CHAPTER I
INTRODUCTION
1.1.
Background
Human life can’t be
separated from the need to conform to what is desired. In the process to meet
their needs, of course people will make a deal in other mean is transaction. Transaction are conducted
as a means of exchange of services from one
person to another.
Process transaction is about Buying And Selling.
Formerly
Exchange Process Services is by way of mutual exchange
to exchange items that are not necessary for the desired needs. as time went on, people began to think about the appropriate use of a medium of exchange. Imagine if a bunch
of fresh fish on
the exchange with a comb of bananas,
is that fair? It’s not fair. found
a solution, which
is a legitimate means
of exchange called money.
Money
is a good solution
for exchange parameters
in a transaction. But, What If Someone
wants to Perform a
transaction with another person,
but Hampered by a
great distance?
With
the rise of
technology, it was
found that
the transaction system quickly without
the need for face-to-face. With a system of e-commerce, someone will be facilitied by an online payment service.
There are many
different online payment systems that exist today. of them, PayPal is probably
the most popular system. PayPal is an account-based system that allows anyone
with an email address to securely send and receive online payments using a
credit card or bank account. Today there are many websites that accept PayPal
as a method of online payment. PayPal uses Secure Sockets Layer protocol
technology as a way to encrypt data and increase security
1.2. Writting Objective
This Paper expected from readers are able to understanding about Paypal, function of
paypal, Problem On PayPal, feature of Paypal and how paypal work.
1.3. Problem Domain
The problem will be explain on this
papers :
1.3.1 Identify E-Commerce
1.3.2 Indentify E-Payment
1.3.3 Identify about
paypal
1.3.4 How To Create
Account in PayPal
1.3.5 Types Account Of
PayPal
1.3.6 How PayPal Work
1.3.7 Identify function
of PayPal
1.3.8 Identify feature of
PayPal
1.3.9 Why Should
Transaction with PayPal
1.3.10 Identify Problem
with paypal
1.3.11 How Implementation
PayPal With Website
1.3.12 Identify System
Security Who used by Paypal
1.4.
Writing Methodology
This paper return by analysing many article on
internet and have help from faculty.
1.5. Writing Framework
Chapter I Introduction
This section describes the background and purpose, writing objective, problem domain, writing
methodology and writing framework.
Chapter II Basic
of Theory
Describes the
theoretical review about Definition of E-Commerce, Definition of E-Payment, and The Relationship
between E-Commerce with Paypal.
Chapter III Analysis
In chapter 3
we will discuss more in depth about Paypal, How Paypal Work, Problem With
Paypal .
Chapter IV Summary
This chapter contains the
conclusions and useful suggestions from the authors after the author conducted
a study.
CHAPTER II
BASIC TEORY
2.1. E-Commerce
E-Commerce is a type of industry where buying and selling of products or
services is conducted over electronic system such as the internet and other
computer networks.
On the Transaction, E-Commerce
have a Many More Implementation. An
e-commerce payment system
facilitates the acceptance of electronic payment
for online transactions, is not different with E-Commerce.
2.2. E-Payment
E-Payment is a subset of an
e-commerce transaction to include electronic payment for buying and selling
goods or services offered through the Internet. Generally think of electronic
payments as referring to online transactions on the internet, there are
actually many forms of electronic payments.
As technology developing, the
range of devices and processes to transact electronically continues to increase
while the percentage of cash and check transactions continues to decrease.
Based on Survey American.Edu, In the US, for example, checks have declined from
85% of non-cash payments in 1979 to 59% in 2002, and electronic payments have
grown to 41%. The Internet has the potential to become the most active trade
intermediary within a decade.
Also, Internet shopping may revolutionize
retailing by allowing consumers to sit in their homes and buy an enormous
variety of products and services from all over the worlds. Many businesses and consumers
are still wary of conducting extensive business electronically. However, almost
everyone will use the form of E-Commerce in near future.
2.2.1
E-Payment System
Based on Wikipedia, The payment
system is an operational network-governed by laws, rules and standards -
that links bank accounts and provides the functionality for monetary exchange
using bank deposits.The payment system is the infrastructure (consisting of
institutions, instruments, rules, procedures, standards,and technical means)
established to effect the transfer of monetary value between parties
discharging mutual obligations. Its technical efficiency determines the
efficiency with which transaction money is used in the economy, and risk associated
with its use.[1]
E-Payment System Can make sure to user with E-Payment System Security.
