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Payment Gateways
A payment gateway is an e-Commerce application service providerthat authorizes payments for ebusiness. It is equivalent to a physical Point of Sale (POS) terminal. Payment gateways encrypt sensitive information like credit card number to ensure that information passes securely between the customer and the merchant.
Electronic Business MS114

Payment Gateways
Part-1

UNIT-III

Working
Customer places the order on website by pressing submit button. Customers web browser encrypts the information before sending it to merchants server in SSL format. The merchant forwards the transaction details through their payment gateway processor. Payment gateway processor forwards the information for validation to payment gateway server. Payment gateway server transfers the information to the merchants acquiring bank.
Electronic Business MS114

The acquiring bank then forwards the transaction information to the issuing bank for authorization. The card issuing bank accepts the information and send the response with a response code. The payment gateway receives the response and forwards it to the relevant customer. The whole process ussually takes 3-4 seconds.

Electronic Business MS114

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UNIT-III

Common payment gateway

Customer Payment gateway process Merchants website Payment gateway server

Merchants acquiring bank

Cardholders issuing bank

Assurepay Bluepay Creditcall Cybersource Link point Network merchants Payment express

Electronic Business MS114

Electronic Business MS114

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Credit Card Transaction Processing: Step-byStep

Paypal Propay PSBill Payjunction Safe merchant payment gateways VaultLine Verepay technologies Verisign payfllow

There are two main types of credit card payment processing systems. They are
merchant account processing and third party credit card transaction processing.

Electronic Business MS114

Electronic Business MS114

UNIT-III

UNIT-III

Merchant account credit card transaction processing Merchant account credit card transaction processing is a type of credit card transaction processing where the money is directly processed by the merchant account providing bank. Your client enters the necessary information using a secure form on your web site This information is encrypted using SSL-encrypted technology The encrypted data is passed to the credit card transaction processing gateway
Electronic Business MS114 UNIT-III

The data is decrypted using an SSL certificate by the gateway The credit card transaction processing gateway verifies the correctness of the information provided The information is re-encrypted using SSL technology and passed on to the credit card transaction processing bank The bank transfers the money from the clients credit card to your merchant account
Electronic Business MS114

UNIT-III

Third party credit card transaction processing

Here the money is transferred through a third party credit card transaction processing company to the bank. This is used when it is difficult to acquire a merchant account due to the banks hard guidelines and credit card transaction processing policies. Your client enters the necessary information using a secure form on your web site This information is encrypted using SSL-encryption technology The encrypted data is passed to the third party credit card transaction processing company
Electronic Business MS114

The third party credit card transaction processing transfers the data to the banks gateway The credit card transaction processing gateway verifies the information and passed it to the bank The bank transfers the money from the clients credit card to the third merchant credit card transaction processing company

Electronic Business MS114

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The third party credit card transaction processing company transfers the money to your third party merchant account Payouts are then made by bank transfer, checks, PayPal, etc.

Both credit card transaction processing systems have different charging systems too. Third party credit card transaction processing does not have any monthly (or membership) fees, but a higher credit card transaction fee is usually taken. Its up to you which type of credit card transaction processing you chose, which type of processing is available to you, or suitable for your business.

Electronic Business MS114

Electronic Business MS114

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UNIT-III

Types of Electronic Payment Modes Trusted Third Party Type: National Fund Transfer Related type: like done using SET Digital Cash or Electronic Money Digital Cash is a synonym for e-money which can be segregated in four categories of classification. Although payment modes for digital cash have following two categories
Bilateral Trilateral
Electronic Business MS114 Electronic Business MS114

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UNIT-III

Bilateral Digital cash:

It is identified e-money with offline combination. As only two parties customers and merchant are involved in a single transaction.

Trilateral digital cash:

It is identified e-money with online combination. As only three parties customers, merchant and bank are involved in a single transaction.

