Ecommerce business technology society Fifth Edition Kenneth C

E-commerce business. technology. society. Fifth Edition Kenneth C. Laudon Carol Guercio Traver Copyright © 2009 Pearson Education, Inc. Slide 5 -1

Chapter 5 Online Security and Payment Systems Copyright © 2009 Pearson Education, Inc. Slide 5 -2

Cyberwar Becomes a Reality Class Discussion n What is a DDo. S attack? Why did it prove to be so effective against Estonia? n What are botnets? Why are they used in DDo. S attacks? n What percentage of computers belong to botnets? What percentage of spam is sent by botnets? n Can anything be done to stop DDo. S attacks? Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -3

The E-commerce Security Environment: The Scope of the Problem n Overall size of cybercrime unclear; amount of losses significant but stable; individuals face new risks of fraud that may involve substantial uninsured losses n Symantec: Cybercrime on the rise from 2007 n IC 3: Processed 200, 000+ Internet crime complaints n 2007 CSI survey: 46% respondent firms detected security breach in last year n Underground economy marketplace that offers sales of stolen information growing Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -4

Categories of Internet Crime Complaints Reported to IC 3 Figure 5. 1, Page 262 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -5

Types of Attacks Against Computer Systems Figure 5. 3, Page 264 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -6

What Is Good E-commerce Security? n To achieve highest degree of security New technologies n Organizational policies and procedures n Industry standards and government laws n n Other factors Time value of money n Cost of security vs. potential loss n Security often breaks at weakest link n Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -7

The E-commerce Security Environment Figure 5. 4, Page 267 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -8

Customer and Merchant Perspectives on the Different Dimensions of E-commerce Security Table 5. 2, Page 268 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -9

The Tension Between Security and Other Values n Security vs. ease of use: n n The more security measures added, the more difficult a site is to use, and the slower it becomes Security vs. desire of individuals to act anonymously n Use of technology by criminals to plan crimes or threaten nation-state Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -10

Security Threats in the E-commerce Environment n Three key points of vulnerability: n Client n Server n Communications pipeline Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -11

A Typical E-commerce Transaction Figure 5. 5, Page 270 SOURCE: Boncella, 2000. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -12

Vulnerable Points in an E-commerce Environment Figure 5. 6, Page 271 SOURCE: Boncella, 2000. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -13

Most Common Security Threats in the E-commerce Environment n n n n n Malicious code (viruses, worms, Trojans) Unwanted programs (spyware, browser parasites) Phishing/identity theft Hacking and cybervandalism Credit card fraud/theft Spoofing (pharming)/spam (junk) Web sites Do. S and DDo. S attacks Sniffing Insider attacks Poorly designed server and client software Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -14

Malicious Code n Viruses: Replicate and spread to other files; most deliver “payload” (destructive or benign) n Macro viruses, file-infecting viruses, script viruses n n Worms: n n Trojan horse: n n Designed to spread from computer to computer Appears benign, but does something other than expected Bots: n Covertly installed on computer; respond to external commands sent by attacker Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -15

Unwanted Programs n Installed without user’s informed consent n Browser parasites n Can n monitor and change settings of a user’s browser Adware n Calls n for unwanted pop-up ads Spyware n Can be used to obtain information, such as a user’s keystrokes, e-mail, IMs, etc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -16

Phishing and Identity Theft n Any deceptive, online attempt by a third party to obtain confidential information for financial gain, e. g. n E-mail scam letter – most popular phishing attack n Spoofing legitimate financial institution’s Web site n Use information to commit fraudulent acts (access checking accounts), steal identity n One of fastest growing forms of e-commerce crime Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -17

Hacking and Cybervandalism n Hacker: n n Cracker: n n Hacker with criminal intent Cybervandalism: n n Individual who intends to gain unauthorized access to computer systems Intentionally disrupting, defacing, destroying Web site Types of hackers White hats n Black hats n Grey hats n Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -18

Credit Card Fraud n Fear of stolen credit card information deters online purchases n Hackers target credit card files and other customer information files on merchant servers; use stolen data to establish credit under false identity n Online companies at higher risk than offline n In development: New identity verification mechanisms Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -19

Spoofing (Pharming) and Spam (Junk) Web Sites n n Spoofing (Pharming) n Misrepresenting oneself by using fake e-mail addresses or masquerading as someone else n Threatens integrity of site; authenticity Spam (Junk) Web sites n Use domain names similar to legitimate one, redirect traffic to spammer-redirection domains Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -20

Do. S and DDo. S Attacks n Denial of service (Do. S) attack n n Hackers flood Web site with useless traffic to inundate and overwhelm network Distributed denial of service (DDo. S) attack n Hackers use multiple computers to attack target network from numerous launch points Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -21

Other Security Threats n Sniffing: n n Insider jobs n n Eavesdropping program that monitors information traveling over a network; enables hackers to steal proprietary information from anywhere on a network Single largest financial threat Poorly designed server and client software n Increase in complexity of software programs has contributed to increase in vulnerabilities that hackers can exploit Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -22

