It can also be seen that the existing payment systems fail to satisfy at least one of the requirements presented in section 2

It can also be seen that the existing payment systems fail to satisfy at least one of the requirements presented in section 2.1. As a result, a payment system that satisfies both requirements is required so that the mobile users an have practical and secure payment transactions which potentially increase the acceptability of mobile payment to users.

Chapter 3

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Formal Mobile Payment Model

We have demonstrated in chapter 2 that a practical and secure mobile payment system is one of essential goals of conducting electronic commerce transactions over wireless networks. To achieve this goal, on one hand, protocol designer needs to have a guideline for designing a mobile payment protocol which satisfies the requirements of a practical and secure mobile payment protocol stated in section 2.1. On the other hand, a payment system provider needs to consider whether the chosen payment system provides sufficient transaction security and is practical for its users.
In this chapter, we present a formal mobile payment model which describes characteristics and interactions among engaging parties including important properties that must be satisfied by the system. Section 3.1 models a general electronic payment system. In section 3.2, a formal model for a practical and secure mobile payment system is introduced. Section 3.3 presents a brief guideline to analyze a mobile payment system based on the proposed model. Section 3.4 summarizes the chapter.

Electronic Payment

Electronic Payment System

In chapter 2, several electronic payment systems have been outlined and dis- cussed. From such systems, we can formally describe an electronic payment system as the following:

Definition 3.1 (Electronic payment system) A payment system S is de- fined as unions of the following sets:

S = {G, CE, P T } ? Goals ? P R ? T Sec ? T rust (3.1)


• G, where G ƒ= ?, stands for the set of engaging parties in S.
• CE, where CE ƒ= ?, stands for communication environment which is composed of payment devices and networks.
• P T stands for a payment transaction which represents actions regarding fund transfer performed by engaging parties in G in the communication environment CE. Generally speaking, P T represents a payment protocol in S.
• Goals stands for the set of goals of engaging parties regarding the payment transaction P T .
• P R stands for the set of party’s requirements for the payment transaction P T .
• T Sec stands for the set of transaction security properties.
• T rust stands for trust relationships among the engaging parties in G.

It can be seen that S must have at least G, CE, and P T as the main elements. In other words, any payment system must be composed of the set of engaging parties G which perform the payment transaction P T to one another in the communication environment CE, e.g. fixed or wireless environment, whereas satisfying the other sets, such as P R, T Sec, or T rust, enhances security of the system. Figure 3.1 illustrates the electronic payment system defined by the proposed formal model diagrammatically.
From figure 3.1, we can see that a payment system is primarily composed of two components: Operational Semantics and Properties. On one hand, Operational Semantics are the essential elements of the system in that a system will not be considered as a payment system if it lacks of any of these elements. They are composed of engaging parties (G), communication environment (CE), and payment transaction (P T ). Properties, on the other hand, fulfill security and practicability of the system. They are mainly composed of Goals and Require- ments, Security, and Performance. A payment system should achieve goals of engaging parties (Goals) at design stage and satisfies requirements to complete the transaction in engaging parties’ points of views (P R) at implementation stage. Moreover, the payment system is considered to be secure if it satisfies Security which consists of transaction security properties (T Sec) and trust relationships among engaging parties (T rust) stated by the model. In addition, the payment system is considered to be practical if it satisfies transaction performance (T P ) stated by engaging parties in the system. The details and formalization of these elements will be presented later in this chapter.

Engaging Parties

Definition 3.2 (Engaging parties) A payment system S consists of a set of engaging parties G, where G = {C, M, I, A, P SP }.
• C stands for a client who wants to purchase goods or services from a

Figure 3.1: Overview of the proposed model

Merchant M . C acts as a payer in S. C holds authorized payment information issued from I.
• M stands for the merchant establishing an account with an acquirer (M’s financial institution) A. M has authorization from a payment system provider P SP to perform transactions in S. M acts as a payee in S.
• P SP stands for the payment system provider performing payment trans- actions on behalf of an issuer (C’s financial institution) I and the acquirer A on the Internet side and on behalf of C and M on the banking private network side. The function of P SP may be operated by a credit-card company, a mobile operator, or a bank.
• I and A stand for the issuer and acquirer performing payment clearing as a result of the request from P SP . The payment clearing is perfo


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