Electronic Business MS114

Electronic Business MS114

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E-Checks
Electronic checks (or cheques) are also known as echecks. This means that instead of a paper check the customer fills out their banking information (bank account number, routing number) online. In a more simple language an e-check is an electronic version of a paper check. It can be used in any transactions where paper checks are used - yet it capitalizes on the speed and processing efficiencies of all-electronic payments.

So how do e-checks work

Electronic checks are designed to accommodate the many individuals and entities that might prefer to pay on credit or through some mechanism other than cash electronic checks are modeled on paper checks, except that they are initiated electronically, use digital signatures for signing and endorsing, and require the use of digital certificates to authenticate the payer, the payers bank and bank account. The payer writes the e-check through a computer, uses a digital signature and sends it either by direct transmission using telephone lines or by public networks such as the Internet. The payee receives it, verifies signatures, endorses it, writes a deposit slip, and signs it. The endorsed check is then sent over internet to the payee's bank for deposit.
Electronic Business MS114

Electronic Business MS114

UNIT-III

UNIT-III

Benefits of Electronic Checks

Bank personnel verify signatures, credit the deposit, and then clear and settle the endorsed e-check by sending it on to the payer's bank, where signatures are once again verified and the amount of the e-check is debited from the payer's account. The cryptographic certificates used with an e-check enable a check payee to determine the validity of the signatures. Initially, these certificates are actually transmitted with the e-check, but alternative models where the transmission, or possibly even issuance, of the certificate is not required are currently in the making. e-check technology also allows digital signatures to be applied to document blocks, rather than to the entire document. This allows parts of a document to be separated from the Electronic Business MS114 original, without compromising the integrity of the digital signature.
UNIT-III

Electronic checks work in the same way as traditional checks, thus simplifying customer education. Electronic checks are well suited for clearing micro payments; the conventional cryptography of electronic checks makes them easier to process than systems based on public-key cryptography. They are well suited for applications where verification can be easily done using the concept of digital signature.

Electronic Business MS114

UNIT-III

Since checks can be attached easily to trading partners remittance information, it can be easily integrated with EDI applications like account receivable. Electronic checks can serve corporate markets. Firms can use electronic checks to complete payments over the networks in a more cost-effective manner than present alternatives. Electronic checks create float and the availability of float is an important requirement for commerce. The third-party accounting server can earn revenue by charging the buyer or seller a transaction fee or a flat rate fee or it can act as a bank and provide deposit accounts and make money from the deposit account pool.
Electronic Business MS114

Electronic check technology links public networks to the financial payments and bank clearing networks, leveraging the access of public networks with the existing financial payments infrastructure.

Electronic Business MS114

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B2B EPS Business to business electronic payment systems generally works using the e-check technology.

Business partner1

Business partner2

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Payment System A payment system means ensuring:

Payment System, E-Money

Part-2

Payment security Transaction privacy System integrity Customer authentication Purchasers promise to pay

Electronic Business MS114

UNIT-III

Real world cash Money is known as:

Medium of exchange to simplify transactions Standard of value to decide on worth of goods A store of value to facilitate the concept of saving

Features of Cash
Convenience: Easy to use, easy to carry and easy to handle in small quantity Wide acceptance: because of stability and durability paper currency is widely acceptable Anonymity: no identification to pay in cash No cost of use: no hidden cost, overhead or processing fees is required to use cash No audit trail: lack of traceability provides you freedom to use it the way you want to.
Electronic Business MS114

Electronic Business MS114

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UNIT-III

Electronic Money E-money is also known as e-currency, emoney, electronic cash, electronic currency, digital money, digital cash, digital currency, cyber currency refers to money or scrip which is only exchanged electronically.

Types of E-Money Classification based on tracking of Money:

Identified Electronic Money Anonymous Electronic Money

Classification Based on involvement of Bank in transaction:

Online Electronic Money Offline Electronic Money

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Electronic Business MS114

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Identified Electronic Money

It is like a credit card. The progress of the e-money can be traced right from the issuing by a Bank till the card is returned to the Bank. The Bank knows who is the original customer and how and when the money is spent by the customer. This is done as the information about the electronic money contains a unique serial number which is generated by the Bank itself.

