A Model For Person-to-person Electronic

A MODEL FOR PERSON-TO-PERSON ELECTRONIC PAYMENT SYSTEM FADI ABDULHAMID* and EZZ HATTAB** * MIS Department Faculty of Information System Arab Academy for Banking and Finance Sciences, Amman- Jordan [email protected] **Computer Science Dept Amman University, Amman 19329, Jordan [email protected] http://www.softlab.ntua.gr/~ezz Abstract: - In this paper, we propose a model for person-to-person (P2P) payment system. The model offers a portable e-wallet that is installed in a removable storage (e.g. flash memory). Further, the model is supposed to provide a secure, anonym, traceable and portable payment, which can be conducted by users in P2P transaction. Users of Business-to-Consumer (B2C) and Consumer-to- Business (C2B) can also use the model in micropayment transactions. Key-Words: - e-payment, consumer-to-consumer transaction, person-to-person payment, micro payment, electronic wallet, electronic cash.

1. Introduction Electronic payment (e-payment) is a method of value exchange in electronic commerce, where the value is transferred via the Internet and communication technologies. An e-payment model should fulfill certain requirements to emulate the characteristics of the traditional payment models, which are flexibility, portability, traceability, and provide a degree of anonymity. However, the success of an e-payment system is measured by the acceptance of all parties involved in the payment transaction. E-payment is conducted in different e-commerce categories such as Business-to-Business (B2B), Business-to-Consumer (B2C), Consumer-to- Business (C2B) and Consumer-to-Consumer (C2C). Each of which has special characteristics that depend on the value of order. Accordingly, [1] classified e-payment systems as follows: • Micro Payment (<$10) that is mainly conducted in C2C and B2C transactions. • Consumer Payment that has a value between $10 and $500. It is conducted mainly in B2C transactions. • Business Payment that has value more than $500. It is conducted mainly in B2B transactions

B2B transactions account about 95% of e-commerce transactions, while others account about 5%[2]. P2P, which is related to the C2C category transactions, is relatively small due to its stiff usability. In this paper, we focus on the micro payment transactions1, which represent a small payment value. Credit cards are inconvenient methods for such payment because of the relatively high transaction fees and logistics. In [3], the e-payment system is divided into two groups: electronic cash and Credit-Debit Card systems as illustrated in figure 1. Electronic Payment System

E-Cash or Token Based Systems Smart Card System

E-cash system

Credit-Debit Card or Account Based Systems Generic System

Specialized system

Credit and debit systems

Fig. 1: classification of electronic Payment System [3]

1

There are different perspective for the micro payment value, for example [1] assumed the value which is less than 5$ and [2] assumed the value which is less than 10$

Our model will handle P2P transactions, which is appropriate for micro-payment. This model can be viewed from e-cash or smart card perspectives. However, this paper focuses on the e-cash perspective only. The paper is organized as follows: Section 2 discusses the related works in P2P payment systems. Section 3 presents the proposed P2P model. The evaluation of the model is presented in section 4, while section 5 concludes the work and discusses the future work.

2. Related Work Numbers of e-payment models are proposed to manage different transactions. PayPal system [4] is proposed to support P2P transactions in which PayPal users send/receive money to/from each other via emails. A PayPal user should provide his/her profile to the system including the credit card information. Once a payment took place, the money is withdrawn from the credit card account to the automated clearinghouse. The receiver of the payment will be notified. PayPal offers instance notification and confirmation of the fund transfer. Thus, PayPal is a third party that organizes the money transfer among users. NetPay Model [5] allows customers to purchase items of micro and macro “consumer” payments without intervention of a third party (Broker). NetPay has three active parties: (1) broker who creates e-cash and handles micro-payment (2) customer (3) vendor. NetPay is an offline payment model that allows vendors to interact directly with customers via their ewallet servers. J. Camenisch et al [6] proposed a model that allows the payer to remain anonymous during the transaction, however anonymity is controlled by trusted third party, which is called “Judge”, this model tries to make a balance between the two major characteristics of the e-payment system, which are anonymity and tractability. It allows a trusted third party to control the anonymity in suspicious payment transaction. The main objective is to prevent criminal use of funds such as money laundering and blackmailing. PayWord model [7] uses cryptographic properties of digital signature in e-cash generation with a simple scenario. The payment process has three major players: (1) broker (2) customer and (3) vendor. The customer creates an account at the broker website. The

