E-CASH PAYMENT SYSTEM


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INTRODUCTION

With the onset of the Information Age, our nation is becoming increasingly dependent upon network communications. Computer-based technology is significantly impacting our ability to access, store, and distribute information. Among the most important uses of this technology is electronic commerce: performing financial transactions via electronic information exchanged over telecommunications lines. A key requirement for electronic commerce is the development of secure and efficient electronic payment systems. The need for security is highlighted by the rise of the Internet, which promises to be a leading medium for future electronic commerce.
Electronic payment systems come in many forms including digital checks, debit cards, credit cards, and stored value cards. The usual security features for such systems are privacy (protection from eavesdropping), authenticity (provides user identification and message integrity), and no repudiation (prevention of later denying having performed a transaction) .

WHAT IS ELECTRONIC CASH?

We begin by carefully defining "electronic cash." This term is often applied to any electronic payment scheme that superficially resembles cash to the user. In fact, however, electronic cash is a specific kind of electronic payment scheme, defined by certain cryptographic properties. We now focus on these properties.

Electronic Payment

The term electronic commerce refers to any financial transaction involving the electronic transmission of information. The packets of information being transmitted are commonly called electronic tokens. One should not confuse the token, which is a sequence of bits, with the physical media used to store and transmit the information.
We will refer to the storage medium as a card since it commonly takes the form of a wallet-sized card made of plastic or cardboard. (Two obvious examples are credit cards and ATM cards.) However, the "card" could also be, e.g., a computer memory.

Conceptual Framework

There are four major components in an electronic cash system: issuers, customers, merchants, and regulators. Issuers can be banks, or non-bank institutions; customers are referred to users who spend E-Cash; merchants are vendors who receive E-Cash, and regulators are defined as related government agencies. For an E-Cash transaction to occur, we need to go through at least three stages:
1. Account Setup: Customers will need to obtain E-Cash accounts through certain issuers. Merchants who would like to accept E-Cash will also need to arrange accounts from various E-Cash issuers. Issuers typically handle accounting for customers and merchants.
2. Purchase: Customers purchase certain goods or services, and give the merchants tokens which represent equivalent E-Cash. Purchase information is usually encrypted when transmitting in the networks.
3. Authentication: Merchants will need to contact E-Cash issuers about the purchase and the amount of E-Cash involved. E-Cash issuers will then authenticate the transaction and approve the amount E-Cash involved.