Saman Jain C 228 WA No. - 4 Ecom

Name: Saman Jain
Div: C
Roll No.:228
Assignment No.: 4
Q1. Explain traditional payment system and modern

payment system in detail.
 Modern payment system –
For decades, when people mentioned credit cards, they meant one thing:
a plastic card with raised numbers on the front and a black magnetic
strip on the back. But with increasing fraud concerns and exploding
technological capabilities, a host of new payment cards are now filling
wallets around the globe.
Here is a quick rundown of the dominant card technology available
today.
 Magnetic Strip
The trusty old magnetic strip, or “mag stripe,” cards have been in use as
a payment method for more than three decades. Within just a few years
of their introduction, they became nearly ubiquitous.With these
traditional cards, a magnetized metallic strip carries the information
needed for a payment transaction encoded on three “tracks” embedded
in the strip.When a customer swipes the card to make a payment, the
card reader extracts the account number, the expiration date and other
information needed to communicate with the account holder’s bank and
speeds it onto a high-speed payment network.
 Chip Cards
Fear of fraud has driven most industrialized countries to shift their

payment networks to so-called “smart card” networks. Smart cards have
embedded microchips that carry the account and other identifying
information. They also carry extra technology to keep scam artists from
creating a fraudulent copy of the card.“The chip in the card securely
stores cardholder data and includes strong transaction security features
and other application capabilities,” said Randy Vanderhoof, executive
director of the Smart Card Alliance and its EMV Migration Forum. “A
mag stripe card, on the other hand, has minimal security because data is
very easily read from and written to the card.”Rather than swiping the
card through a reader, consumers slide smart cards into terminals
equipped to read the card’s encrypted data. Then, to verify that the card
is theirs, consumers typically have to enter a PIN, which unlocks the
chip and makes the data readable by the terminal.
 Contactless Cards
A much less common payment technology allows people to pay with

their smart card simply by tapping the card on or waving the card over a
reader at the cash register. This technology, known as “contactless,”
relies on a tiny radio transmitter to exchange the payment information
with the register – no swipe required.“In the U.S., more than 17 million
contactless payment cards have been issued to consumers. Contactless
payments are a really convenient way for consumers to pay because they
can simply tap their card to a reader to make a transaction,” Vanderhoof
said.The current contactless technology in the United States includes
small chips, known as radio frequency identification, as well as a more
robust wireless protocol known as near-field communication.
 The Future
Some analysts are even predicting that the future of electronic payments
may ditch the cards entirely. These types of transactions might rely on
mobile phones that use wireless transmitters for contactless transactions
or even biometric sensors identifying customers by their fingerprint or
retina scan.
The most advanced ideas of a mobile-based payment system are known
as mobile wallets. With a mobile wallet, consumers can load multiple
cards into one device and choose the preferred payment method for each
transaction, all without carrying an actual wallet of cards.
 Traditional payment system –
There are five general types of payment systems and each of them has its
own unique characteristics. They can all be used to make payments
around the world.
The first payment system that is most common is cash. Cash can be
defined as legal tender that has been defined by a national authority and
represents certain value. The number of transactions made with cash is
the biggest. Why does cash still remain that popular nowadays? Cash
requires no authentication; it is portable and also provides the instant
power to purchase for those who have it on them.
 Using cash as a payment system – advantages:
Cash is instantly convertible into different forms of value and does not
need any intermediation. With cash you can easily make small payments
also called micro payments. Moreover, there is no financial risk for the
seller. Another advantage for the merchant is that the sale cannot be
repudiated. In order to complete a sale using cash you do not need to use
any special hardware that might be very expensive.
 Using cash as a payment system – disadvantages:
There is certain financial risk for the consumer when carrying cash for
making purchases because it can get stolen or even lost. Cash does not
provide float time for consumers. This means that there is no actual time
between the making of the purchase by the consumer and the payment.
Cash purchases are irreversible and final unless the merchant has some
return policy. Unauthorized use cannot be prevented in any way.
Checking transfers are the second most common payment system. A

checking transfer is a payment method with which the funds are
transferred directly through a signed draft or a check form from the
account of the consumer to the account of the seller. You can use a
check for large as well as for small transactions. However, checks are
not available for micro payments such as $1. Checks come with float
time or time for clearance. There are some security risks for the
merchants when it comes to checks because checks are forged a lot more
easily than cash. Moreover, you can cancel a check before it is cleared.
If there is less money in the account of the one paying the check can
bounce.
Credit cards form another very common payment system used
nowadays. A credit card is used to represent an account which extends
credit to consumers and permits them to buy items while postponing the
payments. There are non-profit organizations which have been formed to
set the standards for the banks which issue credit cards.
The banks are the ones that can issue credit cards. They also process all
the transactions of the consumers, calculate and receive the payments
that have been made and charge and receive interest for their services.
There are third party clearinghouses or processing centers which usually
handle the process of the verification of accounts as well as balances.
Q2. Write short note on value exchange system.
In political economy and especially Marxian economics, exchange value