Example

Since the whole journey is identifiable it can create privacy issues

Electronic Business MS114

Electronic Business MS114

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UNIT-III

Anonymous Electronic Money It is also know as blinded money which is like a real hard cash. There is no trace of how money was spent. Products like Digicash can provide this type of money by tying up from the Bank. It is not identifiable as the customer creates the serial number in this case.
Electronic Business MS114 Electronic Business MS114

Steps

UNIT-III

UNIT-III

Example

Online Electronic Money

The bank must actively participate in the transaction between the customer and merchants. That is before the transaction is complete, the merchant would confirm from the Bank whether the electronic money offered by the customer is acceptable or not.
It is not already spent Serial number is valid

Electronic Business MS114

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Offline Electronic Money The Bank does not participate in the transactions between the customer and merchant. The merchant accepts the money but does not validate. The merchant might collect a group of such transactions from a Bank and process them together at a fixed time in a day.
Electronic Business MS114

Total combinations +I+L -I+L +I-L -I-L (Least use because of double spending problem.)

Electronic Business MS114

UNIT-III

UNIT-III

Checks on Money Regardless of the type of money following are test which should be considered in a money transfer. ACID ICES

ACID Properties
It address the properties of money transfer. Atomicity: The transaction must occur complete or not at all. Consistency: all parties involved in the transaction must agree to the exchange Isolation: Each transaction must be independent of any other transaction. And should be treated as a stand-alone task. Durability: It must always be possible to recover the last consistent state or reverse the facts of the exchange.

Electronic Business MS114

Electronic Business MS114

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ICES Properties
It address the properties of money transfer. Interoperability: Ability to move back and forth between the systems Conservation: How well money holds its value over a time and hoe easy money is to store and access. Economy: Processing a transaction should be inexpensive and affordable. Scalability: The ability of the system to handle multiple customers at a time.

Apart from ACID and ICES tests other properties required in an electronic payment system are:
Acceptability: System must be widely acceptable to merchants and customers. Ease of integration: Web site interface must be effective and well integrated. Customer base: enough customer and traffic should be there to justify your investments in electronic payment systems. Ease of use and ease of access:
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Electronic Business MS114

Electronic Business MS114

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Requirements for Internet Based payments

Internet Based Payment System Model

Electronic Currency Credit Cards Debit Cards Smart Cards

Electronic Transaction Systems

CyberCash NetBill SET (Secure Electronic Transaction)
Electronic Business MS114

Electronic currency: the internet equivalent of cash. For exp: EFT moves cash from one account such as the employers payroll acnt, to another acnt, such as employees checking acnt. Credit and debit cards are the electronic equivalent of checks: they require user to have an account on a server or at issuing bank equipped with proper internetwork. Smart cards are equipped with a memory chip.
Electronic Business MS114

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E-Currency

E-Currency, Smart Cards, B2B Electronic Payments

Part-3

It is a network equivalent of a cash Example: Using EFT we can move cash from one account to another account. The ECS Facility i.e. electronic clearing service is an example of electronic currency which is used to transfer money from employers payroll account to employees salary account.

Credit Card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.

ATM Cards
An ATM card (also known as a bank card, client card, key card or cash card) is a card issued by a bank, credit union or building society that can be used at an ATM for deposits, withdrawals, account information, and other types of transactions, often through interbank networks. Some ATM cards can also be used: at a branch, as identification for in-person transactions at merchants, for EFTPOS (Electronic Funds Transfer at Point of Sale) purchases ATM cards are typically about 86 54 mm, i.e. ISO/IEC 7810 ID-1 size. Unlike a debit card, in-store purchases or refunds with an ATM card can generally be made in person only, as they require authentication through a personal identification number or PIN. In other words, ATM cards cannot be used at merchants that only accept credit cards.

