Payment and transactions in electronic commerce system

A method of payment in an electronic payment system wherein a plurality of customers have accounts with an agent. A customer obtains an authenticated quote from a specific merchant, the quote including a specification of goods and a payment amount for those goods. The customer sends to the agent a single communication including a request for payment of the payment amount to the specific merchant and a unique identification of the customer. The agent issues to the customer an authenticated payment advice based only on the single communication and secret shared between the customer and the agent and status information which the agent knows about the merchant and/or the customer. The customer forwards a portion of the payment advice to the specific merchant. The specific merchant provides the goods to the customer in response to receiving the portion of the payment advice.

FIELD OF THE INVENTION 
This invention relates to electronic commerce, and, more particularly, to a 
system and method for payment and transactions in an electronic payment 
system. 
BACKGROUND OF THE INVENTION 
In rapidly growing numbers, businesses and consumers are moving their 
routine commercial activities into the electronic marketplace. The growth 
of electronic networks has given businesses of all sizes unprecedented 
access to new markets. At the same time, networks reduce the need for 
market intermediaries and their associated costs. Increased competition 
among sellers has reduced buyer costs. 
Commercial enterprises are developing technologies to take advantage of the 
electronic marketplace. However, one area that significantly lags others 
is the development of systems for executing financial transactions of all 
types across electronic networks. 
Financial transactions today take many forms: cash, check, credit card, 
debit card, automated teller, etc. The nature of the transaction 
determines which payment system is the method of choice: 
Financial Payments ($500K+): Transactions in this range are predominantly 
payments between financial institutions using electronic systems such as 
CHIPS, FedWire and SWIFT. 
Commercial Payments ($1000 to $500K): These are usually procurement 
payments between businesses. Since these transactions often require the 
exchange of documents, e.g., bids and proposals, Electronic Data 
Interchange (EDI) is commonly used. 
Consumer Payments ($20 to $1000): At the higher end of the range, credit 
cards are generally used. While checks are also used, they have 
significantly less wide-spread acceptance, particularly among merchants, 
and are more often used for bill payment. At the lower end of this range, 
consumers are most likely to use cash. Credit cards are sometimes used as 
a cash substitute. 
Paper Currency Payments ($1 to $20): The vast majority of all financial 
transactions fall in this range. The primary use of cash is for these 
payments. 
Coin Transactions (under $1): Although the value of each transaction is 
low, the volume of transactions is high. These transactions are also 
highly diverse, ranging from buying newspapers to feeding parking meters. 
Financial and commercial payments are already handled somewhat adequately 
by the systems which serve them. While improvements are possible, change 
is likely to be gradual. 
Transactions in the lower range are far less efficient. Consumer payments 
by credit card are appropriate where an extension of credit is required. 
However, because a credit card transaction is bundled with numerous 
supporting services, it is often ineffective as a substitute for cash, 
particularly for small value transactions. 
Cash transactions themselves are highly inefficient. Last year for example, 
Americans executed 300 billion cash transactions for items costing less 
than $20. Banks and businesses spend over $60 billion annually to move, 
secure, and account for these transactions. Growing numbers of consumers 
feel burdened by the inconvenience and risk in carrying cash. Further, it 
is currently impossible to use cash in the electronic marketplace. 
Low value cash and consumer transactions will likely be the heart of 
electronic commerce and electronic payment systems currently under 
development target this market. 
While not all cash transactions will migrate to electronic transfer, the 
development of a global network such as the Internet itself will create 
many new on-line markets. A merchant will be any vendor who has Internet 
connectivity and offers goods for sale, whether they are durable goods, or 
information-based products such as reports and software entertainment. A 
customer will be anyone who subscribes to the Internet and browses the 
vendor web sites for information or tangible goods. 
This will give rise to a new type of payment transaction called a 
"micropayment." These payments will be of very low value--fractions of a 
penny in some cases--but executed in very high volumes. Micropayments will 
purchase many of the new information-based products. Information utilities 
must be able to bill in precise increments for such services as 
information retrieval (search), cataloging, archiving, formatting, 
reproducing in various media, etc. 
The many challenges faced by any electronic payment system include security 
as the paramount requirement. However, in addition to being secure, the 
successful electronic payment system must protect individual privacy 
without impeding legitimate inquiries by law enforcement and government 
agencies. This requires transactional anonymity with an audit trail. 
Transactions may also be non-appealable, emulating cash transactions. 
Electronic payment systems are based on either a credit or a debit payment 
model. In the debit model, first an account is funded, then purchases are 
made by drawing down on those funds. In the credit model, the purchase is 
made in advance of payment as with a conventional credit card. 
Electronic payment systems are either on-line or off-line systems. An 
on-line system is one where the parties to a transaction are joined 
through a network to a third party and communicate with this third party 
(server) during the course of the transaction. When transactions are 
executed on an on-line system, the server immediately records the 
transaction and updates various databases. It may also initiate funds 
movements. 
In an off-line system, two parties exchange funds without any communication 
with a bank or other third party during the transaction. Off-line systems 
normally require hardware devices such as smartcards to provide adequate 
security. In order to download value (cash) onto the card, or to make a 
deposit, the card must be connected in some way to an electronic network 
to communicate with a bank or automated teller service. Until the device 
that receives a payment communicates with a bank over the network, the 
transaction is completely undocumented within the banking system. 
At the time of this writing, a collection of proposed payment systems for 
the Internet included about fifty entries. These existing systems can be 
categorized into the following types: credit card based systems, 
electronic check systems, electronic coin systems, stored value cards, 
on-line payment systems, electronic scrip systems, and debit systems. 
These systems, including their benefits and disadvantages, are summarized 
here. 
Credit Card Based Systems 
There are several electronic payment systems that are essentially existing 
credit card systems adapted for operation over the Internet. The chief 
technical challenge they face in porting the functionality of the credit 
card system to the Internet is to securely obtain or transmit a customer's 
credit card information. As a way to lower overall transaction costs, some 
credit card systems accumulate customer charges and merchant payments up 
to a predetermined threshold before sending them out to processing agents. 
All electronic payment systems based on the credit card model benefit from 
the familiarity and name recognition these franchises have carefully built 
up over many years of operation. 
However, given the average charge of about $0.20 plus 2% to 3% transaction 
fees, most merchants would prefer to do business using an alternate and 
cheaper, payment transaction scheme. 
Credit electronic payment systems are built around the conventional, 
bundled service credit card transaction processing systems. In the current 
environment, the only network transaction for which these electronic 
payment systems are optimized is a merchandise mail order purchase of 
significant value. Even with complicated cumulative charge and payment 
schemes, these systems are too costly and inefficient for the vast 
proliferation of low-value payments, including micropayments, that will be 
common to electronic commerce. 
The privacy scheme for the credit electronic payment systems, in most 
cases, is much like conventional credit card systems. Except for 
withholding credit card numbers, merchants have access to the standard 
customer information. Some of the systems provide authentication using 
digital signatures. 
Electronic Check Systems 
There are electronic payment systems that are analogous to paper checks. An 
electronic check would typically consist of a document, signed by the 
payor using a certified digital signature key, which lists the information 
necessary for processing a paper check such as: the payor, the bank of the 
payor, the account number of the payor, the payee, the amount of the 
payment, and the date of the payment. The payee verifies the signature on 
the electronic check and then sends the electronic check to his bank for 
processing. The bank processing of an electronic check is essentially the 
same process as that used for paper checks today. 
The advantage of electronic checks is that they take advantage of existing 
bank clearing processes, which reduces development time. In the basic 
model of electronic check, the payee would take the risk if the electronic 
check was not good. However, the merchant or payee would have two possible 
avenues to reduce his risk in the case of an on-line payment. If the bank 
was on-line, the payee could obtain approval from the bank that the check 
was good or he could require that the payor obtain a certified check from 
a bank. 
The downside of electronic checks is their relatively high cost. Although 
they are expected to be considerably cheaper than the credit card based 
systems, most developers of electronic check systems expect the cost to be 
in the $0.10 to $0.50 range per electronic check. Part of this cost is 
because of the necessity of an ACH (automated clearing house) transaction 
for each interbank check, which costs about $0.15. Another problem with 
electronic checks is that they do not provide any privacy for the payor. 
The payee will know identifying information which is tied to the payor. 
Electronic Coin Based Systems 
There are numerous proposals for electronic payment systems that use 
electronic coins of fixed amounts as a means of exchange. A customer makes 
a withdrawal from his bank account and receives electronic coins from the 
bank. The customer can then use these coins to pay a merchant. The 
merchant can check the validity of the coins using cryptographic 
techniques. Then the merchant can deposit the coins into the bank. Some 
electronic coin systems can be used with a multitude of banks. 
An advantage of electronic coins is that a coin can be validated by 
cryptographic techniques so a merchant can be convinced that the coin is 
indeed valid. However, the merchant has no way to determine on his own 
whether the coin has been spent before. In order to determine this, the 
coin has to be given to the bank, and the bank has to check to see if that 
coin has been deposited before. Some systems suggest the use of tamper 
resistant hardware for storing the coins so that the tamper resistance has 
to be broken in order for the customer to spend a coin more than once. 
There are electronic coin based systems that provide a very high degree of 
anonymity. Even if the banks and merchants pool their information about 
transactions, the identity of the payor of a particular transaction cannot 
be determined. Because this degree of anonymity might not be acceptable by 
some governments, there are electronic coin payment systems in which the 
identity of payors can be determined by trustees who could be independent 
of the banks and merchants. 
One problem with some electronic coin systems is that a single payment 
might require the use of multiple coins in order to add up to the correct 
value. 
Electronic coin systems are designed to be used in off-line systems, but 
they could be used in an on-line system as well. The merchant could just 
deposit the coins and receive a confirmation of the validity of the coins 
before providing merchandise. 
Digital cash transactions are much like cash transactions. Payments are 
immediate and non-appealable. 
Regardless of the provisions the issuer makes to protect against lost or 
damaged tokens, anonymity means the consumer will be vulnerable to loss. 
To protect against fraud and loss, some electronic coin systems serialize 
the tokens that they issue. If the consumer cannot produce a record of the 
serial numbers, or if the tokens have already been redeemed by someone 
else, the consumer has indeed lost the "cash." 
Anonymity imposes additional overhead on issuers because they must retain 
extensive records of serial numbers for tokens they have issued. 
Stored Value Cards 
Another approach to electronic payments uses devices that store a value on 
them. The device has a register in it that keeps an accounting of the 
amount of money stored in the device. A customer connects with a bank 
through an ATM or equivalent and withdraws money from his bank account and 
the value of the withdrawal is added to the register. The customer can 
authorize a movement of funds from his device to another device in the 
system. During this process, the value on his device is reduced and the 
value on the other device is increased by the same amount. In some 
systems, any device can accept payments, while in other systems only 
specified devices can accept payments. 
An advantage of the stored value approach is that it requires little 
processing at the bank. Transactions can take place with no involvement 
from the bank. 
A serious problem with stored value devices is the possibility that a 
customer could fraudulently add value to his device. One method for 
reducing the risk of this is to limit the scope of acceptability of the 
devices. For example, a metropolitan transit system may provide cards that 
can only be used in the transit system. Another method would be to make 
the devices extremely difficult to break into. However, this still leaves 
the system vulnerable to attack. If these devices were to become widely 
used, it could become financially profitable for an attacker to break into 
one or more devices and place some large amount of value into the device. 
If there was no method built into the system for detecting and recovering 
from such an attack, then losses could be huge. 
There is another type of electronic payment that is strictly an off-line 
system using tamper resistant trusted devices. In this system, a device 
would have a signature key authorized by a bank. By taking the device to 
an ATM, or through some other communication with the bank, the customer 
can withdraw money from his bank account and the balance would be placed 
on the device together with an identifying number that is unique to this 
particular withdrawal. When the customer wants to pay a merchant, the 
device would use the signature key to sign an order to pay the merchant 
for a specified amount, the balance on the customer's device would be 
debited by that amount, and the balance on the merchant's device would be 
credited by that amount. There could be a multiplicity of balances on the 
customer's device. 
One problem with this system is that it requires the bank to keep all 
records corresponding to a particular withdrawal until the entire 
withdrawal has been accounted for. Since the transactions could go to many 
merchants, all of these records must be held until all of the merchant's 
devices have been to an ATM. 
Another problem with the system is that if a transaction has gone through 
several hands, then a receiver has to check all signatures to validate the 
cash. 
A further problem with this system is that the privacy of a transaction is 
protected only by the security of the trusted device. Therefore, if this 
system were to be adopted to low value payments with a lower security 
level on the devices, the privacy could be more easily compromised as 
well. 
Electronic Scrip 
Electronic scrip refers to a type of electronic currency which has a 
merchant identified at the time of issuance of the cash and such that the 
electronic currency can only be spent with that merchant. When a customer 
identifies a new merchant that he wishes to pay, or if he runs out of 
scrip with a previous merchant, he obtains scrip from a broker for some 
specified total amount that can be divided into discrete pieces to pay 
that particular merchant. The payment to the broker for the scrip could 
involve another type of electronic payment. The customer can then make 
payments to the specified merchant until the total is reached or until the 
customer does not want to make any more payments to that merchant during 
the current time period, for instance a day. The merchant must deposit the 
scrip with the broker. The broker then pays the merchant through some 
other payment mechanism. 
Because this system uses some other electronic payment system for the 
customer to purchase scrip from the broker and for the broker to pay the 
merchant for redeemed scrip, it will only be beneficial in instances in 
which a customer has many transactions with a single merchant. In these 
cases, it is more efficient than other electronic payment systems, because 
of the reduced computational complexity that is required for a scrip 
payment. 
Debit Systems 
Debit systems rely on the existing infrastructure of highly efficient ACHs 
and ATMs for initial funding. Therefore, they have relatively lower 
transaction costs as compared to credit systems. Typically, an ATM 
transaction costs $0.50, or less, and an ACH transaction costs less than 
$0.15. Only a single transaction is needed to fund an account. 
Debit systems execute payment transactions by exchanging electronic tokens. 
These tokens are digitally signed by a participating bank and delivered to 
the consumer in exchange for a debit to the consumers checking account. 
The debited funds are held in an escrow account, so that the amount of 
digital cash or tokens issued is backed by an equivalent amount of cash. 
Debit systems today generally use stronger security and authentication 
techniques than credit systems. Debit systems may employ public key 
cryptography schemes for security and a variety of digital signature 
algorithms for authentication. This level of security allows debit systems 
to operate freely over open unsecured networks. 
Debit systems are an attractive alternative to cash for many reasons. 
Transactions will occur faster because there is no need to wait for 
change. Debit systems eliminate the operational costs of handling cash. 
They improve security and reduce losses because businesses are able to 
transmit value to their bank at any time instead of having to wait for 
business hours to deposit cash. 
In addition, a key feature of the debit system is anonymity. However, only 
the payer receives complete anonymity. The payee can always be traced. 
It is generally believed that governments and law enforcement agencies will 
not accept security schemes that do not make provision for a so-called 
back door. Moreover, it is not clear that customers prefer complete 
anonymity in place of personalized contact with a merchant and protection 
against loss. The latter is only possible if records of tokens issued to 
consumers are kept on file. 
Common to all off-line debit systems is the use of proprietary, special 
purpose hardware, including smartcards and the accompanying readers, 
wallets and smart phones. Smartcards offer an added degree of freedom in 
dispensing with cash. A one-on-one transaction can be completed without a 
computer link provided the necessary hardware is available. 
Problems with Existing Proposed Solutions 
None of these existing or proposed electronic payment systems provide for 
payment that is non-appealable, does not need extensive records, is 
relatively anonymous for the consumer, and has low enough processing cost 
so that it can adequately deal with micro-payments to individual 
merchants. As noted, micro-payments are very low-value payments that are 
likely to occur in high volumes on digital communication networks. For 
example, on a network such as the Internet, merchants such as stock 
brokers may wish to sell stock quotes at $0.01 per quote. While the cost 
per sale item is very low, the number of items sold per day may be very 
high. 
With credit card or check-based payment systems, the recipient and/or the 
system must assume some credit risk, since the buyer can repudiate or 
simply become unable to pay. The associated insurance component 
necessarily raises the cost of the payment service. Consumer anonymity is 
desirable in view of fears expressed by privacy advocates and others that 
in the future, it will become possible to collect and analyze huge amounts 
of data concerning every purchase or road toll payment a person makes, 
thereby creating potential privacy problems. 
A problem with payment systems that make an instantaneous payment to 
merchants is that if a fraudulent merchant is accepting many fraudulent 
transactions, he might not be detected until he had already received much 
money. 
For these and other reasons, it is desirable to provide a payment system 
that is non-appealable, does not need extensive records, is relatively 
anonymous for the consumer, and would adequately deal with micropayments 
to individual merchants. 
Other desirable aspects of a payment system include high performance, low 
cost, minimum maintenance, easy scaleabiliy according to volume, 
significant security with moderated anonymity and strong authentication, 
standards-based and open architecture and adaptability for anomaly 
detection for detection of fraud. 
