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The future of payment systems - A case study on digiPROOF, a fingerprint based payment system

Masterarbeit 2006 127 Seiten

Informatik - Wirtschaftsinformatik


Table of Contents

Table of Figures

List of Abbreviations

1 Introduction
1.1 Background and rationale
1.2 Research question and objective
1.3 Structure of the dissertation
1.4 Definitions

2 Methodology
2.1 Qualitative approach
2.2 Research method (Case Study)
2.3 Case selection
2.4 The role of the researcher
2.5 Data gathering
2.5.1 Data sources
2.5.2 Interviews
2.5.3 Questionnaires
2.6 Data analysis
2.7 Objectiveness of answers
2.8 Researcher bias

3 Theoretical foundations of payment systems
3.1 History and development of payment systems
3.2 Classification of payments
3.3 Success Factors of payment systems
3.3.1 Overview
3.3.2 Cost
3.3.3 Convenience
3.3.4 Security
3.3.5 Privacy
3.4 Overview of payment systems
3.4.1 Cash
3.4.2 Electronic cash and smart cards
3.4.3 Credit Cards
3.4.4 Debit Cards (EC-Karte)
3.4.5 Mobile payment systems
3.4.6 Biometric payment systems
3.4.7 Other approaches

4 The case: digiPROOF fingerprint payment system
4.1 Introduction to digiPROOF
4.2 Introduction to the EDEKA group
4.2 Reasons for EDEKA to introduce digiPROOF
4.3 Evaluation of digiPROOF by EDEKA

5 Results of the survey
5.1 Survey design and response rate
5.2 General and demographic data
5.3 Assessment of digiPROOF by Non-Users
5.4 Assessment of digiPROOF by registered users

6 Evaluation of digiPROOF
6.1 Overview
6.2 Cost
6.3 Convenience
6.4 Security
6.5 Privacy

7 Conclusion and Outlook

Appendix 1 – Reasons for not registering with digiPROOF

Appendix 2 – Security Non-Users: T-test digiPROOF/Cash

Appendix 3 – Security Non-Users: T-test digiPROOF/EC-Karte

Appendix 4 – Security Non-Users: T-test digiPROOF/Credit Card

Appendix 5 – User-friendliness Non-Users: T-test digiPROOF/Cash

Appendix 6 – User-friendliness Non-Users: T-test digiPROOF/EC-Karte

Appendix 7 – User-friendliness Non-Users: T-test digiPROOF/Credit Card

Appendix 8 – Security Users: T-test digiPROOF/Cash

Appendix 9 – Security Users: T-test digiPROOF/EC-Karte

Appendix 10 – Security Users: T-test digiPROOF/Credit Card

Appendix 11 – User-friendliness Users: T-test digiPROOF/Cash

Appendix 12 – User-friendliness Users: T-test digiPROOF/EC-Karte

Appendix 13 – User-friendliness Users: T-test digiPROOF/Credit Card

Appendix 14 – Questionnaire digiPROOF Users (German)

Appendix 15 – Questionnaire digiPROOF Users (English)

Appendix 16 – Questionnaire Non-Users (German)

Appendix 17 – Questionnaire Non-Users (English) 105


Table of Figures

FIGURE 1 – Classification of payment systems

FIGURE 2 – Success factors of payment systems

FIGURE 3 – Organisation structure of EDEKA group

FIGURE 4 – Demographic distribution (in%)

FIGURE 5 – Technology affinity (in%)

FIGURE 6 – Shopping frequency of Non-Users

FIGURE 7 – Shopping Frequency Users

FIGURE 8 – Payment preferences of Non-Users

FIGURE 9 – Payment preferences of Users before introduction of digiPROOF

FIGURE 10 – Payment preferences of Users after the introduction of digiPROOF

FIGURE 11 – Reasons for not registering for digiPROOF

FIGURE 12 – Security/Estimation of Non-Users who consider registering in the future (in%)

FIGURE 13 – Security/Estimation of Non-Users who do not want to register in the future (in%)

FIGURE 14 – Security/Average grade of all surveyed Non-Users

FIGURE 15 – User-friendliness/Estimation of Non-Users who consider registering in the future

FIGURE 16 – User-friendliness/Estimation of Non-Users who do not want to register in the future

FIGURE 17 – User-friendliness/Average grade of all surveyed Non-Users

FIGURE 18 – Will fingerprint based payment systems be widespread in the future? – Estimation of all Non-Users

FIGURE 19 – Will fingerprint based payment systems be widespread in the future? – Estimation of Non-Users who do not want to register in the future

FIGURE 20 – Reasons for registering with digiPROOF

FIGURE 21 – What do users like most about digiPROOF

FIGURE 22 – What would you improve about digiPROOF

FIGURE 23 – Security/Estimation of registered digiPROOF users (in%)

FIGURE 24 – User-friendliness/Estimation of registered digiPROOF userS

FIGURE 25 – Security/Average grade of digiPROOF users

FIGURE 26 – User-friendliness/Average grade of digiPROOF users

FIGURE 27 – Would you like to pay by fingerprint in other places AS WELL?

FIGURE 28 – Will fingerprint payment systems be widespread in the future? - Estimation of digiPROOF users

FIGURE 29 – Success factors of fingerprint payment systems

List of Abbreviations

illustration not visible in this excerpt

1 Introduction

1.1 Background and rationale

The exchange of goods between human beings is one of the most natural things which dates back long before the beginning of recorded history. As trade became more frequent and complex, abstract representations for value were created and money was “invented” (Asokan, Janson, Steiner, & Waidner, 1997). Especially in the last decades the options available for money transfer and payments have increased. In the seventies the credit card became widespread and “since then there has been a profusion of other methods that have gained widespread adoption, including different forms of direct debits, retail store cards, automatic payment cards (e.g. Switch, or EFTPOS), and, more recently still, telebanking and Internet banking” (Lawson & Todd, 2003, p. 72).

Especially the growth of the Internet and electronic commerce (e-commerce) led to a demand for new payment methods which were meant to be better suited for the web than traditional payment systems (Panurach, 1996). Many researchers and companies tried to develop digital payment systems which could be used securely on the Internet and which also provided the means for paying very small sums, known as micro or pico payments. One approach was to develop a virtual, cash like system (e-cash or e-money). Examples of e-cash systems can be found in Jakobsson and Yung (1996) or Peha and Khamitov (2003). Apart from e-cash systems a variety of other approaches were presented and introduced into the market of payment systems. They include such approaches as pre-paid cards, payment via the phone bill, smart cards, mobile phone-based payment systems and many more (Bünte, 2004).

