E-Commerce Applications E-payment

Session 3 1

Ecommerce Applications 2009/10

E-Commerce ApplicationsE-payment

Session 3 2


Overview

• Payment process• Credit card payment online• Payment systems• Risks and challenges• Chargeback• Internet fraud

Session 3 3


• Buying and selling of goods and services over electronic networks.

E-commerce overview

customer

Payment system

Online Catalogue Currency Tax models Shipping Checkout Exceptions And then:

Inventory, accounts, Fulfilment, Customer Service, Marketing, Measuring success

WWW

e-shop site

business

Delivery logistics

Session 3 4


Payment: Customer point of view

– Browser or search for products and fill basket– Completes order form– Choose payment method/credit card. Notes that

order taken in secure environment and protected by digital certificate

– Places Order– Receives email confirmation of order – Receives email receipt of payment

Session 3 5


Payment: Business point of view

• Business owners/retailers point of view– Customer places order– Note: the customer receives email confirmation of

order which has been edited/configured by retailer– Retailer gets email confirming order has come in.– Retailer logs on to Administration site to collect

order and payment details– E-payment supplier request merchant services

providers to send funds to retailer’s bank account

Session 3 6


Payment systems

• Fundamentals– take money, anyway that suits the customer– manage risk of fraud and chargeback

• Options– Credit Card manual processing, or online processing– Digital Cash– Micropayments– Smart cards– Payment of delivery– Direct money transfer

Session 3 7


Credit card payment online

• Actors involved:– Customer– E-shop owner (business) might be merchant– Card issuing bank– Merchant service providers– Web agency (ASP)– Regulatory bodies

Session 3 8


Online Credit Card Payment

Card Issuing bank

Customer/shopper

Acquiring bank

e-shop site

Merchant service provider

E-payment gateway e.g. Worldpay

£$£$

Payment details

Payment details

Account settlement

Payment details

order

Session 3 9


E-Payment Suppliers

• Merchant services– CNP (card not present), PDQ/ePDQ– Business plan/prediction of sales– Deposit to cover fraudulent activities

• Authorisation Gateways– WorldPay, SecPay, Netbanx, etc.

• Authorisation Gateway checks:– Checks account number is valid and sufficient credit. – Check account name and address (recent).

• Still a problem if goods delivered to address other than one on the card.

• Merchant carries all the risk.

Session 3 10


WorldPay

• Checks card validity• Checks account credit balance• Authorises transaction• Transfers payment information directly to VISA and other

cards who make the transfer from customer’s account to retailers

• Don’t need existing merchant services agreement• Well evaluate business plan – in detail• Ideal for start up Internet businesses

http://www.worldpay.com

Session 3 11


SecPay

• For businesses with existing merchant accounts with NetWest, Barclays, Bank of Scotland, HSBC and Amex

• Apply for on-line account number • Charge to set up the account (+VAT) • Extra transaction cost

http://www.secpay.com

Session 3 12


E-payment: Risks and Challenges

Unique benefits• speed• convenience,• privacy,• relative anonymity

Challenges• Increase Chargeback• Legal Risks• Internet fraud• Product returns

Card not present or mail order/telephone order rules apply:

If goods bought with stolen card, even if obtained authorisation from issuer merchant is 100% responsible for refunding and the chargeback!!

Session 3 13


Chargeback

• Card issuer identifies disputed transaction and issues request for information

• WorldPay (for example) contacts the E-shop

• If the claim is proved issuer raises a chargeback which cannot be reversed

Card Issuing bank

Customer/Card Holder

e-shop site

NatWest

Worldpay

WorldPay Chargeback

Session 3 14


Risk: reasons for chargeback

Card holder:• did not receive goods• returned them• states did not authorise transaction• states did not participate in transaction• states that paid by other means• Claims received defective merchandise• Claims goods did not arrive• Card expired, accepted before valid, incorrect

card number

Session 3 15


Risks: chargeback burden

• Chargeback applies:• Up to 6 months after transaction• If merchants does not have:

– Signature or proof of receipt– Email or mail confirmation of order

• If any part of the order tracking documentation is incomplete, inaccurate, or not delivered with in a required time limit

Session 3 16


Internet Fraud

• Stolen Cards used before owner detects it missing• Identity Fraud where thieves assume identity of

owner and use the advantage of anonymity on the Internet

• Card Generators where fraudulent credit card numbers are generated using software programs

• Post-Purchase “Ship To” charges after valid transaction

Session 3 17


Summary

• Payment process• Credit card payment online• Payment systems• Risks and challenges• Chargeback• Internet fraud

E-Commerce Applications E-payment

Documents