SUMMARY OF THE INVENTION 
This invention relates to an electronic commerce and transaction system, 
its components and methods for their use. 
In one aspect, the invention is a method of payment in an electronic 
commerce system wherein customers have accounts with an agent and where 
each customer shares a respective secret between that customer and the 
agent. This secret is set up prior to the actual transaction or payment 
and, in preferred embodiments, is a dynamic secret. 
According to the method of this invention, a customer obtains an 
authenticated quote from a specific merchant, the quote including a 
specification of goods and a payment amount for those goods. The customer 
then sends to the agent, in a single authenticated one-pass communication, 
a payment request message representing a request for payment of the 
payment amount to the specific merchant along with a unique identification 
of the customer. The agent, after processing the payment request, issues 
and sends to the customer, in a single one-pass communication, an 
authenticated verifiable payment advice message. The issuing by the agent 
is based only on: 
the single communication from the customer to the agent, 
the secret shared between the customer and the agent and 
non-cryptographic customer information ("customer status information") 
and/or non-cryptographic merchant information ("merchant status 
information") which the agent has. 
The customer and merchant status information are referred to collectively 
herein as "status information." 
Upon receipt of the payment advice message, the customer forwards a portion 
of the payment advice message to the merchant. The merchant then provides 
the goods to the customer in response to receiving the portion of the 
payment advice message. 
The payment advice indicates that payment has or will be made to the 
specific merchant. 
In preferred embodiments of the invention the secret shared between the 
customer and the agent is a dynamic secret which changes per transaction 
based on a previous transaction between the customer and the agent. 
Preferably the secret is modified based on information generated by the 
customer in a previous transaction with the merchant. The modification 
information could be generated by the customer, the agent or both and is 
provided from the customer to the agent in the payment request message and 
from the agent to the customer in the payment advice message. 
The shared secret is modified based on the current shared secret and on the 
modification information sent from the customer to the agent and from the 
agent to the customer. If the agent rejects the customer's payment advice 
request, the shared secret may still be updated. The choice of whether or 
not to update the shared secret depends on other implementation choices 
and on why the request was rejected. 
In another aspect, the customer and the merchant generate a specific 
session key per transaction and the quote from the merchant is 
authenticated using this key. Preferably the key is generated using a 
Diffie-Hellman technique. 
The goods can be digital goods (which can be supplied electronically) or 
they can be any other form of goods, including pre-approved financial 
transactions. Preferably the only representation of the goods to the agent 
is an irreversible unambiguous function of the quote within the payment 
request message. By an "unambiguous" function is meant one such that it is 
computationally infeasible to determine two different inputs to the 
function that will produce the same output value of the function. By an 
"irreversible" function is meant one such that given an output of the 
function it is computationally infeasible to find an input that produced 
that output. 
Using an unambiguous function of the quote prevents a customer or a 
merchant from having two quotes with the same function value. Using an 
irreversible function of the quote means that the actual quotes cannot be 
obtained from the agent, thereby enhancing privacy. 
In preferred embodiments the merchant verifies the validity of the received 
portion of the payment advice message prior to providing the goods to the 
customer. 
In another aspect, this invention is a method of payment in an electronic 
payment system wherein a plurality of customers have accounts with an 
agent, each customer sharing a respective secret between that customer and 
the agent. The customer sends to the agent, in a single authenticated 
communication, a payment request message for payment of a specific amount 
to a specific merchant, along with a unique identification of the 
customer. The agent issues a payment advice message to the customer based 
only on the payment request message, the secret shared between the 
customer and the agent and the customer and merchant status information, 
the payment advice message bearing a verifiable digital signature of the 
agent over part of its content. 
The customer then forwards a portion of the payment advice message to the 
specific merchant who then provides goods to the customer in response to 
receiving the portion of the payment advice message. The merchant can 
verify the validity of the digital signature contained in the received 
payment advice message portion. 
In another aspect, this invention is a method of achieving payment in an 
electronic payment system wherein a plurality of customers have accounts 
with an agent and wherein each customer shares a respective secret between 
that customer and the agent. The invention includes the steps of, by the 
agent, receiving from a customer a single authenticated communication 
representing a payment request message. The payment request message 
includes a request for payment of a specific amount to a specific merchant 
as well as a unique identifier of the customer. The agent then issues to 
the customer a payment advice message which bears a verifiable digital 
signature computed over part of its content, the issuing by the agent 
being based only on the payment request message, the secret shared between 
the customer and the agent and on the customer and/or merchant payment 
information. 
In another aspect, the method includes, at a specific merchant, receiving 
from a customer a portion of a payment advice message issued by the agent, 
where the payment advice message indicates that payment will be made to 
the specific merchant, and then the merchant providing goods to the 
customer in response to receiving the portion of the payment advice 
message. 
In some preferred embodiments the payment advice identifies a quote 
previously provided by the merchant to the customer, and the goods 
provided are goods specified in the quote. 
In another aspect, this invention is an electronic payment system including 
an agent, a plurality of merchants, and a plurality of customers having 
accounts with the agent, where each customer shares a respective secret 
with the agent. The system includes a mechanism constructed and adapted to 
send from a customer, in a single authenticated communication to the 
agent, a payment request message representing an identifier for the 
customer and a request for payment of a specific amount from the customer 
to a specific merchant. The system also includes a mechanism constructed 
and adapted to issue, from the agent to the customer, an authenticated 
verifiable payment advice message in response to only the payment request 
message received by the agent, the secret shared between the customer and 
the agent and customer and/or merchant status information known by the 
agent. 
In some embodiments the system includes a mechanism constructed and adapted 
to forward a portion of the payment advice from a customer to a merchant 
and a mechanism constructed and adapted to provide goods from the merchant 
to the customer in response to receipt of the payment advice. 
In yet another aspect, this invention is an agent in an electronic payment 
system comprising the agent, a plurality of customers and a plurality of 
merchants, the customers having accounts with the agent and each customer 
sharing a respective secret with the agent. The agent has a mechanism 
constructed and adapted to receive, from each customer, a payment request 
message representing a single authenticated communication comprising along 
with an identifier for the customer and a request for payment of a 
specific amount to a specific merchant. The agent also has a mechanism 
constructed and adapted to issue an authenticated verifiable payment 
advice message in response to only a received payment message from a 
customer by the agent, the respective secret shared between the customer 
and the agent and customer and/or merchant status information known by the 
agent. 
In yet another aspect, this invention is a customer, in an electronic 
payment system comprising an agent, a plurality of customers and a 
plurality of merchants, the customers having accounts with the agent and 
each customer sharing a respective secret with the agent. The customer has 
a mechanism constructed and adapted to send a payment request message in a 
single authenticated communication comprising an identifier for the 
customer and a request for payment of a specific amount to a specific 
merchant of the plurality of merchants. The customer also has a mechanism 
constructed and adapted to receive an authenticated verifiable payment 
advice issued by the agent in response to only a received payment request 
message from a customer by the agent, the secret shared between the 
customer and the agent and customer and/or merchant status information 
known by the agent. 
In some embodiments, the customer also has a mechanism constructed and 
adapted to obtain an authenticated quote from a specific merchant of the 
plurality of merchants and a mechanism constructed and adapted to forward 
a portion of the payment advice message to the specific merchant, where 
the portion of the payment advice message identifies the quote. 
In some embodiments the quote specifies goods and the customer includes a 
mechanism constructed and adapted to receive the specified goods from the 
specific merchant. In some embodiments, the customer also has a mechanism 
constructed and adapted to re-forward the portion of the payment advice 
message to the specific merchant when the goods are not received from the 
specific merchant because of non-receipt of the payment advice message by 
the merchant. 
In yet another aspect, this invention is a merchant in an electronic 
payment system comprising an agent, a plurality of customers and a 
plurality of merchants, the customers each having accounts with the agent 
and each customer sharing a respective secret with the agent. 
The merchant has a mechanism constructed and adapted to provide an 
authenticated quote to a customer, the quote specifying goods. The 
merchant also has a mechanism constructed and adapted to receive a 
verifiable portion of a digitally signed payment advice message issued by 
the agent in response to only electronic signals representing a received 
single communication from a customer by the agent, to the secret shared 
between the customer and the agent and to customer and/or merchant status 
information known by the agent. 
In some embodiments the portion of the payment advice message identifies a 
function of the goods, and the merchant also has a provider mechanism 
constructed and adapted to provide the goods to the customer in response 
to receipt of the portion of the payment advice message. 
The provider mechanism can provide for authentication and encryption of 
portions of the goods which comprise electronic signals. 
In another aspect, this invention is a method of payment in an electronic 
payment system wherein a plurality of customers have accounts with an 
agent. Each customer shares a respective dynamic secret between that 
customer and the agent. The method includes obtaining, by a customer, 
electronic signals representing an authenticated quote from a specific 
merchant of a plurality of merchants, the quote including a specification 
of goods and a payment amount for those goods. The customer then sends to 
the agent a payment request message for payment of the payment amount to 
the specific merchant and a unique identification of the customer. The 
agent issuing and sending to the customer electronic signals representing 
an authenticated verifiable payment advice message, the issuing being 
based only on the payment request from the customer to the agent and on 
the dynamic secret shared between the customer and the agent. The customer 
forwards a portion of the payment advice message to the specific merchant 
and then the merchant provides the goods to the customer in response to 
receiving the electronic signals representing the portion of the payment 
advice message. 
In another aspect of this invention, a merchant is unable to associate the 
origin of any particular transaction with prior transactions from the same 
customer. This is because the merchant is not provided with information 
which would enable such an association to be made. 
In yet another aspect of this invention, transactions cannot be linked to 
customers by anyone other than the agent. 
In a further aspect, the encrypted session between customer and merchant 
creates a unique customer/merchant shared secret which acts as the sole 
authenticated reference for the current transaction. 
In still a further aspect, the agent issues the payment message without 
verifying the quote and the customer does not send the full quote to the 
agent. 
In yet another aspect of this invention, the merchant issues the quote 
verifiable only by the customer.

DETAILED DESCRIPTION OF THE PRESENTLY PREFERRED EXEMPLARY EMBODIMENTS 
I. Symbols and Nomenclature 
The following symbols and nomenclature are used herein. 
______________________________________ 
.sym. Denotes the logical exclusive-or operator 
.parallel. Denotes the bit string concatenation 
operator 
.about. Denotes the logical complement operator 
( "ones complement" ) 
SHA(message) 
Denotes the 160-bit result of applying 
the (revised) Secure Hash Algorithm, SHA- 
1, to "message". The SHA algorithm is 
defined in Federal Information Processing 
Standards (FIPS) Pub. 180 and FIPS Pub. 
180-1, the contents of which are hereby 
incorporated herein by reference. 
DSA(X,Y) Denotes Y's DSA signature on the message 
X. 
DSAs(X,Y) Denotes the `s` portion of DSA(X,Y), 
where computation of DSA(X,Y) includes 
computation of SHA(X). The DSA algorithm 
is defined in FIPS 186, the contents of 
which are hereby incorporated herein by 
reference. 
DSAr(X,Y) Denotes the `r` portion of DSA(X,Y) 
Bits(X,O,L) Denotes the string of L consecutive bits 
at offset O from the start of X 
X.sub.CTA Denotes the Diffie-Hellman private key 
(exponent) of the CTA 102 
X.sub.MERCHANT 
Denotes the Diffie-Hellman private key 
(exponent) of some merchant 
Y.sub.MERCHANT 
Denotes the Diffie-Hellman public key 
component of some merchant 
Y.sub.CTA Denotes the Diffie-Hellman public key 
component of the CTA 102 
______________________________________ 
II. Overview 
A. Components of the System 
An embodiment of the present invention is described with reference to FIG. 
1 wherein an electronic commerce system 100 consists of one or more 
customer transfer applications (CTAs) 102 connectable to customer network 
software 104 via communications channels 106 which need not be secure. 
Customer network software 104 is associated with a customer C. In 
preferred embodiments the system 100 operates on a global computer network 
such as the Internet and the customer network software 104 is, for 
example, built into a customer's Internet access/browsing software. 
Each customer has a bank 108, to which the CTA 102 is connectable via some 
standard mechanism such as an automated clearing house (ACH). 
Customer network software 104 can also interact with a merchant M via 
merchant network server (MNS) 110. Interaction between customer C and 
merchant M, that is, between customer network software 104 and merchant 
network server 110, is performed via a communications channel 112 which 
may be insecure. 
Merchant M is connectable to merchant clearing corporation (MCC) 114 via a 
possibly insecure channel 116. The CTA 102 is also connectable to MCC 114. 
Merchant M has a bank 118 with which either the MCC 114 or the MCC's 
designated bank interacts via traditional financial networks 120. The 
merchant's bank 116 and the customer's bank 108 can be the same bank. The 
merchant M has an account with the MCC 114. The MCC 114 may designate 
accounts at one or more banks through which to execute payments to 
merchant banks 118 and/or to receive payments from customer banks 108, 
and/or there may be multiple MCCs 114. There may be multiple CTAs 102. 
Preferably the CTA 102 is made up of a group of dedicated processors at a 
secure location. The CTA 102 executes electronic payments from customers 
to merchants within the system 100, as well as providing customer services 
such as database searches, records and customer receipts and allocation 
and/or collection of fees. The CTA 102 may designate an account at one or 
more banks through which to receive fees from customer banks 108. 
The MCC 114, like the CTA 102, is preferably made up of a group of 
dedicated processors at a secure location. The MCC 114 collects and 
disperses funds due to merchants, possibly through the MCC's designated 
bank. The CTA 102 and the MCC 114 are not necessarily autonomous and may 
share accounts at designated banks. 
B. The System Protocol 
The electronic transfer system 100 operates according to the following 
protocol (described with reference to FIGS. 1 and 2) which defines the 
electronic exchange of messages which effect a payment within the system. 
First, in order to access the electronic transfer system 100, a customer C 
must subscribe to the service and establish an account within a particular 
CTA 102. This customer account must typically be funded before purchases 
can be made, for example through ATM 122, although actual funding is 
outside the scope of the payment system. The customer's bank 108 and the 
CTA 102 negotiate the availability of funds with respect to customer 
transactions within the payment system. The customer's bank 108 may send 
opening balances to the CTA 102 on some regular basis. The customer setup 
process is described in more detail below. 
Having established an account with the system 100, a customer C shops with 
various merchants over electronic networks such as the Internet using the 
customer's existing software such as desktop Internet browser software and 
the like (step S202). A payment sequence begins after the customer C has 
selected goods for purchase from a merchant M. The merchant's network 
server 110 sends a digital message, quote 126, to the customer network 
software 104 which identifies the goods to be purchased and quotes the 
price for those goods to the customer (step S204). The customer must 
confirm the desire to execute a payment in the amount quoted in quote 126. 
This confirmation by the customer triggers the transmission of a digital 
payment request message 128 from the customer network software 104 to the 
customer's designated CTA 102 (step S206). 
In response to receipt of the customer's digital payment request message 
128 (step S208), the CTA 102 processes the request and, if the request is 
acceptable, executes an "intent to transfer" of funds from the customer 
C's account to the merchant M's MCC account (step S210). This intent to 
transfer has the characteristics of an exchange of cash in that it is 
instantaneous, final and non-appealable. The CTA 102 may perform certain 
checks during the process which may include a check that the CTA 102 has 
not been apprised that the designated merchant is not currently in good 
standing. At some point an actual transfer of funds is executed from the 
customer's bank 108 to the MCC 114 possibly into an account held by the 
MCC 114 at a designated bank. These fund transfers may be batched over 
multiple transactions per customer account and over multiple customer 
accounts for reasons of efficiency. The customer's bank 108 initiates 
these funds transfers in response to detailed records and transfer 
requests it receives from the CTA 102. In a similar manner the MCC 114 may 
transfer refunds from a merchant's bank 118 to a customer's bank 108. 
The CTA 102 returns to the customer network software 104 an authenticated 
digital payment advice 130 confirming the intent to transfer of funds 
(step S212). In preferred embodiments, upon receipt of this authenticated 
digital payment advice 130 by C's customer network software 104 (step 
S214), the authenticated digital payment advice 130 is automatically 
forwarded from the customer network software 104 to the merchant's MNS 112 
(step S214). The customer can and should also retain a copy of the 
authenticated digital payment advice 130 for proof of transaction. With 
respect to record checking and reconciliation of accounts, in the 
currently preferred embodiment data distinct from the payment advice is 
actually used to authenticate the transaction status from the CTA 102 to 
the customer network software 104. 
Because the advice is created only after a successful intent to transfer of 
funds by the CTA 102 (from the customer's CTA account to the merchant's 
MCC account), a merchant is assured that an authenticated payment advice 
which the merchant successfully verifies represents a real payment into 
the merchant's system account. Accordingly, once an authenticated payment 
advice 130 is received and successfully verified by MNS 112 (step S216), 
the merchant M is then responsible for providing to the customer C (step 
S218) the goods or services 132 indicated in the original quote 126 (step 
S204). 