Sietmann (2002) states that in 2002 there were already about 50 different cyber payment systems on the market but still today none of those new payment systems could gain a wide acceptance. Although experts estimated the prospects of most of those new payment solutions as rather good, the majority of Internet transactions is still conducted by using traditional payment methods such as credit cards or invoicing (Heng, 2004). A recent survey by the University of Karlsruhe shows that only a very small percentage of users pay with new and innovative payment methods when shopping on the Internet. Only 0.2% regularly used their mobile phone and only 1.4% used prepaid systems to pay for goods ordered over the Internet. In contrast, more traditional payment methods such as credit cards, direct debit and giro transfers account for more than 90% of payments on the Internet. (Krueger, 2004)

The only Internet payment system which could establish itself and find a larger user base is PayPal. This is probably due to the fact that it was bought by eBay and that it can be easily used to do customer to customer (C2C) transactions, which are usually needed in auctions at eBay. Additionally, it also provides the possibility of performing micro payments (Kane, 2002). As those kinds of transactions in the Internet are hardly possible with traditional payment systems, this could explain the acceptance of PayPal. But still, PayPal only has a very small share compared to traditional payment systems (Sietmann, 2002).

The most current topic in payment systems is mobile payment. Mobile payment describes payment solutions that use mobile phones to conduct transactions either on the Internet or in the “real world”. “Mobile payment is considered by many experts as the next ‘big thing’ […]” (Karnouskos, Vilmos, Hoepner, Ramfos, & Venetakis, 2003, p. 1) . Herzberg (2003, p. 53) states that “The use of secure and convenient mobile personal devices could revolutionize the payment, banking, and investment industries worldwide” and Mallat, Rossi and Tuunainen (2004, p. 2) say that “Mobile payments are expected to become one of the most important applications in m-commerce”.

There are surveys which indicate that mobile phone users are willing to use their phones as a payment system. The German ministery of economics (Bundeswirtschaftsministerium) conducted a survey where they found out that about 50% of the German population would be willing to pay with mobile phones (Kuri, 2005). A survey from the University of Karlsruhe led to similar results. According to the survey, for payments below 5 Euro, even 100% of the questioned users would be willing to use their mobile phones as payment devices (Krueger, 2004). The real-life example of the German mobile payment provider Paybox however shows that theoretical willingness of customers does not necessarily translate into real usage of mobile devices for payment. As one of the first mobile payment providers, Paybox had to close down operations in 2003 as they were not able to acquire a sufficient number of users in order to break even quickly enough (Klaß, 2003). But the industry and experts are still convinced by mobile payment methods and keep on pushing forward in this field. Already in 2003 the leading mobile phone providers in Europe founded a consortium in order to establish standards for mobile payment solutions and develop a common system (Stieler, 2003). And only recently, the German ministry of economics (Bundeswirtschaftsministerium) initiated a round table where banks and mobile phone providers come together to push forward mobile payment solutions (Enderle, 2005). It has to be remarked however that although most of the efforts in the mobile payment segment failed, there are few examples which could reach some success. The most prominent example is the ZOOP payment system in South Korea (Chen & Adams, 2004).

The research community focuses strongly on mobile payment systems. Most of the current publications in payment systems focus on mobile payment. But there exist also other innovative approaches such as biometric payment systems or RFID[1] based payment solutions. These approaches are already tested in the industry, but are not as excessively discussed in the literature as mobile payment systems. Credit card companies mainly focus on RFID technology. They equip their credit cards with RFID chips in order to enable contactless payments (Sullivan, 2005). Biometry is also a highly current topic and is already successfully used in different areas. Marshall (2003) reports that already several US grocery stores use payment systems based on fingerprint scanning and van der Ploeg (1999) describes an Automatic Teller Machine (ATM) which uses iris scanning and voice recognition for identification purposes. Disney parks also use fingerprint scanning to control access to the parks (Hansen, 2005) and Lufthansa is planning to introduce a fingerprint solution for check-in and boarding (Wilkens, 2005).

The existing body of literature shows that there have been many new ideas and innovations concerning payment systems within the last years, and although there have been some small successes, the market is still dominated by traditional payment systems and none of the new and innovative solutions was able to gain a significant market share. The example of Paybox also shows that surveys about potential usage and acceptance do not necessarily translate into actual usage. When looking back at the introduction of payment systems that nowadays are well established (e.g. the credit card) one can see that the key factor for the success of a payment systems lies with the customer. Although merchants tried to resist the introduction of the credit card, the fast adoption of credit cards among their customers forced them to accept credit cards (Kreyer, Pousttchi, & Turowski, 2002). In the existing body of knowledge there are also some literature items which tried to examine the key factors which lead to user acceptance and which a payment system must fulfil in order to gain the critical mass of customers to establish itself in the market. (Pousttchi, 2003)

Based on the existing literature, in this dissertation a comprehensive framework of factors which influence the acceptance and success of payment systems will be developed. Subsequently a case study of digiPROOF, a payment system which is based on fingerprint technology, will be conducted. It is evaluated how digiPROOF meets the success factors and how users think about the system and where they see advantages and disadvantages compared to other payment systems. The aim is to find out if a fingerprint based payment system has the potential to be successful in the market and if it can complement or replace traditional payment systems in the future.

As the example of Paybox shows, theoretical surveys about potential usage and acceptance do not necessarily determine the actual acceptance in the market. Therefore it seems reasonable to study the acceptance, adoption and problems of payment systems in a real life example which is already in use. As most existing literature deals rather theoretically with the issue of acceptance and payment systems, this dissertation will add more practical, empirical knowledge. It will furthermore add some knowledge in the field of payment systems which use biometrics. This seems valuable as the research community strongly focuses on mobile payment services and therefore other new and innovative payment systems are rather neglected in current research. The research will not only be valuable to academics by adding more empirical knowledge in the field of biometric payment systems, but it will also be of value for the designers of the digiPROOF payment systems and for potential users. Through the research results the digiPROOF developers can learn about strengths and weaknesses as well as future potential of their system. For merchants and store owners the dissertation provides a deep insight into the digiPROOF payment system and discusses a case where the system has been successfully introduced. They can take the dissertation as a basis to inform themselves and support them in making a decision whether to introduce an innovative payment system like digiPROOF or not.

