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Online credit card transactions

At a time when Internet security is top of mind, understanding how an E-commerce transaction works can put a mind at ease – at least somewhat.

You’ve either embraced the E-commerce revolution by purchasing from your favorite online sites or you’ve sat at your computer pondering an online purchase, credit card in hand but not quite ready to give away that number.

Perhaps if you knew where your personal information went, you’d be more open to buying online. If anything, you will gain insight into what questions you can ask your E-commerce provider.

E-commerce transactions are not simple, and of course, they vary depending on the online business you purchase from and the method of payment you use. The credit card is the most common payment of choice for online purchases. Thus, the process we outline here focuses on an E-commerce transaction using a credit card.

The Scenario:

Another birthday is near and you aren’t looking forward to that trip to the mall to pick up a gift. The hassles of after work traffic, parking and bad weather has you dreading the idea of shopping. The good news is you can avoid all this by making that birthday purchase online. Your friend has hinted that he would like a particular painting that is available from an online site.

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The buying process begins at the online shopping site. In this case, you know exactly where to buy the painting your friend is interested in owning so you browse through the business’s online site. Finding the right painting is easy. The site has an effective search engine that enables you to search for the painting by its title or by the artist. You enter the title of the painting and voila – there it is! An image of the painting is available and you have the option to click on the image to enlarge it and gain a better look. Next to the image is the price in Canadian dollars. There is also a currency converter that enables you to check the price in a variety of currencies. The order button is also visible, and since you already know your choice, you enter in the quantity and submit the order.

Next, you are automatically linked into a page that requires your billing and order information. If there is any point where you hesitate to make that online purchase, this is probably the place. You may begin to question the security measures taken to protect your information. Luckily, this site has a privacy statement and it includes a security alert stating that you are entering a secure site. These features add credibility to the site and put your mind at ease. So, you move forward to complete the form, which asks for information such as your name, address, phone number, payment method, credit card number, and credit card expiration date. Finally, you are provided with the total cost of the order. All the information looks correct so you submit the final order and are provided with an order summary and order number.

From your perspective, the purchase is one quick step. Once you submit the order, you are provided with a message that states the order is being processed, which may take a couple of minutes, and then the order is confirmed. Now, it is simply a matter of waiting for delivery.

Behind the scenes, there is much more happening.

Once you submit the order, your information is directed to the merchant’s site. The merchant will need this information to deliver the order and to check it against their inventory. Meanwhile, your credit card information goes through a payment gateway to the merchant’s bank. The payment gateway bridges a merchant’s online storefront with the financial institutions that authorize the transaction. In other words, all of your credit card information travels over the Internet to the merchant’s bank through a payment gateway that secures the data as it travels from one location to another.

But, it doesn’t stop here. The information travels from the merchant’s bank through a payment gateway to your bank for authorization. Your bank will ensure the card you’re using is not stolen and that it has credit available to make the purchase. If verified and accepted, your order is confirmed. The confirmation also means the merchant’s bank will receive payment from your account, usually in two to three business days.