The goods and services 132 can be anything that can be arranged for sale 
over a network such as the Internet. In one application, the goods and 
services 132 will be very low-cost items for which micropayments will be 
made. For example, the goods and services 132 could include a page of 
text, a digital image, digital sound, access to an on-line search 
mechanism and the like. Digital goods are deliverable over the Internet, 
while hard goods are delivered via conventional means to an address which 
was possibly indicated to the merchant by the customer during the quote 
consideration process. 
Payment records are forwarded routinely (e.g., daily) from the CTA 102 to 
the Merchant Clearing Corporation (MCC) 114 which provides a clearinghouse 
to manage merchant accounts. Merchants periodically receive the proceeds 
of all system payments by direct deposit from the MCC 114, or through an 
intermediary such as a bank designated by the MCC 114, into an account at 
a bank of their choice (merchant's bank 118). 
III. Detailed Description of System Components 
A. Description of Customer 
Customer C is described in more detail with reference to FIG. 3. As noted 
above, customer C has customer network software 104 which is connectable 
to a network such as the Internet. Preferably that customer network 
software 104 is implemented as an applet (customer applet) in the 
customer's network browsing application. 
1. Customer Network Software Database 
The customer network software 104 maintains a local database 136, the 
primary function of which is to permit the customer to reconcile his 
records with those of the CTA 102. The database 136 is organized according 
to a relational model and contains the following tables (each table is 
described in detail below): 
______________________________________ 
1 Transactions 138 
2 Quotes 140 
3 Merchants 142 
4 Payment Advices 144 
5 Payment Requests 146 
6 Service Requests 148 
7 Shipping Advices 150 
8 Goods 152 
9 Pending 154 
10 States 156 
11 Errors 158 
______________________________________ 
The customer network software 104 also maintains local operating parameters 
160 which are also described in detail below. 
The Transactions table 138 provides a short synopsis of every transaction 
which includes the CTA 102 that may affect the customer's balance. Each 
row in the table contains the following fields (FIG. 4A): 
______________________________________ 
PCSEQUENCE sequence number assigned by the 
customer network software 104 
CTRANS customer transaction number. 
TRANSTYPE type of transaction (explained 
below), one of "PMT", "REF", 
"FUNDING", "EVIDENCE", "STATEMENT". 
MID merchant identifier if applicable, 
otherwise zero. 
MTRANS merchant transaction identifier if 
applicable, otherwise zero. 
DATE date of transaction. 
TIME time of transaction. 
AMCUNT amount of transaction. 
BALANCE balance of the customer's account 
after the transaction. 
______________________________________ 
The PCSEQUENCE field of the Transactions table 138 uniquely identifies the 
transaction to the customer network software 104. CTRANS is shared between 
the customer network software 104 and the CTA 102. The same value of 
CTRANS may appear in multiple rows in the Transactions table 138, for 
example, in cases where the CTA 102 does not increment the value of 
CTRANS. 
The Quotes table 140 (FIG. 4B) stores the merchant quote for every item the 
customer has chosen to buy using his system account. Each row in the 
Quotes table 140 contains the following fields: 
______________________________________ 
MID merchant identifier if applicable, 
otherwise zero. 
MTRANS merchant transaction identifier if 
applicable, otherwise zerq. 
QUOTE the complete text of the quote as 
prepared by the merchant. 
RETAIN160 a 160-bit segment of the Diffie- 
Hellman payment transaction key 
shared between the merchant and 
customer. 
PI NUMBER a counter value which indicates the 
number of times Previous Transaction 
Mode has been executed with respect 
to this transaction 
______________________________________ 
The Merchants table 142 (FIG. 4C) stores information about merchants from 
whom the customer has bought goods with his system account. Each row in 
the table contains the following fields: 
______________________________________ 
MID merchant identifier if applicable, 
otherwise zera. 
MNAME merchant name. 
MADDR1 merchant address line 1. 
MADDR2 merchant address line 2. 
MADDR3 merchant address line 3. 
______________________________________ 
The Payment Advices table 144 (FIG. 4D) stores the complete text of every 
merchant's payment advice message transmitted from CTA 102 to a merchant M 
through the customer's computer. Each row in the Payment Advices table 144 
contains the following fields: 
______________________________________ 
CTRANS customer transaction number. 
MID merchant identifier if 
applicable, otherwise zero. 
MTRANS merchant transaction identifier 
if applicable, otherwise zero. 
PADVICE the complete text of the 
merchant's payment advice 
message. 
______________________________________ 
The Payment Requests table 146 (FIG. 4E) temporarily stores the complete 
text of the last payment request message transmitted to the CTA 102 from 
the customer C. The Payment Requests table 146 exists only so that a 
payment request message may be retransmitted to the CTA 102 in the event 
of communications or system failure. As soon as the response to a request 
message is successfully received or the final allowed request attempt has 
failed, the single row of this table 146 is overwritten. The single row of 
the Payment Request Table 146 contains the following fields: 
______________________________________ 
CTRANS customer transaction number. 
PREQUEST the complete text of the payment 
request message. 
______________________________________ 
The Service Requests table 148 (FIG. 4F) temporarily stores the complete 
text of the last service request message transmitted to the CTA 102. Like 
the Payment Requests Table 146, the Service Requests table 148 exists only 
so that a service request message may be retransmitted to the CTA 102 in 
the event of communications or system failure. As soon as the response to 
a service request message is successfully received or the final allowed 
service request attempt has failed, the single row of this table is 
overwritten. The single row of the Service Requests Table 146 contains the 
following fields: 
______________________________________ 
CTRANS customer transaction number. 
SREQUEST the complete text of the service 
request message. 
______________________________________ 
The Shipping Advices table 150 (FIG. 4G) stores the complete text of every 
shipping advice transmitted from a merchant to the customer C. Each row in 
the Shipping Advices table 150 contains the following fields: 
______________________________________ 
CTRANS customer transaction number. 
MID merchant identifier if 
applicable, otherwise zero. 
MTRANS merchant transaction identifier 
if applicable, otherwise zero. 
SADVICE the complete text of the 
shipping advice. 
______________________________________ 
The Goods table 152 (FIG. 4H) stores information about every purchase of 
electronic goods made by the customer C. The Goods table 152 does not 
store information about pending non-electronic goods shipments. The Goods 
table 152 is used in conjunction with the shipping advice to insure that 
the customer receives the goods for which he has paid. Each row in the 
Goods table 152 contains the following fields: 
______________________________________ 
CTRANS customer transaction number. 
FILENAME name of the file to contain the 
electronic goods on the customer's 
computer. 
CHUNKS segments required to transmit the 
goods from merchant to customer. 
LAST last segment transmitted successfully 
from merchant to customer. 
______________________________________ 
The Pending table 154 (FIG. 4I) stores information about statements, 
refunds, funding information and external evidence (described below) that 
have been requested by the customer C but have not yet been received. 
These transactions are described below. In addition, some quantities 
related to the pay/service request CTA-customer Diffie-Hellman session key 
and the merchant-customer Diffie-Hellman session key must also be held 
temporarily in the Pending table 154. The Pending table 154 contains the 
following fields: 
______________________________________ 
CTRANS customer transaction number 
DELIVERED Boolean indication of whether or 
not the information has been 
received. 
MAGICNO unique number assigned by the 
CTA 102 to this request for 
information. 
DECRYPTKEY a forty-bit key used in a bulk 
cipher algorithm to decrypt the 
data. 
AUTHKEY a 320-bit key used to verify the 
authenticity of the received 
information. 
CTABITS1 160 bits of the CTA's Diffie- 
Hellman session key starting at 
bit 448. 
CTABITS2 160 bits of CTA's Diffie-Hellman 
session key starting at bit 608. 
MERBITS1 160 bits of the merchant's 
Diffie-Hellman session key 
starting at bit 320. 
MERBITS2 160 bits of the merchant's 
Diffie-Hellman session key 
starting at bit 480. 
MERBITS3 40 bits of the merchant's 
Diffie-Hellman session key 
starting at bit 640. 
______________________________________ 
Because of the sensitive nature of the CTA and merchant Diffie-Hellman 
session keys, the five fields above which are derived from these keys 
(CTABITS1-2 and MERBITS1-3) should be overwritten at the earliest moment 
at which they are no longer needed. 
The State table 156 (FIG. 4J) stores information about the current state of 
every pending transaction. It is used for recovery in the event that a 
transaction is not completed in one session. Each row in the State table 
156 contains the following fields: 
______________________________________ 
CTRANS customer transaction number. 
ADD a quantity that is used to 
adjust the PIN transmitted to 
the CTA 102. 
RANDOM a quantity that adjusts ADD. 
RETRANS the number of retransmissions 
left until the current 
transaction is aborted. 
NEXTTRANS the number to be assigned to the 
next transaction, initially one. 
STATE the most recent transaction 
state. 
STATUS the Boolean status of a 
transactionwithin a state. 
TEXT free form text assbciated with 
the state. 
______________________________________ 
The transaction states are predefined as follows: 
______________________________________ 
State 
Value Meaning 
______________________________________ 
10 customer confirms the purchase 
20 merchany authenticated by customer's computer 
30 customer computer composed payment request 
40 customer computer sent payment request to CTA 102 
50 payment advice sent by the CTA 102 to the customer 
computer 
60 customer computer sends payment advice to merchant 
70 merchant responds with a shipping advice 
80 merchant begins sending electronic goods to 
customer computer 
90 transaction completed 
100 transaction aborted 
______________________________________ 
The Errors table 158 (FIG. 4K) stores information about errors that may 
have occurred while processing transactions. Each row in the Errors table 
158 contains the following fields: 
______________________________________ 
CTRANS customer transaction number if applicable, 
otherwise zero. 
DATE date of error. 
TIME time of error. 
SEVERITY severity of the error. 
MSGNUM unique number assigned to the error. 
MSGTEXT text associated with the error. 
Possible SEYERITY codes are: 
F fatal, the session is aborted; 
E error, the transaction is aborted; 
W warning; and 
I informational. 
______________________________________ 
Certain of these tables in the customer's local database 136 contain 
sensitive data and may be encrypted. If necessary a forty-bit 
cryptographic key may be embedded into the customer network software 104 
executable at setup time. This key and a weak bulk cipher encryption 
algorithm may be used to inhibit snooping of the customer local database 
136 and other customer information, e.g., operating parameters 160. 
B. Description of a Merchant 
Merchant M is described in more detail with reference to FIG. 5. As noted 
above, merchant M has a merchant network server 110 which is connectable 
to a network such as the Internet. 
1. Merchant Network Server Database 
The merchant network server 110 maintains a local database 162 organized 
according to a relational model. The merchant's local database 162 
contains the following tables: 
______________________________________ 
1 Quotes 164 
2 Addresses 166 
3 Payment Advices 167 
______________________________________ 
The Quotes table 164 stores the merchant quote for every item a customer 
has chosen to buy using his account. Each row in the Quotes table 164 
(FIG. 6A) contains the following fields: 
______________________________________ 
MTRANS merchant transaction identifier. 
QUOTE the complete text of the quote as 
prepared by the merchant. 
RETAIN160 a 160-bit segment of the Diffie- 
Hellman payment transaction key, D-H 
Key.sub.MERCHANT, shared between the merchant 
and customer. 
PI NUMBER a counter value which indicates the 
highest-valued countersetting within 
an intact execution of Previous 
Transaction Mode with respect to this 
transaction. 
______________________________________ 
In addition, Bits (D-H Key.sub.MERCHANT, 320, 360), that is, the string of 
360 consecutive bits of D-H Key.sub.MERCHANT, starting at offset 320, are 
saved until the conclusion of processing of a transaction. 
The Addresses table 166 (FIG. 6B) stores name and address information for 
every transaction for which the merchant requires that the customer reveal 
his identity. The Address table 166 contains the following fields: 
______________________________________ 
CUSTNAME customer name 
CUSTADDR1 customer address, line 1. 
CUSTADDR2 customer address, line 2. 
CUSTADDR3 customer address, line 3. 
______________________________________ 
The Payment Advices Table 167 (FIG. 6C) stores merchant transaction 
identifier and merchant's payment advice message information for every 
transaction for which a valid merchant's payment advice message has been 
received. For this purpose a merchant's payment advice message is valid if 
it can be proved to have been authenticated by the CTA and intended for 
that merchant, independent of the other contents of the message. This 
table is optional in the sense that its entries would only be used for 
potential dispute resolution. 
The merchant network server 110 also maintains local operating parameters 
168 which are also described in detail below. 
C. The CTA Databases 
The CTA 102 maintains a number of databases with customer account 
information. In particular, the CTA maintains for each customer, based on 
the customer's system account number, the number of the last transaction 
for that customer and the value of PIN* for the customer. 
IV. Version Control 
Each executable component which participates in transactions, including the 
customer network software 104 and the merchant network server 110, has an 
embedded version number. Every message transmitted between executable 
components contains both the software version of the sender and the oldest 
version of the receiver with which it is compatible. It is the 
responsibility of the receiver to compare its version against that in the 
message. Upon receipt of an unacceptable message the receiver responds 
with an incompatible version message. 
V. Cross Platform Note 
Executable components that participate in system transactions run on 
hardware from many different manufacturers. In order easily to accommodate 
the differences every message transmitted from one component to another 
will be encoded in Base64 format by the sender. This encoding scheme 
translates all data to seven bit ASCII characters. On the World Wide Web, 
a content encoding type is intentionally not specified. In all cases it is 
the responsibility of the receiving component, rather than an associated 
Web browser to decode the message. 
In some embodiments, messages are encoded with one extra byte per element 
so as to ensure that every string in a message is terminated with a null 
byte. 
VI. Assumptions 
Messages transmitted between customer network software 104 and the CTA 102 
are authenticated by means of a Diffie-Hellman key exchange mechanism. 
Messages exchanged between customer network software 104 and merchants are 
authenticated by the same kind of Diffie-Hellman key exchange as is used 
between the customer and the CTA 102. 
The merchant network server 110 uses a fixed Diffie-Hellman public key 
component. 
The Diffie-Hellman system parameters, p and g described below, are the same 
for exchanges between customer and merchant and between customer and CTA 
102. 
The CTA 102 uses a fixed Diffie-Hellman public key component. The customer 
network software 104 uses a randomly generated exponent and Diffie-Hellman 
public key component pair which is used within a single transaction. 
The randomly generated Diffie-Hellman exponent and public key component 
pair used by the customer network software 104 to communicate with the 
merchant is the same as that used to communicate with the CTA 102 for the 
same transaction. This dual use of the exponent is for efficiency only and 
should be considered optional. 
As stated in the Digital Signature Standard FIPS document, DSA parameters 
can be generated in such a way as to allow mutually distrustful entities 
to check that the system parameters were not generated in a way which 
would allow the party who generated the parameters some advantage, with 
respect to cryptanalysis, over the other users of those parameters. The 
Diffie-Hellman parameters can be generated by a similar procedure. A 
system administrator specifies both the DSA and Diffie-Hellman parameter 
generation procedures. These procedures need not be implemented within 
either the customer or merchant software. 
The certification authority 124 (CA) (see FIG. 1) issues an X.509 
certificate to each merchant, which includes the merchant's Diffie-Hellman 
public key component. The notion of digital certificates issued by 
certifying authorities (public key certificates) is well-known and is 
described in various standards, including CCITT Recommendation X.509. The 
Directory--Authentication Framework, November 1988, which is hereby 
incorporated herein by reference. Although X.509 certificates are 
specified within the preferred embodiment, other certificate structures or 
formats may be used without sacrificing interoperability, since these 
certificates are used only internally to the payment system. 
The merchant network server 110 also needs to access the Diffie-Hellman 
parameters as certified by the CA 124. These parameters are used to 
compute the merchant's Diffie-Hellman public key component from the 
private exponent. The private exponent is initially generated by the 
merchant software. The merchant's X.509 certificate need not include the 
Diffie-Hellman system parameters, since these are accessible to the 
customer via the CTA 102 Diffie-Hellman certificate. Neither the customer 
nor merchant DSA public key need be certified. The CA 124 also issues 
X.509 certificates to the CTA 102 and the merchant clearing corporation 
114. The CTA 102 is issued a Diffie-Hellman and a DSA certificate. The MCC 
114 is issued a DSA certificate. 
The public keys of the CA 124 and the CTA 102 may be embedded in the 
customer network software 104 executable. Also embedded within the 
customer network software 104 executable may be the two sets of system 
parameters: 
1. DSA parameters corresponding to the CA 124, CTA 102, MCC 114, merchant, 
and customer signatures; and 
2. Diffie-Hellman parameters for use between the customer and CTA 102, and 
between the customer and merchant. 
The customer network software 104 does not require access to the CTA 102 
DSA public key for routine processing. The CTA 102 keys, the 
merchants'Diffie-Hellman keys, and the Diffie-Hellman parameters are 
verified by means of the certificates issued by the CA 124. The 
verification is done by a software setup program which creates the 
executable. The CA public DSA key and the DSA parameters may be fixed for 
the lifetime of the software edition. 
The public DSA keys of the CA 124, the MCC 114, and the CTA 102 may be 
embedded in the merchant network server executable. Also embedded within 
the merchant network server executable may be the two sets of system 
parameters: 
1. DSA parameters corresponding to CA 124, CTA 102, MCC 114, merchant M, 
and customer C signatures; and Diffie-Hellman parameters for use between 
the customer and CTA 102, and between the customer and merchant. 
