Lecture 9 Online Payment methods

1、“Marketing on the Internet”Lecture 9:Online Payment methods By Clare ShamEmail: 7/25/20221Well cover Transfer money via the InternetPayment gateway systemTypes of payment methods & authentication such as e-wallets, digital certificate, smart cards, online check, online escrow system, etc.Build the T

2、rust for online business7/25/20222Transfer money via the InternetInvolve two major expenses: a merchant credit card accountenables you to accept credit cards for paymenta payment gateway. connects the transaction on your website in real time with your banks credit card processor. All this takes plac

3、e via secure Internet pipelines so that your customers credit card information is not compromised7/25/202237/25/20224Merchant Credit Card AccountMerchant Credit Card Account enables the merchant to accept credit cards from shoppers for payment. The Merchants Bank, sometimes called the Acquiring Bank

4、, opens a Merchant Credit Card Account for the merchant, allowing deposits based on credit card transactions. Independent Sales Organizations (ISOs) that sell Merchant Accounts place you with a Merchant Bank - for a fee. The banks own fees are typically much lower. The Merchant Bank then contracts w

5、ith a Credit Card Processor to processes credit card sales, debiting credit cards and depositing money in merchants accounts when a transaction clears or is completed. You dont select this, your bank does.7/25/20225Payment Gateway SystemA payment gateway connects the merchants order form to the cust

6、omers credit card processor or bank so that the transaction can be automatically authorized in real-time in just a few seconds.Whereas in Russia, China, and some other countries, 75% or more of the products ordered via the Internet are paid for by COD (Cash On Delivery)Many countries have a sophisti

7、cated means of payment via credit card or bank debit systems.7/25/20226How payment gateway works? (US)Customer fills out credit card information on the website order page and clicks on the submit button. Credit card and sales info are transmitted from the merchant to the payment gateway provider via

8、 secure Internet connection. (optional ) Credit card and sales info are transmitted to a fraud detection system via high-speed leased secure land telephone lines. (optional) The fraud detection system checks massive databases to see if the card and sale match likely patterns of credit card fraud to

9、determine if the risk is less than a pre-determined risk point total set by the merchant. (optional) A positive or negative response is transmitted from the fraud detection system to the gateway provider via high-speed leased secure land telephone lines. Assuming the response is positive 7/25/20227H

10、ow payment gateway works? (US)Credit card and sales info are transmitted from the payment gateway provider to the banks processor via high-speed secure land telephone lines. The banks processor checks a list to see that the credit card account is not overdrafted or reported stolen and that the numbe

11、rs in the address and ZIP code match the billing address on the customers credit card (AVS or Address Verification Service). If the transaction passes these checks, the sales amount is deducted from the remaining credit balance available for the customers account. A transaction authorization number

12、(or a negative response, if it doesnt pass) is transmitted from the banks processor to payment gateway provider via high-speed secure land telephone lines. A transaction authorization number (or a negative response) is transmitted from the payment gateway provider to the merchants website ordering s

13、ystem via secure Internet connection. 7/25/20228How payment gateway works? (US)The merchants website ordering system reports to the customers web browser either the success of the order or that the authorization failed. The merchant notifies the payment gateway provider that the ordered item has bee

14、n shipped and to mark the transaction as to be settled. (For digitally delivered products, transactions are automatically settled each night.)The payment gateway provider settles the transaction overnight with the banks processor. The banks processor transfers the money from the customers credit car

15、d account into the merchant credit card account, and the money is now available to the merchant. 7/25/20229International Payment TransferWhen credit cards are used to make a purchase in another country, the amount is converted automatically by the credit card company to foreign currency,and - includ

16、ing a small conversion fee - debited from the buyers credit card account. However, people in many countries dont commonly use or even own credit cards. They are beginning to develop other payment transfer systems:In Germany, they give checking account info to merchants that directly debit their bank

17、 accounts. Thus, e-commerce in Germany uses a debit system. In China,most e-commerce transactions take place by COD, though payment gateways now allow merchants to accept direct debits from multiple banks at which their customers do business.In Russia COD is the primary mode of e-commerce, but a for

18、m of prepaid e-cash wallets is being accepted in more shops, such as PayCash.ru.7/25/202210Types of Payment Gateway SystemPrepaid E-Cash WalletsThese programs require funding a wallet or virtual account with money via check, credit card, or funds transfer from a bank.To succeed, such a system must b