Debit Cards
A debit card (also known as a bank card or, check card) is a plastic card that provides an alternative payment method to cash when making purchases. Functionally, it can be called an electronic check, as the funds are withdrawn directly from either the bank account, or from the remaining balance on the card. In some cases, the cards are designed exclusively for use on the Internet, and so there is no physical card. Debit cards may also allow for instant withdrawal of cash, acting as the ATM card for withdrawing cash and as a check guarantee card. Merchants may also offer cashback facilities to customers, where a customer can withdraw cash along with their purchase.

Smart Cards
A smart card, chip card, or integrated circuit card (ICC), is any pocket-sized card with embedded integrated circuits. There are two broad categories of ICCs. Memory cards contain only non-volatile memory storage components, and perhaps dedicated security logic. Microprocessor cards contain volatile memory and microprocessor components.

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Smart Cards
Smart cards can provide identification, authentication, data storage and application processing. The benefits of smart cards are directly related to the volume of information and applications that are programmed for use on a card. A single smart card can be programmed with multiple banking credentials, medical entitlement, drivers license/public transport entitlement, loyalty programs and club memberships to name just a few.

Smart Cards
Individuals gain increased security and convenience when using smart cards designed for interoperability between services. For example, consumers only need to replace one card if their wallet is lost or stolen. Additionally, the data storage available on a card could contain medical information that is critical in an emergency should the card holder allow access to this.

Electronic Transaction Systems

CyberCash
Bell Melton and Dan Lynch founded CyberCash in 1994. It is a credit card based payment system. It serves as a gateway between the merchant on the Internet and the Banks secure financial network.

Electronic Transaction Systems

CyberCash NetBill SET (Secure Electronic Transaction)

2 Consumer PC 1

steps
Merchants Server 3

CyberCash Server 4 Merchants Bank 5 Card Holders Bank

Customer places an order on merchants website, then enters the payment shipping information to initiate purchase process. Consumer verifies the info and clicks the appropriate button to submit the packet of info back to merchant. Merchant ships the order and forwards payment info, which has been digitally signed and encrypted, to the cybercash server.

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steps
Cybercash server receives the packet, moves the transaction behind its firewall and off the internet, unwraps the packets within a hardware based crypto box, reformats the transaction, and forwards it to the merchants bank over secure, dedicated lines

Cyber Cash
It is important to note that CyberCash is not a credit card processing company. CyberCash sells safe passage over the Internet for credit card transaction data. They take the data that is sent to them from the merchant, and pass it to the merchant's acquiring bank for processing. Except for dealing with the merchant through CyberCash's server, the acquiring bank processes the credit card transaction as they would process transactions received through a point of sale (POS) terminal in a retail store. The CyberCash payment system is centered around the CyberCash Wallet software program, which buyers use when making a purchase. This program must be downloaded and installed on the buyer's machine before they can make a purchase. This program handles passing payment information, encrypted, between the buyer and the merchant.

Merchants bank forwards authorization request to issuing bank via the card association that settles credit card transactions for approval. The decision is sent back to cybercash server

Cybercash transmits approval or denial code back to merchant, who presentsit to consumer. Merchant proceeds with the fulfillment phase.

Advantages/disadvantages
Advantages:
CyberCash uses strong encryption for transporting payment information. The Merchant does not see the buyer's credit card number.

NetBill
It is a secure and economical payment method used for purchasing digital goods and services. The goods are delivered in encrypted form. The Money Tool (Customer software) verifies the receipt and the goods are displayed automatically for the customer. The NetBill protocol facilitate communication between Money Tool, The Merchants Server and the NetBill Server.

Disadvantages:
Potential buyers and merchants must both install extra software in order to use the system. This makes the system harder to use for people with little computer experience. Merchants need to have an account with an acquiring bank that accepts CyberCash Secure Internet Payments.

Steps Involved
A customer selects a price quote by clicking on the URL in his or her browser. The Merchant respond with a price quote. The customer accepts (or declines) the price via a Money Tool pop-up window. The merchant delivers the good in encrypted form. The Money Tool acknowledges the receipt of the good. The merchant contacts NetBills transaction server to record the transaction and transfer funds. The NetBill transaction server confirms that funds have been transferred and stores the decryption key. The merchant sends the decryption key to the Money Tool, which displays the goods in the consumers browser.