To provide for non-repudiation, time-stamped versions of the CA DSA public 
key, the DSA and Diffie-Hellman system parameters and the hashing and 
signature verification algorithms may be registered with a third-party 
disinterested agent. The registration agent may also be able to provide 
the parameter generation protocols and seed material. In particular, given 
this information, an arbitrator would be able to check the validity of the 
signatures presented to it for dispute resolution. 
The customer network software 104 can be enabled to output data which has 
been hashed and signed by the CTA 102, as well as the corresponding CTA 
102 DSA signature(s) and the CA-certification of the appropriate CTA 102 
DSA public key(s). The customer network software 104 must also be able to 
output complete merchant quote information as saved in the reconciliation 
database. 
All public keys are 768 bits long. These include a DSA key for the CA 124, 
DSA and Diffie-Hellman keys for the CTA 102, DSA and Diffie-Hellman keys 
for the merchant, a DSA key for the MCC 114, and a DSA key for the 
customer. The merchant and customer DSA keys are not used in 
communications between the customer and merchant. 
All security-related quantities, especially private keys, should be held in 
memory for as short a time as is possible. After their use they should be 
overwritten to prevent compromise. They should not be written to the hard 
drive unless and until required, and should be overwritten on disk as soon 
as feasible. 
The merchant network server 110 can be enabled to output data which has 
been hashed and signed by the CTA 102 and/or MCC 114, as well as the 
corresponding CTA/MCC DSA signature(s) and the CA-certification of the 
appropriate CTA 102/MCC 114 DSA public key(s). The merchant network server 
110 must also be able to output complete merchant quote information as 
saved in the merchant database 162. More particularly, the seller applet 
(the merchant network server 110) may be able to output information from 
the local data bases to a disk file in a format that is readable by common 
spreadsheet or database programs (for example, comma delimited ASCII dBase 
II), where data for dispute resolution consists of two classes: (1) 
Merchant-MCC/CTA disputes and (2) Merchant-Customer disputes. For class 
(1) disputes, the statements which have been hashed and signed by the MCC, 
as well as the corresponding payment advice from the local data base which 
is signed by the CTA may be written to a disk file. The CA-certification 
of the appropriate CTA/MCC DSA public key(s) provides solid evidence. For 
class (2) disputes, the merchant can output the payment advice and CTA 
signature from the local data base. 
VII. Setup and Initialization 
Recall that messages transmitted between customer network software 104 and 
the CTA 102 are authenticated by means of a Diffie-Hellman key exchange 
mechanism and that the merchant network server 110 uses a fixed 
Diffie-Hellman public key component. The Diffie-Hellman system parameters, 
p and g described below, are the same for exchanges between customer and 
merchant and between customer and CTA 102. 
To set up a key pair, two Diffie-Hellman parameters p and g are generated 
in advance by the CTA 102. These parameters are public. The first 
parameter, p, is a prime number of exactly 768 bits, (that is, less than 
2.sup.768 and greater than 2.sup.767) with the property that 
EQU p-1=2 p' 
where p' is prime. 
The second parameter, g, is chosen as an integer between 2 and p-1 with the 
following two properties: 
g.sup.2 is not congruent to 1 modulo p 
g.sup.(p-1)/2 is not congruent to 1 modulo p 
The CTA 102 picks a random 160-bit exponent denoted by X.sub.CTA. It then 
computes 
EQU Y.sub.CTA=g.sup.Xcta modulo p. 
The value Y.sub.CTA then becomes the public key component of the CTA 102 
for Diffie-Hellman exchanges. The value of X.sub.CTA must be held securely 
by the CTA 102. 
The values of g, p, and Y.sub.CTA (the CTA's public key component) are 
contained in a digital certificate issued to the CTA 102 and signed by the 
CA 124. The certificate is transmitted initially to the customer as part 
of the customer setup procedure which is addressed below. 
For each customer, the CTA 102 maintains the current value of a 
Transaction-PIN quantity called PIN* (described below). The value of PIN* 
is initialized to the Logon-PIN quantity called PIN, which is assigned to 
the customer via an out-of-band procedure. 
The quantity ADD is set to zero each time the customer indicates that he 
has been assigned a new value of PIN. Customer PINs are assigned during 
calls to a voice response unit (VRU) both at customer setup time and in 
response to loss of PIN* synchronization between the customer and CTA 102 
thereafter. Customer calls to the VRU are authenticated by means of a 
long-term PIN and a customer subscriber identifier (SID) which appears on 
a card that is mailed to customers at the time they open their accounts. 
The DSA parameters are generated in advance, and are public. 
1. Setup of Merchant 
As with the CTA 102, two Diffie-Hellman parameters p and g are generated in 
advance. They are public, and are available to the merchant as certified 
by the CA 124. The first parameter, p, is a prime number of exactly 768 
bits, (that is, less than 2.sup.768 and greater than 2.sup.767) with the 
property that 
EQU p-1=2 p' 
where p' is prime. 
The second parameter, g, is chosen as an integer between 2 and p-1. It must 
have the following two properties: 
g.sup.2 is not congruent to 1 modulo p 
g.sup.(p-1)/2 is not congruent to 1 modulo p 
The merchant picks a random 160-bit exponent which is denoted by 
X.sub.MERCHANT. It then computes 
EQU Y.sub.MERCHANT=g.sup.Xmerchant modulo p. 
The value of Y.sub.MERCHANT then becomes the public key component of the 
merchant for Diffie-Hellman exchanges. Note that the value of 
X.sub.MERCHANT must be held securely by the merchant, and Y.sub.MERCHANT 
must be transmitted securely to the MCC 114, so as not to allow undetected 
substitution. 
The value of Y.sub.MERCHANT is contained in a certificate issued to the 
merchant and DSA-signed by the CA 124. The certificate is transmitted 
initially as part of the merchant setup procedure which is addressed 
separately. As part of merchant setup, the merchant network server 110 can 
check that the received certificate includes the correct merchant 
information and merchant public key, and that the CA signature verifies. 
The DSA parameters are generated in advance, and are public. 
The merchant private DSA key is randomly generated as part of the customer 
setup procedure. The corresponding public DSA key is securely transmitted 
to the MCC 114, so as not to allow undetected substitution. 
The generation of the merchant DSA private key relies on the DSA system 
parameter q. The computation of the merchant DSA public key relies on the 
private DSA key and on the DSA system parameters g.sub.DSA and p.sub.DSA. 
2. Initial Customer Setup 
Prior to describing the operation of the system 100 in more detail, set up 
of customer and merchant accounts with the system is described. At the end 
of the initial customer setup process the customer has certain 
cryptographic keys and other values stored on his computer. 
A customer C sets up a system account at a participating bank 108 and is 
given a unique system account number. 
The customer network software 104 is then delivered on a bank-provided 
diskette or is downloaded from a system distribution server over the 
public telephone network. A sixteen-digit long-term PIN is either 
delivered with the diskette or is mailed later by the bank 108 with the 
public key, described below. The long-term PIN is used for the 
distribution site's voice response unit (VRU). 
The customer then runs a setup program on the customer's computer. The 
program brands the software to this particular customer and generates a 
public/private key pair. The private key is used by the customer to 
generate digital signatures. The public key is used by the CTA 102 to 
verify digital signatures from the customer. 
The customer private DSA key is randomly generated as part of the customer 
setup procedure. The corresponding public DSA key is securely transmitted 
to the CTA 102, so as not to allow undetected substitution. The generation 
of the customer DSA private key relies on the DSA system parameter q. The 
computation of the customer DSA public key relies on the private DSA key 
and on the DSA system parameters g.sub.DSA and P.sub.DSA. 
In addition the customer is assigned a subscriber identifier and an account 
identifier. These two quantities taken together uniquely identify the 
customer. In any transaction between the customer and the CTA 102 the two 
quantities are always transmitted together and encrypted under 
Diffie-Hellman. 
A supported Web browser is configured so that it routes messages with MIME 
types of "ec/quote" to the customer network software 104. 
The customer software uploads the public key to the system distribution 
server. The customer is also prompted to enter the customer's bank system 
account number. The distribution site and server are not part of the CTA 
102. The server is preferably a direct-dial host. At end-of-day the 
distribution server sends a batch message to the CTA 102 listing all newly 
applied-for account numbers. The CTA 102 creates an internal account 
flagged inactive and sends an out-of-band batch message to the bank 108 
listing all accounts to be approved. 
The bank 108 returns to the customer a physical form (typically a fax or 
postal letter) containing the customer's hashed public key. The customer 
compares the delivered hashed public key to a readable version of the 
hashed public key already stored in the customer's software. The two 
hashes must match in order to be valid. The customer signs the physical 
form and returns it through regular postal mail to the bank 108. The bank 
108 performs a physical signature verification, which binds the public key 
to the customer's identity. 
Routinely, e.g., nightly, the bank 108 sends a batch transfer of all 
verified, rejected, and revoked accounts to the CTA 102. Upon receipt of 
the verification message, the CTA 102 binds the public key to the 
customer's account number and activates the customer's account. 
Next the customer telephones the PIN server. A voice response unit at the 
PIN server requests the customer's long-term PIN and subscriber identifier 
and responds with a seven-character logon PIN. The customer uses the logon 
PIN each time the customer authenticates a transaction to the CTA 102. 
3. Merchant Initialization 
Initial merchant setup is as follows: 
System merchant software enabling merchants to offer goods for purchase by 
system customers is delivered on diskette. The merchant's identity is 
verified when the merchant account is activated. 
Like the customer software, the merchant software setup program brands the 
software for use by a particular merchant. Unlike the customer, however, 
the merchant is issued a digital certificate signed by the MCC 114. This 
certificate conveys the MCC's trust in the identity of the merchant. 
The certificate includes a Diffie-Hellman key used to authenticate 
communications between merchant and customer. 
At initialization, the merchant network server 110 determines its version 
number, the DSA parameters, and the DSA public key of the CA 124. These 
quantities are embedded (hardwired) in the executable version of the 
merchant network server software. This guarantees that the merchant 
network server stops functioning if the CA 124 is issued a new 
key/parameters or if the merchant's network server becomes stale. The 
merchant network server 110 then verifies the CTA's DSA certificate and 
the MCC DSA certificate with the CA's public key. If the certificates are 
valid then the CTA's public DSA key and the MCC public DSA key are saved. 
Otherwise the merchant network server 110 logs the error and exits. The 
certified Diffie-Hellman parameters are also saved, if they verify 
correctly. If the system includes multiple CTAs and/or MCCs, the merchant 
network server 110 would hold multiple public keys. 
4. Customer Initialization 
Each time the customer network software 104 is launched it will ask the 
customer for his seven character PIN which will be stored in memory while 
the program is executing. The PIN must be reentered after some number of 
transactions have been completed, after some amount of goods have been 
bought, after some amount of time has elapsed or after some combination of 
the foregoing. In some embodiments the customer will be asked to enter his 
PIN every time he makes a purchase or requests information from the CTA 
102. 
VII. Detailed Operational Description 
A detailed description of the operation of the present invention is now 
given. 
1. Customer Shops with Merchant 
First the customer shops with a merchant (step S202), identifies goods or 
services and receives a quote 126 (FIG. 7A) from the merchant (step S204). 
In operation of the system, when the customer clicks a "Buy" button on a 
merchant's Web page, the merchant transmits the quote 126 which includes a 
merchant certificate. The customer's Web browser interprets the message 
type and activates the customer network software 104 to process the quote. 
An example of a quote message 126 is shown in FIG. 7A and includes 
"Merchant ID," a unique merchant identifier, "Merchant Transaction ID," a 
unique merchant-assigned transaction identifier, an indication of whether 
the customer's address is required, a transaction summary (for example, 
"Two pairs of jeans @ $29.95 each"), the number of items quoted, an array 
for description of each item quoted, arrays with corresponding item 
quantities and costs, a quote subtotal, additional costs, and a quote 
total. Other fields include one for additional information, the currency 
for the quote (e.g., USD), and an indication of whether or not the 
merchant allows refunds. 
The quote 126 also includes the time of the offer (in the quote) and an 
expiration time for the offer. The quote has two URLs, a key exchange URL 
and a payment URL. Finally, the quote includes the merchant's certificate. 
The customer views the quote information in a dialogue box. The customer's 
software has extracted the merchant's Diffie-Hellman system parameters 
initially sent by the CTA 102 to both merchant and customer when they set 
up their software. If the customer elects to confirm the quote, the 
customer network software 104 enters into a Diffie-Hellman key exchange 
based on those mutual system parameters to authenticate the origin and 
integrity of the merchant quote and the customer information. 
If the customer wants physical goods, the customer is prompted to enter the 
appropriate name and address. This information is encrypted and sent to 
the merchant. If the customer wants information (digital) goods, the 
customer's identity remains anonymous to the merchant. 
The Diffie-Hellman key exchange between the customer and the merchant 
generates a shared secret (described in detail below). The shared secret 
is a long number linking the merchant's quote and the CTA's payment advice 
(described later). The secret is used by the merchant to encrypt digital 
goods. 
Because the shared secret has an element of randomness and is unique to a 
transaction, even if it were possible for an adversary to determine this 
number, it would be of no use in attacking future transactions. If, for 
any reason, the Diffie-Hellman key exchange fails, the purchase is 
aborted. 
The customer network software 104 prompts the customer to enter the logon 
PIN. The logon PIN is never written to the customer's hard disk. The logon 
PIN is verified later in the transaction process by the CTA 102. The PIN 
resides only in memory in an attempt to make its compromise difficult. 
The customer network software 104 uses the logon PIN as part of a function 
generating a per transaction PIN. Each transaction has a unique 
transaction PIN, modified on-the-fly by an unpredictable random number 
securely delivered by the CTA 102 and by a value randomly generated and 
sent encrypted by the customer network software 104. The transaction PIN 
is hashed and encrypted using the SHA-1 and the Diffie-Hellman technique 
and then the thus processed PIN is transmitted to the CTA 102 to enable 
the next step of communications. 
2. Customer Gets QUOTE from Merchant 
Each merchant maintains a page on the network on which goods are offered 
for sale. The customer uses a supported browser to view an HTML form which 
resides on the Web server belonging to a merchant who offers goods for 
sale. The customer clicks a "BUY" button, in response to which the 
merchant server composes a quote message 124 and encodes it in base 64. 
The HTTP content type of the quote 126 is "ec/quote". Content encoding is 
intentionally not specified so that the browser passes the customer 
network software 104 character data rather than binary. The browser then 
decodes the quote message. The format of the quote message 126 is shown in 
FIG. 7A and was described above. The quote must contain the merchant's 
Diffie-Hellman certificate and must uniquely identify a single transaction 
("Merchant Transaction ID"). 
The customer's browser receives the message and routes it to the customer 
network software 104. 
The customer network software 104 decodes the quote message from Base 64 to 
binary, verifies the merchant's Diffie-Hellman certificate with the CA's 
public key and, if successful, then presents all pertinent information to 
the customer. If the merchant's certificate can not be verified then an 
entry is written to the customer's transaction log and the customer is 
informed of the failure. 
The customer must either confirm or cancel the purchase. If the purchase is 
canceled then no further processing is required. If the purchase is 
confirmed then the customer network software 104 generates 160 bits of 
randomness, R.sub.c, using some well-known approach. Next the customer 
network software 104 computes the customer's Diffie-Hellman public key 
component, Z: 
EQU Z=g.sup.Rc modulo p 
The customer network software 104 then computes the Diffie-Hellman 
transaction key that it shares with the merchant: 
EQU D-H Key.sub.MERCHANT=Y.sub.MERCHANT.sup.Rc modulo p, 
where 
EQU Y.sub.MERCHANT=g.sup.Xmerchant modulo p 
This is the same as (g.sup.Xmerchant).sup.Rc modulo p which is the same as 
(g.sup.Rc).sup.Xmerchant modulo p which is the same as Z.sup.Xmerchant 
modulo p. To reiterate, 
EQU Y.sub.MERCHANT.sup.Rc =Z.sup.Xmerchant modulo p 
This allows the merchant and the customer to hide D-H Key.sub.MERCHANT from 
others because R.sub.c is known only to the customer network software 104 
and X.sub.MERCHANT is known only to the merchant. They can share it 
between themselves, however, as soon as the merchant receives the value Z 
from the customer. 
After computing D-H Key.sub.MERCHANT, if the merchant quote indicates that 
further information is required from the customer, such as, e.g., address 
information for delivery of hard goods, the customer network software 104 
extracts Bits(D-H Key.sub.MERCHANT, 640, 40) for use with the 40-bit key 
bulk-cipher encryption algorithm (to be specified). The customer is 
prompted to enter in the appropriate information, denoted P40, which is 
then encrypted, resulting in cipher, denoted C40. 
The values of Z and C40 are then inserted into a key exchange message 170 
(FIG. 7B) and posted to the merchant. 