19、e adopted by both consumers (who install a wallet on their PC or become members using a web interface) and merchants (who are willing to take payments via e-cash). Without a critical mass of both consumers and merchants, a wallet system cant succeed. Service BureausService BureauThese companies hand

20、le the entire money transaction process for merchants - for a fee. The merchant receives the order to ship, and receives funds several weeks after the order. No merchant account required!, eg. CCNowsForm hosted on the gateways site.Order system & API hosted on the merchants siteThese companies devel

21、op payment gateway software & systems used by acquiring banks, large companies, and financial institutions to offer payment gateways to their clients, eg. 7/25/202211How to shop for an E-Commerce Payment GatewayNever shop for a payment gateway first. Heres the preferred decision order:Shopping Cart.

22、 Find the store-building program that meets your companys needs. It can be expensive to change to another system if wrong choice at the beginning. Payment Gateway. Determine which payment gateway systems (if any) are supported by the shopping cart you have selected. Now find a compatible Gateway tha

23、t fits your budget and is available in your country. Web Hosting Service. Find a web hosting service that supports both your selected Shopping Cart and payment gateway. Merchant Credit Card Account. 7/25/202212PlayersVeriSign Payment SystemsCyberCCyberSA7/25/202213International Currency - PlayersWor

24、ldPay in the UK allows merchants to accept payment in 160 currencies, but only remits payment to merchants in 22 currencies (not including the Indian Rupee). http:/WorldP PlanetP in New York allows merchants to accept payment in 140 currencies and remits in 22 currencies (but not the Rupee). http:/7

25、/25/202214Verifying Purchaser AddressesTo verify address of the foreign orders, we have to call the issuing bank in the foreign country. AVS (Address Verification System), the service that compares numbers in the ZIP code and address fields with those on record for the cardholders billing address, i

26、s only available in the US http:/AtlantaProP CyberSource http:/ now will check to see that a delivery address is a valid one.Fraud detection services, such as those offered by CyberSource and eFalcon, keep massive computer databases on the use of credit cards worldwide. 7/25/202215Security Provide 5

27、 service foundation for e-CommerceConfidentiality - concealment of data from all but authorized parties. User Authentication - assurance that the parties involved in a real-time transaction are who they say they are. Data Origin Authentication - assurance of the source of a message. Data Integrity -

28、 assurance the data has not been modified by unauthorized parties. Non-repudiation - the binding of an entity to a transaction in which it participates, so that the transaction cannot later be repudiated. That is, the receiver of a transaction is able to demonstrate to a neutral third party that the

29、 claimed sender did indeed send the transaction. 7/25/202216Credit Card Fraud Big problem for MerchantFor US buyers, their loss is limited to $50. For merchants its another story. Between Nov 1999 and Feb 2000, travel site E lost 12% to 18% of sales through fraudulent card purchases.Visa and MasterC

30、ard claim a fraud rate of 0.08% to 0.09%, and say theres little difference for Internet sales, but they recently invoked stiff penalties for excessive chargebacks. The Internet Fraud Prevention Advisory Council pegs online transaction fraud rates at 2% to 40%.Payment gateways are gradually developin

31、g sophisticated fraud checking, but it is not in place yet.Merchants can capture IP addresses of purchasers and say that they are doing so, look carefully at purchases made from free e-mail addresses, those with different shipping and billing addresses, bounced e-mail order confirmations, and large

32、middle-of-the-night transactions. 7/25/202217Alternative secured payment systemsAccepting online checks. US banking law allows merchants to collect check info from US purchasers and print out a check without a signature, which merchants can deposit at their bank. See Yahoos “Transaction Clearing” or

33、 “Check Services” category. Credit card money transfer systems. Services such as PayP allow money to be transferred from one individuals credit card account to anothers, and from your credit card account to your checking account. But its only for US residents at present. See Yahoos “Digital Money”.

34、Escrow systems allow international transactions to be completed upon receipt of goods. eC uses Bank of America. iE is widely used by auction sellers and buyers. Third party transaction services. International sellers, including those in the US, can use London-based WorldPs services to accept credit cards and remit in 22 currencies, without requiring the selling business to have its own merchant cred