Ecommerce Applications 2007/8
E-Commerce Applications
E-payment
Session 3
1
Ecommerce Applications 2007/8
Overview
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Payment process
Credit card payment online
Payment systems
Risks and challenges
Chargeback
Internet fraud
Session 3
2
Ecommerce Applications 2007/8
E-commerce overview
• Buying and selling of goods and services over
electronic networks.
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e-shop site
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customer
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WWW
business
Delivery logistics
Payment system
Session 3
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Online Catalogue
Currency
Tax models
Shipping
Checkout
Exceptions
And then: Inventory,
accounts, Fulfilment,
Customer Service,
Marketing, Measuring
success
3
Ecommerce Applications 2007/8
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
4
Ecommerce Applications 2007/8
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
5
Ecommerce Applications 2007/8
Payment systems
• Fundamentals
– take money, anyway that suits the customer
– manage risk of fraud and chargeback
• Options
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Credit Card manual processing, or online processing
Digital Cash
Micropayments
Smart cards
Payment of delivery
Direct money transfer
Session 3
6
Ecommerce Applications 2007/8
Credit card payment online
• Actors involved:
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Customer
E-shop owner (business) might be merchant
Card issuing bank
Merchant service providers
Web agency (ASP)
Regulatory bodies
Session 3
7
Ecommerce Applications 2007/8
Online Credit Card Payment
Payment details
Card Issuing bank
£$£$
Merchant service provider
Acquiring bank
Account
settlement
Payment details
order
Customer/shopper
e-shop site
Payment details
Session 3
E-payment gateway e.g.
Worldpay
8
Ecommerce Applications 2007/8
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
9
Ecommerce Applications 2007/8
WorldPay
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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
10
Ecommerce Applications 2007/8
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
11
Ecommerce Applications 2007/8
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
12
Ecommerce Applications 2007/8
Chargeback
WorldPay Chargeback
Customer/Card Holder
Card Issuing bank
NatWest
Worldpay
e-shop site
• 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 with cannot
be reversed
Session 3
13
Ecommerce Applications 2007/8
Risk: reasons for chargeback
Card holder:
• did not receive goods
• returned them
• states did not authorise transaction
• states did not participate in transaction
• stares that paid by other means
• Claims received defective merchandise
• Claims goods did not arrive
• Card expired, accepted before valid, incorrect
card number
Session 3
14
Ecommerce Applications 2007/8
Risks: chargeback burden
• Chargeback applies:
• Up to 6 months after transaction
• If merchants does not have 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
15
Ecommerce Applications 2007/8
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
16
Ecommerce Applications 2007/8
Summary
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Payment process
Credit card payment online
Payment systems
Risks and challenges
Chargeback
Internet fraud
Session 3
17