In response to receipt of the key exchange message 170, the merchant 
network server 110 computes D-H Key.sub.MERCHANT (from Z) and uses Bits 
(D-H Key.sub.MERCHANT, 640, 40) (which were used to encrypt P40) to 
decrypt C40. The resulting plaintext, P40, is appropriately stored in the 
merchant database 162. The merchant network server 110 then computes two 
160-bit quantities: a number denoted QuoteCheck, which lets the customer 
network software 104 verify the origin and integrity of the merchant quote 
as well as the proper receipt and decryption of C40 by the merchant's 
network server 110, and a number, denoted Q (Quote-Pay Advice Link), 
which will be used later to link the quote to a payment advice: 
EQU Q=SHA(Quote) 
EQU QuoteCheck=SHA(.about.Quote.parallel.P40.parallel.Bits(D-H 
Key.sub.MERCHANT, 0, 160)) 
An encrypted form of QuoteCheck is inserted into a key response message 172 
(FIG. 7C) which the merchant returns to the customer: 
Encrypted QuoteCheck=Bits(D-H Key.sub.MERCHANT, 160,160).sym. QuoteCheck 
The merchant saves the full text of the quote and the 160 bits Bits(D-H 
Key.sub.MERCHANT, 0, 160) in the quotes table 164 its database 162. The 
360 bits, Bits(D-H Key.sub.MERCHANT, 320, 360), are saved until the 
completion of processing of this transaction. 
Upon receipt of the key response message 172 from the merchant, the 
customer compares the results of its own computation of the value of 
Encrypted QuoteCheck to that value in the message 172. 
If the check fails then the failure is logged, the customer is informed, 
the values of PIN, R.sub.c, Z, D-H Key.sub.MERCHANT, C40, QuoteCheck and 
Encrypted QuoteCheck within memory are overwritten and processing of this 
transaction ends. 
On the other hand, if the check succeeds then the full text of the quote 
message as well as the 160 bits Bits(D-H Key.sub.MERCHANT, 0, 160) are 
saved in the customer database 136 in the Quotes table 140. Three 
quantities are computed from D-H key.sub.MERCHANT and saved in the Pending 
table 154 until the conclusion of the processing of this transaction: 
MERBITS1=Bits(D-H Key.sub.MERCHANT, 320, 160) 
MERBITS2=Bits(D-H Key.sub.MERCHANT, 480, 160) 
MERBITS3=Bits(D-H Key.sub.MERCHANT, 640, 40) 
Then the values of C40, QuoteCheck, Encrypted QuoteCheck and Bits(D-H 
Key.sub.MERCHANT, 160, 160) are overwritten in memory. 
It should be noted that in other embodiments, the information exchanged 
between the customer and merchant may be grouped differently, particularly 
in terms of when it is communicated and/or when it is verified. For 
example, the merchant certificate may be transmitted with the 
authenticated quote rather than as part of the original quote. The fact 
that in the preferred embodiment the merchant certificate is received and 
verified by the customer prior to the confirmation or cancellation of the 
purchase allows for safeguarding the customer's shipping address 
information against delivery to unintended parties, although this may not 
be considered a particularly significant breach of security. 
3. Customer Composes Payment Request 
At this point the customer network software 104 is ready to make a payment 
request 128 (step S206) to the CTA 102. Accordingly, the customer network 
software 104 then computes a Diffie-Hellman key, D-H Key.sub.CTA, to be 
used to communicate with the CTA 102. 
EQU D-H Key.sub.CTA =(Y.sub.CTA).sup.Rc modulo p 
The value of R.sub.c is the same value which was used to compute D-H 
Key.sub.MERCHANT. The value of R.sub.c should be overwritten as soon as 
the computation of D-H Key.sub.CTA is made and should never be written to 
the disk. 
As was the case with the merchant, the CTA 102 will be able to compute the 
Diffie-Hellman key it shares with the customer network software 104 just 
as soon as the customer network software 104 transmits its Diffie-Hellman 
public key component Z to the CTA 102. Unlike the merchant case however, 
there is only one communication in each direction. The Diffie-Hellman 
public key component of the CTA 102, Y.sub.CTA, is known to the customer 
network software 104 prior to the start of communications. If the current 
CTA Diffie-Hellman public key component is not known to the customer 
network software 104, the communication discussed below will fail if the 
CTA 102 uses its current private Diffie-Hellman exponent. This is because 
the CTA 102 will be unable to determine the customer identity, which is 
encrypted under the Diffie-Hellman key. The Diffie-Hellman public key 
component of the customer will be included in the payment request message 
which will be discussed shortly. 
Next the customer network software 104 has the customer generate 56 random 
bits, denoted RANDOM, e.g., with key strokes or mouse movements. 
Alternatively some hardware random source may be used. The value of RANDOM 
is temporarily written to the States table 156 of the customer database 
136. 
Next the customer network software 104 computes the value of PIN* using the 
typed-in value of PIN: 
EQU PIN*=PIN.sym.ADD 
where ADD is either retrieved from the hard drive, or reset to zero if the 
customer indicates that this is the first-time use of a new PIN value. The 
typed-in value of PIN should be overwritten at this point. 
Then the customer network software 104 updates the value ADD by replacing 
its current value with 
EQU ADD.sym.RANDOM 
The new value of ADD is stored in the States table 156 of the customer's 
local database 136. After the value of ADD is updated, the customer 
network software 104 fetches the number to be assigned to the next 
transaction (from field NEXTTRANS of the states table 156). The customer 
then creates an unsigned payment request, PR (FIG. 7D). The unsigned 
payment request PR is formed by concatenating the following: 
the merchant identifier, denoted MID 
the merchant transaction identifier, denoted Tm 
the transaction amount, denoted T$ 
the Quote-Pay Advice Link, Q 
the customer subscriber identifier, denoted SID 
the customer transaction identifier, denoted Tc 
the customer account identifier, denoted AID 
the value of RANDOM 
the value of PIN* 
The value of PIN* should be overwritten at this point. 
Then the customer creates a 160 bit hash: 
H.sub.PC =SHA(PR), after which PR should be overwritten. 
This is followed by computation of 
EQU H.sub.Final =SHA(H.sub.PC .parallel.DSAr(PR, customer).parallel.DSAs(PR, 
customer)) 
In other embodiments the customer signature DSA (PR,customer) may be 
suppressed if non-repudiation is not a system requirement, since the 
transaction security is based primarily on the combined use of the 
customer PIN and Diffie-Hellman. It may be adequate in such an embodiment 
to let H.sub.FINAL =H.sub.PC. 
The randomly generated per-message DSA exponent used to compute the DSA 
signature should be overwritten in memory as soon as the values DSAr (PR, 
customer) and DSAs (PR, customer) are computed. The hash value H.sub.PC 
should be overwritten after the calculation of H.sub.Final. 
Next the customer creates E, the portion of the message to be encrypted: 
EQU E=SID.parallel.Tc.parallel.AID.parallel.RANDOM.parallel.H.sub.Final 
DSAs(PR, customer) 
The values of H.sub.Final and DSAs(PR, customer) should be overwritten at 
this point. 
Because the physical lengths of the quantities above are fixed, namely: 
______________________________________ 
SID 32 bits 
Tc 32 bits 
AID 8 bits 
RANDOM 56 bits 
H.sub.Final 160 bits 
DSAs(PR, customer) 160 bits, 
______________________________________ 
the result E is 448 bits long. 
Then E is encrypted with the first 448 bits of the Diffie-Hellman key D-H 
Key.sub.CTA to yield the value E' 
EQU E'=Bits(D-H Key.sub.CTA, 0, 448).sym.E 
After E is encrypted Bits(D-H Key.sub.CTA, 0, 448) used to encrypt it 
should be overwritten. 
Next the customer network software 104 computes two 160-bit quantities 
which will be used to verify the authenticity of the response to its 
payment request 
CTABITS1=Bits(D-H Key.sub.CTA, 448, 160) 
CTABITS2=Bits(D-H Key.sub.CTA, 608, 160) 
Both CTABITS1 and CTABITS2 are temporarily stored in the Pending table 154 
so that a payment advice message can be verified for authenticity even if 
it is received after a restart of the customer network software 104. 
Finally a payment request message 128 that contains Z, MID, Tm, T$, Q, 
DSAr (PR, customer) and E' is composed. The payment request message is 
temporarily written to the database 136 (in Payment Requests 146) to 
address failures in transmission. Then it is Base64 encoded and posted to 
the URL of the CTA 102 that is embedded in the customer network software 
104 executable. 
4. CTA Processes Payment Request 
Upon receipt of the payment request message 128 (step S208), the CTA 102 
performs the following processing: 
First the CTA 102 uses the value Z from the payment request message 128 to 
calculate the Diffie-Hellman key D-H Key.sub.CTA as follows: 
EQU D-H Key.sub.CTA =z.sup.Xcta modulo p 
Next the CTA 102 extracts E from the message and computes E: 
EQU E=Bits(D-H Key.sub.CTA, 0,448).sym.E' 
Because the lengths and locations of the fields SID (the customer 
subscriber identifier, 32 bits), Tc (the customer transaction identifier, 
32 bits), AID (the customer account identifier, 8 bits), RANDOM (56 bits), 
H.sub.Final (160 bits) and DSAs (PR, customer) (160 bits) are known, the 
CTA 102 is able to recover these values from the calculated value of E. 
The value of SID is then used to find the current value of PIN* and other 
values for this customer in the CTA database. If the recovered value of 
SID does not correspond to an actual customer subscriber ID, processing of 
the customer-specific data stops here. 
Then the CTA 102 recomputes the hash value H.sub.PC (denoted H'.sub.PC) 
from the values MID, Tm, T$ and Q which are in the plaintext portion of 
the message and SID, Tc, AID and RANDOM which were hidden in the message 
by Diffie-Hellman encryption, and PIN* from the CTA database. Recall that 
the customer computed the value of H.sub.PC as H.sub.PC =SHA(PR), where PR 
was formed by the concatenation of MID, Tm, the transaction amount, T$, 
Q, the customer subscriber identifier, SID, the customer transaction 
identifier, Tc, the customer account identifier, AID, RANDOM and PIN*. The 
value H.sub.Final =SHA(H.sub.PC .parallel.DSAr(PR, 
customer).parallel.DSAs(PR, customer)). 
Then the CTA 102 computes H.sub.Final ' from H.sub.PC ', from DSAr(PR, 
customer) [within plaintext], and from DSAs(PR, customer) [after 
Diffie-Hellman decryption]. The values of H.sub.Final and H.sub.Final ' 
are then compared. 
The customer signature may be reconstituted from its parts DSAs (PR, 
customer) and DSAr(PR, customer). In the event of a later attempted 
transaction repudiation by the customer, the CTA 102 can check the 
customer's signature if it is stored along with MID, Tm, T$, Q, SID, 
Tc, AID, RANDOM and PIN*. In the event of a dispute of the signature which 
causes the signature to be presented outside the CTA 102, the customer is 
expected to refresh the value of the logon-PIN, PIN. The CTA 102 enforces 
this by rejecting subsequent transactions. 
Alternatively, if in the formation of H.sub.PC and H.sub.FINAL, RANDOM and 
PIN* had been removed from PR, and if H.sub.PC within the computation of 
H.sub.FINAL had been replaced by H.sub.PC .parallel.RANDOM.parallel.PIN*, 
then it would no longer be necessary for the CTA to force the customer to 
obtain a new value of the logon-PIN in the event the signature needs to be 
presented outside of the CTA. Whether data is input by the customer 
network software 104 as an input parameter to SHA within H.sub.PC or as an 
input parameter to SHA within H.sub.FINAL, it has the same effect with 
respect to the CTA detecting whether the data integrity has been 
maintained. Alternatively, if in the formation of H.sub.PC and 
H.sub.FINAL, if RANDOM and PIN* had been removed from PR, and if H.sub.PC 
within the computation of H.sub.FINAL had been replaced by H.sub.PC 
.parallel.RANDOM.parallel.PIN*, then it would no longer be necessary for 
the CTA to force the customer to obtain a new value of the logon-PIN in 
the event the signature needs to be presented outside of the CTA. Whether 
data is input by the customer network software 104 as an argument of SHA 
within H.sub.PC or as an argument of SHA within H.sub.FINAL, it has the 
same effect with respect to the CTA detecting whether the data integrity 
has been maintained. 
The customer signature data needs to be stored only if H.sub.Final and 
H.sub.Final ' match. 
The CTA's processing thus far is summarized as follows: 
First the payment request message is decrypted which provides the 
subscriber identifier (SID) and account number (AID). From this 
information, the customer's database account entry at the CTA 102 is 
available. The customer's account entry at the CTA includes PIN*, the last 
transaction number for this customer and other information including 
account balance information. 
If the current transaction number is one more than the last transaction and 
the hashes verify then this is considered a good transaction. 
The CTA 102 then composes an unsigned payment advice (PA) message. 
Additionally, the CTA 102 composes a message for use by the customer but 
not to be passed on to the merchant. This message includes customer advice 
(CA), e.g., "Insufficient funds." 
The CTA 102 then signs the payment advice message 130. 
If circumstances warrant that the CTA should update its value of the 
particular customer's PIN* as a result of this transaction, as outlined 
below, then the value of PIN* in the CTA's database is updated with the 
new value of RANDOM and with 56 bits from the CTA signature on the payment 
advice message 130. That is, 
EQU PIN*=PIN*.sym.RANDOM.sym.Bits(DSAr(PA, CTA),0, 56). 
Next the CTA 102 computes the hash value, H.sub.CTA of the payment advice 
PA, DSA(PA, CTA), CA and 160 bits of the Diffie-Hellman key, D-H 
Key.sub.CTA : 
EQU H.sub.CTA =SHA(PA.parallel.DSA(PA, CTA).parallel.CA.parallel.Bits(D-H 
Key.sub.CTA, 448, 160). 
Then the hash H.sub.CTA is encrypted using the last 160 bits of the 
Diffie-Hellman key D-H Key.sub.CTA : 
EQU E.sub.CTA H.sub.CTA .sym.Bits (D-H Key.sub.CTA, 608, 160) 
The CTA 102 then composes its payment advice message (130, FIG. 7E) 
consisting of: 
PA, DSA(PA, CTA), CA and E.sub.CTA. 
In addition to the above, the customer advice portion of the payment advice 
message 130 includes various flags that are used by the customer network 
software 104 to process the message. The flags include a PINFLAG, a 
TRANSFLAG, a RETRYFLAG and a PROTERRFLAG. 
The flag PINFLAG is used to inform the customer network software 104 
whether the CTA 102 updated the value of PIN* in its database. If the 
value of PINFLAG is "YES", then the CTA 102 has updated its PIN* as a 
result of the present transaction. Otherwise, if the value of PINFLAG is 
"NO", i.e., the CTA 102 indicates that the PIN was not updated. 
The flag TRANSFLAG is used to inform the customer network software 104 
whether it should increment the transaction number in its database 136. 
The RETRYFLAG is used to inform the customer network software 104 that the 
customer may have incorrectly entered his PIN and that the customer 
network software 104 should offer the customer another chance to enter his 
PIN correctly. A value of "NO" for the RETRYFLAG indicates that no retry 
is permitted and that the customer's PIN has been invalidated by the CTA 
102. A value of "YES" indicates that a retry is permitted, i.e., the 
maximum number of consecutive bad PIN* values has not been reached. The 
CTA 102 tracks the number of consecutive bad PIN* values using a variable 
BadPinCount for each customer. 
The PROTERRFLAG is used to inform the customer network software 104 of 
protocol errors. A PROTERRFLAG value of "YES" indicates that an error has 
occurred. 
The CTA 102 sets the flags as follows: 
After checking that there is enough money in the customer's account to 
satisfy the dollar amount of the transaction, the CTA 102 checks the 
consistency and validity of PIN*. 
There are six cases that can arise. The following description indicates how 
the CTA sets the flags in the preferred embodiment. It should be 
understood that in other embodiments the CTA may respond differently to 
the payment request message in how it sets these flags or it may use other 
flags: 
Case 1 
The database is blocked or the account number is invalid or the transaction 
number is out of range (not within one of the previous transaction. 
In this case suspect an error or an attempted security breach. Leave 
database unchanged and set all flags to "NO". Unless service is 
unavailable at the CTA, the customer's payment advice message will 
ultimately bear the CTA signature and the Diffie-Hellman-based 
authentication of the customer advice, CA. 
Case 2 
The transaction is good. The hashes verify and the transaction number is 
okay. 
Reset the BadPinCount variable (maintained by the CTA for each customer) to 
zero, 
Set PINFLAG="YES", 
TRANSFLAG 32 "YES", 
RETRYFLAG="YES", and 
PROTERRFLAG="NO". 
If the dollar amount is okay then post the debit. 
Case 3 
The Transaction number is okay but the hashes do not verify. 
This is a bad PIN case, therefore the CTA increments the bad PIN count and 
checks it against a predetermined threshold. If the count exceeds the 
threshold then the account is blocked, and set PINFLAG="NO", 
TRANSFLAG="NO", 
RETRYFLAG="NO", and 
PROTERRFLAG="NO". 
