The Payments System. Ecommerce.

An e-commerce payment system facilitates the acceptance of electronic payment for online transactions. Also known as Electronic Data Interchange (EDI), e-commerce payment systems have become increasingly popular due to the widespread use of the internet-based shopping and banking. The smooth operation of payment systems is often taken for granted both in the academic literature on financial integration and in practical policy considerations. In general, the main role of payment system regulators is to provide a level playing field for different service providers. To secure dynamic efficiency, the regulators also need to ensure adequate incentives for innovation and investment. In this respect, it is important that they do not take too restrictive an attitude towards cooperation among payment service providers.

Electronic commerce on the Internet burst with great force in the late 90\’s, promising to be a transforming element of society in the XXI century. Although its development has been important, has not reached the initial estimations. One of the main problems for this delay was the lack of tools that don\’t give to the users enough confidence in using the model of trading through computer networks. Fortunately there are emerging technologies and electronic payment systems that offer guarantees of security and integrity for these transactions in a reliable environment, giving confidence to users. However, this remains the greatest obstacle (more psychological than technical) to produce the massive use and implementation of electronic commerce. The three most commonly used payment protocols in electronic commerce: SSL (Secure Sockets Layer), SET (Secure Electronic Transaction) and 3D Secure should avoid any doubt about the lack of security in electronic transactions through the Internet.

A payment service provider (PSP) offers merchants online services for accepting electronic payments by a variety of payment methods including credit card, bank-based payments such as direct debit, bank transfer, and real-time bank transfer based on online banking. Some PSPs provide unique services to process other next generation methods (Payment systems) including cash payments, wallets such as PayPal, prepaid cards or vouchers, and even paper or e-check processing. Typically, a PSP can connect to multiple acquiring banks, card, and payment networks. In many cases, the PSP will fully manage these technical connections, relationships with the external network, and bank accounts. This makes the merchant less dependent on financial institutions and free from the task of establishing these connections directly – especially when operating internationally. SSL (Secure Sockets Layer) security technology helps to improve the safety of Internet communications. SSL is a standard for encrypted client/server communication between network devices. The SET (Secure Electronic Transaction) protocol is an open industry standard developed for the secure transmission of payment information over the Internet and other electronic networks. SET has the strong support of two major league credit card companies: Visa and MasterCard. 3-D Secure adds another authentication step for online payments. Merchants are encouraged to use 3-D Secure to achieve higher coverage against fraud losses. When a merchant does not use 3-D Secure they are liable for fraudulent transactions even if the transaction was properly authorized.

Online payment systems allow quick and safe transactions. In fact, if not, our daily lives would be affected very seriously, we should go to the bank every time we wanted to make a payment, would bring stacks of coins and bills, and lose time queuing when now it could be done with a credit card with a simple click on the computer.

SSL: It is the most widely used security protocol on the Net. The SSL protocol combines symmetric encryption systems and asymmetric encryption systems. SET: As a complement SSL Mastercard and Visa developed SEPP (Secure Electronic Payment Protocol) and STT (Secure Transaction Technology) to ensure the economic transactions exclusively using credit cards as payment, although later both entities, with American Express, agreed to join efforts to develop a single protocol for electronic payment cards, called SET. The SET protocol (Secure Electronic Transaction) is a set of rules or safety specifications which are a standard way to perform payment transactions through the Internet. 3D Secure or 3 Domain Secure, has been developed by Visa to verify that the buyer is entitled to use the credit card. It gives to the buyer and to the seller greater certainty in electronic transactions. Its trade name is Verified by Visa. This protocol prevents the fraudulent use of credit cards through the Internet. Its operation is quite simple: 3-D Secure prompts the user for a password that previously have been processed by the issuing bank. If the key is correct and the card Credit is available, the system authorizes the closing of the purchase. 3-D Secure is supported by the SSL protocol to ensure the integrity of the messages exchanged between all those involved in the transaction (Buyer, Seller, the Issuing Bank, Bank of Seller).

The author is a software engineer, expert in systems payment. He has written interesting articles regarding ipn script and ipn php topics.