Computer Notes

Header Right

Home » ECommerce » Electronic Commerce

Secure Electronic Transaction (SET)

By Dinesh Thakur

This also uses digital certificates, which also come from Certificate Authorities, but here another organization known as a proxy merchant is also involved. The idea is that buyers send their, suitably encrypted, credit card details to the proxy merchant which performs the same identity check as for SSL. Assuming everything is in order this proxy merchant then sends an authorization to the seller, but withholds the credit card details. From the point of view of the seller they have the go ahead to complete the transaction, they will get paid, while the actual details of the credit card are, to them, irrelevant. All they need to know is that the card is genuine. It is therefore only the proxy merchant which can match credit card details to name and addresses.

This might seem like transferring the problem rather than solving it as there will still exist a computer file holding extremely valuable credit card details, but the safety here lies in the quantity of those files. Instead of potentially millions of websites each holding credit card details there will be just a small number where the security can be guaranteed; something that cannot always be said of other websites. By concentrating the information together in this way it can be guarded by organizations where security is of paramount concern and taken care of by experts. In fact the latest boast from the companies involved with SET is that their information is protected by encryption routines stronger than those used by the military to protect nuclear launch codes. (So if SET security is ever broken the world might have more to worry about than a banking scandal.)

Given that SET is being backed by MasterCard, Visa and American Express not to mention Microsoft and Netscape the chances are high that this will be adopted throughout the Internet. As such any company who wants to trade off their website has very little choice but to take an interest.

Finally, for anyone wondering where on the computer all these digital certificates will be stored the answer is simple: in a ewallet. These are now included as standard in the latest versions of all the Browsers.

Now that what might best be described as the theory has been dealt with it becomes time to consider more practical matters. Exactly how can anyone set up their own e-commerce website? The first, and easiest, way of setting up an e-commerce website is to throw money at it. Outside consultants can be brought in or companies specializing in e-commerce solutions can be approached. Then just sit back and let it happen. By far the easiest it might be, but it is also the most expensive. In which case what follows is for people who lack such deep pockets. People, in other words, who have to do it themselves,. Here the first point to consider is payment. How will a company be paid for goods bought off a website?

EDI – What is Electronic Data Interchange?

By Dinesh Thakur

Electronic transactions have been around for quite some time in the form of Electronic Data Interchange or EDI. EDI requires each supplier and customer to set up a dedicated data link (between them), where e-commerce provides a cost-effective method for companies to set up multiple, ad-hoc links.

 

Electronic commerce has also led to the development of electronic marketplaces where suppliers and potential customers are brought together to conduct mutually beneficial trade.

EFT – What is Electronic Fund Transfers?

By Dinesh Thakur

Funds are transferred electronically from the customers bank account to yours. (This is a highly simplified explanation, and is accurate in the most general sort of way. However, the bottom line is that the customer buys, and at some point the funds are removed from his or her account and ultimately deposited into yours.)

 

The best known method is the issuing of electronic checks Customers pay for merchandise by writing an electronic check that is transmitted by email, fax or phone. The “check” is a message that contains all of the information that is found on an ordinary check, but it is signed digitally, or indorsed.

 

The digital signature is encoded by encrypting with the customer’s secret key. Upon receipt, the merchant or “payee” may further indorse by encoding with a private key. When the cheque is processed, the resulting message is encoded with the bank’s secret key, thus providing proof of payment.

Define Electronic Wallet

By Dinesh Thakur

Electronic Wallets store your credit card numbers on your hard drive in an encrypted form. You then make purchases at Web sites that support that particular type of electronic wallet . By clicking on a Pay Button, customers initiate a credit card payment via a secure transaction enabled by the electronic wallet company’s server.

What is Digital or Electronic Cash or E-cash or Ecash or Digital Money

By Dinesh Thakur

These terms are also used interchangeably, and they refer to any of the various methods that allow a person to purchase goods or services by transmitting a number from one computer to another.

 

The numbers are issued by a bank and represent sums of real money. Digital cash is anonymous and reusable. Unlike credit card transactions, the merchant does not know the identity of the shopper.

EPS – What is Electronic Payment system?

By Dinesh Thakur

An electronic payment system is needed for compensation for information, goods and services provided through the Internet – such as access to copyrighted materials, database searches or consumption of system resources – or as a convenient form of payment for external goods and services – such as merchandise and services provided outside the Internet. it helps to automate sales activities, extends the potential number of customers and may reduce the amount of paperwork.