Technology Solutions n Protecting Internet communications (encryption) n Securing channels of communication (SSL, SHTTP, VPNs) n Protecting networks (firewalls) n Protecting servers and clients Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -23

Tools Available to Achieve Site Security Figure 5. 9, Page 284 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -24

Protecting Internet Communications: Encryption n Transforming plain text, data into cipher text that can’t be read by anyone other than sender and receiver n Secures stored information and information transmission n Provides: n Message integrity n Nonrepudiation n Authentication n Confidentiality Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -25

Symmetric Key Encryption n Also known as secret key encryption n Both sender and receiver use same digital key to encrypt and decrypt message n Requires different set of keys for each transaction n Advanced Encryption Standard (AES) n n Most widely used symmetric key encryption n Uses 128 -, 192 -, and 256 -bit encryption keys Other standards use keys with up to 2, 048 bits Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -26

Public Key Encryption n Uses two mathematically related digital keys n Public key (widely disseminated) n Private key (kept secret by owner) n Both keys used to encrypt and decrypt message n Once key used to encrypt message, same key cannot be used to decrypt message n Sender uses recipient’s public key to encrypt message; recipient uses his/her private key to decrypt it Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -27

Public Key Cryptography – A Simple Case Figure 5. 10, Page 283 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -28

Public Key Encryption using Digital Signatures and Hash Digests n Hash function: n Mathematical algorithm that produces fixed-length number called message or hash digest Hash digest of message sent to recipient along with message to verify integrity n Hash digest and message encrypted with recipient’s public key n Entire cipher text then encrypted with recipient’s private key – creating digital signature – for authenticity, nonrepudiation n Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -29

Public Key Cryptography with Digital Signatures Figure 5. 11, Page 288 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -30

Digital Envelopes n Addresses weaknesses of public key encryption (computationally slow, decreases transmission speed, increases processing time) and symmetric key encryption (faster, but less secure) n Uses symmetric key encryption to encrypt document but public key encryption to encrypt and send symmetric key Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -31

Public Key Cryptography: Creating a Digital Envelope Figure 5. 12, Page 290 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -32

Digital Certificates and Public Key Infrastructure (PKI) n Digital certificate includes: n n n n Name of subject/company Subject’s public key Digital certificate serial number Expiration date, issuance date Digital signature of certification authority (trusted third party institution) that issues certificate Other identifying information Public Key Infrastructure (PKI): CAs and digital certificate procedures that are accepted by all parties Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -33

Digital Certificates and Certification Authorities Figure 5. 13, Page 291 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -34

Limits to Encryption Solutions n PKI applies mainly to protecting messages in transit n PKI is not effective against insiders n Protection of private keys by individuals may be haphazard n No guarantee that verifying computer of merchant is secure n CAs are unregulated, self-selecting organizations Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -35

Insight on Society In Pursuit of E-mail Privacy Class Discussion n What are some of the current risks and problems with using e-mail? n What are some of the technology solutions that have been developed? n Are these solutions compatible with modern law? n Consider the benefits of a thorough business record retention policy. Do you agree that these benefits are worth giving up some control of your e-mail? Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -36

Securing Channels of Communication n Secure Sockets Layer (SSL): n n S-HTTP: n n Establishes a secure, negotiated client-server session in which URL of requested document, along with contents, is encrypted Provides a secure message-oriented communications protocol designed for use in conjunction with HTTP Virtual Private Network (VPN): n Allows remote users to securely access internal network via the Internet, using Point-to-Point Tunneling Protocol (PPTP) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -37

Secure Negotiated Sessions Using SSL Figure 5. 14, Page 295 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -38

Protecting Networks n Firewall n Hardware or software that filters packets n Prevents some packets from entering the network based on security policy n Two main methods: n Packet filters n Application n gateways Proxy servers (proxies) n Software servers that handle all communications originating from or being sent to the Internet Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -39

Firewalls and Proxy Servers Figure 5. 15, Page 298 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -40

Protecting Servers and Clients n Operating system controls: n n Authentication and access control mechanisms Anti-virus software: n Easiest and least expensive way to prevent threats to system integrity n Requires daily updates Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -41

Management Policies, Business Procedures, and Public Laws n U. S. firms and organizations spend 10% of IT budget on security hardware, software, services n Attacks against organizational computers down n Attacks against Web sites, individual records up n Technology a foundation of security n Effective management policies also required Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -42

A Security Plan: Management Policies n Risk assessment n Security policy n Implementation plan Security organization n Access controls n Authentication procedures n n Biometrics n Authorization policies n Authorization n management systems Security audit Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -43

Developing an E-commerce Security Plan Figure 5. 16, Page 300 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -44

Insight on Technology Securing Your Information: Cleversafe Hippie Storage Class Discussion n What is LOCKSS? What are the advantages and disadvantages to LOCKSS? n How is Cleversafe’s storage method different? How does it work? n Why is it accurate to say that Cleversafe’s method is “green” or “hippie storage”? Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -45