This is Scheme Protection Who Work on Online payment System.
2.2.1.1
E-Payment System Security
E-payment
System Have a many type to secure Online Payment On the Internet. This is
Security Sockets Layer or may be can be called “SSL”, Transaction Layer Security protocol or maybe can be
called “TLS”, Secure
Electronic Transaction or may be can be
Called “SET”.
2.2.1.1.1 Secure Sockets
Layer (SSL)
Secure Sockets
Layer, more commonly known as SSL, is a protocol that is used to maintain
client and server authentication. A site is easily identified as using SSL if
it has the small yellow padlock at the bottom of the browser.
In SSL, communication between the server
and the client is encrypted using their certificates. This encryption creates
virtual information that is not hackable by others. The steps of how SSL works is shown in the following
diagram:
The purpose of
SSL is to provide a means to allow secure communication between two parties.
However, one party must have a certificate trusted by the other in order to
help prevent man in the middle attacks. SSL also supports authentication,
encryption and key exchange.
SSL uses a handshake protocol. Suppose a client
wants to make a purchase from a website server, but this server does not know
anything about the client.
The first step is for the client to send a message
to the server. After the server receives the message, it acknowledges it by
sending the client a message in return. The server also sends the client its
certificate and asks for the client’s certificate. The client sends its
certificate, a client key exchange message, and a certificate verification
message. Both the client and server send change cipher spec messages and then
send finished messages to end the handshake
2.2.1.1.2 Transaction Layer Security (TSL)
The
Transaction Layer Security protocol, commonly known as TLS, is based on SSL and
will soon become its successor. TLS has some changes in its MAC, has clearer
and more precise specifications, cleaner handling because of not having a
client certificate, and more flexibility.
2.2.1.1.3 Secure Electronic Transaction (SET)
Secure
Electronic Transaction, SET, provides a way for the client’s credit card number
to be sent to authorizing banks. However, there was not enough market
acceptance of SET to make it commonplace.
2.2.2
Type Of E-Payment
E-Payment have more types, it’s so make online payment so easily.
Customer can choose one way to transaction on online payment. Customer can
transaction with Card, Internet, Mobile Payment, Financial Service Kiosks, Television Set-Top Boxes and Satellite Receiver, Biometric Payments, Electronic Payments Networks, Person-to-Person
(P2P) Payments.
2.2.2.1 CardsCredit cards, debit cards and prepaid cards currently represent the most common form of electronic payments. For all 3 types of cards the consumer or the business most often uses a plastic card, commonly with a magnetic stripe. The cardholder gives his or her card or card number to a merchant who swipes the card through a terminal or enters the data to a PC. The terminal transmits data to his or her bank, the acquirer. The acquirer transmits the data through a card association to the card issuer who makes a decision on the transaction and relays it back to the merchant, who gives goods or services to the cardholder. Funds flow later for settlement with credit cards and are debited immediately for debit or pre-paid cards.
Along with magnetic stripe cards, smart cards are and will
increasingly be used for payments. Smart cards are at present overwhelmingly
plastic credit cards with an embedded computer chip. Until recently, many smart
cards operated using proprietary rather than common standards. A standard set
of specifications, EMV, has been developed and is being used increasingly so
that the chips on smart cards are interoperable. Korea and Japan are among the
most advanced countries in Asia for smart card payments, with Malaysia catching
up fast due to government mandates for banks to issue smart cards. Most credit
and debit cards are expected to be issued or reissued as smart cards by 2008 or
earlier.
Over time, the chip for payment can be expected to move onto other
devices. A “smart card” might then become the computer chip in a phone, PDA or
other device that can perform the same function as chip in a plastic card,
eliminating the need for the actual plastic card. Smart cards could thus evolve
into “smart phones”, “smart PDAs” or other “smart” devices.
2.2.2.2
Internet
Online payments involve the customer transferring money or making a
purchase online via the internet. Consumers and businesses can transfer money
to third parties from the bank or other account, and hey can also use credit,
debit and prepaid cards to make purchases online.
