Electronic Payment Gateway In Developing Countries Information Technology Essay


In this chapter brief overview of electronic payment gateway and also compare different payment methods of different countries and the e-payment gateway that provides secured transactions over the Internet. What are requirements and factors for an efficient and secure electronic payment system? What are weaknesses and strength of Payment gateway? In short all the detail, which is essential for any secure and efficient electronic payment gateway, is provided.

1.1 Purpose of Document

This is final year project. This project is basically the designing and implementation of the new electronic payment gateway according to the requirement of local environment and the available resources. The document also provides an insight to design, implementation and applications of the proposed e-payment gateway.

1.2 Background knowledge

E payment is a subset of an e-commerce transaction to include electronic payment for buying and selling goods or services offered through the Internet. Generally we think of electronic payments as referring to online transactions on the Internet, there are actually many forms of electronic payments. As technology developing, the range of devices and processes to transact electronically continues to increase while the percentage of cash and check transactions continues to decrease. In the US, for example, checks have declined from 85% of non-cash payments in 1979 to 59% in 2002, and electronic payments have grown to 41%.

The Internet has the potential to become the most active trade intermediary within a decade. Also, Internet shopping may revolutionize retailing by allowing consumers to sit in their homes and buy an enormous variety of products and services from all over the worlds. Many businesses and consumers are still wary of conducting extensive business electronically. However, almost everyone will use the form of E Commerce in near future.

Types of e-payment

The following types of electronic payments are most common today.



Mobile Payments

Financial Service Kiosks

Television Set-Top Boxes and Satellite Receiver

Biometric Payments

Electronic Payments Networks

Person-to-Person (P2P) Payments

The type of proposed gateway is P2P payment. By using P2P payments one person enable to pay other using an account. PayPal in the US, which was recently purchased by Ebay, is one of the most frequently used P2P mechanisms. The Tower Group estimates that the volume of P2P payments will grow from 105 million transactions in 2002 to 1.4 billion transactions by 2005. P2P payments can be made through a variety of means, including services like PayPal, transfers using card readers, or other. In the future other devices, such as mobile phones or PDAs, could also be used to enable P2P electronic payments

E-payment gateways

The service that is responsible of sending secure and reliable transaction of payments from Client to Merchant.

1.3 Motivation

E payment system offers different services for the customer so they can interact with the commercial market locally and globally. As good reliable trustworthy gateway built around the needs of citizen is essential to the modern fair and dynamic society. In Pakistan most of the population required such fair e payment gateway. The existing gateway is not fair and reliable. The success of the e payment gateway is primarily associated with the understanding needs of the citizens and addressing them through ease. Pakistan is developing country and careful allocation of the resources should be made because of the limited budget. On the basis of citizen requirements and the existing resources we direly need for developing a secure efficient e payment gateway because we have resources and there are many application areas for such payment system like export, local businesses etc.

1.4 Research statement

On the basis of strengths and weaknesses of electronic payment gateway of different countries and the requirements associated with any e-payment gateway, we proposed a Secured, reliable and efficient electronic payment gateway according to the requirements and resources of the local environment.

1.5 Objectives

Main objectives of this research is to analyze the existing e payment gateway in developed and as well as in developing third world countries and design the new one using the existing available resources that should be easy to implement, easily understandable, provide quick and instant accessibility, reduced paper work and better focus on common man needs. The e-payment gateway should be able to complete whole processing and transaction in real time. The system should also provide trust and security that are the major factors involved in making any payment system successful.

1.6 Scope of Document

This document analysis’s the e payment gateway of different countries. On the basis of the weaknesses and the strengths of these analyzed systems a new e payment gateway is designed and implemented for Pakistan that is according to the need of citizens and the government.


This chapter discussed the electronic payment gateway of different countries including developed and the developing countries like USA, turkey, Nepal. How their existing payment gateway works. Some countries proposed new gateways on the basis of flaws in the existing gateway all the factors which cause their failure and the proposed gateway are also discussed in this chapter. The strengths and the weaknesses of each gateway are also given in detail.

