence of taxes (10% service tax and 15% spectrum and allied charges, for a total of about 23% on what the end users pay) makes it difficult to use the cash balance for real world transactions. Suppose, we were to change this and allow the cash balance that operators have to be used for third-party non-voice services for a fee of 5-10%. Credit card companies charge merchants about 2.5-3% for transactions. Operators could play a similar role for small transactions (say, under Rs 250 or Rs 500). This would be a game-changer in India. Application and service providers could now create services and leverage the cash balance that users have for collecting their payments. Consumers already know how to refill their accounts with cash given the ubiquity of the mobile prepaid infrastructure.

FEATURES OF MICROPAYMENT SYSTEMS

1) 2) 3) 4) 5) 6) 7) Low Transactional cost . Low amount of payment can be done . Ease of joining .- Payment system is not to complex . Ease of Use Can be used with fair degree of knowledge . Pervasiveness Same system can be used in many different situations . Fixed transactional cost . Transactional speed Speed is most important because it will only determine success of a system .

WHAT COULD MICROPAYMENTS SYSTEMS BE USED FOR ?

1. 2. 3. 4. Online magazines and newspapers Online music and videos Online software and games Internet and sms payment alerts .

Current micropayment systems

1. The Exception Magazine - an online newspaper based in Maine, launched a
micropayment system in July, 2010, which uses a cell phone for payment 2. Flattr -Flattr is a micropayment system (more specifically, a microdonation system) which launched in August, 2010. Actual bank transactions and overhead costs are involved only on funds withdrawn from the recipient's accounts .

3. Payclick -A micropayment system set up by visa inc in australis , Payclick allows users to
fund an account that is then drawn from when purchases at participating online retailers . 4. Zong Is a micropayment system that charges payments to users mobile phone bills .This service can be used to purpose of online games .

Actors in Micropayment Systems

All commerce requires at least two actors, a buyer and a seller . In electronic commerce, the names of the parties have many synonyms: for instance the buyer is often called as the customer, and the seller as the merchant. In a world of digital micropayments, however, a TTP, like a bank is also usually needed. The bank can serve as e.g. a trusted depository in which the buyer and the seller keep their accounts. It can take part in the actual payment transaction for instance by verifying the identity of the user and the validity of his account when the seller requests the payment sum to be transferred to his account in the bank. It should be noted that the buyer and seller need usually not be customers of the same bank . There are, however, also other actors or groups of actors in the micropayment world as well as other possible categorizations than the one just described. For instance Stalder divides the actors into three groups: Industry actors are the ones that handle the financial information, like banks, and the ones that develop the hardware and sofware needed to set up the mechanism, the developers. Governments - national and multi-national - control the legal framework in which the micropayment systems can operate. Finally, the group of users consists of both merchants and individual customers purchasing and selling intangible goods.

4 Requirements for Micropayment Systems

In this section we discuss the requirements for electronic money, which are interesting and important especially in respect of micropayments.

4.1 Micropayments as Electronic Payments

Micropayment systems can be described as a subset of electronic payment systems and thus they inherit many of the general requirements set for them. By 1997, there were already over dozen micropayment proposals in the Internet - today the number is even larger. According to Aukia , some of these requirements have purposely left out in the development of the contemporary micropayment systems, where they are not necessarily needed and where the developers have wanted to concentrate on only few aspects that are important in the environment the payment system is applied. We discuss the requirements for micropayment mechanisms by referring to two research papers of Aukia and Lehmann and Schmidt and Mller and noting a few others. The descriptions of these two frameworks form the next two sections, from which we have selected and categorized the most important and interesting ones in the respect of the scope of this study.

4.2 Criteria for Evaluating Micropayment Systems

Aukia & Lehmann have formed a five-dimension set of criteria for evaluating micropayment systems from different points of views. The dimensions are Intrisic characteristics, Extended features, Security, Privacy and System aspects. We emphasize the three last ones the most, since the criteria of the two first groups are closely related to the general criteria and features of the electronic money we assume the reader already is aware of. The criteria are constructed by applying the general characteristics of electronic money described by Stalder and Matonis as the basis and by considering the special characteristics of the micropayments.

Intrisic characteristics
Intrisic characteristics form the base of the criteria for the micropayment systems. According to Aukia & Lehmann , the characteristics are:

Bounds of value. The micropayment system should allow the creation of payment units of arbitrary size. The lower bound of the value is, however, usually defined so that the cost of transaction is smaller than the price. The upper bound is usually fixed in micropayment systems for different reasons - e.g. the number of bits used to express the value restricts the interval of the possible payment values as such. Divisibility. The micropayment system should allow the creation of (nearly) any value from the specified interval so that the client is able to buy any item at the advertised prices. The client must also be able to receive the change money from the payment. Duration. Ideally the electronic cash should never expire - compared with the traditional money that can expire - e.g. when the euro replaces the national currencies of the countries in the European Monetary Union totally in 2012. Portability. Micropayments should be independent of the transportation method (network) and storing media utilized. Moreover, the Independence criterium of Stalder states that electronic payment information should be transferrable as independent of the physical condition. Note that if the system is developed to be unportable, then the transactions can be directed through well-defined and controlled interfaces - and of course, taxed! Offline-capability. The micropayment systems should not force the user to contact a TTP during every transaction. This is a very important criterium considering the very hard latency requirements for the micropayment transactions.