1.2 Research question and objective

The main objective of this dissertation is to find out whether payment systems based on fingerprint technology do have the potential to supplement or replace traditional payment systems in the future. This dissertation tries to answer the question by analysing a real world case of a fingerprint based payment system, called digiPROOF. In the United States and in the U.K. there exist already several grocery stores which have introduced fingerprint based payment systems (Lowrey, 2005). The first supermarket in Germany which has implemented such a system is EDEKA. The EDEKA aktiv Markt Fitterer in Rülzheim started implementing the fingerprint payment system digiPROOF in November 2004 (Ziegler, 2005). Since then almost 200 users have registered for the system and the number of subscribers is still growing. In the dissertation, this EDEKA market and the digiPROOF payment system will be used as a case study to evaluate fingerprint based payment systems.

In order to evaluate the future prospects of fingerprint based payment systems it is necessary to answer several sub questions in advance. Firstly it has to be clarified what the main success factors of payment systems are. This is done by building on the body of existing knowledge and drawing from experiences with more traditional payment systems which are already successfully established in the market. In a second step the digiPROOF payment system has to be analysed according to how well it meets the success factors and finally it has to be evaluated in which aspects it is better or worse than existing payment systems.

In order to be able to evaluate the digiPROOF payment system a survey among the users but also among the non-users of the system was conducted. In the survey users were asked to compare the system to existing payment methods and also to comment on their attitudes toward the system and the reasons for using and not using the system.

With this approach the fingerprint payment system is on the one hand evaluated from a more theoretical perspective by comparing the system to the established success factors and to more traditional payment systems. On the other hand, the survey adds to the evaluation with empirical results and the attitudes and feelings of the actual users of the system are also accounted for. This holistic approach makes sure that the problem is regarded from several different angles and that the research question can be answered in the best possible way.

1.3 Structure of the dissertation

The first part of the dissertation in chapter two comprises a detailed description of the underlying methodology of the work. The chapter describes in detail which research method is used and why it is especially suitable for this research project. Furthermore data gathering and analysis methods are discussed. Chapter three provides a theoretical view on the topic and literature in the field of payment systems is reviewed and discussed. First the historic development and some basic characteristics of payment systems are presented. This seems necessary to understand how change in payment systems evolved and to get a deeper insight into the topic. Subsequently a framework of success factors is developed in order to be able to evaluate digiPROOF in a later stage of the dissertation. Furthermore, traditional and selected innovative payment systems are presented in detail. This will help to understand the differences between digiPROOF and other payment systems in order to be better able to judge digiPROOF against other systems.

In chapter four the case which this dissertation researches in depth, is presented. First an introduction to digiPROOF and EDEKA, the retail chain which introduced digiPROOF, is given. Following, digiPROOF is evaluated from a merchant’s point of view as well as from a customer’s point of view. The customer perspective was obtained by doing a survey. The results of the survey are presented in chapter five. The case study part concludes with an evaluation of digiPROOF from a more theoretical point of view. In chapter six digiPROOF is evaluated according to the success factors which were developed in chapter three. Additionally digiPROOF is compared to other payment systems in order to be able to see whether digiPROOF meets the success criteria better or worse than other payment systems.

From all the information that was gathered during the research project and the evaluation in chapter six, a conclusion is drawn in chapter seven and an outlook on the future development in the payment systems landscape is given.

1.4 Definitions

As the term payment systems substantially determines the content of this dissertation, first of all a definition of this term shall be elaborated in this chapter. In the literature the term payment systems is mainly used in two different ways. Firstly, the term payment systems is used to describe methods and devices which are used to settle large scale transactions, mainly between banks (Central Bank of Malta, 2005). The second meaning of the term payment systems is connected to payment methods that the end-consumer and normal bank customer can use to pay for goods and services (Board of Governors of the Federal Reserve System, 2002). In this category belong payment methods such as credit cards or cash. As this dissertation deals with payment systems for the end-consumer, the second meaning of payment systems will be used as a basis to define payment systems.

A term which is also frequently used in this dissertation is traditional payment systems. When talking about traditional payment systems payment methods are meant, which are already established in the market and are widely used and accepted. This group consists of cash, credit cards and debit cards. Cheques are not included in this group as the dissertation focuses on a case study in Germany and in Germany cheques were never very important and have nowadays disappeared from the market. The term innovative payment systems on the other hand describes all new payment methods and approaches which are not included in the group of traditional payment systems.

Besides the term payment systems, the term payment methods is sometimes used with the same meaning.

2 Methodology

2.1 Qualitative approach

This research project follows a qualitative approach. Qualitative research methods were developed in the social sciences and help researchers to understand people and the context in which they act. In comparison to quantitative research, which is mainly confirmatory and deductive, qualitative research is rather explanatory and inductive (Myers, 1997). This means that the researcher does not only try to confirm or reject a predefined assumption, but tries to explore a topic holistically and explain the topic in detail. The research is not tightly prefigured but rather emergent and the researcher tries to collect as many different aspects of a problem as possible. This helps to discover new aspects and give a complete picture of the research problem. (Creswell, 2003)

The motivation for doing qualitative research, as opposed to quantitative research, comes from the observation that, if there is one thing which distinguishes humans from the natural world, it is our ability to talk!” (Myers, 1997, p. 241). Qualitative research methods are designed to provide rich information about real life people and situations and they help to better understand and make sense of the behaviour of people (de Vaus, 2002). Kaplan and Maxwell (1994) argue that the point of view of people and the social context often get lost when data is quantified.

For this dissertation a qualitative approach seems to be appropriate as, when looking at the adoption of payment systems, the opinion and attitude of the users is a crucial success criterion. Furthermore, the field of biometric payment systems is rather new and therefore an exploratory approach which delivers a holistic picture seems to be favourable.

2.2 Research method (Case Study)

Within the field of qualitative research, a case study approach is used in this dissertation. According to Myers (1997), case studies are the most employed research method within Information Systems and are especially suited to that field of research. Case studies are used to reach an understanding of complex issues or objects within real life situations. A definition commonly referred to in the literature is the definition by Robert K. Yin. He defines a case study as “an empirical inquiry that investigates a contemporary phenomenon within its real-life context; when the boundaries between phenomenon and context are not clearly evident” (Yin, 1984, p. 23)

As biometric payment systems are a very new, contemporary topic and as the acceptance and success of payment systems highly depends on people’s perceptions of the system within the real-life context, a case study seems especially suitable to the topic. Furthermore, the existing literature and past experience has revealed, that general surveys about the potential willingness of customers to use innovative payment systems do not translate into actual usage (e.g. in mobile payment). For people it is often hard to imagine how they would accept and like a product, or in this case a payment system, if they never have used it. This is even more the case if the payment system is based on a technology which they have never used as well, such as fingerprint technology. Therefore it seems favourable to use a research method where the opinion and behaviour of actual users in a real-life environment can be observed. As EDEKA is the first supermarket and first large merchant which introduced a fingerprint based payment system in Germany, conducting a case study in this real-life context seems to be the ideal approach for this research.