(German: Tauschwert) refers to one of four major attributes of a
commodity, i.e., an item or service produced for, and sold on the market.
The other three aspects are use value, economic value, and price. Thus, a
commodity has:
a value (note the link is to a non-Marxian definition of value);

a use value (or utility);
an exchange value, which is the proportion at which a commodity can be
exchanged for other commodities;
a price (it could be an actual selling price or an imputed ideal price).
These four concepts have a very long history in human thought, from
Aristotle to David Ricardo, becoming ever more clearly distinguished as
the development of commercial trade progressed but have largely
disappeared as four distinct concepts in modern economics. This entry
focuses on Marx's summation of the results of economic thought about
exchange-value.
Marx regards exchange-value as the proportion in which one commodity
is exchanged for other commodities. Exchange-value, for Marx, is not
identical to the money price of a commodity. Actual money prices (or
even equilibrium prices) will only ever roughly correspond to exchange-
values; the relationship between exchange-value and price is analogous
to the exact measured temperature of a room and everyday awareness of
that temperature from feeling alone, respectively. Thus Marx did not
regard divergence between the two as a refutation of his theory. The
exchange-value of a good is determined by the socially necessary labour
time required to produce the commodity. Marx believed that an
understanding of exchange-value was necessary to explain fluctuations
in price.
the word "price" came into use in Western Europe only in the 13th
century AD, the Latin root meaning being "pretium" meaning "reward,
prize, value, worth", referring back to the notion of "recompense", or
what was given in return, the expense, wager or cost incurred when a
good changed hands. The verb meaning "to set the price of" was used
only from the 14th century onwards.
The evolving linguistic meanings reflect the early history of the growing
cash economy, and the evolution of commercial trade. Nowadays what
"price" means is obvious and self-evident, and it is assumed that prices
are all one of a kind. That is because money has become used for nearly
all transactions. But in fact there are many different kinds of prices,
some of which are actually charged, and some of which are only
'notional prices'. Although a particular price may not refer to any real
transaction, it can nevertheless influence economic behavior, because
people have become so used to valuing and calculating exchange-value
in terms of prices, using money (see real prices and ideal prices).
Q3) Explain various threats of w.r.t. electronic payment system.

1. Sophisticated (and Zero-Day) Malware
Malware has gotten very sophisticated, tracking everything from
keystrokes to learning passwords, to infiltrating laptop cameras and
microphones. URL scraping can see where you’ve been online, and bots
can be installed in your system without you ever knowing it. This all
adds up to bad actors knowing who you are, what you do, your
passwords, etc. This is all bad news.
With malware and ransomware (encrypting your files until you pay a
ransom to a hacker) on the rise, you must have the latest and greatest
security software installed and running. You also must be vigilant in the
links you click, the pages you visit and the people you interact with
online.
2. Poor Patching
Patching is a critical activity for any progressive, security-conscious
organization. Unfortunately, patching demands must be addressed on
operating systems, applications and network infrastructure, making it a
bit of a hindrance in some minds.
It’s important to patch often and completely. Back in 2014, about half of
all exploits went from the publishing of the vulnerability to being hacked
in less than a month. Last year, 99.99 percent of vulnerabilities
compromised were done so more than one year after they were
identified.. You must patch frequently and patch often.
3. Application/Middleware Vulnerabilities
Breaching the perimeter is no longer the preferred attack vector.
Attackers are now taking advantage of the proliferation of applications
across the typical enterprise. Most vendors will do the right thing with
vulnerabilities and patches, but you must remain vigilant.
Establish an application security program to address this need. Scan
internal apps and do frequent code reviews. Keep your security program
up to date by always installing the latest versions of all security
solutions.
4. Service Providers
Third parties have become a large part of many infrastructures owing to
their cost-savings, expertise and capabilities. Many are trusted with
sensitive info, making them a very tight extension of your organization.
Sadly, the Ponemon Institute states that third-party organizations
accounted for (or were involved in) 42 percent of all data breaches.
Be strict in your third-party service provider evaluations. Ensure they
have a solid track record of security.
6. Mobile and BYOD

Mobile devices are prevalent in our enterprises, and not all of them are
company issued (bring your own device). Unmanaged mobile devices
present many threats. Non-compliant and jail-broken devices are often
easy to exploit, and employees frustrated by multiple-authorization
requests may simply get around your controls.
Anticipate this by developing a comprehensive mobile device
management (MDM) strategy and stick to it. Work to understand how
your employees are using these devices and implement policies to
address said usage. Also, make it a priority to know all the devices using
your network.
7. Smarter Phishing and Spear Phishing

Phishing used to be easy to identify. Poor spelling and grammar were
dead giveaways, as was the non-personal nature of the email. Well the
“Dear sir/madam” intro has been replaced by very targeted messaging.
“CEO Wire Fraud” attacks accounted for $2.3 billion in losses,
according to the FBI. This “spear phishing” features language that is
very specific to the recipient, and often high-level folks with top access
and the ability to authorize payments.
Never authorize access or payments to people you don’t recognize.
Follow up with people in your organization responsible for such things.
8. Over-trusting Encryption
Encryption is a great thing, but it’s not everything. Encryption of data is
only as safe as the encryption type you use and how the keys are
managed. Payment Card Industry (PCI) compliance does not allow
encryption to take data out of PCI scope.
Simply put, encryption should be employed as part of a total solution,
not as the only solution.

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Name: Saman Jain

Q1. Explain traditional payment system and modern

 Modern payment system –

Fear of fraud has driven most industrialized countries to shift their

A much less common payment technology allows people to pay with

 Traditional payment system –

 Using cash as a payment system – disadvantages:

Checking transfers are the second most common payment system. A

Q2. Write short note on value exchange system.

In political economy and especially Marxian economics, exchange value

a value (note the link is to a non-Marxian definition of value);

Q3) Explain various threats of w.r.t. electronic payment system.

6. Mobile and BYOD

7. Smarter Phishing and Spear Phishing

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