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Advanced Electronic Payment Systems

28 billion transactions are made using dial-up POS systems in North America, as well as multi-billion transactions in EMEA.

In the United States, there are 10 million payment terminals, over 60% currently dial-up terminals.

To date, the consumer retail market has utilised analog dial-up payment processing systems.

Benefits of Analog Systems

Accounts for 60% or more of all payment terminals in the world.
A typical transaction data message is 300 bytes or less
A transaction is completed in 8-12 seconds
Legacy systems are reliable and trusted
Low start-up costs
Security is not a concern

The majority of dial-up payment systems operate at low speeds, [300 bps to 2.4 kbps].

Some full-featured dial-up terminals and back-office systems are capable of high data rates of up to 56 kbps.

POS terminals have a long shelf life, on average of 8 years, and many are on fixed term lease contracts, slowing the upgrade to more advanced terminals that support digital smartcard funcitons.

Thus, analog dial-up technology has continued to support systems such as:

Point-of-Sale (POS)
Automated Teller Machines (ATMs)
Multi-purpose Kiosks
Vending Machines
Back office transaction processing

Digital Payment Systems

With the introduction of IP based services, and in particular, with the emergence of IP Convergence Networks, it is necessary to upgrade these systems to digital componentry.

Initial trials in this area failed due to lack of session timing needed to interrogate systems, complete a secure handshake and transmit the payment message. With IP protocols being significantly more cumbersome than analogue handshakes, the time taken to complete the payment was unacceptable.

A typical digital payment system combined four parties:

The Issuer - who owns the financial contract with the client. e.g. Visa
The Acquirer who acts as an agent for the Issuer, thus has the client relationships with the card or account holder. e.g Bank of Amercia
The Payer - the client
The Merchant - e.g. Walmart

Types of Digital Payment Systems

Basic Mobile Payment Systems - uses the mobile phone to make simple money value queries, such as bank balance, and effect simple payments and transfers between accounts.

Advanced Mobile Payment Systems - generally have a dual purpose smartcard SIM or an additional slot to the SIM slot, to hold a smartcard. A smartcard provides significantly more security around authentication and verification; and thus supports a wider range of payment types - such as stored value, credit card replacement.

Mobile Payment Systems

Electronic Payments Index