How Secure an Online Transaction Process in E-Commerce

Figure Summary of an Online Transaction

1. User makes online purchase. (See diagram above for each numbered step.)
2. A program within the Payment Page sends data to the T.P. (Transaction Processor).
3. T.P. checks User's account to verify funds and identity.
4. T.P. gets results back.
5. T.P. returns results to webpage informing user of purchase OK'ed or denied.
6. For OK'ed purchases only, T.P. sends details to a Settlement Processor, (SP)
7. S.P. sends authorization to User's bank to send $ to Merchant's bank.
8. User's bank sends funds to Merchant's bank.
9. Merchant receives funds and accounting details of transaction.

Details of A Transaction

Transaction Processor: a company which receives data from website programs, that offer online purchasing, and performs the following service for the owner of that website:
a. verifies the identity of the purchaser;
b. verifies that the purchaser's account is active, valid and that funds are available;
c. assuming ID is valid and funds are available, purchase amount is "set aside" (frozen);
d. purchaser is informed of outcome - transaction approved or not;
e. approved purchases are then sent to a "Settlement Processor".

Settlement Processor: a company which is authorized by the banking networks to transfer funds from a purchaser's account to a merchant's account, after a Transaction Processor has verified the purchasing action.

Profit Gate is an Authorized Agent for Total Merchant Services, one of the largest Transaction Processors in the world. A global leader in credit card processing, Total Merchant Services has been a pioneer of e-commerce and non-face-to-face transaction technologies since 1991. As one of the first companies to specialize in internet start-ups, they service thousands of e-business merchants worldwide.

Total Merchant Services streamlines and automates the credit card clearing process with an all-encompassing payment program. Rather than relying on third-party processors and their associated fees, merchants can count on Total Merchant Services to speed transactions, reduce fraudulent transactions, and ultimately reduce the cost of doing business. To better understand Total Merchant Services approach to credit card processing, here's a step-by step example of how the process works.

1. Authorization
Before the credit card acceptance process begins, merchants must first have a Web site where they plan to accept credit cards as payment for goods or services. Merchants also need a merchant bank account with a financial institution. Merchants then subscribe to an online payment service (such as Total Merchant Services) and install payment-processing technology on their Web server. With Profit Gate's assistance, all of these requirements are addressed with a single program.

Once the customer submits a credit card number on the merchant’s Web site, the program contacts Total Merchant Services to request authorization.Total Merchant Services filters the information for fraud and may reject the transaction.

The transaction information is then sent to the credit card network for authorization of the charge by the Issuing Bank. If the transaction is approved, an authorization code is returned to the merchant’s Web site and the authorization is complete.

2. Settlement
Once the customer’s order is shipped (or downloaded), the authorization code is used to settle the amount of the transaction. An Internet Payment Gateway and the credit card network exchange information with the Settlement Processor to confirm the transaction.

3. Funds transfer
Finally, a Settlement Processor requests a funds transfer from the Issuing Bank, which moves money through the Settlement Authority into the merchant’s bank. The payment process is now complete.

Source: www.myecommercehosting.com/howitworks.html