When customer creates NetBill account a public key pair is generated along with a unique ID, which is used for signatures and authentication. The NetBill system enables consumers and merchants to communicate directly with each other, using NetBill to confirm and ensure security for all transactions. NetBill has its own simplicity when it comes to perform the transaction -User, who wants to participate in a transaction simply selects the item he or she wants, and NetBill will confirm his or her selection, ensuring that the merchant delivers the goods to him/her, and then charge his/her pre-funded NetBill account

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SET Secure Electronic Transaction

End User Network Service Provider

NetBill Money Tool

It is a specification designed by VISA, MasterCard and Europay. It is used for handling fund transfer from credit card issuer to merchants bank account. It is a well known payment model based on signature.

Bank

SET Secure Electronic Transaction

It provides:
Confidentiality Authentication Integrity Interoperability Of payment card transmission
Cardholder registration Merchant registration Purchase request Purchase authorization Payment capture Payment notification Authorization reversal Credit reversal

SET
Services provided by SET are:

It uses a variety of encryption techniques, digital signatures and certificates.

Types of Electronic Payment Media

Trusted Third Party Type: this type maintains all sensitive information. Bank maintain bank accounts and credit card numbers for customers who may be buyer and sellers. Financial transactions are updated completely off line. National Fund Transfer Related type: this is the visa/mastercard SET based transaction.

Credit Card Transaction Processing: Step-by-Step

There are two main types of credit card payment processing systems. They are
merchant account processing and third party credit card transaction processing.

The customer submits a credit card to a merchant for payment. The merchant transmits the credit card number via ph line to the issuing bank for confirmation. The issuing bank in turn adjusts the customers & merchants account accordingly. All is done online, the info is encrypted for security.
Digital Cash or Electronic Money: this type allows the transfer of money itself, which carries value. In
this case, serial numbers representing actual money are encrypted all the way to their destination and can be converted into real money such as u.s. dollars.

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Merchant account credit card transaction processing

Third party credit card transaction processing

Here the money is transferred through a third party credit card transaction processing company to the bank. This is used when it is difficult to acquire a merchant account due to the banks hard guidelines and credit card transaction processing policies. Your client enters the necessary information using a secure form on your web site This information is encrypted using SSL-encryption technology The encrypted data is passed to the third party credit card transaction processing company

Merchant account credit card transaction processing is a type of credit card transaction processing where the money is directly processed by the merchant account providing bank. Your client enters the necessary information using a secure form on your web site This information is encrypted using SSL-encrypted technology The encrypted data is passed to the credit card transaction processing gateway The data is decrypted using an SSL certificate by the gateway The credit card transaction processing gateway verifies the correctness of the information provided The information is re-encrypted using SSL technology and passed on to the credit card transaction processing bank The bank transfers the money from the clients credit card to your merchant account

The third party credit card transaction processing transfers the data to the banks gateway The credit card transaction processing gateway verifies the information and passed it to the bank The bank transfers the money from the clients credit card to the third merchant credit card transaction processing company The third party credit card transaction processing company transfers the money to your third party merchant account Payouts are then made by bank transfer, checks, PayPal, etc.

Both credit card transaction processing systems have different charging systems too. Third party credit card transaction processing does not have any monthly (or membership) fees, but a higher credit card transaction fee is usually taken. Its up to you which type of credit card transaction processing you chose, which type of processing is available to you, or suitable for your business.

