September 7, 2007 10:10 AM
Shopping cart software, shopping cart, shopping basket or basket is the software used to facilitate purchases online. Shopping cart normally represents and electronic analog of the regular shopping cart used in malls. While browsing the web-site, users collect the appropriate items and proceed to check out. Shopping cart calculates the total for the order including delivery and handling fees along with associated taxes if applicable. Shopping cart software is also responsible for transaction processing, i.e. communication of the calculation results along with product codes and other service data to the credit card processor.
Modern shopping carts are easy to install and require minimum coding adjustments from administrators. All shopping-cart related data (product codes, prices, descriptions, customers, discounts, etc.) is stored in on-line database and are accessed by the software on real time basis.
Typical shopping cart consists of two components:
Storefront - area of the web-store accessed by the customers to purchase the goods or services. Product pages are generated dynamically basing on the available data.
Back office - administrative area controlled by the merchant. Back office contains tools required to control the online shop. Set of available tools varies for different types of shopping cart software. Normally, shopping cart manager is able to edit products, categories, prices, discounts, descriptions and other product-related information. Besides, many shopping carts provide merchants with detailed statistics on dynamics of sales, origin of the customers and other information.
You will have to select hosted or licensed version of the shopping cart software.
Hosted version does not require installation and is normally very flexible in terms of initial setup. Besides, hosted versions propose templates to choose from. Thus, time and effort required to have everything running is minimal with hosted solutions. On the other hand, choosing to utilize a hosted solution you bind your business with another business: hosted versions charge percentage for each transaction processed and may change their condition at any time.
Licensed version represents a fully functional version of the shopping cart software installed on the merchant's server (with the right to re-install the software on other servers if the license permits). Obvious advantage is independence from other businesses and absence of per-transaction charges. Licensed version requires more time for installation and requires qualified administrative assistance.
September 7, 2007 7:36 AM
Friendly fraud is a term used to describe the situation when the credit card holder purchases goods or services with his own credit card and then claims to have never received them, thus initiating a chargeback dispute through his/her issuing bank.
Tangible products
Merchants dealing with tangible products can protect themselves from this type of fraud by requiring a signature on goods delivery receipt. Signed receipt is a valid argument in a chargeback dispute. Merchants may also request CVV (3-digit number on the back of the card) to avoid of the "card-not-present" claims.
Intangible products
Friendly fraud is much harder to fight with when dealing with intangible products. It is very hard to prove that the products or services were delivered exactly to the credit card holder. Verified by Visa or other security programs testify that the cardholder was present when the transaction was processed, but do not prove the delivery of the product or service. In case of digital subscription service, merchants can envisage the mechanism that suspends the service in case chargeback is initiated. In other cases cardholder is most likely to get electronic goods or services without paying. At that merchant will still have to handle the chargeback fees charged by the issuing bank and the credit card processor (chargeback fees start with $20 and may grow dramatically in the course of a complicated chargeback dispute).
September 7, 2007 7:30 AM
A chargeback occurs when a customer refuses to recognize the charge on his credit card statement. As an Internet merchant, you will have to face the chargeback issues. Different categories of goods and services have different chargeback rates, however every merchant has to be prepared to the chargeback dispute. Frequently, chargeback is the result of fraudulent activities that were not prevented on the stage of initial transaction: as the real cardholder discovers the unknown charges and informs the issuing bank about the fraudulent transactions associated with his credit card. Every credit card holder has 6 months to dispute the charge on his credit card statement. You may receive clarification request (chargeback pre-note) from the issuing bank asking to provide the complete details on transaction. As a merchant, you will have to provide all available data on transaction - payment receipts, delivery receipts, copies of communication with the customer, etc. - to prove that transaction is not fraudulent. Speaking about intangible products, it is ultimately hard to avoid of a chargeback once the chargeback dispute is initiated. Therefore it is important to envisage the authorization mechanisms where the customer acknowledges the receipt of the product.