Current estimates are that over 80% of payments for online
purchases are made using a credit card or debit card. At present, most online
transactions involve payment with a credit card. While other forms of payment
such as direct debits to accounts or pre-paid accounts and cards are
increasing, they currently represent a less developed transaction methodology.
2.2.2.3 Mobile Payments
Mobile phones are currently used for a limited number of electronic
transactions. However, the percentage seems likely to increase as mobile phone
manufacturers enable the chip and software in the phone for easier electronic
commerce.
Consumers can use their mobile phone to pay for transactions in
several ways. Consumers may send an SMS message, transmit a PIN number, use WAP
to make online payments, or perform other segments of their transaction with
the phone. As phones develop further, consumers are likely to be able to use
infrared, Bluetooth and other means more frequently to transmit full account
data in order to make payments securely and easily from their phone.
Additionally, merchants can obtain an authorization for a
credit or debit card transaction by attaching a device to their mobile phone. A
consortium in the US also recently announced PowerSwipe, for example, which
physically connects to a Nextel phone, weighs 3.1 ounces, and incorporates a
magnetic stripe reader, infrared printing port, and pass-through connector for
charging the handset battery.
2.2.2.4 Financial Service
Kiosks
Companies and service providers in several countries, including
Singapore and the US, have set up kiosks to enable financial and non-financial
transactions. These kiosks are fixed stations with phone connections where the
customer usually uses a keyboard and television-like screen to transaction or
to access information.
At AXS stations in Singapore, for example, consumers can make
electronic bill payments, send email or SMS message and make phone calls.
Kiosks in the United States enable the customer to send money via wire transfers,
cash checks, make purchases using cash, and make phone calls.
Located at convenient public locations such as bus or subway
stations, convenience stores or shopping malls, these kiosks enable electronic
payments by individuals who may not have regular access to the internet or
mobile phones.
2.2.2.5 Television Set-Top
Boxes and Satellite Receiver
Specialized boxes attached to a television can also be used for
payments in some locations. The set-top box attaches to the television and a
keyboard or other device, and customers can make purchases by viewing items on
the television. Payment is made electronically using a credit card or other
account. While usage is presently low, it could grow substantially in countries
with a strong cable or satellite television network.
2.2.2.6 Biometric Payments
Electronic payments using biometrics are still largely in their
infancy. Trials are underway in the United States, Australia and a limited
number of other countries.Most biometric payments involve using fingerprints as
the identification and access tool, though companies like Visa International
are piloting voice recognition technology and retina scans are also under
consideration. Essentially, a biometric identifier such as a fingerprint or
voice could replace the plastic card and more securely identifies the person
undertaking the transaction. The electronic payment is still charged to a
credit card or other account, with the biometric identifier replacing the card,
check or other transaction mechanism.
2.2.2.7 Electronic Payments Networks
Various countries have electronic payments networks that consumer
can use to make payments electronically. ACH (Automated Clearing House) in the
US, domestic EFTPOS networks in Australia and Singapore, and other networks
enable electronic payments between businesses and between individuals. The
consumer can go online, to a financial service kiosk or use other front-end
devices to access their account and make payments to businesses or other
individuals.
2.2.2.8 Person-to-Person
(P2P) Payments
P2P payments enable one individual to pay another using an account,
a prepaid card or another mechanism that stores value. PayPal in the US, which
was recently purchased by Ebay, is one of the most frequently used P2P
mechanisms. The Tower Group estimates that the volume of P2P payments will grow
from 105 million transactions in 2002 to 1.4 billion transactions by 2005. P2P
payments can be made through a variety of means, including services like
PayPal, transfers using card readers, or other. In the future other devices,
such as mobile phones or PDAs, could also be used to enable P2P electronic
payments.
CHAPTER III
PROBLEM ANALYSIS
3.1 Definition PayPal
PayPal is a Web-based application
for the secure transfer of funds between member accounts. It doesn't cost the
user anything to join PayPal or to send money through the service, but there is
a fee structure in place for those members who wish to receive money.
PayPal relies on the existing
infrastructure used by financial institutions and credit card companies and
uses advanced fraud prevention technologies to enhance the security of
transactions.
