How to Receive Payment at Your Web Store

Although the majority of payments in Web stores are made through traditional credit card transactions, web store owners need to be in a position to receive payment in as many ways as possible in order to maximize your sales.

Credit Cards

There is little doubt as to the value of accepting credit cards as payment for your product or service. The problem is that it can be difficult to obtain a merchant account if you do not have a bricks-and-mortar store or if the majority of your business is via mail order. Many banks and card processors are particularly shy of any Internet based businesses. However, with the growth of mail order only and home based businesses, many intermediaries have appeared offering to provide merchant accounts. Be careful, as fee structures vary widely and your merchant account could cost you a lot more than necessary.

Once your merchant account is in place you need to be able to verify each payment. The simplest method is to manually verify each credit card payment through a terminal or software , then pack and ship the goods.

If customers are unwilling to wait for manual verification, or your sales volume is high, you need real-time card verification software. One such tool, ICVerify, is available for DOS, Windows, and Unix, and is integrated with many Web storefront packages. ICVerify collects credit-card information from a Web form and processes the authorization in real time, depositing the purchase price amount in your merchant account. ICVerify currently requires a dedicated connection to a bank or credit-card processing company, although an Internet-based solution called NetVerify is being developed.

An alternative credit-card processing scheme, supported by card-issuing banks, is the Secure Electronic Transaction (SET) protocol developed by Visa and MasterCard and now backed by American Express. Designed for cardholders, merchants, banks and other card processors, SET uses digital certificates to ensure the identities of all parties involved in a purchase. SET also encrypts credit and purchase information before transmission on the Internet. However, despite the hype from the banks and the card issuers it is likely to be at least 2001 or 2002 before SET becomes widely established. A detailed explanation of how SET works can be found in the Technology Watch section.

In the meantime there are already rival systems to SET available from several companies including CyberCash, Verifone and First Virtual.

CyberCash and Verifone both use a helper application called a “wallet”. In the process of setting up the wallet, the user provides their credit-card information and receives an encrypted code that refers to their credit card in return – credit card numbers are only stored in the Wallet, not at the merchant’s server and not by CyberCash or Verifone. When making a purchase at a participating Web store, the wallet passes the code to the merchant. The merchant then hands that code, along with the purchase price, to the wallet issuer who verifies the transaction with the credit-card company and transfers the funds to the merchant along with an authorization to ship the product.

First Virtual issues a VirtualPIN to the customer, after they have provided their credit-card number over a voice telephone call – no credit card information is ever transferred over the Internet. Customers can then use their VirtualPIN in lieu of a credit card number. For each purchase, First Virtual sends the user an e-mail message asking them to confirm the transaction. Once First Virtual receives the confirmation back, the credit card transaction is processed off the Internet and an e-mail sent to the merchant authorizing them to ship the goods.

Additional ways to receive payment at your Web store also include:

Digital Cash

Digital cash or e-cash is nothing more than a string of digits or tokens issued by a bank. To use e-cash, both users and merchants must have an account with a bank that issues e-cash. The bank gives them “purse” software for managing and transferring their e-cash. Users convert funds from their regular accounts into e-cash and then transfer it to the purse software, where it is stored on the user’s hard drive in encoded form until it is spent.

When making a purchase with e-cash, the user transmits the relevant amount of tokens to the merchant who relays them to the bank for verification and redemption. Since e-cash is not a physical object, a complex series of serial numbers are used to assure that each e-cash “coin” can only be spent once. Users seeking privacy in their transactions can not use credit cards as they are highly traceable. E-cash however, can be made to behave like regular cash through the use of blind signatures which allows banks to check the tokens are valid but prevents them from matching the tokens to the person they issued them to.

Other advantages of e-cash are the relatively low transaction costs and the fact that it can be divided into smaller denominations than are used in the real world. This makes it suitable for use in low value transactions such as paying for a stock quote or news article. These small denomination tokens are known as microcash and transactions with them are called microtransactions or micropayments.

The major disadvantages to e-cash is that there are currently very few banks that issue it or Web stores that accept it.

Electronic Checking

In virtually all aspects an electronic check has the same features as a paper check. Indeed, in its simplest form some systems merely require the customer to fill out a form in the Web store. This data is then transferred to the merchant where it is converted in to a paper check by using blank check forms in a standard office printer; the check is then submitted to a bank for payment as normal.

A further level of security can be obtained by utilizing third parties who provide additional services such as verification.

The Redi-Check system allows customers to enter their checking account information at a secure site – they need never repeat this information to any Internet merchant – and then chooses a unique user name and password. A customer wishing to make a purchase from a participating Web store simply completes the merchant’s online order form. The order information is then submitted to Redi-Check’s secure server where it is verified.

The CyberCash PayNow system is basically an extension of their credit card wallet. After users register for the PayNow service, their checking account(s) information is electronically stored in an encrypted format in their wallets. When making a purchase at a participating Web store, the customer elects to use the PayNow system and enters a pre-assigned user ID and password to review their billing information. The user then clicks on a “pay button” to pay the entire amount of the balance due, or enters the amount he or she wishes to pay. The CyberCash Wallet opens and prompts the user for a Wallet password. The user enters the password, selects a payment instrument, and confirms payment.

Other Payment Methods

Commerce on the Web is still in its infancy, and many customers will wish to use more traditional payment methods. You therefore need to ensure you are able to accept payment in as many ways as possible, for example credit cards via the telephone or COD.

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How to Receive Payment at Your Web Store

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