Electronic Payment Systems (ECOM 6016)

COURSE DESCRIPTION AND SYLLABUS

January 26 - February 7, 2005

Course Description

This course covers a wide variety of electronic payment mechanisms, with specific reference to the Hong Kong and Mainland China banking systems and payment mechanisms that are used to make more than 10^16 HKD in payments worldwide each year.  It is designed to stimulate creative thinking about the future of money, foreign exchange, Internet implications, mobile payments, stored-value cards, micropayments, peer-to-peer payments and large-scale B2B payments.  Upon completion, the student should understand different forms of electronic money, how money moves through the world's banking systems, how security is achieved in payment systems and how electronic banking works.

Instructor

Michael I. Shamos is Distinguished Career Professor in the School of Computer Science at CMU, Visiting Professor at the University of Hong Kong, Director of the Universal Library and Co-Director of the Master of Science in eBusiness Technologies degree program at Carnegie Mellon University in Pittsburgh, Pennsylvania.  He is a member of the Pennsylvania Bar and the Bar of the United States Patent and Trademark Office.

Email: shamos@cs.cmu.edu

Textbook (Required)

Protocols for Secure Electronic Commerce, by M. H. Sherif, Second Edition, ISBN 0849315093.

Readings

Assigned readings for a particular lecture are to be completed before the lecture.  Some of the readings are quite long and detailed.  In such cases you should familiarize yourself with the material generally and delve deeply only into the topics listed in the syllabus.

Course Format

10 three-hour lectures, readings, one homework assignment and a final exam. The basis for the course is the lectures. The reading assignments provide important background information. Because no textbook exists that presents all the necessary course material, you should make frequent reference to the list of links.   The homework assignment counts for 1/3 of the grade; the final exam counts for 2/3 of the grade.

Course Syllabus

Lecture 1 - INTRODUCTION TO MONEY (Wednesday, January 26, 2005)  The nature of money, desirable properties of money and electronic payment systems.  Fiduciary v. scriptural money.  Token v. notational money.  Cash and "real money."  The role of central and commercial banks.  Mechanisms of money transfer: giro, cheques, electronic funds transfer.  Foreign exchange.

Readings : Sherif Ch. 1.  Sherif Ch. 2.1 - 2.4.  Article by Camp, Sirbu and Tygar, Token and Notational Money in Electronic Commerce.

Lecture 2 - AUTOMATED CLEARING AND SETTLEMENT SYSTEMS (Friday, January 28, 2005) – The Hong Kong banking system, U.S. dollar and Euro settlement.  Cheque clearing.  ATM networks. CHIPS, SWIFT.  Real-time gross settlement.

Readings : Sherif Ch. 12, Payment Systems in Hong Kong, Hong Kong Financial Infrastructure, Payment, Clearance and Settlement: A Guide to the Systems, Risks and Issues (General Accounting Office, LONG DOCUMENT, not necessary to read all of it.)

Lecture 3 - EPAYMENT SECURITY (Sunday, January 30, 2005 a.m.)  – Cryptographic methods, hash functions, trapdoor functions, DES and AES (Rijndael), Diffie-Hellman Key exchange, RSA. 

Readings : Sherif Ch. 3.1 - 3.6.

Lecture 4 - DIGITAL CERTIFICATES (Sunday, January 30, 2005 p.m.) –  Digital signatures and certificates, certification chains.  The public-key infrastructure.   Hong Kong e-Cert.  Digital identity documents, remote authentication, SiteCertain.

Readings : Sherif Ch. 3.7 - 3.10.

Lecture 5 - CREDIT CARD PROTOCOLS (Monday, January 31, 2005) – The SSL/TLS Protocol.  Cipher suites.  Transport-Level Security (TLS), Secure Electronic Transactions (SET), Server Gated Cryptography (SGC), Visa 3D-Secure.

Readings : Sherif Ch. 6, Everything You Always Wanted to Know About CC's (Joe Ziegler), Sherif Ch. 7.

Lecture 6 - STORED-VALUE CARDS (Wednesday, February 2, 2005) – Smart card architecture and security, contactless cards, PIN verification.  Octopus, Mondex, Geldkarte.

Readings : Sherif Chs. 13, 8, Geldkarte section of Ch. 9.

Lecture 7 - MICROPAYMENTS (Friday, February 4, 2005) – Characteristics of micropayment systems: Payword, Micromint. The role of brokers and scrip.

Readings : Sherif remainder of Ch. 9.

Lecture 8 – MOBILE PAYMENTS, VIRTUAL MONEY  (Sunday, February 6, 2005 a.m.) – Wireless payments, Mobipay, Paybox.  Digital wallets.  Peer-to-peer payments: PayPal.  Foundations of electronic cash: anonymity, untraceability, double-spending prevention.

Readings : Sherif Ch. 11, Mobile Payments: Alternative Platforms and Players (Gιrard Carat), Tanaka, Possible Economic Consequences of Digital Cash.

Lecture 9 - BANKING IN MAINLAND CHINA (Sunday, February 6, 2005 p.m.) – Electronic Interchange System (EIS), China National Automated Payment System (CNAPS), Modern Payment System (MPS), Shenzhen RTGS, electronic banking generally.

Readings : Payment Systems of China, Digital Payment Systems (Siemens)

Lecture 10 - ELECTRONIC INVOICE PRESENTMENT AND PAYMENT (Monday, February 7, 2005) – B2B payments and documentation requirements, electronic statement delivery. Biller service providers, customer service providers.  Thick vs. thin consolidation.  Reconciliation.  Future directions for ePayment systems.

Readings : Business-to-Business EIPP (NACHA), EBPP Business Practices