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Real-Time Credit Card
Transactions
by:
AY Software Corporation
When customers
press the 'Purchase' button on an order form, the
information is transferred to the server. But,
what happens after the server receives the
information? The diversity of technical solutions
is enormous. The solutions differ by price,
security features, level of automation, and many
other factors. This article discusses which
solutions are better.
The major
difference between solutions is real-time
processing versus deferred processing. With
real-time processing, credit cards are
immediately approved and the customer sees the
results immediately. With deferred processing,
the order is forwarded to the merchant who then
processes the order. Both methods have advantages
and disadvantages.
Real-Time
Processing
The most
important advantage of real-time processing is
that the customer sees the results immediately.
If you sell software or information that you can
deliver electronically, this feature is priceless
because it lets you fill the order within
minutes. This is a strong selling point,and you
can conceivably sell more of your product if you
can fill your orders immediately. If you have to
ship your product through the regular mail, this
feature probably won't make any difference.
Real-time
processing also makes your customers more
confident because they know that their card has
been approved. So, if there is a mistake, like a
wrong expiration date, they can correct it
immediately. Half of the Internet buyers are
impulse buyers, and they may not re-order if they
are told about the mistake the day after they
place their order. However, the probability of
this kind of mistake is small. The credit card
number is checked by the software, so the
customer cannot enter an incorrect number.
However, the expiration date and the address can
be entered incorrectly in 1-2% of the orders.
The possibility
of seeing immediate results may also attract
hackers. The hackers may have some incomplete
credit card information. For example, they may
pick up a discarded credit card slip, which
contains almost all of the information they need.
They can then use your order form to guess the
rest of the information. If you do not give them
an answer right away, this will not work. So,
real-time processing may have a higher percentage
of fraudulent transactions.
If you use
real-time processing, you can leave the system
unattended. All you need to do is to receive
e-mails that will inform you about the orders
made and the products sold.
There are two
ways to do real-time processing. The most common
way is to use processing providers (the largest
is CyberCash) who specialize in
Internet transactions. These companies usually
provide you with a set of scripts to build your
storefront so you can easily integrate their
processing with your storefront software.
However, their services are expensive. You
usually have to pay a setup fee between $200 to
$800 plus 10 to 30 cents per transaction and/or
$20-$50 per month. All of these costs are in
addition to your bank charges. This solution is
easy to transfer if you change your ISP.
The other
solution is to install your own credit card
processing software on your server. Most
processing software vendors have solutions that
let you integrate their processing with your
storefront software. If you prefer this solution,
you will have to install a modem on your server
and connect it to a dedicated phone line. You can
expect to pay $50 for a modem (you do not need a
fast one) and about $300 to your ISP to install
this system. The credit card processing software
will cost another $350-400. However, since you
paid to have the system installed on your server
and bought the processing software, your only
recurring cost will be the phone line.
Some Internet
Service Providers already have a credit
processing software installed on their servers,
so you will be able to easily plug in your store.
But, you will have to pay about $200 for the
setup and a per-transaction or per-month fee for
using their system. With this solution, you won't
be able to transfer your system if you change
your ISP.
If you use
real-time processing, make sure that the software
does not keep the transaction log on the server,
because the log containing all the credit card
numbers, may become a target for hackers. If your
Internet Service Provider hosts several
merchants, it may store thousands of credit card
numbers. If hackers break into their system, the
merchants will be responsible for card numbers'
loss.
Deferred
Processing
If you defer
credit card processing, you cannot fill the
orders immediately. So, this processing method is
more suitable for businesses that cannot deliver
their goods over the Internet.
The advantage of
using deferred processing is that you can
inspect your orders manually, and correct
them before you ship the order. For example, a
customer called you and told you that he is from
a non-profit organization, and arranged a 20%
discount on his purchase. He can still use the
order form, and then you can correct his order.
You can do any discounts or surcharges for any
orders, or otherwise edit the orders, before you
process them. Real-time processing doesn't
provide this convenience.
When order cards
are processed, the credit card issuer's network
may be down. This is especially true, if your
customers are in China, Brazil, or other distant
countries. In these cases, the credit card
processor returns the 'CALL CENTER' answer, which
means that you must call the center to authorize
the transaction. If you do real-time processing,
these transactions will be reported to the
customer as declined. Not only do you loose a
sale, but the customer may be confused by the
answer.
Deferred
processing is much cheaper than real-time
processing because you do not have to pay anybody
for any special processing. All you need is a
credit card processing software, which you can
buy for $350-400. You can use this software for
both Internet and phone orders, which is a big
advantage. You do not incur any additional costs
for processing. The orders are delivered to you
by your storefront software and then processed.
However, deferred processing requires daily
attention because you need to download your
orders and process them every day. This may be
just a single mouse click, but it needs your
attention every day.
If you use
deferred processing, the orders stored on the
server must be securely encrypted. If the orders
are just e-mailed to you, then anyone with
administrative privileges on the server can read
the orders and steal card numbers. So, before you
use the system, ask your ISP or storefront
software vendor how the orders are encrypted to
secure the orders against hackers.
It is not easy
to decide which method is the best for you
because you have to choose a storefront software
consider integration issues. at the same time,
and We will talk about storefront software in one
of our next issues.
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