The weak point of case studies is to establish validity and generality of findings. Whereas internal validity, which means that data is captured from a variety of different sources and that a complete chain of evidence is given, can be reached, external validity and generality is always a contentious issue. Critics of case studies claim that when only studying a limited number of cases it is impossible to transfer the results to other cases. Therefore, according to them, case studies cannot provide external validity and generality. (Soy, 1998)

In the case of biometric payment systems however, it is impossible to conduct research with a broad sample of users, as only few cases exist where a fingerprint based payment system is already in use. Furthermore, EDEKA is the largest food retailer in Germany and the customers at EDEKA are therefore likely to represent the average German shopper in supermarkets and not only a specialised group. For these reasons a case study seems to be an optimal approach and with EDEKA as the largest German food retailer the results should at least be generalisable to a certain degree.

Many authors have developed frameworks for conducting case study research (Soy, 1998; Stake, 1995; Yin, 1984). The framework of Brock, Kukulski and Tanis (2002) is one of the most detailed and comprises nine steps for organizing and conducting case study research:

1. Define the problem
2. Search and review the literature
3. Form your research question
4. Pick your participants
5. Select data gathering instruments
6. Collect the data
7. Analyze the data
8. State the results
9. Discuss and make recommendations

To evaluate the fingerprint based payment system in this dissertation the framework of Brock et al. is closely followed. Previous understanding of the research topic was attained by reviewing the literature. Existing literature in the field of payment systems and biometrics has been used in order to establish a framework of success factors for payment systems. Furthermore the characteristics of all established and current payment systems are described in the literature review. In order to get a holistic picture of the digiPROOF fingerprint payment system a variety of different data sources was selected. Interviews were conducted with the owner and the store manager of the EDEKA store as well as with the CEO of the company who designed and implemented digiPROOF. Additionally, a survey among the users of the system as well as the non-users has been conducted and the author of this dissertation also had the opportunity to take part in a presentation and discussion session about digiPROOF with academics, data protection experts, biometry specialists and industry representatives. In the last part of the dissertation the results of the interviews and the survey are compared to the framework of success factors which was established in the literature review and to already established and current payment systems. From this comparison and the collected data, the author tries to draw a conclusion on whether fingerprint based payment systems have a future potential or not.

2.3 Case selection

When selecting a case for the research project, options were quite limited. There exist only few places and stores in Germany where paying with the fingerprint is possible. To select a case outside of Germany was not possible due to the author’s location and budget constraints. The first large supermarket which introduced a fingerprint based payment system in Germany was EDEKA. Apart from EDEKA, only small, independent stores and places introduced fingerprint based payment systems. Examples are a computer store in Offenburg (Ziegler, 2003a) and a food court in Heilbronn (Ziegler, 2003b). The customer base in these small stores is rather specialised and the fingerprint payment system is mainly used as a marketing tool. EDEKA as the largest food retailer in Germany provides an ideal setting for a case study, as the customers at EDEKA are likely to cover a wide spectrum and are likely to represent the average distribution of shoppers in other large supermarket chains. A further reason for choosing EDEKA is the larger customer base. At EDEKA the number of users and therefore the number of potential survey participants is much higher than in small, specialised stores. These aspects should help to make a case study at EDEKA more generalisable and valid than case studies in other settings. Findings of this study are therefore not only interesting for academics and researchers in the field of biometric payment systems but also for other merchants and retailers.

2.4 The role of the researcher

The idea of undertaking a case study in the field of biometric payment systems came up when the media reported about the introduction of a fingerprint based payment system at EDEKA. Fingerprint technology in payment systems seemed to be a promising idea and therefore the author made contact with the owner of the EDEKA store which had introduced digiPROOF and asked if he would be interested in cooperating with him. Both, the store owner and the company that has invented and introduced digiPROOF liked the idea of doing a case study on the system. Thus the project was initiated. The author conducted interviews with the store owner and the manger of the EDEKA store as well as with the CEO of the company which implemented digiPROOF. A questionnaire was sent out to all users of the system and the author also conducted a survey on site at the EDEKA store where he questioned customers of the store. The aim of this survey was to gather information and opinions from non-users of the system. Before the research project, the author did not have any contact to the persons involved in the project or the EDEKA supermarket and the only contact with persons from EDEKA and the digiPROOF project team was for conducting this research.

2.5 Data gathering

2.5.1 Data sources

In order to get a holistic perspective of the research problem and as qualitative data is extremely varied in nature, different data sources and methods of data collection were used. Interviews were conducted with the owner and the store manager of the EDEKA aktiv Markt Fitterer in Rülzheim as well as with the CEO of the company that implemented digiPROOF. These interviews were mainly used to get a deep insight into the digiPROOF system and also to get an evaluation of the system from the perspective of a merchant. The perspective of customers was captured by a survey. In this survey, users as well as non-users of the system were questioned about their opinion on digiPROOF. Furthermore, the author of the dissertation had the opportunity to take part in a discussion panel with academics, data protection experts and biometry experts, in which digiPROOF was discussed.

2.5.2 Interviews

The interviews with the store manager and the owner of the EDEKA store were conducted on the premises of the EDEKA aktiv markt Fitterer in Rülzheim. The aim of these interviews was to get an insight into the system, how it is working and to find out how successful the system is from the perspective of a merchant. As a basis for the interviews a rough guideline of open ended questions was used. But with the aim of collecting as many information and feelings about the system as possible the interviews were conducted very openly and unstructured. The interviewees were asked to talk openly about the system, what their experience was with the system and to mention all points which seemed important to them. The method of doing open and unstructured interviews provided the possibility to drill further down on interesting points which emerged during the interview. The store manager of the EDEKA store was able to provide many information on the operation of the system and how the users react to the system. The owner of the EDEKA store, who is also a member of the board of the EDEKA supermarket chain and responsible for IT within the EDEKA group, was able to give a more detailed insight into the financial and strategic advantages of digiPROOF for EDEKA.

The interview with the CEO of the company that invented and implemented digiPROOF was also conducted as an unstructured and open interview. The aim of this interview was to get a detailed overview of how the digiPROOF system works. Additionally to the open questions about the functionality of digiPROOF some targeted questions on security, reliability and data protection issues were asked.

All interview partners participated voluntarily in the interviews and agreed that the outcomes of the interviews could be used in this dissertation. Before submission of the dissertation the interviewees also had the possibility to review the dissertation and object if they did not agree with the statements in the dissertation.

