A Simple and Secure Credit Card-Based Payment System
Authors: Po Cheong Chi 
Published: May 2010

Credit card is the most popular payment method used in Internet shopping. The idea of credit card payment is to buy first and pay later. The cardholder can pay at the end of the statement cycle or they can pay interest on the outstanding balance. Therefore, there are many credit card-based electronic payment systems (EPSs) that have been developed to facilitate the purchase of goods and services over the Internet such as CyberCash (VeriSign), iKP (Bellare, Garary, Hauser, et al, 1995), SET (Visa and MasterCard, 1997), CCT (Li & Zhange, 2004), and so forth. Usually a credit card-based EPS involves five parties: cardholder, merchant, acquirer bank, issuer bank, and financial institution. Internet is an open system and the communication path between each other is insecure. All communications are potentially open for an eavesdropper to read and modify as they pass between the communicating endpoints. Therefore, the payment information transmitted between the cardholder and the merchant through Internet is dangerous without a secure path. SSL (Zeus Technology, 2000) is a good example to secure the communication channel. Besides the issue of insecure communication, there are a number of factors that each participant must consider. For example, merchant concerns about whether the credit card or the cardholder is genuine. There is no way to know the consumer is a genuine cardholder. As a result, the merchant is incurring the increase in losses due to cardholder disputes and frauds. On the other hand, cardholders are worried about the theft of the privacy or sensitive information such as the credit card number. They don’t want any unauthorized usage of their credit cards and any modification to the transaction amount by a third party. These security issues have deterred many potential consumers from purchasing online. Existing credit card-based EPSs solve the problems in many different ways. Some of them use cryptography mechanisms to protect private information. However, they are very complicated, expensive, and tedious (Xianhau, Yuen, Ling, & Lim, 2001). Some EPSs use the Certificate Authority (CA) model to fulfill the authentication, integrity, and nonrepudiation security schemes. However, each participant requires a digital certificate during the payment cycle. These certificates are issued by independent CAs but the implementation and maintenance cost of this model is very high. In addition, the validation steps of Certificate-based systems are very time-consuming processes. It requires access to an online certificate server during the payment process. Moreover, the certificate revocation list is a major disadvantage of the PKI-based certification model (The Internet Engineering Task Force). The cardholder’s certificate also includes some private information such as the cardholder’s name. The requirement of a cardholder’s certificate means software such as e-Wallet is required to be installed on the cardholder’s computer. It is the barrier for the cardholder to use Certificatebased payment systems. To solve this problem, Visa Company has developed a new payment system called Verified by Visa (VbV) (http:www/visa-asia.com/ ap/sea/merchants/productstech/vbv_implementvbv. shtml). However, sensitive information such as credit card number is still passed to the merchant. Therefore, the cardholder is not protected by the system.