Here is the list of possible reasons for a chargeback request:
- Card holder did not authorize the transaction
- Card holder requests a copy of the transaction receipt
- Card not used within valid expiration date
- Card-holder claims invalid mail or telephone order transaction
- Card-holder claims merchant changed transaction amount without permission
- Card-holder never authorized transaction
- Card-holder not satisfied with quality of product or services
- Card-holder was denied ability to return item
- Counterfeit transaction
- Customer never received merchandise/services
- Error in transaction amount
- Failure to notify cardholder of pre-authorized amount
- Failure to obtain card-holder signature
- Incorrect Transaction Date
- Merchant knowingly participated in a fraudulent transaction
- No authorization
- Non-matching account number
- Product different from what was described or promised
- Refund not processed
- Services not rendered
- Signature on receipt different from card
- Signature on the card was blank
- Transaction not processed within Visa or MasterCard time frames
- Transaction processed for incorrect amount
- Transaction receipt is incorrect, incomplete, or illegible
- Transaction receipt was not imprinted
- Transaction was not canceled successfully
- Transaction was processed more than once
Merchant is responsible for all chargeback-related expenses unless it is proved that the chargeback request is ungrounded. In such case merchant is granted a reversal.
September 6, 2007 9:48 AM
3-D Secure is an XML-based protocol that is utilized for authentication of cardholders in electronic transactions. 3-D Secure was initially developed by Visa for its Verified by Visa program. The protocol is also used by MasterCard for its SecureCode program and JCB for its J/Secure service.
The essence of 3-D Secure protocol is the connection of financial authorization and online authentication. Authentication process is based on 3 domain (3-D) model: acquirer domain, issuer domain and interoperability domain. The protocol uses XML messages that are sent via SSL connection. Both peers (servers and client) use digital certificates for authentication.
Each issuer identifies the authentication method used, but in the majority secret password is associated with the card. This password must be entered in the special dialog to complete the online purchase.
September 6, 2007 9:47 AM
Verified by Visa is a security mechanism introduced by Visa in response to online credit card fraud (card not present transactions). SecureCode introduced by MasterCard is an analog of Verified by Visa. Whenever the credit card is enrolled in Verified by Visa program, the person who is using the credit card is redirected to the issuing bank's verification web-page. Verified by Visa utilizes cardholder's personal information (code) kept by the bank. Another more secure option is utilization of a one-time password. Verified by Visa program is a liability shift as tangible data is verified by the bank and therefore it is bank's responsibility to keep it secure.
Verified by Visa and MasterCard SecureCode are protecting the merchants from fraudulent transactions, yet providing the credit cards users with additional facilities for protection from the personal identity theft.
September 6, 2007 8:38 AM
As an Internet merchant, you will have to protect yourself from the fraudulent transactions as they are inevitable part of any Internet business. As a beginning Internet merchant, you should treat fraudulent transactions as an inevitable business risk that you accept as you enter the market. Realizing that, it is your responsibility to work on reduction of these risks and identification of the fraudulent transactions before they are processed.
Here are some tips on detection of the fraudulent transactions:
- check the transactions for liability shift; if the transaction is verified by Visa, customer will not be able to claim that he wasn't the one who processed the payment;
- check the customer's IP address. There are several IP address databases that provide IP to location service, i.e. it is possible to determine the customer's location basing on his IP. The majority of card processors record the IP addresses of the customers. If you see that location of the IP address is different from the billing address stated by the customer, you should pay more attention to verification of the transaction;
- check bulky or repetitive transactions via telephone. Telephone confirmations for suspicious transactions might become your most effective protection from credit card fraud;
- check your credit card processor's transactions history. Fraudulent credit cards are often declined by the processors. Thus if you see the attempt to place the same order with different credit card numbers and different cardholders, this is a clear indication of fraud.
Yet another problem for Internet businesses is an attempt of the customers to claim that goods or service were not received. It is easy to deal with this type of fraud if you deal with tangible products: customers normally sign the delivery receipt that testifies that the product was received. Many merchants, however, deal with intangible products. In such case, customers may always claim that they have not received the product or what they have received was not what they expected. There is no possibility to be 100% secure from such kind of fraud. It is very useful to develop some kind of mechanism where the customer signs electronic delivery receipt as he downloads the product. Merchant should keep the appropriate records easily available in case any dispute takes place. Whenever the chargeback dispute takes place, merchants must provide as much information testifying their faultlessness as possible.