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Electronic Funds Transfer Electronic Funds Transfer

Part-4

Two Types of EFT

EFT is a generic term Describing two different methods of transferring funds electronically
Fed Wire

Wire Transfer
Wire Transfer Book Transfer Foreign Wire

EFT Wire Transfer ACH

Between two banks

Within same bank

Foreign bank

Movement of funds is real time effected immediately FRB open for fed wires up to 6:00 p.m. Book Transfers are memo posted up until midnight ZBA (Zero Balance Account) sweeps are book transfers Fed Wire Affects banks Reserve Accounts maintained at the FRB Sending banks account at the FRB gets debited Receiving banks account at the FRB gets credited Foreign exchange and Euro dollars through Clearing House for Inter-bank Payments System (CHIPS) 54 New York Banks

Both performed through Federal Reserve Bank System Common mistake to call an ACH payment a wire transfer
Each are handled by different departments at a bank
(Except for in-bank or on-us transactions)

Wire Transfer Utilization

When appropriate to use Examples

Initiating Wire Transfers

Banks provide corporate customers ability to initiate their own wires via online banking access Templates are used Repetitive Transfers Pre-established ABA# and acct.# Non-Repetitive - Open wire to anywhere State Treasurer initiates all wire transfers for agencies Via Wachovia Connection and BOA Direct As requested by agencies via Core Banking $ystem Results in debit to agencys disbursing / STIF acct.

Time sensitive - Funds need to be moved same day initiated Large dollar amounts

Debt Service Payments (preserve States credit rating) Funding ACH payments (e.g. payroll direct deposit) Funding investments (e.g., at custodian bank) Adjusting balances (between depository banks) Remitting ESC payments (to US Treasury) DOR accepts wire transfers from corporate taxpayers on an exception basis only

Agency Logs in

Disb. Acct. at DST

Online Wire System

DSTs Bank

Payees Bank

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ACH Network A batch-process, store and forward for future settlement

ACH

ACH Utilization
When appropriate to use Large number of payments in a single file (batch) At least one day is available between initiation and settlement Any size dollar amounts Examples Outbound Payroll direct deposit to bank account (ACH credits) Outbound Payroll direct deposit to debit card account (ACH credits) Outbound Vendor payments (ACH credits) Inbound Taxpayer payments (ACH credits or debits) ACH Transactions can have Addendum Records Remittance data attached Can be interfaced with A/R system DOR requires taxpayers to use TXP format

Two types of ACH (Automated Clearing House)

ACH ACH Credits

Direct Deposit. Debit Card Account Direct Deposits Always initiated by sender Senders account is debited and receivers account is credited Receivers Acct
Bank account Debit card account

ACH Debits

Electronic Drafts Initiated by sender or receiver If by sender Sender authorizes a third party to initiate transaction If by receiver Receiver initiates transaction

Also referred to as Direct Payments

ACH Players
Governing Org.

Primary Differences
Trade Group

2
Originating Depository Financial Institution (ODFI) ACH Operator (FRB)

3
Receiving Depositor y Financial Institution (RDFI)

Wire Transfers Item Cost - $6.75 Same day funds Transfer almost instantaneous Use for critical payment (e.g. debt service)
State Checks Average Cost - Range $.74

ACH Item Cost < 1 penny Next day funds One day delay in settlement Used for large batch files (e.g., payroll)

1
Originator (Company / Employer) Receiver (Company / Employee)
Authorization / Enrollment

Electronic Checks
Loosely used term Refers to two different methods Electronic Checks
Online Paper Check ACH Conversions

Regulator Governance
Regulation E, per Electronic Funds Transfer Act (EFTA)

Issued by Federal Reserve Bank Covers ACH and debit cards (but not wires or credit cards) Consumer protection oriented Some protection afforded the consumer does not apply to corporate or government customers

Online Paper Check Developed by Financial Services Technology Consortium (FSTC) Notfor-profit group of CA banks Initiated using a PIN and digital signature Receiver prints out paper check for deposit ACH Conversions (most common method referred to) Transactions converted to ACH debits (e.g., ARC, POP, WEB, TEL) Services can be provided by third party processors Account verification determined upfront. Guarantees available. Examples of services provided through third-party CyberSource (POP)
Telecheck: CheckFree: AmeriNet: Paymentech:

NACHA Operating Rules

National Automatic Clearing House Association Applies to ACH transactions only Applicable to both consumer and corporate (including government)
Uniform Commercial Code (UCC) Article 4A

Applies to Wire Transfers Only

Uniform Commercial Code (UCC) Articles 3 and 4 and Reg CC

Applies to consumer checks only, not business checks.