2.5.3 Questionnaires

Two different groups were selected to conduct the survey. Questionnaires were handed out to users of the system as well as to non-users. This multi-group survey provides a deeper understanding of the reasons for adopting as well as rejecting the system. For both groups different questionnaires were developed. Whereas users were asked to judge the system and make comments about negative as well as positive aspects of the system, non-users were asked about their motivation for not using the system. Both groups were asked to judge the system against the success criteria which were developed in the theoretical part of this dissertation. They also were asked to mention which points are important for them in a fingerprint based payment system and how they evaluate future chances of such a system. The complete questionnaires, in German as well as in English, can be found in the Appendices 14-17.

The questionnaire for users was sent out by mail to all 182 registered users of the system. They were asked to fill in the questionnaire and drop it at the information desk in the EDEKA store or directly mail or fax it to the author. Non-users were directly questioned in the store. After having made their purchases they were asked at the exit door to take part in the survey. The survey was conducted on different days and different times in order to avoid a time bias and to obtain a complete spectrum of different user groups. The survey was conducted on Monday and Tuesday during different times in the morning, afternoon and evening. Furthermore Friday afternoon and evening as well as the complete Saturday were covered, as on week-ends a different customer group tends to be in the store than during the week.

Before sending out the questionnaires and conducting the survey, the questionnaires were pre-tested. Both questionnaires, the user and the non-user questionnaire, were tested on persons from different age groups. Questions which were not easily understandable were revised and the design of the questionnaire was optimised according to the comments of the pre-testers.

2.6 Data analysis

As this research follows a qualitative case study approach no pre-defined hypothesis was established which was tried to be tested through the questionnaires and interviews. The main aim was to gather as much information as possible and to find patterns and tendencies which emerged through the data. This is why in the questionnaires as many open ended questions as possible were asked. The data from the questionnaires was thoroughly analysed and groups of questionnaires were clustered to find patterns in the answers. All questionnaires were put into a mySQL database in order to be able to run queries on the data to find and test tendencies and patterns. While conducting the survey and entering all questionnaires into the database the author gained an overview of all gathered data and thus could already form first ideas about themes and patterns in the data. These patterns were later tested by running queries on the mySQL database to verify the patterns. Furthermore patterns and relationships which seemed to be interesting and valuable to the author were tested (e.g. are there differences in the payment and purchasing behaviour between digiPROOF users and non-users or do people who do not want to register in the future evaluate the system positively anyway?).

Besides the qualitative data also some quantitative data was collected through the questionnaires. Quantitative data was mainly used to compare established payment methods and the digiPROOF fingerprint system according to the success factors which were established in the theoretical part of this dissertation and to collect data about the future prospects of digiPROOF. Quantitative data was mainly analysed by using Microsoft Excel and the Statistical Package for the Social Sciences (SPSS). Missing values and questions that had not been answered were identified and calculations were adjusted accordingly. To present the data, aggregations, means and standard deviation were used. Additionally, tests of significance were conducted in order to determine whether digiPROOF scores significantly better or worse than established payment systems in regard to the success factors of payment systems.

In the last part of the dissertation all data and findings are interpreted and digiPROOF is matched against the framework of success factors as well as against other current and established payment systems. From this comparison and the collected data a conclusion is drawn on whether fingerprint based payment systems have a future potential or not.

2.7 Objectiveness of answers

Both questionnaires, user and non-user, were anonymous. Users could drop their questionnaire anonymously at the information desk in the EDEKA store or mail it anonymously to the author. Non-users were anonymously questioned at the exit of the store and as the author of the dissertation, who does not have any relationship to EDEKA conducted the survey himself, the answers of the non-users can be considered as rather objective. The aspect that during the survey extremely positive as well as highly negative opinions about the digiPROOF payment system were expressed, supports the view that objectiveness of answers can be assumed.

The positive attitude of EDEKA towards the digiPROOF system could be questioned as they probably would not be willing to admit a failure even if the system was not running successful. However, the fact that EDEKA is planning to roll out the system in further stores and wants to offer digiPROOF for all their customers in the future, leads to the conclusion that the positive estimates of EDEKA seem to be objective.

The interview with the CEO of the company which invented digiPROOF mainly covers technical aspects and aspects about the functioning of the digiPROOF system. As these points do not ask for opinion but are based on facts, objectiveness does not seem to be a major problem in this case.

2.8 Researcher bias

Before conducting this research the author of this dissertation did not have any contact or special relationship to EDEKA. This means that the findings and interpretations in this dissertation will be only shaped by the author’s background as a student of Business Administration and Computing and as a usual customer who uses different payment methods. This naturally induces an inevitable element of bias. The author will however try to conduct the case study research as objectively as possible and try to minimise all possible bias.

3 Theoretical foundations of payment systems

3.1 History and development of payment systems

“Money, like certain other essential elements in civilisation, is a far more ancient institution than we were taught to believe some few years ago. Its origins are lost in the mists when the ice was melting, and may well stretch back into the paradisaic intervals in human history of the inter glacial periods, when the weather was delightful and the mind free to be fertile of new ideas in the Islands of the Hesperides or Atlantis or some Eden of Central Asia.” (Keynes, 1930, p. 13)

This quote by Keynes shows that exchange processes and money are almost as old as humankind. The first and most primitive form of payment involves barter. This means that people directly exchanged goods or services for other goods and services. Although this form of payment is still used today in primitive economies it suffers of a substantial problem called the “double coincidence of wants”. This means that a person who is hungry and wants something to eat, but does only have a TV to trade in against food must first find somebody who has some food to give away and at the same time wants to have a TV in return for the food. This problem led to the development of money. (O'Mahony, Peirce, & Tewari, 2001)

The first form of money that evolved was called commodity money. This form of payment made use of physical commodities (e.g. salt, corn, gold) whose values were well known to everybody. According to its properties which allowed easy portability and divisibility gold and silver coins became the most used form of commodity money. The next step in the evolution of money was the introduction of tokens. This meant that the value of money was not anymore incorporated in the money itself. Tokens, e.g. bank notes, were issued and the value of the token was backed by deposits of gold and silver by the money issuer, which was usually the state. (O'Mahony et al., 2001)

The last step which led to the form of money we use today was the abolishment of the gold and silver standard in the 1930s. From then on, the state did not anymore guarantee the value of money by backing it with gold and silver but the money was only backed by the fiat of the state. That is why the present form of money is called fiat money. (Greenspan, 2002)

Cash is still the prevailing form of payment for private transactions. Even in the U.S. where credit cards and checks are a wide spread means of payment it is estimated that still more than 50 per cent of transactions are based on cash (Weiner, 1999). But as amounts get larger and due to security issues people tend to hold their wealth in form of bank accounts and not as cash. Bank accounts and also direct transfers between bank accounts and the use of checks however, is a very old idea. The idea of banks and bank accounts preceded even the invention of coins as a payment method. It is reported that banking systems already existed in the ancient Mesopotamia and in Egypt (Davies, 2005).

