The introduction of the modern technology, which is known as the computer modern era, has brought a lot of positive changes in the field of electronic commerce. Transaction can now be made without the buyer and seller coming into face-to-face contact with each other. In business transactions, the payments and shopping is now done using online payment system. In this form we have payments done or made using credit card, smart card and electronic cash.
Other types of electronic payments include: electronic money system, E-mail payment system and mobile payments.The electronic money system of payment comprise of electronic wallet, virtual money and the virtual wallet. Online shopping and the use of credit cards have emerged because of the increasing competition in the electronic commerce global environment. Before the introduction of online shopping and electronic businesses, payments were made in a form where the buyer and merchant would come into face-to-face contact during the exchange of goods and services in banks. This was observed with a lot of concern and it was found that it was very insecure as most of the banks have been involved in payment system where security measures are not provided to the parties involved.
In the online payment system security measures such as detecting fraud has become a very simple issue to be dealt with. In our markets nowadays online shopping is done using different electronic payment systems which have the capability to detect fraud, improve the efficiency of transaction thus promoting the business production in the global environment. One of the most common modes of payment using the modern technology is the credit card. Payment using credit cards is done in a more closed way or restrictive manner.
The payee and payer need not to have same bankers who have direct relationship or connection. The information or data transfer in credit card based system is protected by the secure socket layer (SSL).The secure socket layer ensures that there is integrity and encryption of the transferred messages or information. Otherwise most of the customers using the credit cards to make payments have experienced a lot of problems of fraud when paying via internet. It was expected that the use of credit card for making payment would be more secure but this is not the case.
A lot of money is found to be getting lost when internet business transaction is made through the internet or online. Evaluation criteria and measures therefore have to be found inorder to address the issue of security involved in the use of credit card via the internet. These include confidentiality, non-repudiation and authentication among others.The credit card fraud usually occurs in two ways; either the card number is stolen to make false payment or the merchant becoming dishonest during transaction.
(Gosh, 1996, p.23-28). One major problem is how to detect fraud. This is a very complicated task if at all it is to be in the normal or traditional way. Some of the models used in credit card fraud detection is discussed in this paper.
Background information In the earlier days the modes of payment that were used could not offer any security any more both to the banks and their clients or customers.Whith all these kind of threats coming into our markets different payment methods have been introduced because of the computer software.The introduction of the Internet payment system and online shopping has nowadays used to prevent the various forms of insecurity that do arise during transactions and payment the so called fraud. Shopping’s and payments are currently taking place through or via the Internet because of the ability to detect and minimize Since the emergence of electronic payment using credit card, security issues have been pointed out because most of our markets have realized the rapid increasing cases of fraud.
Security therefore is the major issue facing most of our customers trading using the electronic commerce. This is because of the possibility of occurrence of fraud- experienced by buyers paying via the internet.Most of these customers at first rejected the use of credit card in making fraud. This was developed when insufficient security was found in the global market especially when transactions are made manually, which is a strong barrier to the success of business. Endless debates about the net security arose in United States inorder to prevent fraud and to come up with a system in which easy payment procedures that is very smooth can take place.
(Hansen, 1996, p1030). The challenges that we are facing currently are on how to come up with solutions that can meet all these needs. This brought the issue of credit card based payment system. In credit card based payment system information transfer is highly protected by the secure socket layer (SSL) which ensures and provides the security and integrity of transferred information or message.The banking network is so complicated where by most banks have been found to effect payment in a wrong way.
Online payments basically because of problems associated with it. Otherwise the use of credit card is making payment in the field of electronic commerce has brought a lot of benefits to both customers and merchants. Electronic commerce has proved to address the marketing challenges which aim at attracting customers in the market of e-payment.The credit cards have been developed to address some of these challenges since it is vey fast means of payment cheap and more secure.
The use of credit card therefore aims at assisting the online payment parties in processing their services without any problem. Unlike some days before when the parties involved in transaction could stand a lot of time in making payment. Before payments were made both the vendor and customers (buyer) were expected to take a lot of time filling in many pages of application forms. After making an application, they were expected to wait for long until the transaction was completed. The security of the transaction system was neither even guaranteed nor provided.Therefore the credit card payment means provide maximum security in the procedures involved in the transaction.
Customers or buyers make their own payment using the credit card via the internet. This is to increase the attractiveness of customers in the field of electronic commerce. (Martin, 1997, p.249). The use credit card in making payment has therefore brought a lot of competitions in the market. Most of the companies engaged in electronic commerce are now facing competition in the market whereby they are struggling to convince customers that the use of credit card is suitable.
Payment of goods can be made online without the customers getting involved in traveling to make payment in banks.This saves a lot cost and improves the efficiency of production in most of these companies trading in electronic commerce. With the development of online payment system, banks have faced a serious dynamic inflow of new competitors in the electronic-commerce global environment. Companies from computer industry have been established which operate in low cost value providers offering e-mail payments, virtual wallets and electronic checks.
Telecommunication and mobile operators are now developing various payment systems that might attract customers in order to compete with banks. In relation to this service providers dealing with electronic data interchange which is to manage electronic payment and financial date exchange have also emerged. Telecommunication operators and internet service providers (ISPs) are also attempting to earn an electronic payment proposing differently innovative tools such as telcom and internet kiosks, phone cards among others. (Chen, 2006, p45).
A part from the credit card as a system of payment we also have other types of online payment systems. These include electronic money systems, E-mail payment system and mobile payment system.The electronic money system of payment comprises of the following three payment systems: virtual money, electronic wallet and the virtual wallet. The electronic wallet is based on the smart card technology.