September 6, 2007 5:29 AM
As every business, e-commerce businesses face certain business risks. Credit card fraud is the major risk that is inseparably connected with Internet transactions. Card-not-present mechanism presents vast possibilities for fraudulent activities. Losses for businesses from fraudulent transactions are estimated to be from 10 to 40 billion USD in 2006, despite the efforts of Visa and MasterCard to introduce the advanced security mechanisms (Verified by Visa and MasterCard Secure Code). The majority of Internet users (69 to 76 percent) have concerns over online and offline credit card fraud.
As a merchant, you should be aware of these facts and make sure that your customers feel secure enough to purchase goods and services from your web-site. This purpose can be achieved by but are not limited to the following actions:
- clearly display your credentials on the web-site (corporate identity, physical address, detailed contact information, etc.)
- make sure your payment processor provides the secure payment channel and supports Visa and MasterCard online verification technologies - they are used by many credit card users at the moment
- register your business with some public organizations, such as the Better Business Bureau
- state your privacy policy in a clear and concise manner. Be sure to indicate that you are not storing the customer's credit card information in any form. Indicate that you are not going to use or disclose the customer's personal information for any purpose unless you have the customer's written permission to do so
Remember that the majority of Internet users are well aware of the identity theft issues and they will appreciate your preoccupation with their concerns.
September 5, 2007 5:43 AM
If you are reading these lines, you are obviously in the process of selecting the payment solution for your on-line business. Basing on experience of many merchants, it is possible to state that importance of this decision is crucial. Selection of the proper credit card processing solution determines the stability of your business. Therefore, we will try to state some tips on selection of the third-party credit card processor.
In many cases, potential vendors concentrate on the obvious factors while making their choice, i.e. the only thing they look at is discount rate or percentage charged for each transaction processed. However, this approach is very superficial. We would suggest composing the list of potential solutions and processing the basic research on each of them comparing the results. Here is the list of factors that we would include into analysis (make sure to contact the credit card processor with an inquiry if any of the listed factors are not discussed clearly and entirely on their web-site):
- all possible charges (discount rate, transaction fee, gateway fee, holdback percentage and any other fees that are going to be deducted from your sales);
- availability of support;
- security mechanisms provided by the payments processor;
- additional features included with the vendor's account;
- if applicable, it is important to collect other vendors' feedbacks about the provided services;
- information about the process of application and acceptance criteria.
The majority of credit card processors do not disclose all charges they deduct from their vendor's account. For example, many of them choose to set 8 to 16 percent holdbacks on their vendor's accounts, i.e. this amount is put on hold for 3 to 6 months and is released upon expiration of this period. Many credit card processors do not display taxation charges that are added to their discount rate. Therefore, it is ultimately important to clearly understand all charges that are going to be deducted from your account to have the real competitive figure for your comparative analysis.
It is very probable that you are going to have problems of technical character as you start processing the transactions and in the process of work as well. Therefore, it is important to understand how the credit card processor handles the technical problems of its clients. Clarify if the phone support is available and how the support responds via e-mail. You should formulate an inquiry with all questions that you might have after reading this article and address them to the credit card processor of your choice. Note the time required for response and the quality of response itself. This would generally represent the attitude of the credit card processor to your future inquiries.
Many credit card processors choose to narrow the security mechanisms to holding the beginning vendor's funds for several months and then refunding all sales to the customers in case they see anything "suspicious". Search the Internet for tons of horror stories of such kind. Many businesses have collapsed without even starting properly just because their choice was not right. Ask your potential payment processor about the security mechanisms they apply to decrease the possibility of the credit card fraud. If the answer is unclear or if they reply that it is vendor's responsibility to ensure the security of transactions, there is a huge probability that with the first chargeback you receive, your holdback will be increased or funds put on hold.