2.1 Overview of Global E Payment Diffusion

2.1.1 Projection of E-Business Spread-out Worldwide

2.1.2 The Diffusion of Global Payments Market

 2.1.3 Degree of Collaboration and Economic Size Relation 

The appropriate level of industry-wide collaboration seems to be correlated to market size

 2.1.4 The relative Development of Countries and the Relative Microeconomic Business Environment

 Above chart shows that the best practice countries in payment market sophistication are also ones with highly competitive economies.

2.2 Overview of Electronic Payment Gateway in some Developed Countries

2.2.1 Regulatory and Initiatives in Europe

Many regulatory and cross-industry have started to facilitate customer adoption of new payment technologies are already underway. The followings are the examples in Europe market.

EMV (the Europay Mastercard Visa alliance)


Global platform

ECBS (European Committee for Banking Standards).


 CEPS (Common Electronic Purse Specifications)

2.2.2 E payment Gateway in USA $3.5 trillion transactions pours in the Bank of New York through three payment gateways . They transmit everything including utility bills, payments etc. These electronic payment gateways converge at just 10 secret data-processing centers nationwide.

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Model Process diagram of e payment gateway in USA is shown in Figure 2.1

Figure 2.1: Process diagram of e payment in USA

USA e payment Gateway advantages

Every payment is hosted on the USA ePay secure servers, and these are automatically secured by the SSL certificates on servers. The gateway also supports another layer of security with an encrypted hash that prevents vandals from misusing your merchant’s form on a different website. These servers are extremely reliable in up time so people don’t need to worry about their payments.

2.2.3 E-Payment Gateway in China



Payment is the single biggest unmet demand in China:

1. Lack of trusted and secure payment mechanism, low credit card penetration, no personal checks

2. Inefficient legacy payment systems (COD, Bank/Postal wires)

3. Bank centric, debit card driven payment environment with little trust, virtually no protection for the consumers

4. A mix of online and offline markets: payment is not only a bottleneck to ecommerce, but also the missing link in traditional businesses.

2.2.4 E-payment Gateway in Turkey


Current e-payment gateway in Turkey in shown in Figure 2.2.

Figure 2.2: Current e-payment gateway in Turkey


This gateway is not user friendly and secure.

The electronic payment gateway’s charges are very expensive, total cost of ownership, and maintenance cost.

The electronic payment gateway has different user interfaces and different terminologies and makes it very confusing for different users who have different backgrounds because of which majority of users prefer visiting bank offices rather than using the Internet.

Ineffective use of Internet bandwidth and other computing resources, and increased security risk figure.

As during office hours internet traffic rate is very high and because of high load and Internet traffic, the possibility of completing a transaction is very low. In general, Internet services are poorly or ineffectively operated.

To increase the Internet bandwidth it needs additional costs that might reflected on user’s budget.

Suggested e payment gateway for Turkey

The existing electronic payment gateway have shown many shortcomings, where the basic problems are mainly related to the cost, opaque structure and security, which was heavily influenced by locally developed approaches of the banks themselves. There are a number of activities in standardization that will hopefully be reflected on the Turkish e-payment and transaction arena.


New suggested e-payment gateway in Turkey is shown in figure 2.3.

Figure 2.3: New suggested gateway in Turkey


The entire architecture is mainly aimed to solve problems introduced inherently in the existing payment gateway.

Atomicity: The transaction must occur completely or not at all,

Consistency: All parties must agree on the facts of the exchange constraints, e.g., receiver should not change banking relations on senders premises,

Economy: Conducting a transaction should not be expensive,

Interoperability: The gateway must support interaction between different gateways,

Scalability: One should add new payment and transaction systems and transactions types without having to install new software or perform additional modifications.

Flexibility: One should, at any time, be able to change banking relations and continue to use existing gateways.

2.2.5 E-Payment Gateway in Nepal

Current situation:

According to Vivek S. Rana there are around 3 banks that are offering Internet Banking services.


Current e payment gateway in Nepal is shown in Figure 2.4

Figure 2.4: current e payment gateway in Nepal


Electronic payment gateways are not commonly used.

Number of credit/debit/pre-paid cardholders are low.

