<p>The purpose of this thesis work was to make a survey of current on-line payment technologies and find out which are they and how do they work? Compare and analyze them from a security point of view, as well as a usability point of view. What is good? What is bad? What is lacking?</p><p>To achieve this purpose, an overview of the current on-line payment technologies was acquired through academic books and papers, Internet sites, magazines. Basic cryptographic and security related techniques were studied for the security analysis of current on-line payment systems.</p><p>In this work, various current on-line payment systems were classified into two groups [Macro and Micro on-line payment systems]. This classification was based on the mode of on-line payment transactions. To analyze these on-line payment systems, a set of payment system requirements were formed [Security Issues, Usability Issues, Anonymity, Scalability etc].</p><p>Under the category of Macro payment system, Credit Card payment system, Debit Card payment system, Stored Value Card payment system, Electronic Check payment system, Electronic Cash payment system, Electronic account transfer payment system and mobile payment system transactions were examined.</p><p>Under the category of Micro payment system, Hash Chain based Payment System, Hash Collisions and Hash sequences based Payment Systems, Shared Secrete Keys based Payment Systems and Probability based payment systems were examined.</p><p>Based on the requirements of payment system, these on-line payment systems were analyzed and compared. In the analysis phase, the advantages and drawbacks of these payment systems were figured out.</p><p>It was found from the study that the credit card based payment systems are the most widely used means of conducting on-line payments. It is evident that credit card based payment systems satisfy stakeholder requirements the best, as they offer more flexible payment options, having a large user-base, benefit from familiarity and simplicity of use and also allow international payments. The other on-line payment systems lack this flexibility</p><p>It can also be extracted from the study that users want more simplified, convenient and secure on-line payment systems. Thus the futuristic on-line payment systems will have all secure payment options into one system.</p>

As a consumer, you can use cards for payment more or less everywhere you go, however, it is not certain that the card can be used for all purchases. When a customer pays with card there arises a card transaction fee charged to the merchant. This is a big problem for businesses where transactions with small amounts are a large portion of sales. An observation at the beginning of this study showed that seemingly similar merchants have chosen to solve this problem in different ways. Some merchant’s refuses card purchases below a certain amount, while others accept card with any purchase. This study aims to create understanding why there is a difference between these merchants. Fifteen different merchants in kiosks, shops, cafes and convenience stores were interviewed. To analyze the collected data the investigator’s used “The Balanced Scorecard”. The model’s purpose is to illustrate a way of thinking of performance management and which factors are of importance. The responses from the interviews were categorized into “The Balanced Scorecards” four perspectives in order to see differences, similarities and patterns. The survey shows two distinct patterns. The six merchants who chosen not to have a threshold for card payments says that service towards the customers is the most important factor behind the decision. These merchants are aware that some purchases are unprofitable but they see a better financial result in future if their customers are satisfied. All of the other nine merchants who have a threshold indicate financial motives as a basis for their decisions. These merchants are more likely to see the effect to the individual transaction in which the nonprofitability of each purchase gives an inferior total result and therefore should be avoided.