Extended features
Extended features include the following criteria:

Transferability. Micropayment cash should be transferrable without any registration. Most of the contemporary systems do not support peer-to-peer transactions, which is a central feature of the traditional cash. Multi currency. The micropayment systems should be able to operate with multiple currencies, by converting the currencies either inside or outside the system. Cancellation. The systems in which the payment transactions cannot be executed in both directions, should allow the undoing of any payment, if the parties agree to do so.

Fault tolerance. Latency in network or the failure of the software or hardware of any party should not generate any inconsistencies in the transactions.

Security aspects and Privacy

Security model. The security of micropayment system depends on the underlying trust and security models applied. In an ideal micropayment system heavy a priori assumptions of the trust between the parties should not be required. In the payment systems of today, however, the trust relationships are usually asymmetric - the customer must always trust at least one of the other parties such as the bank or the merchant. On the other hand, the other parties are often protected by the payment protocol itself. Authenticity. Authenticity means that every party of the payment protocol should be able to confirm the origin of any message dedicated to them. Integrity. Integrity of the payments means that the payment data - protocol messages in the network or stored transaction data - cannot be tampered or copied. The integrity requirements is linked to the double spending prevention: when the integrity of the stored and transported messages is protected, double spending should not be possible. Interruption tolerance. The micropayment mechanism must support atomicity - the transactions must be executed at both ends either entirely or not at all. Atomicity is one of the ACID properties defined for transactions, for further information about the transaction atomicity issues. Non-repudiation. Non-repudiation means that a party cannot a posteriori deny event history in which he has been a participant. Moreover, non-repudiation should be required for all parties. Unobservability. This criteria states that the other parties not involved in the transaction have no other knowledge of the transaction after the transaction has been run than what a priori was available for anyone. It may also be required that the transaction is completely hidden from all the parties not taking part in it. Parameter secrecy. Parameter secrecy concerns the payment protocol - the other parties of the transaction and complete outsiders must not be able to uncover the contents of the transactions such as the parameters used in the protocol run. These parameters to be protected could for instance include the financial information of the payment like the sum to be paid or the balance of the customer account. Note that if the identity of the party participating in the transaction is unknown, the contents may still be uncovered and vice versa. Anonymity. Anonymity concerns the amount of knowledge other parties have of others (see Parameter secrecy). Merchants or banks usually have no anonymity, while customers may have at least partial anonymity. Unlinkability. This criteria states that two events of the same party cannot be linked by another party.

System aspects
According to Aukia and Lehmann , system aspects are rather broad and difficult issues, so they mainly describe two general criteria:

Scalability. The micropayment system to be developed should respond to the (possibly very rapidly) growing markets in the Internet. The micropayment system must be scalable, both in technology- and business-wise. Universality. A successful micropayment system that is envisioned to be in wide utilization should not be restricted by any financial contract made with e.g. an organization operating in a single country. In theory, a world-wide system could be constructed some day. There are, however, lots of other issues that may prevent this - these aspects are discussed in the conclusions of the study.

Technological dimension
According to Schmidt and Mller , Technological dimension consists of requirements for micropayment systems whose fulfillment is (here) mainly an issue of proper (technical) implementation.

Security. Security of the micropayment systems is partly an issue of the security of the technology used. For instance, failures of the underlying technology - software or hardware - can substantially decrease the trust on the payment system. Scalability. In micropayment systems, a scalable distributed design is required to prevent the possible bottlenecks that may emerge if the system cannot respond to the requirements set by the potentially rapid increase of the transaction traffic through it. Reliability. The micropayment system must serve customers 24 hours in a day and seven days a week, having no point of failure in the system at any time. Matonis discussed this further, when he introduced the concept of availability from the viewpoint of the requirements on electronic money in general: the system must be available at any time for any (valid) customer and it must be off-line capable so that no on-line TTP involvement in respect of authentification is required. Latency. This is a very important requirement for an on-line oriented micropayment system - even at peak times the response times must be bearable. Interoperability. Interoperability in the technological dimension means that the currencies like digital cheques and tokens applied in different micropayment systems are fully interexchangeable between the systems and protocols. Hardware independence. For instance, to prevent double spending, credit card systems rely on hardware protection which produces additional costs. An ideal micropayment system should not depend on the underlying hardware or the lower network levels.