broker issues a digitally singed certificate, which allows the customer to make PayWord chain. In [8], M. Lee et al. suggested a payment model for micro-payment that can be applied to several merchants using one hash chain. The model is an extension of PayWord [7] to achieve a complete transaction of digital goods. The model assumes that the broker is the trusted party by both the vendor and the customer. As the case of the PayWord, the customer opens an account with the broker to be able to create one hash chain to deal with multiple vendors. The model takes some security issues into consideration. PayNow model [9] is developed by Cybercash to support micro payment in form of e-check. Cybercash has an e-wallet server that contains special checks for PayNow, which can be used in e-shops. The e-check works in a similar manner to stored-value chip card, where consumer can easily reload Cybercash wallet by using credit card or bank account. The above models do not process person-to-person (P2P) payments in a direct manner. In the next section, we proposed such a model that supports P2P transactions with a limited intervention of a third party.

3. The proposed model The main objective is to develop a novel payment model that supports P2P transactions. The model is supposed to provide anonymous, traceable, secure, portable and easy to use payment system with a limited intervention of a third party. The model is an offline payment system⊗ that uses portable e-wallet♦ with e-cash. The proposed model focuses on the following issues: • How to generate e-cash that can be used many times with different users. • How to use Removable Storage “flash memory” as client based e-wallet to hold the e-cash. • Managing the transaction of P2P payment.

⊗

Offline payment system is payment system when the three phases of payment do not conduct at the same time “withdraw, payment and deposit phases “ ♦ The flash memory is a data disk that can be plugged on any device through the USB port

3.1 Parties and Players of the model The payment process has three major players: (1) issuer (2) payer and (3) payee. The issuer may be a bank or a financial institute. The issuer has the following main responsibilities: • Issuing the e-cash. • Tracing the e-payment. • Providing a mechanism to exchange e-cash to/from real cash • Managing the e-wallet, which is a software application installed in flash memory. The payer is an individual who uses the credit card, debit card or bank account to purchase e-cash and save it on the e-wallet. The payee is an individual who has some goods to sell over the Internet; the merchant “payee” should also have an e-wallet to receive the e-cash.

3.2 e-cash Real cash is a legal tender defined by national authority to represent value [10]. It has the following features:

The proposed model makes benefits of the features of the real cash and tries to imitate the real cash payment system in the real word, to support P2P e-cash payment transactions. It is clear that Governments issue real cash with some constraints to prevent financial and economical obstacles (e.g., Inflation). Similarly, e-cash could be issued to imitate the national cash and issuing activities should be regulated and controlled by governmental parties to prevent such problems.

3.3 e-Cash structure In [11], e-cash could be identified as a string of bits that represents certain values such as reference number and digital signature, which can be used for security purposes to prevent forgery and criminal use. We believe that the proposed structure in [11] needs some extension to make e-cash more secure. Therefore, our model adds a digital watermark to the e-cash structure to protect it from the illegal copy and forgery activities. Further, the model modified the structure of the reference number to support tractability as shown in figure 2. Currency

• Convertible: cash can be converted easily to different value forms. • Portable: cash is portable and can be carried by the individuals. • No need for authentication: The payer will not be asked to present his/her ID while paying the cash. This means cash can preserves anonymity. • Cash supports instance payment. • The use of cash is free. • No need for third party to manage the transaction. On the other hand, cash has some limitations [10] such as: • It is limited for small transactions • It is easy to be stolen or forgery. • It is irreversible. These limitations do not threaten the cash as a payment method, since it is appropriate for micropayment and being easy to be stolen is a solvable problem by various techniques. In some cases irreversibility is positive characteristic that makes the direct payment via cash prevents any problem of chargeback.