It is also interesting to note that there exist different payment cultures in different countries. The payment culture thereby describes which form of payment is prevailing in the respective country. Böhle, Rader and Riehm (1999) distinguish three types of payment cultures: cash oriented, check oriented and giro oriented cultures. Germany falls into the domain of giro oriented countries as checks never played an important role in Germany and don’t even exist anymore.

A big innovation of payment systems was the introduction of “plastic money” in the 1950s. The first credit card was issued 1950 by Diner’s club in the United States. American Express and the Bank of America (today the Visa Card) followed in 1958. This new form of payment was marketed as a method for time-saving in the payment process and became a big success in the United States (Bellis, 2004). In Europe however credit cards initially were not very successful, they only have become popular about 10-20 years ago. Till the late 1970s the penetration of credit cards was quite limited in Europe (Crede, 1995).

The next innovation was the introduction of debit cards. This type of payment cards is widely known as EFTPOS in the United States. In Germany they are called EC-Karte and were first introduced into the market in 1968. In the beginning debit cards served to obtain cash from the bank and from ATM machines, as well as a verification mechanism for checks. Later on, the possibility of paying with those cards at the point of sale (POS) was introduced as well. When paying with a debit card at the POS, an online link to the bank is established and the money is directly debited from the customer’s account. (ATM Locator, 2005)

Additionally to the normal EFTPOS payment procedure at the point of sale, which is offered through the card issuers, another “wild” system evolved in Germany: The Elektornisches Lastschriftverfahren (ELV). In comparison to EC-Cash, the original EFTPOS payment procedure, ELV does not establish a direct link to the bank and does not directly debit the account of the customer. With ELV only the account details of the customer are extracted from the payment card. Then the customer signs an agreement that the merchant can collect the money from the customer’s bank account. Although this method is less secure, because there is no direct online check, it is widely used in Germany. (EURO Kartensysteme GmbH, 2005)

The last two decades finally brought a vast amount of new developments in the payment market. Globalisation and especially the internet led to a dynamic evolution in the payment market which hasn’t been seen before (Hartmann, 2002). One of the first approaches to replace money by “virtual money” is described by Chaum (1985), often called the father of “virtual money”. In 1985 he described a system that is based on a small card computer which the user employs to perform all sorts of payments. In this scenario, the user does not need cash anymore, but all transactions would be performed virtually through the card computer.

Germany also introduced a smart card based payment solution. An additional chip was added to the EC-Karte where the user could upload money directly from his bank account and then use the stored money to pay at POS terminals. However, this payment method called GeldKarte could never gain a wide acceptance in the market. (Sietmann, 1999)

The vast amount of new payment systems though was created to facilitate e-commerce activities in the internet. Sietmann (2002) states that in the year 2002 there were more than 50 different payment solutions available in the internet. Among those were pre-paid cards, payments via the phone bill, virtual money and e-cash systems, special solutions for micro payments plus also traditional payment systems such as credit cards. Most of those systems did not gain a wide acceptance. The only system that is quite successful, is PayPal, which was bought by eBay (CNN, 2002). But still, compared to traditional payment systems, PayPal has only a very low market share (Sietmann, 2002).

Currently the hot topic in payment systems is mobile payment, which describes technologies that use the mobile phone as a payment instrument. “Mobile payment is considered by many experts as the next ‘big thing’ […]” (Karnouskos et al., 2003, p. 1). Nevertheless, Paybox, a German provider of mobile payment services, had to close down operations in 2003 as they were not able to acquire a sufficient amount of users in order to break even (Klaß, 2003). There exist however few examples of mobile payment systems which seem to be able to successfully survive in the market. A prominent example is the ZOOP payment system in South Korea (Chen & Adams, 2004).

Besides mobile payment systems there are also approaches which use biometry to develop new and innovative payment systems. Van der Ploeg (1999) describes an ATM which uses iris scanning and voice recognition for authentication and Marshall (2003) reports, that there are already several supermarkets in the United States which use fingerprint based payment systems. Master Card recently announced the introduction of Master Card Pay Pass, a contactless credit card which is based on RFID technology (M2 Presswire, 2004b) and American Express and Visa offer similar solutions (Sullivan, 2005).

Furthermore, there exist unusual approaches such as a method developed by Japanese researchers. They use a laser to engrave information into fingernails. This could be used to store credit card information or account details and then use this information for payment transactions. The problem with that method however is that fingernails are growing, get cut off and then the information needs to be renewed. (Sietmann, 2005)

3.2 Classification of payments

In order to better understand the requirements for payment systems it seems necessary to briefly elaborate on different payment scenarios. Payments can be classified into different groups, whereby each group poses different requirements on a payment system.

The first differentiation that can be made in regard to payments is the amount of the transaction. Here one usually differentiates between micro and macro payments. Micro payments are payments which have a rather low value. Usually payments which are below 5 to 10 Euro are grouped as micro payments (Henkel, 2001; Mallat et al., 2004). For this group it is especially important that the transaction costs are low, as for lower amounts, especially fixed transaction costs have a much higher weight than for high sums. Some authors differentiate additionally between micro and pico payments (Balzer, 2005). Pico payments are payments which are in the range of several cents and are especially important in the context of downloads in the internet and on mobile phones (e.g. content, music, ring tones …).

Another classification that can be made is the time of payment. Three different categories are distinguished: pre-paid solutions, pay now solutions and pay later solutions (Abad Peiro, Asokan, Steiner, & Waidner, 1998). In pre-paid systems the user pays in advance and then usually gets some sort of coupon which enables him to trade the coupon against the goods he wants to purchase. A classical example is mobile phone pre-paid cards. The most popular pay now solution is cash, but also systems like EFTPOS which directly effect the transaction on-line belong to the category of pay now solutions. In pay later systems the customer pays after having received the goods. Credit cards and also invoices are the most common forms of pay later solutions.