Only Rich and elite people have credit cards

Debit cards: Private enterprises mainly for salary distribution.

Mostly students have prepaid cards.

Majority of middle class are out of such services in Nepal.

Fund transfer from one account to another account in another bank is not possible

Lack of quality/ adequate fiber optical/high speed network.

High local levies and bank transaction charges.

Limited E-security knowledgeable resources in country

Little confidence in e-payment on Internet

Limited Internet access among customers

2.3 Electronic Payment gateway in Developing Countries

On the basis of the survey conducted by Wondwossen Tadesse, Tsegaye G/Medhin, Solomon Atnafu, Dawit Bekele there are lots more challenges faced by third world countries especially Africa, Ethiopia that are causing for implementing any electronic payment gateway in these countries. Some weaknesses are described below.


Frequent connectivity failure in telephone lines.

Low bandwidth, particularly for Internet

High cost of Internet

Availability of Internet especially at peak hour is low

Unavailability of dedicated data service networks and closed financial networks

Frequent power interruption

Banks are not yet fully automated

No financial networks that links different banks

Banks are not ready for e-payment

No legal and regulatory framework for e-commerce and e-payment

Inexistence of large pool of e-commerce and e-payment users group,

Lack of awareness on the benefits of new technologies

Lack of trained personnel in key organizations

People are resistant to new payment mechanisms

2.3.1 E-Payment Gateway in Africa


As penetration of credit card is low in Africa so online credit card payment or electronic payments based on credit card are not suitable for Africa. Credit card usage depends mainly on bank accounts. But mostly people of Africa do not have bank accounts.

Inadequate telecommunication infrastructure

Banks are not ready

Behavioral constraints

Inexistent of proper legal and regulatory framework

Low level of credit card access

2.3.2 E-Payment in Pakistan



Electronic Payment Gateway is present in our country but it’s not secure enough. The proposed architecture was also lacking the security feature. That architecture is made secure by the implementation of secure electronic transaction infrastructure. Only authentic customer can now purchase goods from merchant’s site whose credit card number is valid and credit card amount is enough to buy the desired product. At first its checked weather the customer is authorized one or not then the whole transaction takes place. Hence the site is made secure enough that any authorized customer can easily rely on it and fearlessly make the electronic transaction over the internet.

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a. DES

b.Triple DES:

In cryptography, Triple DES is the common name for the Triple Data Encryption Algorithm (TDEA) block cipher, which applies the Data Encryption Standard (DES) cipher algorithm three times to each data block. Because the key size of the original DES cipher was becoming problematically short, Triple DES was designed to provide a relatively simple method of increasing the key size of DES to protect against brute force attacks, without designing a completely new block cipher algorithm.

c. AES:

Requirements of entities involved in electronic payment gateway

According to Paul, Smit, Helme in electronic payment system there are some requirements that are associated with efficient payment system. All the entities involved in any payment system have some set of requirements e.g. system efficiency, security and privacy. On the basis of the entities involved in such system these requirements can broadly classify into two classes like requirements of customer or merchant and requirements of financial institution and regulatory authority.

i)Concerns of customers and merchants

Customers and merchants will have an almost common set of wishes and concerns for electronic commerce mechanisms:

Privacy:  It is necessary to assure privacy in the payments like bank accounts.

Naming: There should be a way of identifying the customers bank accounts and the merchant bank accounts.

Security: In gateways security should provide to protect data of transactions.

Integrity: Data should be difficult to change.

Confirmation: When transaction took place customer must have notification and merchant must have confirmation

Confidentiality: Any third parties should not be able to access or view such payments.

Settlement: Separate banking institutions must have a way of settling their accounts.


The Internet has the potential to become the most active trade intermediary within a decade. Also, Internet shopping may revolutionize retailing by allowing consumers to sit in their homes and buy an enormous variety of products and services from all over the worlds. Many businesses and consumers are still wary of conducting extensive business electronically. However, almost everyone will use the form of E Commerce in near future.