The Role of Laws and Public Policy n New laws have given authorities tools and mechanisms for identifying, tracing, prosecuting cybercriminals n National Information Infrastructure Protection Act of 1996: created National Infrastructure Protection Center n USA Patriot Act n Homeland Security Act n CERT Coordination Center – private group n Government policies and controls on encryption software n OECD guidelines Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -46

Types of Payment Systems n Cash n Checking Transfer n Credit Card n Stored Value n Accumulating Balance Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -47

Cash n Legal tender n Most common form of payment in terms of number of transactions n Instantly convertible into other forms of value without intermediation n Portable, requires no authentication n “Free” (no transaction fee), anonymous, low cognitive demands n Limitations: easily stolen, limited to smaller transaction, does not provide any float Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -48

Checking Transfer n Funds transferred directly via signed draft/check from a consumer’s checking account to merchant/ other individual n Most common form of payment in terms of amount spent n Can be used for small and large transactions n Some float n Not anonymous, requires third-party intervention (banks) n Introduces security risks for merchants (forgeries, stopped payments), so authentication typically required Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -49

Credit Card n Represents account that extends credit to consumers; allows consumers to make payments to multiple vendors at one time n Credit card associations: n n Issuing banks: n n Nonprofit associations (Visa, Master. Card) that set standards for issuing banks Issue cards and process transactions Processing centers (clearinghouses): n Handle verification of accounts and balances Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -50

Stored Value n Accounts created by depositing funds into an account and from which funds are paid out or withdrawn as needed n n Examples: Debit cards, gift certificates, prepaid cards, smart cards Peer-to-peer payment systems n Variation on stored value systems n e. g. Pay. Pal Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -51

Accumulating Balance n Accounts that accumulate expenditures and to which consumers make period payments n n Examples: Utility, phone, American Express accounts Evaluating payment systems: n Different stakeholders (consumers, merchants, financial intermediaries, government regulators) have different priorities in payment system dimensions (refutability, risk, anonymity, etc. ) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -52

Dimensions of Payment Systems Table 5. 6, Page 309 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -53

E-commerce Payment Systems n Credit cards are dominant form of online payment, accounting for around 60% of online payments in 2008 n Other e-commerce payment systems: n Digital wallets n Digital cash n Online stored value payment systems n Digital accumulating balance systems n Digital checking Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -54

How an Online Credit Transaction Works Figure 5. 18, Page 312 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -55

Limitations of Online Credit Card Payment Systems n Security: n n Cost: n n Neither merchant nor consumer can be fully authenticated For merchants, around 3. 5% of purchase price plus transaction fee of 20 – 30 cents per transaction Social equity: n Many people do not have access to credit cards Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -56

Digital Wallets n Seeks to emulate the functionality of traditional wallet n Most important functions: n Authenticate consumer through use of digital certificates or other encryption methods n Store and transfer value n Secure payment process from consumer to merchant n Early efforts to popularize have failed n Newest effort: Google Checkout Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -57

Digital Cash n One of the first forms of alternative payment systems n Not really “cash” n n Form of value storage and value exchange using tokens that has limited convertibility into other forms of value, and requires intermediaries to convert Most early examples have disappeared; protocols and practices too complex Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -58

Online Stored Value Systems n Permit consumers to make instant, online payments to merchants and other individuals n Based on value stored in a consumer’s bank, checking, or credit card account n Pay. Pal most successful system n Smart cards n Contact smart cards: Require physical reader n n Mondex Contactless smart cards: Use RFID n EZPass n Octopus Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -59

Digital Accumulating Balance Payment Systems n Allows users to make micropayments and purchases on the Web n Users accumulate a debit balance for which they are billed at the end of the month n Valista’s Payments. Plus n Clickshare Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -60

Digital Checking Payment Systems n Extends functionality of existing checking accounts for use as online shopping payment tool n Example: Pay. By. Check Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -61

Wireless Payment Systems n Use of mobile handsets as payment devices well -established in Europe, Japan, South Korea n Japanese mobile payment systems n n E-money (stored value) n Mobile debit cards n Mobile credit cards Not as well established yet in U. S, but with growth in Wi-Fi and 3 G cellular phone systems, this is beginning to change Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -62

Insight on Business Mobile Payment’s Future: Wavepayme, Textpayme Group Discussion What technologies make mobile payment more feasible now than in the past? n Describe some new experiments that are helping to develop mobile payment systems. n How has Pay. Pal responded? n Why haven’t mobile payment systems grown faster? What factors will spur their growth? n Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -63

Electronic Billing Presentment and Payment (EBPP) n Online payment systems for monthly bills n 50% of households in 2008 used some EBPP; expected to grow to 75% by 2012 n Two competing EBPP business models: n n Biller-direct: Dominant model n Consolidator: Third party aggregates consumer’s bills Both models are supported by EBPP infrastructure providers Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Slide 5 -64

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 65