The purpose of this study was to create understanding about how the reduction of cash affects societal ideas about integrity. We wanted to research human attitudes to the ongoing reduction of cash use in Sweden from a integrity perspective. The method used was a qualitative approach and the empirical data was collected using a focus group with students and three semi structured interviews in different branches of industry based on their way of working with and handling cash. Participating in the study was five students, a store manager in the grocery store business, an economic advisor at a bank and three investigators at the Swedish central bank. The result was analyzed using a theoretical foundation based on Georg Simmel’s work “The philosophy of money” and other socioeconomic research with a focus on the terms value, power and integrity. The results showed that people in the swedish society are aware and partially wary of the development towards a cash free society. Advantages that were illuminated was a reduced risk of robbery towards banks and businesses, less environmental effects due to reduced transportation and handling of cash, easier payments for consumers and increased profitability of card payments for businesses and a increased difficulty of usage of “black” money within the society. Negative aspects that were brought up were the issues of vulnerable groups in society that rely on cash, a fear that the development is moving too fast and that the society will be increasingly vulnerable when the payment infrastucrure relies on a single point of failure. The integrity aspects that the people in the study discussed showed that society is aware of the risks surrounding digital payments, but that the advantages outweigh the potential negatives, and that there is a strong trust in institutions and businesses in Sweden to not exploit their positions when it comes to the integrity of private individuals. / Studiens syfte var att skapa förståelse hur kontantavvecklingen påverkar samhälleliga föreställningar kring integritet. Vi ville undersöka människors inställningar till den rådande kontantavvecklingen i Sverige från ett integritetsperspektiv. Metoden som användes var kvalitativ och det empiriska materialet samlades in genom att genomföra en fokusgrupp med studenter och tre semi-strukturerade intervjuer med branscher som vi valde ut efter deras olika arbetssätt med kontanter och digitala betalningsmedel. I studien deltog fem studenter, en butikschef för dagligvaruhandel, en ekonomisk rådgivare inom bankbranschen samt tre utredare på Riksbanken. Resultatet analyserades med en teoretisk grund baserat på Georg Simmels verk “The philosophy of money” och annan socioekonomisk forskning med fokus på begreppen värde, makt, och integritet. Resultaten visade att människor i det svenska samhället är medvetna och till viss del oroade av utvecklingen mot ett kontantfritt samhälle. Fördelar som uppmärksammades var mindre risk för rån i banker och butiker, mindre miljöpåverkan av transporter av kontanter, enklare betalning för konsumenten och bättre lönsamhet för kortbetalningar för företagen samt att det försvåras att spendera svarta pengar i samhället. De negativa aspekterna av ett kontantfritt samhälle som togs upp var problemen som uppstår för utsatta grupper i samhället som är mer beroende av kontanter, en rädsla för att utvecklingen går för fort och att samhället blir mer sårbart när infrastrukturen förlitar sig på att de digitala betalningssätten fungerar även i krissituation då systemet får en inneboende “single point of failure”. De integritetsaspekter som människorna resonerade kring visade att samhället är medvetet om riskerna med digitala betalningssätt, men att fördelarna med dessa vägde upp de potentiellt negativa, och att det finns ett starkt förtroende för att myndigheter och företag i Sverige inte missbrukar sin ställning när det kommer till privatpersoners integritet.

The purpose of this thesis work was to make a survey of current on-line payment technologies and find out which are they and how do they work? Compare and analyze them from a security point of view, as well as a usability point of view. What is good? What is bad? What is lacking? To achieve this purpose, an overview of the current on-line payment technologies was acquired through academic books and papers, Internet sites, magazines. Basic cryptographic and security related techniques were studied for the security analysis of current on-line payment systems. In this work, various current on-line payment systems were classified into two groups [Macro and Micro on-line payment systems]. This classification was based on the mode of on-line payment transactions. To analyze these on-line payment systems, a set of payment system requirements were formed [Security Issues, Usability Issues, Anonymity, Scalability etc]. Under the category of Macro payment system, Credit Card payment system, Debit Card payment system, Stored Value Card payment system, Electronic Check payment system, Electronic Cash payment system, Electronic account transfer payment system and mobile payment system transactions were examined. Under the category of Micro payment system, Hash Chain based Payment System, Hash Collisions and Hash sequences based Payment Systems, Shared Secrete Keys based Payment Systems and Probability based payment systems were examined. Based on the requirements of payment system, these on-line payment systems were analyzed and compared. In the analysis phase, the advantages and drawbacks of these payment systems were figured out. It was found from the study that the credit card based payment systems are the most widely used means of conducting on-line payments. It is evident that credit card based payment systems satisfy stakeholder requirements the best, as they offer more flexible payment options, having a large user-base, benefit from familiarity and simplicity of use and also allow international payments. The other on-line payment systems lack this flexibility It can also be extracted from the study that users want more simplified, convenient and secure on-line payment systems. Thus the futuristic on-line payment systems will have all secure payment options into one system.