Otherwise, set PINFLAG="NO" and RETRYFLAG="YES". 
Case 4 
The transaction number is the same as the previous transaction number and 
the payment request is identical to the previous payment request. 
This is a duplicate transaction case. In this case the CTA gets the 
corresponding payment advice and does not update anything in the customer 
database (except possibly for a count of how many times this same 
transaction has been requested). 
Case 5 
The transaction number is the same as the previous transaction number, the 
hashes agree and the current payment request is not identical to the 
previous payment request. 
This is a protocol error case. 
Set PINFLAG="YES", 
TRANSFLAG="YES", 
RETRYFLAG="YES", 
PROTERRFLAG="YES". 
Case 6 
The transaction number is the same as the previous transaction number, the 
hashes do not agree and the current payment request is not identical to 
the previous request. 
This is identical to case 3. 
This payment advice message 130 is Base64 encoded and then sent to the 
customer (step S212). 
Although several of the computations done by the CTA have been described 
above as being done sequentially, the system has been designed to permit 
similar computationally intensive processing elements to be performed by 
the CTA in parallel. This is principally due to two factors which relate 
to the nature of the incoming and outgoing data, respectively: 
(i) The incoming payment request message data is partitioned into plaintext 
and ciphertext, where the customer-specific data is in ciphertext and the 
merchant-related data is in plaintext. In order for the CTA to decrypt the 
ciphertext, it regenerates the Diffie-Hellman key using the received value 
of Z and its securely stored value of the exponent X.sub.CTA. Once this 
session key is computed, the actual decryption to recover the 
customer-specific information, and the authentication of the customer 
advice and other information necessary for the creation of the customer's 
payment advice message, can both be done very quickly; 
(ii) The plaintext data alone suffices for the CTA to prepare the 
merchant's payment advice message. In fact the two potential versions of 
this message, consisting of PA and DSA(PA,CTA), one which indicates the 
merchant is to be paid, and one which indicates the merchant is not be 
paid, can be prepared simultaneously as well. 
5. Customer Receives and Processes Payment Advice from CTA and Forwards 
Part of Payment Advice to Merchant 
The customer network software 104 receives and processes the payment advice 
message 130 (step S214). 
The payment advice message 130 includes the text of the payment advice 
which will be delivered to the merchant, PA, the CTA's signature on the 
payment advice, DSA(PA, CTA), a customer advice, CA, and an encrypted 
portion, E.sub.CTA. The customer advice is that portion of the response 
which is appropriate for the customer but not appropriate for the 
merchant. For example a message that informs the customer that there are 
insufficient funds in his account to make a purchase is not required to be 
seen by the merchant. It is sufficient for the merchant to know that the 
payment will not be forthcoming. 
The customer network software 104 retrieves the values PA, DSA(PA, CTA), CA 
and E.sub.CTA from the decoded message. These value are used for 
authentication purposes. It recovers a hash, H.sub.CTA which was 
calculated by the CTA 102: 
EQU H.sub.CTA =E.sub.CTA .sym.CTABITS2 
Then the customer recalculates the hash from the value of fields in the 
clear text portion of the message and from D-H Key.sub.CTA : 
EQU H.sub.CTA '=SHA(PA.parallel.DSA(PA, CTA).parallel.CA.parallel.CTABITS1) 
Note that if the payment advice is being received after a restart of the 
customer network software 104, CTABITS1 and CTABITS2 are retrieved from 
the Pending table 154. 
If the values of H.sub.CTA ' and H.sub.CTA are not the same, then the 
customer network software 104 may resend the payment request message to 
the CTA 102 a predetermined number of times, e.g., up to three more times. 
This count is kept and the limit enforced at the customer network software 
104. The payment request message for resending may be fetched from the 
Payment Requests table 146 of the database 136 if a hardware failure 
occurs between transmissions. If after the maximum number of resends, the 
hashes still do not agree then CTABITS1 and CTABITS2 are overwritten in 
the database 136, the full text of the payment request is reset in the 
database and the update of ADD is undone: 
EQU ADD=ADD.sym.RANDOM, 
and then RANDOM is reset to zero in the database. Then the failure is 
logged, the customer is informed and processing stops here. In this case, 
the customer may be required to go out-of-band in order to acquire a new 
value of the logon-PIN, PIN, prior to the next transaction. 
If the values of the hashes H.sub.CTA ' and H.sub.CTA do agree and PINFLAG 
defined below is set to "YES" by the CTA, then the value of ADD is 
adjusted: 
EQU ADD=ADD.sym.Bits(DSAr(PA, CTA),0, 56). 
In addition to the text mentioned above, the customer advice portion of the 
payment advice message also includes various flags that are used by the 
customer network software 104 as follows: 
As noted above, the flag PINFLAG is used to inform the customer network 
software 104 whether the CTA 102 updated the value of PIN* in its 
database. If the value of PINFLAG is "YES", then the CTA 102 has updated 
its PIN* as a result of the present transaction. Accordingly, the customer 
network software 104 also updates its value of ADD. If the value of 
PINFLAG is "NO", i.e., the CTA 102 indicates that the PIN was not updated, 
then the customer resets ADD to its previous value by: 
EQU ADD=ADD.sym.RANDOM 
The flag TRANSFLAG is used to inform the customer network software 104 
whether it should increment the transaction number in its database 136. 
The customer network software 104 increments the transaction number field 
CTRANS in the States table 156 if and only if the TRANSFLAG field contains 
a "YES". If the CTA 102 indicates that the transaction number has been 
incremented then the customer network software 104 updates the field 
CTRANS in the States table 156. Note that it is only when the CTA 102 
indicates that the transaction has been updated that the customer network 
software 104 increments its transaction number. 
The RETRYFLAG is used to inform the customer network software 104 that the 
customer may have incorrectly entered his PIN and that the customer 
network software 104 should offer the customer another chance to enter his 
PIN correctly. A value of "NO" for the RETRYFLAG indicates that no retry 
is permitted and that the customer's PIN has been invalidated by the CTA 
102. A value of "YES" indicates that a retry is permitted, i.e., the 
maximum number of consecutive bad PIN* values has not been reached. 
If the customer wants to retry the transaction. If so a new values of 
R.sub.c and RANDOM are generated, the customer is prompted to reenter his 
PIN and a new payment request message for the same transaction is 
generated and transmitted as above. Note that it is the responsibility of 
the CTA 102 to inform the customer as to whether he may retry the same 
payment with another PIN. The customer network software 104 need not keep 
track of PIN failures. It is possible that the customer's account may have 
been used without his knowledge and that his account is blocked. In that 
case he gets no more retries. 
The PROTERRFLAG is used to inform the customer network software 104 of 
protocol errors. A PROTERRFLAG value of "YES" indicates that an error has 
occurred, in which case the customer network software 104 displays the 
text portion of the customer advice and offers the customer the 
opportunity to retry the transaction after assignment of a new T.sub.c 
(CTRANS) and the generation of a new RANDOM and a new R.sub.c. If the 
customer advice contains a "YES" in the PROTERRFLAG then the transaction 
is marked as aborted in the State table 156 and the text of the customer 
advice is copied to the TEXT field of this table. Processing of the 
current transaction terminates here notwithstanding the fact that the 
customer may retry the same transaction, without either requesting or 
authenticating new quote, after the reentry of the customer's PIN, and new 
values for RANDOM, R.sub.c and T.sub.c. If PROTERRFLAG is set to "YES" 
this forces the customer network software 104 to increment CTRANS by one, 
independent of the response by the customer network software 104 to the 
setting of TRANSFLAG. 
The text portion of the customer advice is displayed to the customer. In 
particular, customer advice may indicate that the customer must acquire a 
new value of PIN. When the CTA 102 denies the payment, the customer advice 
will clearly indicate it. 
Following the update of ADD, the customer network software 104 resets 
RANDOM to zero in the database and overwrites the values of CTABITS1 and 
CTABITS2. 
At the conclusion of customer network software 104 processing of CTA 102 
data, both the payment request message and D-H Key.sub.CTA should have 
been overwritten in memory. 
Next the customer network software 104 uses the merchant identifier and the 
merchant transaction identifier to retrieve the quote from the Quotes 
table 140 in its database 136. The customer then composes a merchant's 
payment advice message 131 (FIG. 7F) which contains the payment advice 
portion of the message it received, PA, and the CTA's signature on it, 
DSA(PA, CTA). The message is Base64 encoded and the resultant text is 
posted to the payment URL which is contained in the merchant's quote (step 
S214). 
6. Merchant Processes Payment Advice from Customer 
Upon receipt of the merchant's payment advice message 131 (step S216), the 
merchant network server 110 decodes the payment advice message and checks 
it for validity. The checks include the following: 
a verification of the CTA's signature; 
a comparison of the merchant identifier in the payment advice message with 
the identifier assigned to the merchant by the MCC; 
a scan of the Quotes table for one which includes the merchant transaction 
identifier found in the payment advice message; 
a comparison of the secure hash of the quote against the value of Q in 
the payment advice message. Note that Q may either have been 
pre-computed and stored, or may now be computed from the stored value of 
the quote a comparison of the amount in the payment advice message against 
the amount in the original quote; and 
a comparison of the current time against the expiration time in the quote. 
In the event that any of the checks fail then the merchant network server 
110 logs the specific failure(s). 
If the CTA signature does not verify correctly or the merchant identifier 
is incorrect then processing stops here, with the proviso that the 
customer network software 104 can successively retransmit if necessary. 
The merchant responds to a newly received payment advice message for which 
the CTA signature verifies correctly and the merchant identifier is 
correct either with a shipping advice message (SA) (178, FIG. 7G), in the 
case it accepts the payment or with a payment refused message (PREF) (180, 
FIG. 7H), when it does not. In the currently preferred embodiment, it is 
the individual seller's responsibility to ensure that he does not 
unintentionally ship goods multiple times for the same transaction. If the 
CTA 102 signature DSA(PA, CTA) verifies correctly, and PA indicates the 
merchant is not to be paid, the merchant network server 110 can delete all 
data associated with the particular transaction after sending the 
(authenticated) payment refused message (PREF), provided it does not reuse 
that value of the merchant transaction identifier. Either 
EQU SA.parallel.[MERBITS2.sym.SHA(SA.parallel.MERBITS1)] 
or 
EQU PREF.parallel.[MERBITS2.sym.SHA(PREF.parallel.MERBITS1)] 
is then transmitted to the customer network software 104. 
The customer network software 104 retrieves MERBITS1 and MERBITS2 from the 
Pending table 154 to verify the authenticity of either SA or PREF. 
If the merchant responds with a correctly verifiable payment-refused 
message 180, then the error is logged, the customer is informed and 
processing stops here. 
If the merchant responds with a correctly verifiable shipping advice 
message 178, then there are two cases. If physical goods have been bought, 
then the advice 178 includes any text from the merchant that describes the 
time and method of delivery. The text is presented to the customer and 
processing ends normally. 
In the case that digital goods have been bought then the shipping advice 
includes the type of goods, a suggested file name, the number of 
transmissions from the merchant to the customer network software 104 that 
will be required to receive the goods followed by the length and secure 
hash of each transmission to follow. The shipping advice message also 
includes a location (Delivery URL) where the customer can get the goods. 
7. Customer Gets the Goods 
The customer network software 104 then presents a dialog to the customer 
that asks for the location on the customer's computer to which the digital 
goods will be written. 
Next the customer network software 104 sends a send-goods message to the 
merchant. The customer network software 104 knows how much data the 
merchant should return because that information was included in the 
shipping advice message. 
The merchant responds with a digital-goods message (182, FIG. 7I). Note 
that the goods are encrypted by the merchant on the fly using a forty bit 
key bulk cipher encryption algorithm. The forty bit key is taken from 
MERBITS3. 
Upon receipt of the digital goods message 182, the customer network 
software 104 decodes the message from Base64 format to binary and then 
uses MERBITS3 to decrypt the digital goods. Next it applies the secure 
hash algorithm to the plaintext digital goods. The length of the data 
received and its hash is compared against that in the shipping-advice 
message. If the comparison succeeds then the data is written to the file 
that the customer specified. If the comparison fails, the error is logged, 
the customer is informed and processing stops here. 
The customer network software 104 then checks the shipping advice message 
178 for the number of transmissions expected from the merchant. If more 
pieces remain, the process repeats until all pieces are received. If not, 
the customer is informed that his goods have been delivered and processing 
ends normally. 
At the conclusion of processing, whether or not the above comparison fails, 
the only bits of D-H Key.sub.MERCHANT which should be retained by the 
customer are Bits (D-H Key.sub.MERCHANT, 0, 160) denoted Retain160. The 
values of MERBITS1, MERBITS2, and MERBITS3 should be overwritten. 
VIII. Previous-transaction Mode 
There are a number of cases where a customer will want to do something 
about a previous transaction. For example, if a customer did not receive 
goods paid for, the customer may request a refund or retransmission of the 
goods. A customer may also wish to register a complaint about a particular 
merchant with the CTA 102 or a customer may wish to query the CTA about a 
particular previous transaction. 
Accordingly, the customer network software 104 enters a 
Previous-transaction Mode upon customer input indicating processing 
instructions which may be in the form of a refund request, a 
retransmission of electronic goods request, or a query/complaint. The 
processing instructions include a counter value, transaction number, with 
respect to the particular original transaction. In the case of a request 
to a merchant for retransmission of electronic goods, the customer network 
software 104 refers to the original shipping advice in order to format a 
send-goods message and to process the delivered goods. The send-goods 
message may specify the re-delivery of only those portions of the 
electronic goods which were not received or which were not received 
correctly (e.g., which did not hash correctly to the associated secure 
hash value within the shipping advice). 
The customer network software 104 indicates to the merchant that it intends 
to transmit in previous-transaction mode. The merchant network server 110 
returns the merchant's current Diffie-Hellman certificate (issued on setup 
by the CA 124). The customer network software 104 verifies the merchant's 
certificate with the CA's public DSA key and, if successful, presents all 
pertinent information to the customer. If the merchant's certificate 
cannot be verified or the certificate can be verified but the merchant 
identifier, MID, within the certificate does not agree with the value of 
MID in the original stored quote, then an entry is written to the 
transaction log and the customer is informed of the failure. As an 
additional security measure, the customer should be required to confirm or 
cancel the transaction based on the displayed certificate information. If 
the customer cancels then no further processing is required. If the 
customer confirms the transaction, then the customer network software 104 
generates new values for R.sub.c, D-H Key.sub.MERCHANT and Z=g.sup.Rc 
modulo p. 
Then a previous-transaction mode message (184 in FIG. 7J) is generated and 
transmitted to the merchant. The previous-transaction mode message 184 
includes the following: 
the value of Z (g.sup.Rc modulo p for the new value of R.sub.c); 
the original merchant transaction identifier, Tm, and Date of Transaction 
(both within original merchant quote and taken from the customers local 
database 136); 
The value Bits (D-H Key.sub.MERCHANT, 0, 160).sym.Retain160 using the newly 
calculated value of D-H Key.sub.MERCHANT ; 
Processing Instructions; and 
Bits (D-H Key.sub.MERCHANT, 320,160).sym.SHA (Processing 
Instructions.parallel.Bits(D-H Key.sub.MERCHANT, 160,160)). 
In the case of a request for the retransmission of electronic goods 
request, the 40 bits to be used as the encryption/decryption key when the 
merchant subsequently transmits his electronic goods are contained in 
Bits(D-H Key.sub.MERCHANT, 480, 40). 
A previous-transaction mode message 184 is considered to be received intact 
by a merchant if the value of Retain160 as stored by the merchant network 
server 110 matches the information retrieved from the previous-transaction 
mode message, and if the secure hash of the processing instructions is 
correct. Otherwise the received previous-transaction mode message is 
considered by the merchant to be not-intact. 
The merchant network server 110 responds to an intact previous-transaction 
mode message 184 by transmitting its computation of Bits(D-H 
Key.sub.MERCHANT, 520, 40). The merchant network server 110 responds to a 
not-intact previous-transaction mode message 184 by transmitting its 
computation of Bits(D-H Key.sub.MERCHANT, 560, 40). 
The merchant network server 110 updates the status of the particular 
original transaction in its database. The merchant network server may not 
fulfill an intact request if the transaction number within the processing 
instructions does not exceed the highest transaction number the merchant 
has seen within an intact request referring to that particular original 
transaction. The merchant may also limit the number of times it honors 
retransmission of electronic goods requests. 
Refunds operate as follows: each customer maintains a local database of 
transactions. If a transaction is incomplete or merchandise or information 
is not delivered, the Customer can choose to enter Previous-Transaction 
Mode (PTM). The merchant can retransmit the information or provide a 
refund, perhaps depending on the desire of the customer. The merchant 
initiates a refund with a message to the MCC. The MCC debits the 
merchant's account and sends a request for payment to the CTA 102 which 
credits the customer's account. 
In the preferred embodiment, a refund amount from the merchant of $0.00 
indicates that the refund request from the customer has been refused. 
The merchant also may specify in the initial contact with the customer that 
there will be no refunds. The merchant sets a refunds-not-processed flag 
in the quote. In this case, the customer network software 104 will 
automatically deny refund requests initiated by the customer within 
Previous Transaction Mode. 