The last categorisation deals with the “location” or the circumstances of the payment. One normally distinguishes whether the purchase and the payment are conducted online over the internet or over the mobile phone, or whether the transaction is done in a real environment, directly at the point of sale. In the latter case the customer and the merchant have direct physical contact and can directly interact with each other, whereas in the internet the customer and the merchant usually do not know each other. This normally increases the level of uncertainty and hence the need for higher security measures. A third category which can be distinguished is the customer to customer (C2C) transaction. This transaction differs as customers do not necessarily posses the same possibilities and hardware (e.g. a credit card terminal) as merchants. (Pousttchi, 2003)

Figure 1: Classification of payment systems

Abbildung in dieser Leseprobe nicht enthalten

Source: Author’s illustration

3.3 Success Factors of payment systems

3.3.1 Overview

In order to be able to evaluate the future prospects of a payment system, in this chapter a framework of success factors is developed. The framework is established on basis of previous research in this area and by analysing the success of already established payment systems in the market.

As payment systems are a classical network good a wide acceptance and a fast adoption of new payment systems is crucial for their success. The two main characteristics of network goods are: “the value a person gets from the product increases as more people consume [ use ] it and the technique a firm chooses to produce the product will depend on techniques chosen by other firms” (McAndrews, 1997, p. 15). For payment systems this means that merchants are not willing to invest into new payment systems which only few customers use, and on the other hand customers decline to use payment systems which are not widespread among merchants (Heng, 2004). Therefore only a product which delivers substantial advantages over existing payment systems for both parties, the merchants as well as the customers, has the potential to quickly gain acceptance and reach the critical mass in order to survive in the market.

However, when analysing the development of payment systems in the past, one can see that the key success factor for a payment system are the customers. Examples are the credit card and the simple debit procedure (ELV) in Germany. Although merchants did not like the idea of giving 3 to 5 per cent to the credit card issuers, they were forced by the pressure of customers to accept credit cards as a payment system. And the German ELV became widespread, although banks tried hard to prevent this as they wanted to sell their POS terminals for EFTPOS. (Kreyer et al., 2002)

The fact that customer acceptance is the key success factor of payment systems is also confirmed through a study by Berlecon Research about payment methods in the internet. According to Wichmann (2002), one result of the study was that most online stores follow the payment preferences of their customers although they often would prefer to use different payment methods.

Therefore, in the following analysis of success factors priority will be given to criteria influencing the acceptance of users. Acceptance criteria for merchants will also be taken into account, but when there are contradicting requirements for customers and merchants the customer preferences will be attributed more weight.

In the literature there exists a variety of publications which elaborate on acceptance factors of payment systems (Henkel, 2001; Matonis, 1995; Pousttchi, 2003; Wichmann, 2002). Kreyer et al. (2002) group the different acceptance criteria discussed in the literature into three main groups: Costs, security and convenience. This categorization seems reasonable and will therefore be adopted in this dissertation. Additionally, a fourth group will be added to the categories of Kreyer et al.: Privacy. In the paper of Kreyer et al. the issues of privacy and anonymity are discussed within the security category. Security however, is rather a technical and conceptual characteristic of the system which describes how difficult it is to manipulate the system or the payment process. Privacy on the other hand is the degree to which information about the payment process and the parties involved in the process can be made available to the merchant or any other person. This means that privacy deals with the aspect of how much information can be “legally” obtained, whereas security deals with the aspect of how secure the system is against “illegal” misuse. Therefore it seems to be reasonable to differentiate the categories security and privacy.

The main categories which influence the acceptance of payment systems will thus be cost, convenience, security and privacy. Whereas the interests in the first three categories are similar for merchants and customers, the interests of those two groups differ essentially within the privacy category. Both groups want to have cost efficient payment systems with a high level of convenience and security, but concerning privacy, merchants usually prefer to collect as many data as possible whereas customers tend to protect their privacy as much as they can.

To give a complete picture of success factors of payment systems, a fifth point should be mentioned here. One of the most important factors for the success of a payment system is marketing. Due to the network effect it is crucial that a payment system can quickly reach a wide acceptance, what is only possible through extensive marketing activities. Additionally, marketing is important to create a positive image of the payment system and establish trust for the system in the public. It is a prerequisite for a payment system to be technically secure, but ultimately the perception of the user about the security of the system will decide about its success. This perception and the image of the payment system can be highly influenced through marketing activities. (Henkel, 2001)

Anyhow, in this dissertation marketing will not be included as a criterion in the framework of success factors when evaluating payment systems. This is due to the fact that marketing is independent of the design characteristics of a payment system and can be performed in the same way for all payment systems.

3.3.2 Cost

For customers cost is a very important acceptance criterion when looking at payment systems. Leibold, Stölzle and Stroborn (2002) conducted a survey about acceptance criteria for payment systems in the Internet and found out that the most important criteria for customers is low cost. On the other hand, when looking at already established payment systems such as the credit card or EFTPOS, customers often pay fees for their credit cards and EFTPOS accounts. Furthermore, the study revealed that more than 15% of the questioned customers would even pay extra fees for additional security measures in payment systems. However, it seems to be doubtable that a system which incurs substantially higher costs than existing payment systems will have a high degree of acceptance, even if it is more secure and more convenient. Therefore, for customers an important acceptance criterion is that the costs for the new system are not higher than for existing payment systems.

Pousttchi (2003) splits up cost for customers into two groups, fixed costs and transaction fees. Fixed costs can be fixed recurring fees for the systems but also up-front costs which the user has to invest into special hardware (e.g. electronic device for e-money) which is needed for the payment system. But especially payment systems which require a high up-front investment for hardware are very unlikely to be accepted by the customer. Mürl (2002) states that this is also one of the main reasons why smart card payment systems for the internet are not very successful, as the customer is required to install a special card reader for those systems.

Another point which falls into the category of cost is the time of payment. The customer naturally prefers to pay after the purchase. Credit cards for example give the customer an incentive as he only has to pay at the end of the month, which means that he can keep his money for a longer period. According to the survey by Leibold et al. (2002) however, the time of payment is one of the least important criteria to the customers.

For merchants cost is also an important criterion. Similar to the customers, for merchants cost can be divided into transaction fees and fixed costs. The difference between merchants and customers is, that merchants are more likely to adopt a system which incurs rather high up-front hardware investments for them if it has low transaction fees in return. This is due to the fact that the number of transactions is usually very high with merchants. On the other hand, it has already been shown that merchants will follow the preferences of their customers as long as the costs do not become unbearable for the merchant (Wichmann, 2002). Therefore merchants will only adopt a payment system which is widespread among their customers or of which they think that it has a good future potential.

Stroborn, Heitmann and Frank (2002) state that more important than the absolute cost is the cost-risk ratio for merchants. If a payment system has a high level of security and therefore reduces the risk of losses, the merchant will be willing to pay an additional premium for the new system.