Value

Reference No.

Digital signature

Digital Watermark

Fig. 2: e-cash proposed structure E-cash structure has the following fields: • Currency that defines the issued currency to support multi-currencies e-cash. • Value that determines the value of e-cash. • Reference number that allows the issuer or any other authorized party to trace e-cash movement. It has the following four subtypes: o o o o

Issuer part, which is used as a reference to the issuer. Client part, which is used as a reference to the customer who orders the e-cash in the first time. Owner part, which is used to represent the ID of the new owner of the e-Cash each time. Final part, which is used to check the generated digit each time.

• Digital signature is used to authenticate the identity of the issuer as an authorized party. It may used the cryptography schema which proposed in [12]

• Digital watermark is used for copyright protection [13, 14, 15]. It inserts invisible (and hard to remove) data into the digital file. In our model, e-cash structure uses the digital watermark to prevent forgery or illegal copy of the e-cash.

3.4 E-wallet structure E-wallet is a software component in which a user stores personal information such as credit card numbers and other related information [6]. Our model supports portable e-wallet by holding the e-cash in a removable Storage “flash memory”. The e-wallet performs the following activities: • It stores the credit card information to be used by the issuer of e-cash. • It stores the e-cash for the micro-payment. • It stores the log information of incoming and outgoing e-cash. • Once a payment is performed the payer e-wallet contacts the payee e-wallet. • It validates the parties and organizes concurrent payments. • Once the e-wallet gets the e-cash from the payer, it validates the following: o o o o

The reference number by validating its check digit. The digital signature to identify the issuer. The e-watermark to verify the trusted ecash. The value of the transferred e-cash

• It notifies the issuer in case of abnormal or a suspicious payment. Such as illegal payment, forgery cash, bad digital signature, inconsistent check Digit. • Once the e-wallet gets the e-cash, it changes the owner part of the reference number and re-generates a new check digit. We assume that a trusted party supervises the design of removable storage “flash memory” and the e-wallet software components.

3.5 The role of the Removable Storage “Flash Memory” as portable e-wallet The removable storage “flash Memory” as e-wallet holder will imitate the real life wallet, since it will carry the e-cash, credit card Number and user information, on other hand the e-wallet will perform additional functionalities - the Functionalities

Provided by e-wallet thoroughly discussed in E-wallet Structure section- and further more the removable storage could be plugged into any PC that has USB entrance and most of the PC’s nowadays have such entrance, so it will provide user friendly e-wallet for different users , without any required high tech experience. Flexibility is supported because the approach deals with the removable storage “Flash Memory”. Authenticity is achieved through user name, ID and password. Other authentication mechanisms may use another techniques like biometric systems, which needs additional hardware and user training. Further security factors will be achieved through the flash memory serial number, as we know that each hardware device has identical and unique serial number that identify the producer, so when the payer or payee try to activated the e-wallet software from illegal copy on the PC for example, the e-wallet should reject this action since the Flash memory serial number will not be found, from this perspective no illegal copy will allowed, this action will support the security consideration in this model. As it is mentioned above, we assume that a trusted party will provide a proper design for the removable storage and associated e-wallet software, which is based on the security consideration and the required functionalities. Once the e-wallet is installed on the removable storage “flash memory”, the serial number of the device will be read and stored as a reference for future uses. Putting user information on a removable storage will enhance the e-activities in general and will provide solutions for many related problems such as the case in e-government applications, where the cost of the authentication mechanism will be reduced.

3.6 The Payment Model Figures 3 and 4 illustrate the main functionalities and preparation procedures. The preparation procedures of our model can be summarized as follows: (1) The user gets the e-wallet from the issuer (2) s/he can buy the ecash using credit card or bank account (3) The e-cash is added to the e-wallet, which acts as a token and control the communication between the issuer and the user. In the case of digital goods (e.g., music files), the transfer of e-cash is synchronized with the transfer of digital goods; that means the transfer should end at the same time.