The smart card technology is used to store information about the financial details to the customers. Money is loaded into the E-wallet by transfer from the cardholders account. This is done without involving the banking in the transaction of the purchase.However, this use of smart card in making payments only targets those trading in markets requiring small payments.
The smart card readers on customer’s side installed for the system to be integrated in the internet payment. This installation is done by building such reader into mobile phones. This is most likely going to enhance the development of pay-as-you use services, such as online games, electronic gaming, music, and tickling or mass transit systems. Virtual wallet is similar to electronic wallet only that money is stocked on the software instead of on smart card.
A bankcard issuer mostly manages this system. After creating an account the buyer then enters the ID number and password during the time of transaction. Like with smart cards virtual wallet is also used in making micro-payments via Internet. (Dorronsoro, 1997, p830).
The other online payment via Internet payments is the E-mail payment. The E-mail payments are used by small businesses and person-to-person transactions. The system is widely used in online gambling, adult entertainment and low-valued international payments.A customer loads an amount of money from his bank account into a service provider account.
He then specifies the sum of amount that is to be sent and feeds the email address of a recipient to be paid. Both the recipient and the customers are informed that the money has been transferred thereafter the recipient can withdraw from their bank account. Mobile payments are carried out by online payments. Personal trusted devices like wireless phone or personal digital assistance carry it out.
The payments are used in areas such as wireless Internet shopping, vending machines, event and public transport tickling, person-to-person payments. (Wall, 2001, p.76). Credit and frauds The issue of frauds is a very serious problem faced by credit card users and issuers especially in America.
Uptodate various intelligent officers are working on research to come up with effective measure of dealing with fraud. The loss cost by credit card fraud is very high such that a lot of money is lost in the banking system. The frauds mostly occur and result from those tending to forge the numbers and from intelligent people trying to use complicated machines in forgery. Therefore it can be said that occurrence in forgery.
Therefore it can be said that occurrence of fraud in online business is something inventible.The credit card risk management thus has become a big issue that faces the various officials in the country to address and research are working on it. (Kannen, 2003, p.89).
There are basically two types of credit card frauds. We have the inner card fraud and the external card fraud. Inner card fraud occurs with an intention to defraud the cash. In most cases inner card fraud occurs when collusion takes place between the merchant and the cardholder. The two parties use a wrong transaction to defraud bank cash. This has mostly affected our banks.
The other type that is the external card fraud is mainly happening in the using of stolen fake of counterfeit credit card to consume cash in disguised manner.In other words it is the attempt of using fake cards to get cash is a wrong manner. Mostly reported is where credit card number is stolen and is used for making purchases when the owner is not aware. The merchant at sometime may become dishonest especially when making charges on the user’s e-wallet without consent or permission of the user. When transaction dispute is presented the e-wallet provider is then expected to answer questions by providing the proof about the records of the transaction.
The e-wallet system is a place where an important and genuine logic for balance storage is presented, transaction history of the e-wallet is kept and the overall management and monitoring of the card accounts are implemented. The e-wallet system also keeps the e-wallet account information containing the credit balance per formal identification number (PIN), expiry date and card status. Therefore the front-end serve allows the cardholder to access their e-wallet through the internet browser. The following are some of the criteria of security measures to provide a payment solution using credit cards in our bank. The first criterion is identification.
This involves identification of the parties involved in transaction before it is initiated between the two parties. The two parties comprise of the buyer who is obliged to pay and the merchant who suppose to provide a product or service.Therefore when buyer pays online they are not in a position of using clues from direct observation of the vendor’s appearance and behaviour to know the sellers as in a situation of face-to-face contact. The other solution mechanism is confidentiality.
In this case only indispensable transaction details are revered to the two parties with the remounting information concealed. For example the customer’s card number should not be known by the vendor when a third party or an intermediary provides him with a pay certification.(Leibbrandt,2004,p.24).The third party in turn is not supposed to be told about the information regarding purchases. The third party is also not supposed to intercept data since they always tend to abuse the other.
Intercepting the data by unintended third party usually cause problems of Internets payments. Authentication is also another criterion of security. All the electronic transactions must be authenticated to provide some honesty during transactions. Honest intentions of the parties (buyer and merchant) are ensured by the terms of transaction. Customers require a guarantee that a merchant will not charge them an imaginary purchase.
Therefore information concerning products such as product features and quantity, price of the ordered goods, delivery date among others should be made known to both the merchant and customer (buyer). The electronic transaction in this exchange thus is the major factor of the future progress e-commerce. Non-repudiation is another criterion of security measure to check fraud. Merchants are to be made aware and adjured that the payment obligation will not by any means be repudiated afterwards. This will be the success of the future development of online business and transaction.
Another security criterion is the data integrity. During transaction session or process, payment data should not be intentionally or unintentionally tampered with. Customer solvency can be checked and verified by a merchant or to a certain amount a guaranteed by a bank. Durability is other criteria whereby the credit card users are made assured that their transaction details could be verified and may not be mishandled or misused after a certain period of time. The transaction system should not be affected by any hardware or software defaults. Liquidity/convertibility measures deals with the transfer of money.
The transferred money is to be withdrawn or converted to another currency as soon as possible without any additional procedure or information to affect this. The last measure for security in the use of credit card on online business is anonymity or trace ability. The buyer or customer in most cases want to be anonymous and would not like leaving any traces of transaction completed. Credit card fraud detection is a very cumbersome task especially if it is to be done in the manual way. Therefore some models have been developed to assist in the detection of fraud. These models are mostly artificial intelligent based or statistics oriented.
For example a neural network fraud detection system has been used to train a large sample of credit card account transactions which come from a credit card issuer. (Gosh, 1994, p.25).