Max Levchin and Peter Theil
founded PayPal in 1998. Levchin and Theil hoped to make online shopping more
appealing to the consumer by creating a secure payment system that would be as
easy to use as taking money out of your wallet. To send money through PayPal,
you just enter the recipient's e-mail address and the amount of money you want
to send them.
By mid-2003, PayPal's Mountain
View, California-based offices were administering over 30 million accounts in
38 countries around the world. EBay, the popular Web-based auction enterprise,
acquired PayPal in October 2002.
3.2 Create Account In Paypal
To use all the
features on paypal first thing that should be required is a paypal account, for
those who do not have a paypal account is required to make a paypal account to
be able to take advantage of all the features in paypal. Steps should be taken
to make a paypal account is :
ü Open
website of paypal and click button sign up and wait until user should choose
type of account user need.
ü And
select one of three types of account user need and want.
ü
After this step user will
go to a page that asks for user basic personal information.
ü
If user want to make
business account user will choose one of list for business options.
ü In
this step business sign up will appear where in this step user must enter the
information about account business to be created.
ü If
user want to add funds to user PayPal account from user checking account, or
vice versa, user need to enter and verify user bank account with PayPal.
Figure 3.2.1 Website Paypal
Figure 3.2.2 Personal or Premier Account Sign Up Page
Figure 3.2.3 Business
Sign Up Page
Figure 3.2.4 Business Account Sign Up
Figure
3.2.5 Get
verified to move funds between user bank account and
user PayPal account.
3.3 Types Account Of PayPal
Figure 3.2.6 Types
of account paypal
Paypal have 3 account types :
3.3.1 Personal Accounts
Personal
accounts give you access to the core features, but that's all. PayPal handles
customer support for Personal accounts primarily by e-mail or through a virtual
customer support agent at the PayPal Web site. There's a phone number
available, but it's not toll-free and may have extensive wait times. And with
type personal accounts paypal can’t recieve payment with credit card or debit
card.
3.3.2
Premier Accounts
Premier account
are almost same with personal accounts but difference is that a premier
accounts can be registered with a business, group or individual. Also, you can
set up multiple users to access a business account and thist type can recieve
payment with credit card or debit card.
3.3.3 Business Accounts
Business
accounts are almost same premier
accounst but the main difference is that a business accounts must be registered
with a business or group name. PayPal does not charge to buyer to sends the money to the seller.
PayPal will charge to the seller (beneficiary) of 1.9% to 2.9% of the amount of
money received.
In addition to
PayPal's core functions, Business and Premier accounts provide these options:
a)
Accepting debit and credit card
payments
b)
Allowing senders to set up recurring
payments (subscriptions)
c)
Unlimited use of a PayPal
ATM/debit card
Business and Premier Accounts also get a toll-free customer
service number and extended customer service hours.
3.4 How Paypal work
As an online financial transaction broker, paypal let’s
people send money to each other's email addresses. At no time will either party
see the other's credit card or bank information. Similiar to an escrow service,
paypal acts as the middleman holder of money. Through its policies, practices
and business integrity, paypal has earned the trust of both parties.
With multiple guarantees in place, buyers and sellers
entrust paypal with their credit card and bank information. Paypal keeps their
private customer information secret. Then while "blinded" from the
other party's confidential information, strangers safely send money to each
other through paypal and email.
Escrow is a service that provides a means of security in
the handling of important property, funds, and documents. An escrow holder
works with the Buyers, Sellers, Lenders and Borrowers ("the
principals") involved in a transaction to assure funds and documents
change hands at the appropriate point in time, after preset conditions have
been met.
Figure 3.1 Schema of Paypal
Source : www.indonesiapal.com
3.5 Function of Paypal
Paypal is an online payment network of the largest and
trusted in the world, which can be used to receive and make payments online
without exposing credit card no to many people.
This method is more secure than a credit card
transaction. And by Paypal customers do not need to bother to open an account
at Bank America or elsewhere to receive / send payments all over the world.
3.6 Feature of
Paypal
Paypal has many features that are beneficial to the customer so that the
customer will easier to make activities buying and selling to use paypal.
