HDFC Bank last week went live with its e-commerce payment gateway. HDFC allows anyone with a credit card, issued by any bank (national or international), to pay for goods or services across the Internet. It also automates the entire process _ eliminating the system of faxing and other physical interference.
This is different from other gateways which provide services only to a limited group of people.
According to a study by PricewaterhouseCoopers' dotcom arm, indiainitiative.com, unlike the HDFC Bank gateway, there were sites in India that had been offering online payment via credit cards. They used to accept credit cards, store the number and the transaction value in their database, get a printout of it at the end of the day and fax it across to their bank. The bank then physically verified the transactions and completed the process.
However, the system had a major flaw. The merchant and bank had the credit card number and could use it for further transactions without the owner's knowledge.
A payment gateway is a system through which shoppers can pay for goods or services using a credit card.
The HDFC Bank gateway is based on the principle that each time a credit card number is entered to buy something over the Internet, a highly sophisticated process is triggered that involves complicated transactions between a number of organisations.
In less than 10 seconds, different organisations _ often located in different parts of the world _ are linked to each other, the cards authenticated, bank accounts checked for availability of money, transactions verified and okayed or rejected.
Meanwhile, the bank has tied up with Indiainfoline.com for use of its payment gateway to enable online financial transactions.
There are four major parties involved in processing credit cards online _ the merchant, the software, the processor, and the bank. Each party has a distinct function and work together to transfer funds from the customer to the merchant.
When a customer makes a purchase from an online store, the transaction gets an authorisation number. For every transaction a unique number is generated. The number is like an ID that is used to identify the transaction and to trigger the money transfer from the shopper to the merchant.
The merchant himself will also have an ID _ known as the terminal ID _ which will be issued by the bank to him.
The merchant's credit card processing software will use a merchant ID and the terminal ID to complete a transaction.
