Electronic funds transfer (EFT) systems constitute a major form of electronic commerce system in banking and retailing industries. EFT systems use a variety of information technologies to capture and process money and credit transfers between banks and businesses and their customers. For example, banking networks support letter terminals at bank offices and automated teller machines (ATM). Banks may also support pay-by-phone services allowing bank customers to use their telephones as terminals to electronically pay bills. Major forms of EFT systems are outlined below.

Banking and financial payments:

• Large-scale or wholesale payments (e.g., bank-to-bank transfer)
• Small-scale or retail payments (e.g., automated teller machines and cash dispensers)
• Home banking (e.g., bill payment)

Retailing payments:

• Credit cards (e.g., VISA, MasterCard etc.)
• Private credit/debit cards (e.g., JC Penny Card)
• Charge cards (e.g., American Express)

Online electronic commerce payments:

• Token-based payment systems
• Electronic cash (e.g., CyberCoin)
• Electronic Checks (e.g., NetCheque)
• Smart cards or debit cards (e.g., Mondex Electronic Currency Card)
• Credit card-based systems
• Encryped credit cards (e.g., SSL, CyberCash, or SET encryption)
• Third-party authorization numbers (e.g., First Virtual)

Secure Electronic Payments on the Internet:

One of the most noticeable and controversial topics in the Internet commerce today is the security of Internet transactions. While the technological difficulties may be soluble, a less obvious problem is how to define standards to let all consumers and merchants do business with each other while satisfying security requirements of the financial institutions involved. 

When a user makes an online purchase on the Internet, his credit card information is vulnerable to interception by network sniffers-software that easily recognizes credit card number formats. Several basic security measures are used to solve security problems:

• Encrypting (code and scrambling) the data passing between the customer and merchant.
• Encrypting the data passing between the customer and the company authorizing the credit card transaction
• Taking sensitive information offline.

Many companies use the Secure Socket Layer (SSL) security method developed by Netscape Communicator that automatically encrypts data passing between user Web browser and a merchant’s server. However, sensitive information is still vulnerable to misuse once it is decrypted (decoded and unscrambled) and stored on a merchant’s server. So a digital wallet approach, such as the Cyber Cash payment system, was developed. In this method one can add security software add-on modules to the Web browser. This enables user’s browser to encrypt credit card data in such a way that only the bank that authorizes credit card transactions for the merchant gets to see it.

Another security mechanism is Secure HyperText Transfer Protocol (SHTTP). To ensure a secure conversation between a Web client and a server, SHTTP works by negotiating the type to encryption scheme used between client and server. SHTTP and SSL can both be used for improved security.

To Secure Electronic Transaction, or SET, is another ordinary for electronic payment safety. In this technique, e-commerce software encrypts a digital envelope of digital certificates specifying the payment details for each operation. SET has been agreed to by VISA, Master Card, IBM, Microsoft, Netscape, and most other commerce players. Therefore, SET is expected to become the dominant standard for secure electronic payments on the Internet.

Other electronic payment systems for example, micro-payment systems like CyberCoin and DigilatCash. These technologies create currency or digital cash, sometimes called e-cash, for making payments that are very small for credit card transactions. Authentication and the encryption techniques are used to create strings of data that can be handled like currency for making cash payments. For example, Web sites like ESPNET Sports Zone, and Rocket Science Games let users chat with superstars, Discovery Online, play various kinds of video games or download the desired video segments by using digital cash micro-payment methods.