Feature of paypal such as :
ü Send
Money
ü Request
Money
ü Auction
Tools
ü Website
Payments
ü Money
Market
ü Virtual
Debit Card
ü Account
Insurance
ü E-mail
Customer service
ü Mass
Payments
ü Unlimited
Credit Card Payments
ü Payment
Receiving Preferences
ü Subscriptions
ü ATM/Debit
Card
3.7 Paypal Payment Method
Customers can make payment in paypal by selecting the
type of payment that is provided by paypal. Payment in paypal can through :
ü
PayPal
Balance
ü
PayPal
Credit (Bill Me Later, PayPal Extras Card, or PayPal Smart Connect)
ü
Debit card
ü
Credit card
ü
eCheck (a
delayed transfer from your bank account - may result in significantly slower
shipping by seller)
3.8 Why Should Paypal
PayPal is one of the many types of online payment that
is most often used in making payments via the Internet. so many reason to make people should have account paypal and using paypal as akind online payment, such as :
ü PayPal accounts can be obtained for FREE customers don’t charge
a penny for the registration open a PayPal account. If there is a cost when the
process of verification (premier and business account types), the cost will be
refunded by PayPal in the next month. Also no minimum balance required as is
the case when customers open an account (account) in the bank.
ü PayPal secure credit card transactions on the Internet customer
can transact safely use a credit card or
at least reduce the risk of misuse of customers credit card. Customers do not
need to share customers credit card information to all sellers and buyers.
Customers just share it with PayPal.
ü Paypal transactions in a safe and comfortable PayPal uses
technology that is constantly updated to ensure the safety and convenience of
transacting online.
ü Paypal accepts all major credit cards world, namely Visa, Master
and American Express customers can transact via Visa, Master, or American
Express. Customers can also transact using available funds in customers PayPal
account to another PayPal fellow owners.
ü The cost of shipping is cheap customers can use PayPal for
remittance transactions. The fee charged is very small, even free to the
shipper (all account types) and receiver (for the type of personal account).
ü Cash withdrawal at any time customers can do a cash withdrawal
or withdraw funds from PayPal anytime, without having to wait for a certain
time period.
ü PayPal network wide PayPal operates in more than 190 countries
and 17 currencies. This may indicate the large potential Internet business now
and in the future.
ü PayPal can be cashed at a local bank in Indonesia This is good
news for the netters Indonesia, starting in October 2007 PayPal opened an
opportunity for the owners of Indonesian Paypal account to be able to disburse
their funds on Paypal into dollars into their bank accounts in Indonesia.
To take advantage of all the facilities Paypal, then
customers already have Paypal account verified first.
3.9 Problem
With Paypal
Though paypal does have millions of seemingly satisfied
customers, not all users have had such a pleasant experience. In fact, so many
people have felt slighted by paypal that entire Web sites exist to discuss
problems about paypal and mock its business practices. The most prominent is
paypal Sucks. The biggest criticism of paypal is that it acts like a bank, but
it isn't regulated like one.
This means that paypal offers none of the protection
that real banks offer, and it isn't required to maintain any of the security,
customer service or dispute resolution services that banks provide. At the same
time, paypal holds large amounts of their customers money, makes millions of
financial transactions and even offers credit and debit cards. So why isn't it
considered a bank? In 2002, the Federal Deposit Insurance Corporation (FDIC)
declared that because paypal didn't meet the federal definition of an entity
accepting deposits as a bank, hold any physical money or have a bank charter,
it was not a bank. In other words, paypal isn't a bank because it doesn't call
itself a bank.
As a result, most states license paypal as a "money
service." One of the most common problems encountered by paypal users is
the sudden and inexplicable freezing of their accounts. If your paypal account
is frozen, you can't add or withdraw any funds from your account, and you're
required to go through a long, complicated process to verify your identity.
Some users claim that paypal has simply seized their funds and never returned
them. Other complaints against paypal include rude customer service
representatives, a long and confusing User Agreement and loose hiring practices
that may have led to account fraud.
3.10
How Implementation Paypal On Website
User can
implement paypal on the website as one of the means to pay because with
implemented paypal will enable customers to make payments for goods or services
required more easily. And this is a steps in entering paypal on the website :
ü Visit the PayPal website
(link in the Resources section below) and log in if user currently hold a
premier or business PayPal account. PayPal website integration software is
available to business and premier account holders. There is a monthly fee for a
business account, but not for a premier account. Fees are deducted per
transaction.
