Internet payment gateways
Summary Description How does an online store receive money from a buyer? Newswire's 5 Minute Guides looks at the mechanisms behind Internet transactions.
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Roullas Top10 Simon Vandore

Newswire
No


Editorial InformationArticle Location http://www.newswire.com.au/0005/5mg25.htm
Article Topic 5 Minute Guides
Story Order
Story Group 000528
Post Date 25/05/2000 09:16 AM Status Posted Entered by Simon Vandore on 24/05/2000 05:18 PM


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Content
Introduction
How does an online store receive money from a buyer? Newswire's 5 Minute Guides looks at the mechanism behind Internet transactions.

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How do online payments work?
Most merchants on the Web use SSL (Secure Sockets Layer) to securely transfer your credit card details. There are other reliable methods, such as secure wallet systems and electronic currencies, but at the end of the day, they are all just the beginning of the transaction process. An online transaction also needs a mechanism to verify the exchange of funds between buyer and seller. For example, any business can set up its own system of taking the details of a credit card holder, but it must then pass the information on to its bank so that the actual funds can be requested from the buyer's account.
This applies to everything from online shopping malls to bill payment portals and the next step, which is known as the Internet payment gateway.
What does this Internet payment gateway thing do?
An Internet payment gateway provides the link between an online shopfront and the financial sector. It allows transactions (either business to business, or business to consumer) to be verified, and enables an actual exchange of funds to occur. Most are run by trusted third parties who have a private link to the Australian banking system. The gateway provider translates credit card transaction details into the format used by banks and credit card companies, and then deciphers the information received to let the merchant know whether the transaction was approved or denied. Theoretically this exchange should all take place in a matter of seconds, so that it's transparent to the purchaser -- and very convenient for the seller.
Who runs Internet payment gateways in Australia?
It's impossible for each online commerce site to have its own line into the banking system, so most establish a relationship with a gateway provider. One of the oldest in Australia is Camtech in Adelaide, which claims to have 60% of the national payment gateway market, accounting for $7 million worth of transactions. Melbourne IT, the same company that handles .com.au domain name registrations, also operates a real time transactional payment system.
Another local provider, Pure Commerce, runs an Internet payment gateway which it recently extended to handle WAP (Wireless Access Protocol) transactions from a new breed of mobile phones with Web access. The company sees this as "a virtual EFTPOS terminal in your hand". SecurePay has a system aimed at both ecommerce and online bill payment. CommSecure is another big name, which has Westpac and OzEmail among its customers.
Should I care which gateway I'm using?
If you're a consumer, it doesn't really matter. The major concern for you is the secure transaction method used by the Web site's front end. However, you might see the payment gateway provider's logo on the site, just to inspire your confidence in the transaction's security.
If you are running an online shopfront, you'll want to think hard about the payment gateway you choose. Are its fees structured to suit your volume of business? Who's behind it? Does it have a reputation for reliable connectivity? Fees are a major concern -- as a business, you may be asked to pay a licence fee, a regular maintenance charge, and even an amount per transaction. Ideally the gateway will allow the merchant to accept transactions in any currency, and even display prices in a currency specified by the customer.
Why don't the banks do it themselves?
Indeed, some banks are implementing their own Internet payment gateways. For example, National Australia Bank has one called SIPS (Secure Internet Payment Services). The promotional advantage is that all credit card details remain with a bank, rather than passing through a third party.
However, a few years ago Visa and MasterCard developed SET (Secure Electronic Transactions), a complex system which verifies buyers and sellers by means of digital certificates. Ultimately it is hoped this will overtake SSL as the primary means of conducting online transactions, but so far it has proved difficult for Web sites to implement. There are now transaction systems which take the burden away from sites themselves and add smartcards for SET security, but it may be some time before they are widely implemented.


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How does an online store receive money from a buyer? Newswire's 5 Minute Guides looks at the mechanism behind Internet transactions.

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