It is important to understand the potential necessity for expansion of your business and analyze the availability of the technical facilities. Many credit card processors provide their vendors with additional possibilities, e.g. shopping carts, promotion instruments, marketing solutions, etc. It is important to understand what instruments you have at your disposal as one day their availability may become critical.
Collecting the feedbacks from other vendors is fairly simple. Angry voices are easily spread through the multitude of merchant forums available on the Internet. Just type your potential credit card processor name + feedback in any major search engine to get tons of results. Positive feedbacks are rare as those who have no problems rarely care to tell about their satisfaction. On the other hand, person who had negative experience and whose financial interests were infringed will do everything possible to make his experiences available to public.
Study your credit card processor's marketing materials to clarify what the process of application is and what the possible complications are. Be ultimately suspicious if your account is active and working without any visible security checks or complications. This is the clear indication of the fact that security checks are going to be processed after your account is active and processing. They will put your funds on hold and process all necessary security checks and most surely they will take their time regardless of your business interests.
September 5, 2007 4:59 AM
The majority of beginning businesses and many developed e-commerce solutions choose to utilize the services of the third-party credit card processors for their credit card processing needs. Why choose third-party credit card processors and what are the potential disadvantages of such solution?
Third-party credit card processors facilitate the process of accepting credit cards on-line (card not present mechanism). The primary advantage is the absence of the necessity to get through the formalities that are inevitable while registering a merchant account. Registering an ordinary merchant account requires substantial investments ($2,000 - $10,000) and takes significant time due to bureaucratic formalities. Furthermore, registering a merchant account may be even more complicated problem for international merchants that do not have credentials in the US or other developed countries. Third-party credit card processor is an optimal solution for beginners because it allows to start selling goods and services on-line within several days, including arrangement of the technical nuances. Another benefit of the third-party credit card processor is the limitation of the vendor's liability. Third-party credit card processors normally introduce security mechanisms that are developed in the process of work, which enables them to track the fraudulent transactions effectively, which reduces the vendor's risks.
Third-party credit card processors are functioning because they charge their clients for each transaction processed through the processor's merchant account. Therefore, discount rates and transaction fees charged by the third-party credit card processors are somewhat higher than those proposed to "real" merchant account holders. However, it is necessary to take into account the financial expenses and amount of time required to register a merchant account. Merchant account providers are very demanding, especially to new businesses and this is yet another reason to start your e-commerce business with the third-party credit card processor.
September 5, 2007 4:20 AM
Using a third-party credit card processor enables merchants to start accepting credit cards easily and without any special technical knowledge, with very modest amount of initial capital required. First of all you will need to create product pages where you list the products you sell, indicating their properties and prices. It is highly important to design the product pages in a proper way, to ensure that your web-site visitor is able to navigate all pages easily. We will discuss the peculiarities of product pages design in one of our consecutive articles in more detail.
You should also create a Thank You page (return URL), i.e. the page where the customer lands after the purchase is completed. This page may display simple thank you message and the service information, e.g. date/time when the product is going to be shipped for tangible products or download/installation instructions for intangible ones.
Further, it is necessary to work at the technical side of the purchase process. As your customer selects the product he wants to purchase, he clicks the link that redirects him to your credit card processor's secure page, where the transaction is processed. It is important to process the transaction via secure channel as losing credit card data conditions possibilities for credit card fraud. Normally, credit card processors get the necessary data from your web-site via POST or GET method. Credit card processors normally give detailed explanations of the technical nuances they have. In many cases you will have to create the detailed product list within vendor shell - interface where the vendor controls all processing issues. Product list will include product code, name, description, price and any other technical information varying for every credit card processor. Some credit card processors allow creating new products "on the fly", i.e. immediately during the process of transaction.
As soon as your product list is created, it is possible to create the "Buy Now" link for each of the products. "Buy Now" link will contain your vendor ID, product code, quantity of products purchased, return URL, transaction type and some other technical data (varies for each payments processor). Once all your links are tested and your vendor's account is activated, you will be able to accept orders. Vendor's area on your credit card processor's web-site will enable you to trace and process incoming orders, conduct security checks on your customers, get statistical data on sales and resolve any other related issues.
© 2007