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Credit cards
There is little doubt as to the value of being able to take 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 authorisation 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. Adetailed 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 authorisation 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 authorising them to ship the goods.