In contrast to the customers, the time of payment can be very important for merchants. Especially with low-priced goods and in the retail industry margins are often very low and still falling (Vargas, 2005). Thus it is almost impossible for the merchants to wait long periods for their money. This is also the reason, why many retail discounters in Germany do not accept credit cards as a form of payment. Merchants will consequently prefer payment systems that offer a fast and efficient settlement process.

3.3.3 Convenience

User friendliness and fast processing speeds are important factors for the acceptance of a payment system. Especially in income-rich but time-poor societies people strive for efficient and convenient products and services. Prideaux (1999, p. 257) states that exactly “this quest for convenience and the need to save time have also led to the boom in payment cards.” New payment systems must therefore be even more convenient and efficient in order to win over existing payment systems.

Pousttchi (2003) conducted a survey about the acceptance factors of mobile payment solutions. In his work he broke down convenience into seven factors: Easy handling, fast processing of payment transaction, high number of accepting merchants, easy learnability of the payment procedure, no installation of software on the mobile device, payment abroad possible and no pre-registration necessary. Prideaux (1999) on the other hand takes another approach. He establishes three sub categories to measure convenience. Those categories deal with factors before the actual payment process, during the payment process and after the payment process.

Those two approaches can be combined in order to arrive at a complete but at the same time limited amount of factors related to convenience. Therefore in this dissertation the following four factors will be used in order to measure user convenience.

- Ease of registration/setting up payment system: This criterion refers to the phase before the actual payment process and describes how easy it is to register for the payment system, how easy it is to learn to pay with the system and whether there is some additional hard or software needed in order to use the payment system or not.
- Ease of use: This criterion refers to the actual payment process and measures how easy and fast this process is.
- Traceability: This criterion corresponds to the category which corresponds to the phase after the payment process. It describes how easy it is for the customers to trace where they spent how much money and over how much money they still dispose.
- Ubiquity of use: This criterion describes in how many different payment scenarios the user can use the payment system. This means on the one hand, how many merchants accept the payment system and on the other hand it measures whether the payment method can be used for micro and macro payments and also if it can be used on the internet, in real world transactions or in customer to customer transactions.

According to the study by Pousttchi (2003) ease of use and speed are the most important criteria for customers. Ubiquity of use scored somewhere in the middle and ease of registration and setting up the payment system has rather a low priority for users. The importance of traceability is hard to estimate as there exists no study which explicitly measures the importance of traceability. As existing systems such as credit cards or EFTPOS mostly deliver only a statement at the end of the month which shows all transactions of the respective month and as it is usually not possible to get information about available funds and previous transactions at the point of sale, the importance of traceability is estimated as medium.

Merchants also prefer payment systems which are easy to handle for them and which allow them to easily trace and process payment data (Wichmann, 2002). But the most important point for merchants still is the convenience of the payment system for their customers, because if a merchant does not offer a payment system which is easy to use and is accepted by the customers, nobody will purchase from this merchant (Mürl, 2002).

3.3.4 Security

Security is a crucial requirement for a payment system. A payment system which is easy to manipulate and does not guarantee a safe transaction will be rejected by customers as well as merchants. Hence, security is, as one of the essential fundamentals of payment systems, extensively discussed within the existing literature (Asokan et al., 1997; Herzberg, 2003; Zhang & Wang, 2003).

According to Herzberg (2003) a secure payment process consists of three sub processes:

First there must be an identification of the customer and the merchant. This means that the payment system must incorporate a mechanism which makes it possible to verify that the customer and the merchant are really the person which they claim to be and that they are authorised to use the payment system.

The second process step is to authorize the transaction. In this step, the merchant will submit the transaction details such as price and payment conditions to the payment system and the customer can then authorize or reject the payment.

In the last process step the payment system must provide a secure and efficient settlement of the transaction.

Asokan et al. (1997) describe the same requirements for a secure payment system that Herzberg (2003) outlined. They are however more precise on the part describing how a secure settlement of the transaction is defined. Acoording to Asokan et al. a secure settlement of the transaction can only be guaranteed if the integrity and the confidentiality of the messages, which are exchanged during the payment process, can be assured. Confidentiality in this context means, that no one can obtain information about the payment and transaction details by intercepting the communication between the merchant and the customer. Integrity goes one step further and signifies that the messages exchanged between those two parties, which include the payment and transaction details, can not be altered by a third party during the process. Asokan et al. (1997) also see the availability and reliability of a payment system as an important factor. In order to be accepted by the user a payment system must have a very low error rate and after a crash there must be a mechanism to restore the data about the payment processes. Additionaly the system must guarantee atomicity of payments. Atomicity of a payment system guarantees that a payment transaction is either conducted entirely or not at all. The system must make sure that the transaction is not somewhere stopped in the middle when the funds are already taken from the customer but have not yet reached the account of the merchant.

Zhang and Wang (2003) introduce a further requirement for secure and efficient payment systems. For them a payment system also has to incorporate audit trails and the system must support non-repudiation[2] of transactions. These features make sure that in cases of disputes the payment and transaction details can be accessed and the dispute can be settled quickly. Furthermore, if one party makes commitments during the payment process, this party should not be able to repudiate theses commitments later on. This is especially important for merchants if the payment system is a pay later solution and there is no direct online check to ensure that the customer has the necessary funds to settle the transaction.

All previously discussed security aspects are technical features of the payment system. However, the crucial point for the acceptance of a payment system is the perception of the user (Heng, 2004; Wong, Mirlas, Kou, & Lin, 2003). A user will only adopt a payment system if he believes that it is secure and if he trusts in the system. Naturally, all “[technical] security is a necessary condition for trust and use, but it is not a sufficient condition” (Singh, 2004, p. 513). Therefore it is important that a payment system is not only technically secure but that also a secure and trustworthy image of the payment system is build up in the public through design characteristics of the system and through marketing efforts.

In order to get a complete picture, in this dissertation security will be measured by evaluating both, the technical security aspects of a payment system as well as the user perception of the security. The factors which will be used to measure security will be namely:

- Identification
- Authorization
- Confidentiality and integrity
- Availability and reliability (including atomicity)
- Audit trails and non-repudiation
- Customer perception of security


[1] RFID stands for Radio Frequency Identification. The concept of RFID is similar to the concept of bar codes or the magnetic stripe in the credit card. An RFID tag contains information and can be read by a reading device. The difference is, that RFID tags can be read contactlessly and without the need of a line of sight between the reader and the RFID tag. Furthermore, a RFID tag can hold more information than a conventional bar code. (Kabachinski, 2005)

[2] Non-repudiation means that if a party makes a commitment in the transaction process, it has to stick to that commitment and is not able to repudiate the prior commitment.


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Titel: The future of payment systems - A case study on digiPROOF, a fingerprint based payment system