ü Open a PayPal premier or business account. Click the
"Business" tab on the PayPal home page. That opens the business page.
Under the row of tabs on this page, the top box on the upper left is labeled:
open a PayPal account. Click the "Create account" button inside that
box. This will direct user to a page for choosing a personal, premier or
business PayPal account. A premier or business account will allow user to set
up PayPal on a website.
ü Create a premier account by clicking the "Get started"
button inside the premier box. This opens a page requesting personal information.
Fill in the boxes with user email address, a password, user physical address
and phone number. Then click the button at the bottom marked "Agree and
create account." An account verification message will be sent to the email
address user provide. The message will contain a link for user to click to confirm
user email address. User premier account will be open once user email address
is confirmed.
ü Log in to user PayPal premier account on the PayPal home page
with user email address and newly created password. Click the
"Profile" choice on the second row of tabs. That opens user profile
summary page. Under selling preferences, click "Create new button."
Choose "Products" or "Services" from the drop-down menu,
then click the dot beside "No, create a 'Buy now' button," and fill
in the product or service and price in the boxes provided. Then scroll to the
bottom of the page and click "Create button." This opens a page
showing the HTML code for the product or service and price user listed.
ü Click the "Select code" button under the HTML code.
Copy the text of this HTML code onto the clipboard by right clicking and
selecting "Copy." Go into the web editor tool for user website and
bring up the page user want the 'buy now' button to appear on. Set the page on
an HTML view to prepare it for receiving the code. Paste the text where user
want the button positioned by right clicking over that spot and choosing
"Paste." This will post user new 'buy now' button and add PayPal
payment options to user website.
3.11 Using Account Paypal
To Transactions
One of the functions of the paypal account is
to make transactions using a paypal account where users can perform sending and
receiving funds.
3.11.1 Sending Funds
More than 70
percent of all eBay sellers offer PayPal as a payment option, and a large chunk
of PayPal's business still comes from online auctions. However, one of the keys
to PayPal's success has been its ability to expand beyond the eBay market.
users can use it send money to a friend, donate to a charity and buy items from online merchants. You can use PayPal to
purchase goods from non-eBay merchants who have set up a PayPal accounts.
Merchants
who want to use PayPal to accept payments have a wide range of options
available. For basic payments, such as online auctions or simple Web site
sales, the merchant can simply provide buyers with their e-mail address, and
buyers can make the appropriate payments to the PayPal account. eBay sellers
can place PayPal buttons on their auctions, and the checkout invoice PayPal
sends to auction winners will include a link to pay via PayPal.
3.12 Technologies Used By
PayPal
The technologies used by PayPal consist of the main
security mechanisms that most sites would employ. PayPal uses HTTPS and SSL to
encrypt the data stream when a user establishes a session with the PayPal site.
It is unknown what security mechanisms are used to protect their databases
containing information about their customers.
3.12.1 Secure Sockets Layer
(SSL)
According to the PayPal website, PayPal encrypts information sent to
their website using SSL. It uses an encryption key that is 128-bits long, which
is currently the most secure level being used today. Before proceeding, the
server checks whether or not the user’s browser uses SSL 3.0 or higher.
PayPal also uses an electronic firewall to protect its data from the
Internet. Their servers are behind the firewall and not directly connected to
the Internet in order to protect private information from unauthorized computer.
CHAPTER IV
SUMMARY
4.1. Conclusion
The conclusion of this ISAS article are :
4.1.1. Online
payment through PayPal is relatively safe because it uses SSL technology
4.1.2. Transaction
With Paypal can asure security and privacy on the user, Cause PayPal using
Secure Sockets Layer (SSL) .
4.1.3. If
you Want Create a Account, You will have 3 ways, Personal, Premier, Business.
Depent What You Needed.
4.2. Suggestion
The suggestion of this ISAS article are :
4.2.1. User
Must be Carefully on the transaction, Cause
many more fake accont.
4.2.2. If
you want transaction on Paypal, You must know step by step or feature on
Paypal.
