Write short note on the following:
- Generally, in e-business transactions, payments are made online.
- There is no physical exchange of cash across a counter, as possible in retail outlets or stores.
- The procedures and steps involved while making an online payment is known as ‘Payment Mechanism’.
- Payments are made with the help of an e-commerce application service provider called ‘Payment Gateway’.
- Payments can be made through debit cards, credit cards or by direct transfers from bank accounts through the net banking facility.
- These options for payment are offered by most payment gateways.
- A payment gateway authorizes payments made online by the buyer.
- A payment gateway is the virtual equivalent of a physical point of sale terminal located in outlets.
Working of a Payment Gateway:
Any buyer who uses the payment gateway goes through the following steps:
- Place an Order: After selecting the desired goods, the customer confirms the order by clicking on the ‘Submit’ button on the merchant’s website.
- Mode of Payment: The customer is then asked to select the mode of payment i.e. either debit/credit card or Net
- The customer is then required to enter his credit/debit or Net Banking details, as he proceeds for payment.
- Once the details are entered, the customer’s web browser encrypts the information.
- Information sent to the Payment Gateway:
- The merchant, or the e-business website, then forwards the transaction details to their payment gateway.
- At this point, again information is coded.
- Information sent to the Payment Processor:
- The payment gateway forwards the transaction information to the payment processor used by the credit card issuing bank.
- On the payment processor, the customer is required to enter a PIN or password.
- Information sent to the Card Association:
- The payment processor forwards the transaction information to the card association.
(e.g.: Visa/MasterCard/American Express)
- Information sent to the Card Issuing Bank:
- The card association forwards the information to the card-issuing bank.
- Authorization of the Payment:
- The card issuing bank authorizes the payment and sends the authorization back to the merchant’s website (via the same process).
- Once the authorization is received, the sale is approved.
- The entire process does not take more than 2-3 minutes, depending upon the speed of the
- Internet Connectivity Issues:
- If the internet connection fails at any step of the process, then the appropriate procedure is adopted.
- In other words, if the connection fails after payment but before the order is finalized, then the payment is credited back to the card account within a stipulated time.
Concept: Payment Mechanism
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