Most of the developing countries lagged behind in building the Internet infrastructure. Though Asia is catching up with Europe in number of Internet hosts, subscribers and PCs, the penetration per inhabitant is still very low. In Pakistan, we do not have any payment gateways. If you develop software and you want to sell it on Internet, there is no way to get the payment. Currently Ebay has the payment Gateway Paypal which is very popular. But we do not have any payment gateway in Pakistan. We need to develop in Pakistan. It will facilitate payment of all types. We shall be able to pay utility bills; we shall be able to transfer funds from bank accounts. We shall be able to buy from Internet. Banks are not suitable for that as people do not wish their economy to be documented. Pakistan needs an online payment gateway for a small/medium sized business, which could set services /product on Internet. The payment system would provide a quick, efficient and secure mechanism.

4.1 Major issues in designing an electronic payment gateway

Translating checks or credit card transactions to the Internet requires finding electronic and business model equivalents for the functions used in the existing paper-based system. The simple model below illustrates the major issues that must be addressed in designing an electronic payment system.

Privacy:  It is essential to assure personal privacy in the networked environment.

Naming: There must be an unambiguous way of identifying the payers’ bank accounts and the payees’ bank accounts.

Security: Users of information should provide security measures to protect the data

Signatures: it must be possible for the payers’ banks to verify that payment instructions were generated by people authorized to use accounts.

  Integrity: credit information should be difficult to alter.

Confirmation: payees must have confirmation that transfers took place; payers must have notification of transfers out of their accounts.

Confidentiality: third parties should not be able to monitor such payments.

 Settlement: separate banking institutions must have a way of settling their accounts.

4.2 Proposed Model for E-Payment Gateway

4.3 Participants in the proposed Model:

Online customer:

A customer is an entity who will buy products by making payments in timely manner.


A merchant is a seller who will receive payments made by customer.


Two banks are involved.

1. Client bank

2. Merchant bank

Client bank:

Client bank holds client’s bank account and validate customer during account registration.

Merchant bank:

Merchant bank holds merchant bank account. It is responsible of management, fraud control etc

Payment Gateway:

A payment gateway is connected to all customers, merchants and banks through Internet and responsible for the speed and reliability and security of all transactions that take place.

State Bank:

If any bank wants to be an authorized part of electronic payment system then it should be certified and all the banks that are involved in the transactions should be authorized by the State Bank of Pakistan.

Certification authority:

This entity certifies all customers and merchants. It is necessary. They issue public key certificates to entities involved in a payment gateway so that their authenticity can be publicly verified.


5.1 Data Design.

5.1.1 Data Operations

Insert Data

Encrypt Data

Send Data

Receive Data

Decrypt Data

Split Data

Save Data

Update Data

Search Data

Delete Data

5.1.2 ERD



Customer’s Bank

Merchant’s Bank

Process and Data Analysis

5.2.1 Context Level:

5.2.2 Level 1:

5.2.3 Level 2:

System Requirements

5.3.1 Hardware Requirements.

Pentium III 700MHz Processor

256 Mb of Ram

Network Card

5.3.2 Software Requirements

.Net Framework 1.1 or .Net Framework 2.0

Visual Studio 2003 or 2005

Ms. Access

5.3.3 Non Functional Requirements

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5.3.1 Reliability.

5.3.2 Usability.

5.3.3 Portability.

5.4 Use Cases



View Items




Order Info

Split Data

Decrypt Data


Save Request


Mail Client

Make Payment

Update Account

Payment Request


Mail Merchant

Update Account

Get Payment

Orders Record

Items Record

Sequence Diagram

5.6 Class diagram


5.7 Algorithms

5.7.1 Algorithm of Client:

Start and connect

Start Customer browse merchant website

If select Category then

Go to Item list of selected category

If Select Item

Then Show detail of selected item

If Want to buy selected item

Then select Add to order form

Else Go back to category

If select add to order form

Do AddToOrder SubCategoryId

go to Order form and fill required fields like credit card No., expiry Date, and telephone no, Address

Select Submit

Else Continue shopping

Else Cancel

If select submit Display Authorization

If Credit card no.Text is equal to Credit card no.

display This Customer is Authorized From Bank.