In other embodiments, refund processing may be different. For example, if 
the merchant is paid but no payment advice was issued (due to, e.g., an 
interrupted transaction), the merchant can initiate a refund to the MCC to 
clear the records. 
CTA Processing of Merchant Data 
With respect to refund requests: 
The CTA 102 receives via the MCC 114 refund requests signed by the 
merchant, or information from the MCC 114 which indicates which 
transactions have been authorized for refunds by merchants. In the 
preferred embodiment a particular transaction cannot be refunded more than 
one time. In alternative embodiments these requests can be checked for 
duplicates prior to issuing refunds to the appropriate customer account, 
where the merchant may legitimately issue multiple refunds for the same 
transaction. 
IX. Delayed or Exception Processing and Service Requests 
A customer may wish to have various transactions with a CTA relating to the 
customers account status or to the status of particular transactions. For 
example, a customer may request account statement information, account 
funding information, evidence of a previous transaction and the like. 
1. Customer Processing of Service Request 
To make one of these requests, the customer sends the appropriate service 
request message to the CTA 102. 
A customer may request any of the following in a service request message: 
information about one or more refunds previously requested from a 
particular merchant (Refund Information Message 186, FIG. 7K); 
information about one or more transfers from the customer's bank into his 
CTA account, i.e., fundings information (Funding Information Message 188, 
FIG. 7L); 
information about the customer's account, i.e., statements (Statement 
Information Message 190, FIG. 7M); and 
information about a previously paid transaction, i.e., external evidence 
(External Evidence Message 192, FIG. 7N). 
External evidence acts to attach identity to a previous anonymous 
transaction with a merchant. That is, it serves as a means to re-contact a 
merchant via the CTA 102, regarding, for example, a transaction for which 
the payment advice may or may not have reached the merchant, but the 
merchant was credited for the transaction. 
A successfully executed external evidence request, initiated by the 
customer to the CTA 102, results in authenticated notification to the 
merchant of the pertinent transaction information, including 
Q=SHA(quote). In the preferred embodiment, an external evidence request 
is denied if the original transaction did not result in a previous credit 
to the merchant's account correspondingly debited from the 
evidence-requesting customer's account. The information forwarded to the 
merchant may include the refund status of the transaction. 
In the preferred embodiment, the notification to the merchant occurs 
whether or not a refund has been requested of the merchant and/or 
processed. Notifications to the merchant may be aggregated and delivered 
as part of the regular merchant-transaction statement (or as a separate 
statement). A successfully executed external evidence request results in a 
CTA-signed binding of the original transaction information to the 
customer's account information as it is known to the CTA 102. In the 
preferred embodiment, the notification to the merchant regarding an 
external evidence request does not include the customer's account 
information. Furthermore, the association of the account to the person's 
actual name or other bank-held information must be provided by the bank. 
This proof-of-association may be provided to the customer as part of the 
hard-copy documentation delivered to the customer as part of customer 
setup. In this case, the customer must retain a bank-authenticated 
original copy of the document, which may later be provided to a third 
party if necessary. Alternatively, the customer may be required to acquire 
such documentation from his bank on an as-needed basis. 
As noted above, to make one of these service requests, the customer sends 
the appropriate service request message to the CTA 102. First the customer 
network software 104 generates a 160-bit random value R*.sub.c using some 
well-known mechanism. Next the customer network software 104 computes a 
Diffie-Hellman public key component, Z*: 
EQU Z*=g.sup.R*c modulo p 
Then the customer network software 104 computes a Diffie-Hellman key to be 
used to communicate with the CTA 102 
EQU D-H Key*.sub.CTA (Y.sub.CTA).sup.R*c modulo p 
The CTA 102 will be able to compute the Diffie-Hellman key it shares with 
the customer network software 104 as soon as the customer network software 
104 transmits its Diffie-Hellman public key component Z* to the CTA 102. 
The Diffie-Hellman public key component of the CTA 102 is known to the 
customer network software 104 prior to the start of communications. If the 
current CTA Diffie-Hellman public key component is not known to the 
customer network software 104, the communication discussed below will fail 
if the CTA 102 uses its current private Diffie-Hellman exponent, because 
the CTA 102 will be unable to determine the customer's identity which is 
encrypted under the Diffie-Hellman key. The Diffie-Hellman public key 
component of the customer will be included in the service request message 
discussed below. 
Next the customer generates a 56-bit random value RANDOM*, e.g., with key 
strokes and mouse movements (alternatively some hardware source may be 
used to generate this value). The value of RANDOM* is temporarily written 
to the customer database 136. The customer network software 104 then 
computes the value of PIN* using a typed-in value of PIN: 
EQU PIN*=PIN.sym.ADD 
where ADD is either retrieved from the hard drive, or reset to zero if the 
customer indicates that this is the first-time use of a new PIN value. The 
value of PIN should be overwritten at this point. 
Then the customer network software updates the value of ADD by replacing 
its current value by: 
EQU ADD.sym.RANDOM* 
The value of ADD is then updated in the database 136 and the value of 
RANDOM is temporarily stored there too. The next transaction number, 
CTRANS, is retrieved from the States table 156 in the database 136 and the 
customer network software 104 creates an unsigned service request, SR. The 
service request SR (FIG. 7Q) is formed by concatenating the following 
values: 
the service-request information field, SIF; 
the customer subscriber identifier, SID; 
the customer transaction identifier, Tc; 
the customer account identifier, AID; 
the value RANDOM*; and 
the value of PIN*. 
The value of PIN* should be overwritten at this point. 
In the case of a customer statement request, the service request 
information field SIF includes the statement parameters which designate 
the scope of the desired statement. 
In the case of an external evidence request, SIF includes the information 
relating to the appropriate payment advice, MID and Tm. 
Then the customer creates a 160-bit hash value 
EQU H*.sub.PC =SHA(SR), 
after which the value of SR should be overwritten. This is followed by 
computation of 
EQU H*.sub.Final =SHA(H*.sub.pc .parallel.DSAr(SR, customer).parallel.DSAs (SR, 
customer)), 
after which the value of H*.sub.PC should be overwritten. 
In other embodiments the customer signature DSA(SR,customer) may be 
suppressed if non-repudiation is not a system requirement, since the 
transaction security is based primarily on the combined use of the 
customer PIN and Diffie-Hellman. It may be adequate in such an embodiment 
to let H*.sub.FINAL =H*.sub.PC. 
The randomly generated per-message DSA exponent used to compute the DSA 
signature should be overwritten in memory as soon as DSAr(SR, customer) 
and DSAs (SR, customer) are computed. 
Next the customer creates the portion of the message to be encrypted: 
EQU E*=SID.parallel.Tc.parallel.AID.parallel.RANDOM*.parallel.H*.sub.Final 
.parallel.DSAs(SR, customer) 
The values of H*.sub.Final and DSAs(SR, customer) should be overwritten at 
this point. Because the physical lengths of the quantities above are 
fixed, namely 
______________________________________ 
SID 32 bits 
Tc 32 bits 
AID 8 bits 
RANDOM* 56 bits 
H*.sub.Final 160 bits 
DSAs(SR, customer) 160 bits, 
______________________________________ 
the result E* is 448 bits long. 
The value of E* is then encrypted with the first 448 bits of the 
Diffie-Hellman key to yield E* 
EQU E*'=Bits(D-H Key*.sub.CTA, 0, 448).sym. E* 
The values of E* and Bits(D-H Key*.sub.CTA, 0, 448) should be overwritten 
at this point. Next the customer network software 104 computes two 
quantities to be used to verify the authenticity of the response to its 
service request, namely 
EQU CTABITS1=Bits(D-H Key*.sub.CAT, 448, 160) 
EQU CTABITS2=Bits(D-H Key*.sub.CTA, 608, 160) 
Both CTABITS1 and CTABITS2 are temporarily stored in the Pending table 154 
so that a service advice message can be verified for authenticity even if 
it is received after a restart of the customer network software 104. 
Finally a service request message 196 that contains Z*, SIF, DSAr(SR, 
customer) and E*' is composed and then Base64 encoded. The complete text 
of the service request message is temporarily stored in the database 136 
(in the Service Requests table 148) so that communication failures can be 
addressed. The resultant text of the message is sent to the CTA 102, e.g., 
by posting it to the URL of the CTA that is embedded in the customer 
network software 104 executable. 
The CTA responds to a service request message with a Base64 encoded service 
advice message 194 (FIG. 7P). The customer network software 104 decodes 
the service advice message. The service advice message includes a randomly 
generated Diffie-Hellman key component Z.sub.SERVICE, a system-wide value 
N.sub.MAGIC uniquely identifying this request, a customer advice, CA*, and 
an encrypted portion, E*.sub.CTA. 
The customer network software 104 retrieves the values of Z.sub.SERVICE, 
N.sub.MAGIC, CA* and E*.sub.CTA from the decoded message. It then recovers 
a hash, H*.sub.CTA which was calculated by the CTA 102: 
EQU H*.sub.CTA =E*.sub.CTA .sym.CTABITS2 
Then the customer recalculates the hash from the value of fields in the 
clear text portion of the message and from D-H Key*.sub.CTA : 
EQU H*.sub.CTA '=SHA(Z.sub.SERVICE .parallel.CA.parallel.N.sub.MAGIC 
.parallel.CTABITS1) 
If the values of H*.sub.CTA ' and H*.sub.CTA are not the same, then the 
customer network software 104 may resend the service request message up to 
a predetermined number of times, e.g., three more times. The service 
request message may be fetched from the service requests table 148 of the 
database 136 if a failure occurs between transmissions. If, after the 
maximum number of resends, the hashes still do not agree then CTABITS1 and 
CTABITS2 are overwritten, the full text of the service request message is 
reset in the database, R*.sub.c is overwritten in memory, and the update 
of ADD is undone: 
EQU ADD=ADD.sym.RANDOM*, 
and then RANDOM* is reset to zero in the database, and the failure is 
logged and processing stops. In this case, the customer may be required to 
go out-of-band in order to acquire a new value of the logon-PIN, PIN, 
prior to the next transaction. 
If the hashes agree and PINFLAG is set to "YES" by the CTA, then the value 
of ADD is adjusted: 
EQU ADD=ADD.sym.Bits(Z.sub.SERVICE, 0, 56). 
If the hashes agree and the service advice message indicates that the 
transaction has been accepted, the customer network software 104 computes 
a Diffie-Hellman session key which it shares with the CTA 102 
EQU D-H Key.sub.SERVICE =(Z.sub.SERVICE).sup.R*c 
The customer network software 104 overwrites R*.sub.c after the computation 
of D-H Key.sub.SERVICE is completed. The value of R*.sub.c should never be 
written to disk. 
From the session key a decryption key and an authentication are computed. 
The customer network software 104 computes a key to be used to decrypt the 
message when it is subsequently delivered with 
EQU DECRYPTKEY=Bits(D-H Key.sub.SERVICE, 0, 40) 
and a key to be used to verify the authenticity of the subsequent message 
EQU AUTHKEY=Bits(D-H Key.sub.SERVICE, 40, 320) 
The customer network software 104 then inserts the values of CTRANS, 
N.sub.MAGIC, DECRYPTKEY and AUTHKEY into a new row in the Pending table 
154. Finally, the transaction number field CTRANS of the States table 156 
is incremented. 
If the service advice message 194 indicates that the transaction has not 
been accepted then the customer network software 104 must refer to flags 
in the customer advice, CA*. If the CTA 102 indicates that PIN* was not 
updated then ADD is restored to its prior value: 
EQU ADD=ADD.sym.RANDOM* 
The text portion of CA* is displayed to the customer. CA* may indicate, in 
particular, that the customer must acquire a new value of PIN. CA* should 
indicate if the requested service will not later be provided to the 
customer. 
Following the update of ADD, the customer network software 104 resets 
RANDOM* to zero in the database and overwrites CTABITS1 and CTABITS2. 
At the conclusion of customer network software 104 processing of the CTA 
102 response to a service request, both the service request message and 
D-H Key*.sub.CTA should be overwritten in memory. 
In addition to the text mentioned above, the customer advice portion of the 
service advice message also includes flags. These flags have the same 
meaning as the corresponding flags described above for payment requests. 
If the PROTERRFLAG is set in the customer advice then the transaction is 
marked as aborted in the State table 156 and the text of the customer 
advice is copied to the TEXT column of this table. Processing of the 
current service request terminates here notwithstanding the fact that the 
customer network software 104 may offer the customer the opportunity to 
make the same request without further customer input except the reentry of 
the customer's PIN and after generating new values for RANDOM*, R*.sub.c 
and T.sub.c (CTRANS). If PROTERRFLAG is set to "YES" the customer network 
software 104 increments the value of CTRANS by 1 independent of the 
response by the applet to the setting of TRANSFLAG. 
There is a complication associated with the use of the service request 
message resend mechanism. If the customer's computer has crashed, for 
example, and if the resend is being attempted after a restart, then the 
value of R*.sub.c is unavailable. It is too sensitive a quantity to write 
to disk. The resend done here is necessary in order that the customer not 
have to request a new PIN as would be the case if the response to the 
request were not received intact at the customer network software 104 and 
if the value of PIN* were updated at the CTA 102. However, because the 
value of R*.sub.c is not available, the encrypted data prepared in 
response to the request and made available as explained below after an 
appropriate data retrieval- and processing-driven delay, is useless 
because it may not be decrypted. Therefore, if one of the resends results 
in successful receipt of the service advice message in that the hashes 
agree in the customer network software 104, and if the values of PIN* and 
T.sub.c were good, but the value of R*.sub.c is apparently no longer 
available due to a crash, the customer network software 104 may offer the 
customer an opportunity to re-enter his PIN and redo the transaction with 
an incremented transaction number. 
The customer network software 104 must give the customer the opportunity to 
request responses to the four requests above at a time of his choosing. 
The Pending table 154 may enumerate all the requests for which responses 
have not been received. To request a response the customer network 
software 104 composes a message which contains the number, N.sub.MAGIC, 
and posts it to the CTA 102, or a query server designated to handle these 
requests. 
The service data response provided to the customer includes the service 
data, SERD, as well as DSA(SERD, CTA), all encrypted under a forty-bit key 
bulk-cipher encryption algorithm using Bits (D-H Key.sub.SERVICE, 0, 40). 
ENSERD denotes the ciphertext which results from DES-encrypting 
SERD.parallel.DSA(SERD, CTA). The service data response also includes 160 
bits of authentication data, E.sub.SERVICE, and the length l of ENSERD. 
SERD is specified to be a multiple of 64 bits. 
In the case of a successfully executed customer statement request, SERD 
includes the statement data. 
In the case of a successfully executed external evidence request, SERD 
includes PA and Account Identifying Information. In order for the CTA 102 
to process the external evidence request, PA is retrieved from the 
appropriate archived transaction database, while DSA(SERD, 
CTA)=DSA([PA.parallel.Account Identifying Information], CTA) is computed 
by the CTA 102 in response to the external evidence request. 
In any case, the customer retrieves ENSERD and E.sub.SERVICE from the 
message. It recovers a hash, H.sub.SERVICE : 
EQU H.sub.SERVICE '=E.sub.SERVICE .sym.Bits(D-H Key.sub.SERVICE, 200, 160) 
It recalculates the hash: 
EQU H.sub.SERVICE '=SHA(1.parallel.ENSERD.parallel.Bits(D-H Key.sub.SERVICE, 
40, 160)) 
If H.sub.SERVICE and H.sub.SERVICE ' are not the same then the failure is 
logged. In this case the customer network software 104 may attempt to 
resend the same request message up to a predetermined number of times, 
e.g., three more times. The customer decrypts ENSERD, of length l, using 
Bits(D-H Keys.sub.SERVICE, 0, 40) to recover SERD and DSA(SERD, CTA). 
Where H.sub.SERVICE and H.sub.SERVICE ' are the same, SERD and DSA(SERD, 
CTA) can be entered in the customer database. The value of Bits(D-H 
Key.sub.SERVICE, 0, 360) should now be overwritten. 
2. CTA Processing of Service Request 
Upon receipt of a service request message, the CTA 102 uses the value of Z* 
to calculate the Diffie-Hellman key D-H Key*.sub.CTA : 
EQU D-H Key*.sub.CTA =Z*.sup.Xcta modulo p 
The CTA 102 then extracts E*' from the message and computes the value E*: 
EQU E*=Bits(D-H Key*.sub.CTA, 0, 448).sym.E*' 
Since the lengths of each of SID, Tc, AID, RANDOM, H*.sub.Final and DSAs 
(SR, customer) are known, the CTA 102 is able to recover these values from 
E*. 
The value of SID is used to find the customer's current value of PIN in the 
CTA database. If the recovered value of SID does not correspond to an 
actual customer subscriber ID, processing of the customer-specific data 
stops here. 