Requirements:

security: payment systems are very likely to become a target for criminal attacks.flexibility: different models for different situations (anonymity, accountability, risk).computational efficiency: support for micropayment; per-transaction cost must be small enough so that they are insignificant.
Payment Methods:

secure (or non-secure) presentation: the customer provides credit card information over a secure (or even clear) transportation means.

customer registration: the customer gets a password or digital signature based on a credit card (hides the credit card information from the merchant, but still clears through the credit card).

credit-debit instruments: similar to customer registration but only one bill per month either through credit card or debit check.

electronic currency: this method has potential for anonymity but requires tamper resistant hardware.

server scrip: the customer gets a kind of coupons from an agent that can be spend only with one particular merchant. this reduces the risk of double spending and allows off-line transactions.

direct transfer: the customer initiates the transfer of funds to the account of the merchant. this method provides no anonymity.

collection agent: the merchant refers the customer to a third party who collects payment using one of the methods mentioned above.

How Payment Processing Works?

By Dinesh Thakur

         Payment processing in the online world is similar to payment processing in the offline or “Brick and Mortar” world, with one significant exception. In the online world, the card is “not present” at the transaction. This means that the merchant must take additional steps to verify that the card information is being submitted by the actual owner of the card, Payment processing can be divided into two major phases or steps: authorization and settlement.

 

Payment Processing—Authorization and Settlement

Authorization verifies that the card is active and that the customer has sufficient credit available to make the transaction. Settlement involves transferring money from the customer’s account to the merchant’s account.

Authorization: Online

A customer decides to make a purchase on a merchant’s Web site, proceeds to checkout, and inputs credit card information.

The merchant’s Web site receives customer information and sends transaction

information to the payment gateway. The payment gateway routes information to the processor. The processor sends information to the issuing bank of the customer’s credit card. The issuing bank sends the transaction result (authorization or decline) to the processor.

The processor routes the transaction result to the payment gateway. The payment gateway passes result information to the merchant.

The merchant accepts or rejects the transaction and ships goods if necessary. Because this is a “card not present” transaction, the merchant should take additional precautions to ensure that the card has not been stolen and that the customer is the actual owner of the card.

Payment Processing—Settlement

The settlement process transfers authorized funds for a transaction from the customer’s bank account to the merchant’s bank account, The process is basically the same whether the transaction is conducted online or offline.

 

What are Electronic Payment Technology Issues

By Dinesh Thakur

Online payment processing requires coordinating the flow of transactions amonga complex network of financial institutions and processors. Fortunately, technology has simplified this process so that, with the right solution, payment processing is easy, secure, and seamless for both you and your customers.

Online Payment Processing Basics

Purchasing online may seem to be quick and easy, but most consumers give little thought to the process that appears to work instantaneously. For it to work correctly, merchants must connect to a network of banks (both acquiring and issuing banks), processors, and other financial institutions so that payment information provided by the customer can be routed securely and reliably.

The solution is a payment gateway that connects your online store to these institutions and processors. Because payment information is highly sensitive, trust and confidence are essential elements of any payment transaction. This means the gateway should be provided by a company with in-depth experience in payment processing and security.

The Payment Processing Network

Here’s a breakdown of the participants and elements involved in processing payments:

 

Acquiring bank: In the online payment processing world, an acquiring bank provides Internet merchant accounts. A merchant must open an Internet merchant account with an acquiring bank to enable online credit card authorization and payment processing. Examples of acquiring banks include Merchant eSolutions and most major banks.

Authorization: The process by which a customer’s credit card is verified as active and that they have the credit available to make a transaction. In the online payment processing world, an authorization also verifies that the billing information the customer has provided matches up with the information on record with their credit card company.

Credit card association: A financial institution that provides credit card services that are branded and distributed by customer issuing banks. Examples include Visa® and MasterCard®

Customer: The holder of the payment instrument—such as a credit card, debit card, or electronic check.

Customer issuing bank: A financial institution that provides a customer with a credit card or other payment instrument. Examples include Citibank and Suntrust. During a purchase, the customer issuing bank verifies that the payment information submitted to the merchant is valid and that the customer has the funds or credit limit to make the proposed purchase.

Internet merchant account: A special account with an acquiring bank that allows the merchant to accept credit cards over the Internet. The merchant typically pays a processing fee for each transaction processed, also known as the discount rate. A merchant applies for an Internet merchant account in a process similar to applying for a commercial loan. The fees charged by the acquiring bank will vary.

Merchant: Someone who owns a company that sells products or services.
Payment gateway: A service that provides connectivity among merchants, customers, and financial networks to process authorizations and payments. The service is usually operated by a third-party provider such as VeriSign.
Processor: A large data center that processes credit card transactions and settles funds to merchants. The processor is connected to a merchant’s site on behalf of an acquiring bank via a payment gateway.