Applies to negotiable instruments (checks) Reg CC issued by Federal Reserve - Applies to checks not EFT Check 21 (Check image conversion) governed by Reg CC, not Reg E

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ACH Terminology
Typical ACH Standard Entry Class Codes PPD Prearranged Payments and Deposits (Consumer payments) CCD - Cash Concentration or Disbursements (Corporate payments) CCD+ - Corporate payments with 180 character addenda record TXP Addendum format for Tax Payments (Used by DOR) Check Conversion Standard Entry Class Codes POP Point-of-Purchase / Face-to-face (e.g., Wal-Mart) ARC Accounts Receivable Conversion Non-face-to-face (e.g., Lockbox) BOC Back Office Conversion Face-to-face, but later converted (Mar 07) Check Conversions not eligible for use with corporate or government checks and have an amount limit of $25,000 Other Standard Entry Class Codes (Debit entries) WEB Internet-initiated entries against a consumer account TEL Telephone-initiated entries against a consumer account RCK Represented check (representment of a non-sufficient funds check)

Daylight Overdraft
Federal Reserve charges bank interest per minute for overdrafts in their Fed account Banks do not allow wire transfers to be made from account if available balance is not sufficient
Over-the-counter deposits not posted until night ACH credits are posted in mornings (6:30 and 8:30) Could pose problems when need to wire funds out

Some banks will assign an allowable daylight overdraft limit

Based upon customers credit risk Based upon bank overdraft cap at the FRB States arrangements with banks are handled by DST

Check 21
Federal legislation Result of 9/11 when planes could not fly Became effective October 2004 Banks have option of presenting substitute checks instead of original check Also referred to as Image Replacement Documents (IRDs) Originals paper checks are to be destroyed Substitute document is legally same as original Check 21 is different than Check Conversion (POP/BOC/ARC)
POP, BOC & ARC - Check converted to ACH transaction Therefore POP, BOC & ARC subject to NACHA Rules not UCC POP, BOC & ARC only applicable to consumer checks Check 21 applicable to both consumer & commercial Check 21 has no amount limit Check Conversion limit is $25,000

EFT Milestones
1972 SCOPE (Special Committee on Paperless Entries) 1974 NACHA (National Automated Clearing House Association) 1977 Retirement System began using Direct Deposit for retirees 1979 Central Payroll began using Direct Deposit for employees 1980s University Payroll Centers began using Direct Deposit - employees 1984 GMTS (Governmental Moneys Transfer System) implemented by DST for paying local units of government (Replaced by STEPS) 1988 DOT Payroll began using Direct Deposit for employees 1992 STEPS (State Treasurers Electronic Payments System) implemented for local units (two-way street). (Ended 2003, except Retirement) 1994 DOR implemented EFT for corporate tax collections 1990s LEAs and community colleges implemented direct deposit for employees (costs being paid for by DST) 1999 SB 222 enacted, giving OSC responsibility for EFT 2002 Common Payment System implemented (DMV-IRP first) 2005 OSC initiated expansion of Electronic Commerce Program

States E-Commerce Program

States Cash Management Legislation (G.S. 147-86.11) requires State Controller to develop policies regarding cash management practices, including E-Commerce. Two Master Services Agreements (MSAs) procured
MSA for Electronic Funds Transfer Services Wachovia Bank MSA for Merchant Card Services SunTrust Merchant Services

E-Commerce Inbound Programs

Utilizes Both Merchant Cards and EFT

Agencies and local units of governments eligible participants Each participant must execute an Agency Participation Agreement (APA) Paying for Services In accordance with MSA fee schedule
Agency pays in most cases EFT for payroll and NCAS payments DST pays

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E-Commerce Outbound Programs

Utilizes EFT Only