Next the CTA 102 recomputes the value of hash H*.sub.PC from the value of 
SIF which is in the plaintext portion of the message and SID, Tc, AID and 
RANDOM* which were hidden by Diffie-Hellman encryption, and PIN* from the 
CTA 102 database. Denote this computed value by H*.sub.PC '. Then the CTA 
102 computes H*.sub.Final ' from H*.sub.PC ', from DSAr(SR, customer) 
within plaintext, and from DSAs(SR, customer) after Diffie-Hellman 
decryption. 
The values of H*.sub.Final and H*.sub.Final ' are then compared. 
The customer signature may be reconstituted from its parts DSAs(SR, 
customer) and DSAr(SR, customer). In the event of a later attempted 
transaction repudiation by the customer, the CTA 102 may then check the 
customer's signature if it is stored along with SIF, SID, Tc, AID, RANDOM* 
and PIN*. In the event of a dispute of the signature which causes the 
signature to be presented outside the CTA 102, the customer is expected to 
refresh the value of the logon-PIN, PIN. The CTA 102 enforces this by 
otherwise rejecting subsequent transactions. Alternatively, if in the 
formation of H*.sub.PC and H*.sub.FINAL, RANDOM* and PIN* had been removed 
from SR, and if H*.sub.PC within the computation of H*.sub.FINAL had been 
replaced by H*.sub.PC .parallel.RANDOM*.parallel.PIN*, then it would no 
longer be necessary for the CTA to force the customer to obtain a new 
value of the logon-PIN in the event the signature needs to be presented 
outside of the CTA. Whether data is input by the customer network software 
104 as an input parameter of SHA within H*.sub.PC or as an input parameter 
of SHA within H*.sub.FINAL, it has the same effect with respect to the CTA 
detecting whether the data integrity has been maintained. 
The customer signature data needs to be stored only if the values of 
H*.sub.Final and H*.sub.Final ' match. 
The CTA 102 either generates or extracts from secure storage a new randomly 
generated Diffie-Hellman key component, Z.sub.SERVICE. Z.sub.SERVICE 
=g.sup.Rservice modulo p, where D-H Key.sub.SERVICE 
=(Z.sub.SEVICE).sup.R*C modulo p=Z*.sup.Rservice modulo p is later used to 
encrypt and authenticate the requested-service information to the 
customer. The computed value of D-H Key.sub.SERVICE will not actually be 
used in the event that H*.sub.FINAL .noteq.H*.sub.FINAL ' since in that 
case the preferred embodiment specifies that the requested service will 
not be performed. The CTA 102 can either compute D-H Key.sub.SERVICE and 
then discard Z*, or save Z* so that D-H Key.sub.SERVICE can later be 
computed from Z and R.sub.SERVICE. The value of R.sub.SERVICE need not be 
known by the CTA 102 if another entity encrypts and authenticates the 
requested-service information destined for the customer. 
The CTA 102 composes a message for use by the customer which includes 
customer advice CA*. 
If circumstances warrant that the CTA should update its value of the 
particular customer's PIN* as a result of this transaction, as outlined 
above with respect to the CTA's processing of payment requests, then the 
value of PIN* in the CTA's database is updated with the new value of 
RANDOM* and with 56 bits from Z.sub.SERVICE. 
EQU PIN*=PIN*.sym.RANDOM*.sym.Bits (Z.sub.SERVICE 0, 56) 
This differs from the PIN* updating equation for CTA processing of payment 
requests in that the Diffie-Hellman key component Z.sub.SERVICE rather 
than the DSA signature DSA(PA,CTA) is used for the update. 
Next the CTA 102 computes a hash, H*.sub.CTA of Z.sub.SERVICE, 
CA*,N.sub.MAGIC and 160 bits of D-H Key*.sub.CTA : 
EQU H*.sub.CTA =SHA(Z.sub.SERVICE .parallel.CA* .parallel.N.sub.MAGIC 
.parallel.Bits(D-H Key*.sub.CTA, 448, 160)) 
Then the hash H*.sub.CTA is encrypted using the last 160 bits of D-H 
Key*.sub.CTA. 
EQU E*.sub.CTA =H*.sub.CTA .sym.Bits(D-H Key*.sub.CTA, 608, 160) 
The CTA 102 then composes its service advice message, consisting of 
EQU Z.sub.SERVICE, N.sub.MAGIC, CA* and E*.sub.CTA. 
Although several of the computations done by the CTA have been described 
above as being performed sequentially, the system has been designed to 
permit similar computationally intensive processing elements to be 
performed by the CTA in parallel. This is principally due to two factors 
which relate to the nature of the incoming and outgoing data, 
respectively: 
The incoming payment request message data is partitioned into plaintext and 
ciphertext portions, where the customer-specific data is in the ciphertext 
portion. In order for the CTA to decrypt the ciphertext, it regenerates 
the Diffie-Hellman key D-H Key*.sub.CTA using the received value of Z* and 
its securely stored value of the exponent X.sub.cta. Once this session key 
is computed, the actual decryption to recover the customer-specific 
information, and the authentication of the customer advice and other 
information necessary for the creation of the service advice message, can 
both be done very quickly. 
The received value of Z* alone suffices for the CTA to prepare the 
Diffie-Hellman session key, D-H Key.sub.SERVICE, from a randomly generated 
exponent, R.sub.SERVICE, to be used to encrypt and authenticate the 
separately transmitted service data intended for the customer network 
software 
The computation of this key can be done simultaneously with the computation 
of the CTA's Diffie-Hellman public key component, Z.sub.SERVICE, which is 
to be transmitted to the customer network software to enable the customer 
network software to regenerate D-H Key.sub.SERVICE in order to verify and 
decrypt the separately transmitted service data. 
When the requested service data, SERD, is available, the CTA generates 
DSA(SERD,CTA). Then D-H Key.sub.SERVICE is used to encrypt and 
authenticate the data, after which D-H Key.sub.SERVICE can be deleted from 
the CTA database: 
H.sub.SERVICE =SHA(l.parallel.ENSERD.parallel.Bits(D-H Key.sub.SERVICE, 
40,160)) 
E.sub.SERVICE =H.sub.SERVICE .sym.Bits(D-H Key.sub.SERVICE, 200, 160) 
ENSERD=the encryption of (SERD.parallel.DSA(SERD,CTA)) under 
a forty bit bulk cipher encryption algorithm using 
Bits(D-H Key.sub.SERVICE, 0,40). 
3. CTA Processing of Merchant Data 
In the case of a successfully executed external evidence request initiated 
by a customer: 
These are sorted by merchant, and itemized information relevant to all such 
transactions specifying a given merchant and processed during the current 
merchant statement cycle, including Q but excluding reference to 
customer identifying information is bundled and signed by the CTA 102 for 
inclusion in the next merchant statement. The merchant statement also 
bears a signature of the MCC prior to transmission to the merchant. 
4. Summary of Merchant/MCC Communications 
As a result of merchant setup, the merchant's DSA public key has been 
registered and the merchant network server 110 has the DSA public key 
information of both the MCC 114 and CTA 102. The merchant can transmit to 
the MCC 114 at any time a signed refund request specifying a particular 
transaction. Each merchant statement is signed by the MCC 114 prior to 
transmittal to the merchant. In the case of information relevant to 
CTA-fulfilled external evidence requests, the value of Q, but not 
customer account information is included in the merchant statement. If the 
value of Q does not agree with the merchant database record of SHA 
(Quote), then the corresponding transaction apparently was not previously 
successfully executed between the customer and merchant. 
The detailed statement, showing each payment received, is sent to the 
merchant via some form such as electronic mail. When electronic mail is 
used, the merchant may select any electronic mail address for delivery of 
the mail, including, e.g., his Internet server's address. The merchant 
network server 110 allows merchants to request a new copy of the last 
detailed statement received. Statements are sent to the merchant via 
electronic mail. The detailed merchant statement and complete records 
maintained on the merchant network (Internet) server may be used to verify 
accuracy of each payment. Individual payments may be matched by the 
merchant identifier and merchant transaction identifier. The merchant's 
bank statement should contain a payment in the amount matching the total 
indicated in the detailed statement from the MCC 114. 
Because the initial transmission of each statement is expected by the 
merchant at set intervals, this digitally signed data from the MCC may 
also include other notifications to the merchant, such as notification of 
missing receipts of delivery of previous statements or external evidences 
from the MCC to the merchant, where such receipts should have been 
received by the MCC as signed and sent by the merchant. 
5. Summary 
The payment advice message which the agent issues to the customer in 
response to the customer's payment request message, has two parts one of 
which includes the other. The customer processes one part of the message 
to the extent necessary and sends the other part on to the merchant. Thus, 
the customer is able to verify whether the entire payment advice message 
came unchanged from the agent and has not been corrupted along the way. 
Without completely processing the actual content of the message, the 
source of the entire message can be verified. Accordingly, when the 
customer sends the part of the message to the merchant, the customer knows 
that he is sending something that came from the agent. 
This general structure, that is, splitting the payment advice message into 
two parts, enables additional parallelism with respect to the agent's 
processing in creating the payment advice message. 
Note that the Diffie-Hellman session key operation (between the customer 
and the agent) serves two functions. The first function is the encryption 
between them and the second is the customer being able to verify the 
authenticity of data coming from the agent. This helps the agent as 
follows: in order to prepare the information (in the payment advice) 
needed only by the merchant, no customer specific information is needed by 
the agent. 
This structure also helps preserve anonymity of the customer. The customer 
specific information is sent encrypted from the customer to the agent, and 
this information can be decrypted in parallel with the preparation of the 
data intended for the merchant. That is, while the agent is decrypting the 
customer's information (sent encrypted), it can begin to prepare the 
payment advice. For example, the agent can prepare both an acceptance and 
a rejection of the transaction and then select one of them based on 
processing it performs after the decryption of the customer information. 
The generation of the Diffie-Hellman key on the agent's end (the session 
key process) is parallelized with the creation of the merchant's part of 
the payment advice. This encryption actually serves three purposes. First, 
the customer authenticates himself to the agent. 
The same Diffie-Hellman session key is used to authenticate the integrity 
of the data from the customer to the agent as coming from the owner of the 
PIN (that is, as coming from that customer). 
The customer and merchant set up a Diffie-Hellman key, distinct from the 
key that the customer and agent set up, that lets the customer know that 
he is dealing with the merchant. That is how the merchant authenticates 
the data to the customer. In the preferred embodiment, the customer's only 
authentication of data to the merchant, versus the merchant's 
authentication of data to the customer, happens in the so-called previous 
transaction mode. 
Under the circumstances that a merchant sends hard goods he is to send them 
to an address which was sent encrypted from the customer to the merchant. 
That address gets associated at the merchant with that particular merchant 
transaction identifier. When a merchant gets a payment advice message, he 
knows what address it refers to. In particular, it could happen that the 
particular quote to which the payment advice message refers to gets paid 
for by someone else, but if that payment advice message relates to hard 
goods, the one who receives the goods is the one who initiated the process 
with the merchant. If the transaction relates to soft goods, the goods 
will get encrypted using part of the Diffie-Hellman key, so that only the 
customer who initiated the process will have ready access to the plaintext 
goods. 
When the customer sends his shipping address to the merchant, it is 
encrypted but not authenticated. But when the merchant authenticates the 
quote, he also authenticates the shipping address that he received from 
the customer. So a customer will not send a payment request to an agent 
unless the authenticated shipping information from the merchant matches 
the customer's actual shipping information. 
In the preferred embodiment, a portion of the payment request information 
is digitally signed by the customer. The CTA system rules designate at 
what point and under what circumstances this signature is verified. Since 
this the transaction security is based primarily on the combined use of 
the customer PIN and Diffie-Hellman, in other embodiments the customer 
signature may be suppressed. A similar observation holds true for service 
request messages. 
In order to effect the anonymity provided by this invention, the merchant 
network server need not conceal any information from its authorized users. 
X. Additional Embodiments and Features 
A. Frequent Customer Number Feature 
In some embodiments, the system supports the use of a frequent customer 
number feature. This number can be encrypted and delivered from the 
merchant to the customer as (part of) electronic goods. This (long-term) 
number can be inserted as (part of) the shipping address information when 
the customer places an order with the merchant. In some embodiments the 
retrieval of the number from the electronic goods and its input into the 
shipping address information may not require user intervention. 
Alternatively, the frequent customer number may be chosen by the customer. 
The merchant can offer incentives to the customer for giving its linkage 
information. 
B. Other Embodiments 
While the invention has been described with specific key sizes, the 
bit-lengths of the various quantities may be chosen differently than they 
are in the preferred embodiment. In the preferred embodiment, all bits of 
the Diffie-Hellman key are used by the customer and the CTA. However, in 
the communication between the customer and the merchant, not all bits are 
used. Unlike this embodiment it is possible that not all bits of 
Diffie-Hellman keys established between customers and the CTA are actually 
designated for encryption/authentication of data. The Diffie-Hellman 
modulus length, which determines the Diffie-Hellman key length, must be 
chosen large enough to resist attacks against the discrete logarithm even 
if not all bits of the Diffie-Hellman key are earmarked for use. 
The merchant's certificates issued by the CA 124, whether or not X.509, may 
include additional information relating to characteristics of the 
particular merchant (subject to legal/liability constraints). For 
instance, the merchant may specify no refunds in the certificate. 
The CTA may include additional customer information in the payment advices. 
Such information could include the state of residence of the customer for 
tax purposes, the age range of the customer, and the like (subject to 
legal/liability constraints). 
The quantity RANDOM (described above) may be used for DES encryption of 
data transmitted from the customer to the CTA 102, and/or for DES 
encryption of payment advice messages and/or other data transmitted from 
the CTA to the customer. RANDOM is a 56-bit quantity which can be used 
directly as a 56-bit DES key, or which can have its entropy 
downward-adjusted to say 40-bits so that the resulting 56-bit DES key 
meets export control criteria regardless of the nature of the data. 
While the system has been described above with respect to particular 
preferred embodiments, other embodiments are envisioned. 
In one other embodiment, the customer/merchant quote-negotiation session is 
eliminated. The merchant identifier, MID, and the merchant transaction 
number, T.sub.m, are obtained via processes external to the system. For 
example, in a subway token system, the MID may equal the number for a 
train station, posted conspicuously behind the ticket booth glass, and the 
value of T.sub.m may be obtained from a merchant server which increments 
T.sub.m each time it is accessed. In this embodiment, care is taken in the 
delivery of the payment advice (e.g., subway token) from the CTA to the 
customer in order to prevent useful theft. Accordingly, the pay advice 
message may be encrypted, using an external process such as SSL, or using 
the quantity RANDOM for DES encryption. In this case the quote and 
Q=SHA(quote) may be suppressed. Alternatively, the customer software 
may be configured to construct a random "quote" and include 
Q=SHA("quote") in the payment advice request. In this case, successful 
payment to the merchant requires delivery of a value of "quote" which 
hashes to Q. In order to secure the delivery of the payment advice 
information from the customer to the merchant, devices such as card 
readers may be installed to read the tokens. 
In another embodiment, the customer electronically submits information to 
be processed (i.e., to be printed, faxed, copied, etc.) to a merchant. 
This may be done locally at the site of the service-providing machine. 
Then the quote is computed by the merchant (i.e., a service-providing 
machine), and includes the payment amount as determined by the page-count, 
etc. 
Bill Paying 
In another embodiment, customers and merchants can have pre-established 
relationships. For example, a merchant may be a local utility company or a 
telephone company. The customer may then set up a pre-authorized payment 
from his bank to the merchant, the payment being triggered by the 
merchant's receipt of a payment advice from the customer. In this case the 
payment advice takes on a more general function of notifying a merchant 
that it can initiate the pre-authorized payment. 
In some embodiments, the customer establishes a pre-authorized payment with 
an upper limit, for example, $200. Then the quote from the merchant 
specifies the actual amount that the customer must pay. When the customer 
obtains a payment advice from the agent and forwards it to the merchant, 
this payment advice authorizes the merchant to initiate the transfer of 
the actual amount from the customer's bank to the merchant's bank. 
Notably in this case the actual payment from the customer to the merchant 
can take place outside of the system. Either the customer or the merchant 
or both can pay a fee to the agent for issuing the payment advice. 
While the invention has been described with reference to particular 
cryptographic mechanisms (algorithms, processes and functions) and key 
management architectures, one skilled in the art would realize that other 
cryptographic mechanisms and/or key management architectures could be used 
while still achieving the invention. The choice of cryptographic 
mechanisms depends on a number of factors including but not limited to an 
assessment of the risk versus the amounts of money involved. 
While embodiments of the present invention have been described with 
particular setup and initialization procedures, other setup and/or 
initialization procedures can be used. 
Further, while many of the operations have been shown as being performed in 
a particular order, one skilled in the art would realize that other 
orders, including some parallelization of operations, are possible and are 
considered to be within the scope of the invention. 
While the present invention has been described with reference to payment 
requests and payment advices in an electronic commerce system, these 
requests and advices are considered to be general constructs covering 
other, non-payment systems and transactions. 
Thus, an electronic commerce system is provided. One skilled in the art 
will appreciate that the present invention can be practiced by other than 
the described embodiments, which are presented for purposes of 
illustration and not limitation, and the present invention is limited only 
by the claims that follow.