5.7.2 Algorithm of Payment gateway

Start connection

If connected

Receive payment message

Else display Not Connected

If receive payment message

{Decrypt message

Split and send it to different textboxes

Add to database

Sent it to Client bank}

Else Cancel

If client bank is sending message

{Receive it

Send it to merchant bank}

Else wait

If merchant bank is sending message

{Receive it

Send it to Merchant}

else wait

5.7.3 Algorithm of Client Bank

Start connection

If connected

Receive payment message including client’s info

If client’s info is present in database of bank

Send message to server This customer is Authorized

Else Send message This customer is not Authorized

If customer is Authorized

{Save payment request into database

Deduct amount from Client bank

Send that amount to Payment Gateway}

5.7.4 Algorithm of Merchant Bank

Start connection

If connected

Receive payment message including merchant account no.

If merchant’s account is present in database of bank

{Receive payment

Add payment to Merchant’s account}

Else Send message Invalid account no.

5.7.5 Algorithm of Merchant

Start connection

If connected

{Make and update website

If server is sending message

Receive message and decrypt it}

Else retry to connect

6. Results

1.Table of comparisons of various countries






























Proposed System





Time: Time of transaction

Cost: E-gateway’s charges per transaction

Availability: The degree to which e-gateway is operable

Security: Overall security related to electronic gateway

2.Various Techniques of encryption

DES (Digital Encryption Standard) is a 56 bit key encryption standard. But it was observed that it can be compromised. Therefore, its improved standard was developed, called Triple DES. It uses 168 independent key bits. That has been used in the encryption. There is latest improvement known as AES (Advanced Encryption Standard). However, Triple DES is considered to be sufficiently strong.

Experiments were carried out to compare the 128 bit, 64 bit encryption and AES encryption. The results are as follows: Time was compared for encryption. If there is large number of transactions, the time assumes importance.

Comparison of Encryption standards

3. Survey Results:

I did survey in three different areas, and wrote it by compiling the average results of mentioned questions.

Have u ever used this system

Area 1:20% Yes

Area 2:50% Yes

Area 3:45% Yes

Do you find it easy to use?

Area 1:40% Yes

Area 2:20% Yes

Area 3:20% Yes

c.Describe your e-business activity? Selling buying

Area 1:99% Buying

Area 2:100% Buying

Area 3: 100% Buying

Is there any chance of fraud in it?

Area 1:80% Yes

Area 2:85% Yes

Area 3:90% Yes

Have you ever heard about fraud in this system

Area 1: 81% Yes

Area 2: 82% Yes

Area 3: 82% Yes

What kind of security you want in this system

Area 1: Only System and Customer should be involved in this system

Area 2: No one should be allowed to know my current balance in account

Area 3: No one could hack my account.

What are main problems of this system?

Area 1: Security

Area 2: User friendly and security

Area 3: Security and Reliability

Why you don’t use this system? Because of no access to Internet and Pc?

Area 1: 10%Yes

Area 2: 15% Yes

Area 3: 10% Yes

Graph of Survey Results

Graphical results of survey

User Friendly: People wants a payment gateway which should be easy to use.

Knowledge: Some people don’t know anything about payment gateway.

Trust: Mostly people don’t use it because of lack of trust.

Need: Some people thinks there is no need of e-payment gateway.

PC and Internet availability: Limited access of PC and internet.

4) Experimental Results:

As compare to other e-payment gateways our proposed system will be more secure and do transactions in less time as compare to other gateway. Proposed system will be inexpensive as compare to existing systems

Graphical results of proposed system

Conclusion and Future Work:

Electronic Payment Gateway is present in our country but it’s not secure enough. The proposed architecture was also lacking the security feature. That architecture is made secure by the implementation of secure electronic transaction infrastructure. Only authentic customer can now purchase goods from merchant’s site whose credit card number is valid and credit card amount is enough to buy the desired product. At first its checked weather the customer is authorized one or not then the whole transaction takes place.Hence the site is made secure enough that any authorized customer can easily rely on it and fearlessly make the electronic transaction over the internet

If this system is to be implemented in Pakistan then strong support of government is needed as there is not much awareness of electronic transaction in Pakistan. People think of electronic payment as a People are to be educated that it’s a secure way of buying goods.

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