Economic dimension

Transaction costs. These are the costs the merchant must pay to be able to perform the final payment-committing transaction. The costs can be divided into direct losses - the cost for executing transaction itself - and indirect losses - e.g. rent losses. Atomic exchange. This requirement resembles very much the atomicity issues

Customer base. The feasibility of the micropayments systems relies heavily on the size of the customer base. With no customers and no previous experience on the electronic payment business, the merchants may have significant startup problems. Convertibility. Currencies used by different micropayment systems must be exchangeable which means that they must be exchangeable also to and from the currency the bank uses - thus the currency applied in micropayment systems must have monetary value.

NET BANKING
HDFC BANK
Taking the "Secure Banking" initiative to the next level we are pleased to announce the launch of Secure Access, an online security initiative which will make your NetBanking transactions more safe. Two key points you need to note- .

As a part of Secure Access, logging into HDFC Bank NetBanking is now a two step process. After keying in your customer id on the first screen, we will take you to the next one where you can enter your password. Secure Access has an innovative Multi-layered Authentication Process, which requires you to register for conducting ANY Third Party Transaction. A personalized picture and message will help you identify fraud sites. This online security measure has been introduced to protect your account from fraudsters and hackers. Just follow the four easy steps to register, and ensure your transactions are safe and secure!

SBI BANK
Features for Safe Online Banking SBI Online SBI provides several inbuilt features for safe and secure banking. You can use the security options in the profile tab to:

Customize your Personal Profile You can set your display name, mobile number and email ID in your personal profile. The display name is used in the Welcome message. Manage Third Party You can define your own trusted third parties to whom you wish to transfer funds. You can also add, delete or modify your list of trusted third parties. Define Limits You can set limits for demand draft and third party transfers, in the profile section. It is advisable to set a lower limit. You can enhance the limit as and when required Enable High Security SMS based high security is an additional layer of security provided for your transactions. It is recommended that you enable this feature, in the profile section. Whenever you transfer funds to own or third party accounts, issue a demand draft or credit funds to a PPF account you will receive a high security password

Icici net banking Process

We can now access your account details online and also link your relationships with ICICI Bank through Internet Banking at www.icicibank.com. To get started, all you have to do is follow the three simple steps described below: Step 1: Access Internet Banking - Obtain your User ID and Passwords

For the security of your accounts, a unique user ID is created and allotted for every account number.
o

For bank accounts, the user ID and passwords (both log-in password and transaction password) are given to you as part of your 'Welcome' kit at the time of account opening. o In the case of credit-card accounts, the user ID and passwords are mailed to your registered mailing address separately after dispatch of the card to you. o For demat accounts, you can ask for your Internet Banking user ID / passwords by submitting a filled-in application form. If you have received your Internet Banking user ID / passwords but have lost them or do not remember them, you can ask for them by calling usAccess Internet Banking - Obtain your User ID and P at our 24-hour Customer Care numbers or by submitting a filled-in application form at any ICICI Bank branch. If your accounts are not linked to a single user ID (see Step 3), you will have to ask for a separate user ID and set of passwords (log-in password and transaction password) for each account number that you have. Step 2: Create your Own Unique User ID.

The second simple step is to create you own unique user ID. The user ID is your permanent identification to the Internet Banking service. This facility of creation of your own user ID helps you to modify your system-generated user ID so that you can customize it to a form that

you find easier to remember. o Click the 'Personal' button at the top left corner of the web page and then log in with the user ID and password given to you. o Click the "Change User ID" link at the top-most menu and proceed. Setting your own user ID is very simple and convenient. You do not need to store your user ID physically for future recall and thus compromise the security of your account.

Please note that this facility is available to you only once, i.e. once you have changed your user ID through this step, you cannot change it again. Try and create a user ID that no one can guess easily. o Your user ID should be unique to you and yet not obvious to others. Avoid using your name, nickname, date of birth and other such commonly known or easily findable information. Along with the creation of your user ID, you should change the passwords that have been provided to you. Please choose a password that is at least 8 characters and up to 32 characters long. Passwords should contain both letters and numerals. A word of caution: After you have changed your user ID, the system will instantly ask you to change your log-in password and transaction password also. o So, if you do not remember your transaction password, please do not initiate this step. o Instead, please obtain a transaction password from our 24-hour Customer Care (as in Step 1) and then proceed with this step. Step 3: Link the Account Number to your User ID (if you have more than one ICICI Bank relationship)

If you have more than one relationship with ICICI Bank, you can link all your accounts to a single user ID. Once you do so, you can log in and view the details of all your ICICI Bank relationships with just this one user ID. o To link your bank accounts / credit card accounts and/or loan accounts, just log in with the user ID to which you wish to link these accounts and go to the 'Request' option under the 'Bank' menu of the homepage. o Select the appropriate request pertaining to the type of account that you want to link, and enter your account number that you wish to link. The system will also ask you to confirm your request with your transaction password. o Once the request is validated by the system, linking is effected within three to four business days, after which you can access your account details and transact online.

The next time you want to see your account details, all you need to do is log in and select the account that you wish to view from the 'My Accounts' page. o For security reasons, the transaction password and/or ATM/debit card related authentication would be necessary when you choose to transact online.