The e-payment transaction summarized as follows:

of

our

model

is

• Withdrawal phase, in which the e-cash is transformed from the issuer to the customer. • Payment phase, in which the e-cash is transformed from the payer to the payee. • Deposit phase, in which the e-cash is converted from e-cash to real cash and deposit it into the given bank account.

G e t e - W a l le t , F la s h M e m o ry

Fig. 5: A payment Scenario

P e rs o n 1 Payer B u y E -C a s h T h e e - c a s h w i ll b e s e n d T h r o u g h T u n n e l M o d e w it h i n s e c u r e tr a n s a c ti o n

S y n c h r o n i z e t h e t r a n s fe r o f t h e e - c a s h a n d d ig ita l goods

4. Evaluating the model E x c h a n g e E -C a s h W ith re a l c a s h

In this section, the model is evaluated based on the following factors: anonymity, traceability, security, portability and noninvolvement of a third party.

P e r f o r m E -P a y m e n t S e n d D i g it a l I n f o r m a t io n R equest

D i g it a l G o o d s

P e rs o n 2 Payee

Fig. 3: the proposed model of P2P e-payment

Request E-Cash

Customer 1

Send E-cash

Issuer " Bank" Deposit e-cash Into Customer Account

Request Goods Or Services

Lemma 1: the proposed model support anonymity Proof: the proposed model is anonymous for each party since the payment is conducted through communication among the payer and payee e-wallets, and there is no need to for the payer or the payee to identify and know each other to conduct the payment transaction. As for the Issuer, there is no intervention by any third party. Furthermore, the issuer will not be able to violate the privacy of the payer or payee as long as there are no illegal transactions, which are detected by means of exceptional reports.

Lemma 2: the proposed model is traceable Customer 2

Do E-Payment

Fig. 4: Architecture of the proposed payment model The Figure 5 will provide a deep description of the payment model which taking place between the payer and payee.

Proof: This lemma might be seen confusing with lemma 1. However, this is not the case since (1) the ewallet software will inform the Issuer about any suspicious action that may conducted using the e-cash or e-wallet software (2) the INLOG and OUTLOG data will be stored on the e-wallet data storage and could be sent to the issuer just in case of any suspicious action and this information could be transformed to any legal entity (3) the reference number which is suggested in e-cash structure will support traceability through tracing the e-cash

information about the Issuer, client and the last person who owns this e-cash. Balance should be made between the need for anonymity and the need for traceability to follow up with illegal operation. Lemma 3: This model is secure Proof: This model is secure because the customer has to provide his/her credit card number only to the issuer, who gets e-cash or deposit it into the bank account. Therefore, sensitive information will not be used directly to perform the payment. Further, the ecash is protected by public key encryption and digital watermark to prevent illegal copy of the cash.

The main features of the model are the following: 1.It supports P2P micro payment system 2.It creates a new business model to provide eexchange of e-cash 3.It supports multi-currency e-cash 4.It preserves the anonymity of the user 5.The digital identity can be used to support egovernment solution. Our current research is implementing the complete payment system that based on the proposed model. The e-wallet application uses Java technology because it supports hardware and software portability. The model can be used in B2C micro-payment transactions.

Additional security will be achieved through removable storage serial number, which should be identical and unique.

Further work is needed to identify the best digital watermark method to be used in e-cash.

Lemma 4: This model is portable

References:

Proof: The model is portable, since the e-wallet is carried on removable storage (flash memory), which could be plugged into any machine that has USB entrance.

[1]

Lemma 5: this model does not require an involvement of a third party

[3]

Proof: the model does not require a third party involvement when the payment is taking place since the issuer provides the e-wallet software, which is responsible to detect the forgery of e-cash or double spending transaction, the involvement of the third party will be limited to exceptional situations when any illegal action is taking place. The illegal transactions will be detected by means of exceptional reports.

5. Conclusion and further work In this paper we proposed a payment method, which imitate the real cash payment using a portable e-wallet installed in a flash memory. The proposed model supports the multi-currency feature and provides secure, anonym, traceable and easy to use payment. The model uses digital watermark to verify the legality of e-cash and prevent illegal copies from unauthorized parties.

[2]

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