This thesis sheds light on the functioning and characteristics of payment systems to serve as a foundation for understanding the drivers for higher payment system efficiency. Its central goal is to develop insights into the determinants of collective payment choice suitable to lower payment costs to society. So far, the institutional environment, as potential important influence on the payment instrument mix, has not been focused on in the literature. Therefore, particular emphasis is laid on the empirical analysis of the impact of institutional factors on the share of card payments on consumer spending at the point of sale (POS). For this, a unique panel data set is constructed covering the eight most important European payment markets ranked by non-cash transaction volumes. The empirical results allow formulating conditions necessary to achieve a more efficient payment mix. They also form a basis for the assessment of related policy measures with a focus on the SEPA project in terms of their efficiency enhancing effect. Future research could possibly build upon the panel data collected.

This thesis sheds light on the functioning and characteristics of payment systems to serve as a foundation for understanding the drivers for higher payment system efficiency. Its central goal is to develop insights into the determinants of collective payment choice suitable to lower payment costs to society. So far, the institutional environment, as potential important influence on the payment instrument mix, has not been focused on in the literature. Therefore, particular emphasis is laid on the empirical analysis of the impact of institutional factors on the share of card payments on consumer spending at the point of sale (POS). For this, a unique panel data set is constructed covering the eight most important European payment markets ranked by non-cash transaction volumes. The empirical results allow formulating conditions necessary to achieve a more efficient payment mix. They also form a basis for the assessment of related policy measures with a focus on the SEPA project in terms of their efficiency enhancing effect. Future research could possibly build upon the panel data collected.:1 Introduction 1.1 Payment behaviour in selected European countries 1.2 Research question and approach 2 Foundations: Payment systems and markets 2.1 Functioning of payment systems 2.1.1 Payments, market participants and payment system 2.1.2 Payment instruments and methods 2.1.3 Clearing and settlement arrangements 2.1.4 First observations on obstacles to payment systems development 2.2 Network character of payment markets 2.2.1 Theories of networks 2.2.2 Demand-side network effects in payment markets 2.2.3 Two-sided markets and payment cards 2.2.4 Supply-side economies of scale and open access to infrastructure 2.2.5 Obstacles to payment system development 3 Efficiency of payment systems 3.1 Research on payment infrastructure costs 3.1.1 Efficiency of interbank retail payment systems 3.1.2 Efficiency of intrabank payment processing 3.1.3 Factors influencing infrastructure efficiency 3.2 Research on payment instrument costs at the POS 3.2.1 Methodology and classification of the literature 3.2.2 Estimates of payment costs at the POS 3.2.3 Indicative efficiency ranking of payment instruments 4 Research on payment instrument choice at the POS 4.1 Data sources and categorisation of payment choice determinants 4.2 Price characteristics of payment instruments 4.3 Non-price characteristics of payment instruments 4.4 Transaction attributes 4.5 Constraints on payment choice 4.6 Developing an institutional view of payment choice 5 Empirical analysis: Institutional determinants shaping the POS payment mix 5.1 Two-step modelling approach 5.2 Panel construction and exploration of key data series 5.2.1 Panel data collection and overview of variables 5.2.2 Card usage and cash holding 5.2.3 Payment card diffusion and POS terminal density 5.3 European card schemes and markets 5.3.1 Institutional data collection 5.3.2 Description of European card markets 5.3.3 Overview of institutional data series 5.4 Payment decision 5.4.1 Development of the model and possible extensions 5.4.2 Discussion of the regression results 5.4.3 Diagnostic tests 5.5 Sourcing decision 5.5.1 Diffusion of payment cards 5.5.2 Density of POS terminals 5.5.3 Cash holding and availability at ATMs 5.6 Conclusions: Institutional determinants of payment choice 5.6.1 Linking empirical and theoretical analysis 5.6.2 Route for further research 6 Prospects for an efficient European payment mix 6.1 Objectives for establishing a European payment markets 6.2 SEPA for cards regulatory framework 6.2.1 Regulatory ecosystem 6.2.2 Regulatory framework set by European authorities 6.2.3 Standardization industry initiatives 6.3 Remaining obstacles for an efficient payment mix and outlook Appendix 6.3.1 A–1: Credit- and debit-based payment mechanism 6.3.2 A–2: Multilateral settlement: Access, settlement assets and methods 6.3.3 A–3: Statistical properties of variables 6.3.4 A-4: Unit root tests References