Settlement: The process by which transactions with authorization codes are sent to the processor for payment to the merchant. Settlement is a sort of electronic bookkeeping procedure that causes all funds from captured transactions to be routed to the merchant’s acquiring bank for deposit

EDI standards

By Dinesh Thakur

EDI standards are very broad and general because they have to meet the need of all businesses.

 

EDI share a common structure:-

 

1. Transaction set is equivalent to business document, such as purchase order. Each transaction set is made up of data segments.

 

2. Data segments are logical groups of data elements that together convey information, such as invoice terms, shipping information or purchase order line.

 

      3. Data elements are individual fields, such as purchase order number, quantity on order, unit price.

 

The need for EDI standards:-

EDI provides on electronic linkage between two trading partners. To send documents electronically to each other, firms must agree on a specific data format and technical environment.

 

EDI standards and initiatives:-

 

National standards:-

 

 1. ODETTE:- an EDI format developed for European motor industry. ODETTE stands for organization for data exchange by tele transmission in Europe.

       2. TRADACOMS:- it is UK national standard, which is developed by ANA (Article number association) in 1982.

 

ANSI ASC X12 (American national standards – X12) – X12 is a standard that defines many different types of documents, student loan applications, injury and illness supports and shipment and billing notices.

 

International standards –

 

EDIFACT – (Electronic data interchange for administration, commerce and transport) was developed during 1990’s with a subset of EANCOM, which is the most widely used dialect of EDIFACT in international retail and distribution sector.

 

UN/EDIFACT – (United nations/electronic data interchange for administration commerce and transport) is an international set of EDI standards that are published by united nations trade data interchange (UNIDID).

 

What is Electronic Data Interchange?

By Dinesh Thakur

1. The buyer enters order information into the production database, which generates a purchase order on the computer. The order information is then channeled through a number of interface programs.

 

2. The interface software programs perform edits and checks on the document and direct the order data into predefined EDI intermediate files.

3. The EDI intermediate files contain information in a form that the EDI translation software can read.

 

4. The translation software is a set of programs that translates the interface file data into a document formatted according to EDI standards that the supplier’s computer can recognize.

 

5. The electronic document now consists of a file that contains the order data in a predefined, recognizable order.

 

6. The communications software adds appropriate communications protocols to the EDI document in preparation for transmission via telephone lines.

 

7. Using a modem and telephone line, the buyer transmits the EDI purchase order to a VAN (Value added network).

 

8. The communications software on the supplier’s computer picks up the document from the VAN, interprets and/or converts the communications protocols to open the electronic document.

 

9. The purchase order is now in a standard, recognizable format in a file and is available to the supplier’s computer.

 

10. The supplier’s translation software interprets the documents from the EDI format and places the order information in EDI intermediate file(s).

 

11. The EDI intermediate files contain the translated purchase order information.

 

      12. The interface programs perform edits and checks before the data is integrated with the supplier’s production database

 

 

EDI Architecture

By Dinesh Thakur

 EDI architechture specifies 4 layers:-

1)Semantic (application layer)

2)Standard transaction layer

3)Packing (transport) layer

4)Physical n/w infrastructure layer.

1)Semantic layer:- It describes the business application that is driving EDI.

For a procurement application, this translates into requests for quotes, price quotes, purchase orders, acknoledgements & involves.

The information seen at this layer must be translated from a company specific from to a more generic form so that it can be send to various trading partners, who could be using a varity of software applications at this end.

When a trading partner sends a document, the EDI translation software converts the proprietary format into a standard mutually agreed on by the processing system. When a company receivers the document, their EDI translation software automatically changes the standard format into proprietary format of their document processing software so that company can manipulate the information in whatever way it chooses to.

 2. EDI standards:- It specify business form structure and it also influence the content at application layer.

3. The most two important standards are:-

     – EDIPACT

     – ANSI X12

 

3.EDI transport layer:- it corresponds closely with the non-electronic activity of sending a business form from one company A to company B.

The business form could be sent via regular postal service, registered mail, certified mail or private carrier such as united pariel service (UPS) or simply faxed between the companies.

EDI semantic layer application level services

EDI standard layer EDIFACT

ANSI X12

EDI transport layer e- mail X 435

Point2point FTP

www HTTP

4.Physical layer :- Dial up lines

 

What are EDI terminology

By Dinesh Thakur

A trading partners:- a trading partner is an organization who uses EDI. They are assigned a trading partner ID number which is their generic “customer number”.  If you decided to use EDI, you will register your company with your service provider (VAN) who will provide with a trading partner.

 

B VAN:- it is a service provider which stores your EDI mail form your trading partners and transmits your EDI documents to your trading partner’s mailbox.

 

C transaction software:- software used to send & service EDI documents within VAN.

 

Global / DX:- this modules takes the output from the transaction software & creates necessary transactions and also creates files trading partners.