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By J. ZAVERI

Online Payment Processing Basics

� Online Purchase USING WEBSITE� quick and easy, instantaneous.

� Merchants (SELLER) must connect to a network of banks (both acquiring and issuing banks), processors, and other financial institutions so that payment information financial institutions so that payment information provided by the customer can be routed securely and reliably.

� The solution is a payment gateway that connects the online store to these institutions (e.g. bank)

� Payment information is highly sensitive � Trust and confidence are essential. So gateway should be

provided by a company with in-depth experience in payment processing and security (e.g. VISA)

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e-payment or ONLINE PAYMENT PROCESS

CLIENT BROWSER

MERCHANT’S SERVER

Information is encrypted

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CREDIT CARDS BANK ACCOUNTS PRIVATE LABEL CARDS

e.g. VISA e.g. ICICI, SBI, HDFC e.g. J.C. PENNY

PAYMENT SERVERCUSTOMERBROWSES

E-COMMERCE WEBSITE

Credit cards� Represents an account that extends credit to

consumers, permits them to purchase items while deferring payment, and allows payments to multiple vendors at a time.

� Credit card associations – Visa � Credit card associations – Visa � Issuing banks (process transactions)- Citibank� Processing centers (clearing house)- verify accounts

and balances : 3rd party.

� OR DEBIT CARD� INSTANT DEBIT

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# Credit cards #The parties involved :

� Consumer / CUSTOMER (BUYER)

� Merchant Web server (SELLER)

Payment gateway � Payment gateway

� Merchant’s bank (SELLER)

� Consumer’s card issuing bank (BUYER’S BANK)

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What is SSL?

� SSL is an abbreviation for Secured Socket Layer

� SSL technology secretly encodes (or encrypts) information as it is being sent over the Internet between your computer and Bank's Server computer system

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and Bank's Server computer system

� This encryption technology is designed to ensure that account information travels securely over the Internet and remains confidential.

The transaction processing� 1: Consumer makes purchase

� 2: SSL provides secure connection through internet to merchant server

� 3: Merchant software contacts clearing house

� 4: Account verification done by C/H� 4: Account verification done by C/H

� 5: Issuing bank credits merchant account

� 6: Monthly statement issued with debit for purchase.

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Front side of Credit Card:

(1) is the bank logo. (2) is the EMV chip (commonly referred to as 'Chip And Pin') (3) is the Hologram (4) is the 16 digit card number (5) is the logo of the card type (6) is the expiry date (7) is the name of the cardholder

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(1) is the magnetic stripe. (2) is the signature strip

A diagram showing the reverse side of a typical credit/debit card.

(2) is the signature strip (3) is the CVC2 code

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Credit Card Issuing Banks in India� HSBC

� ICICI Bank

� Deutsche Bank

� SBI

� Barclays Bank

� Canara Bank

Standard Chartered � Standard Chartered

� Amex

� HDFC

� Kotak Mahindra

� ABN Amro

� American Express

� Axis Bank

� Bank o Baroda

� City Bank.

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Type Public (NYSE: MA)

Founded 1966

HeadquartersPurchase, New York, United States

Area served Worldwide

Key people

Richard N. Haythornthwaite(Chairman)Robert W. Selander

Type Public (NYSE: V)

Founded Delaware (1970)

Headquarters San Francisco, California

Key people

Joseph Saunders (Chairman, CEO)John (Hans) Morris (President)Byron Pollitt (CFO)John Partridge (COO)Key people

Robert W. Selander(CEO, President & Director)

Industry Financial services

Products Payment systems

Market cap US$27.36 billion (2008)

Revenue ▲ US$5 billion (2008)

Operating income ▲ US$1.108 billion (2007)

Net income ▲ US$1.085 billion (2007)

Total assets ▲ US$6.260 billion (2007)

Total equity ▲ US$3.027 billion (2007)

Employees 5,000 (2008)

Website MasterCard.com

John Partridge (COO)

Industry Financial Services

Products Payment systems

Market cap US$ 75.20 billion (2008)

Revenue▲US$3.5898 billion (2007)

Operating income ▼US$-1.449 billion (2007)

Net income ▼US$-1.076 billion (2007)

Total assets ▲US$4.390 billion (2007)

Total equity▼US$-501.33 million (2007)

Website Visa.com

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Bitter facts of Plastic money!!!� ICICI Bank, lost more than Rs 11 crore due to over

8,000 cases of credit card frauds last year.

� A total of 703 and 2,484 cases were received by American Express Bank and HSBC Bank related to American Express Bank and HSBC Bank related to credit card frauds, in which they lost Rs 6.04 crore and Rs 4.90 crore, respectively.

� Citibank, which lost Rs 4.73 crore, Standard Chartered Bank Rs 2.39 crore and Deutsche Bank with a loss of Rs 2.09 crore

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$ Payment gateway $� A service that provides connectivity among merchants,

customers, and financial networks to process authorizations and payments. The service is usually operated by a third-party provider such as VeriSign. operated by a third-party provider such as VeriSign.

� A gateway that translates SET messages to and from standard bank financial data formats.

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Why is Payment Gateway needed?

� Payment Gateway holds the essence of any e-commerce site. One cannot think of making or receiving on-line payments without a Payment Gateway.

� Payment Gateway basically refers to an e-commerce service that authorizes payments for e-businesses & service that authorizes payments for e-businesses & online retailers.

� It, in a way, represents a physical POS (Point-of-sale) terminal located in most retail outlets. Payment gateways encrypt sensitive information, such as credit card numbers to ensure that information passes securely between the customer and the merchant.

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Alternative payment solutions� P2p = Person-to-person (No account- only mail)

like www.PayPal.com

� Multicurrency credit card acceptance services <planetpayment.com> <planetpayment.com>

� Token Value and Store-Based Credit

� www.internetcash.com

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� Digital Wallets http://www.webewallet.com/faq.cfm

� Smart cards (embedded chips to verify the card’s presence in a smart card reader).

� Visa: Fusion card

� MasterCard: Mondex� MasterCard: Mondex

� American express: Blue

� Auction resources <eBay.com> & <ubid.com>

� electronic bill presentment and payment (EBPP)

<cybercash.com> & < checkfreecorp.fiserv.com>

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THANK$A MILLION

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JYOTINDRA ZAVERITwitter handle @followERPwww.dnserp.com