Payment processing scheme

Let’s proceed to the mechanism of online payment processing. How is it actually handled?

  1. The customer enters card details on the payment page of online merchant.
  2. The internet-merchant sends card data by means of payment gateway (technical connection transmitting data in an encrypted form) to the processing center, which verifies the transaction. In addition, the gateway itself also checks the transaction before transmitting information. It checks various parameters to prevent fraud, based on its filters and settings.
  3. If the transaction is approved, its data are sent forward to the acquiring bank which is providing services to the internet – merchant.
  4. Then the acquiring bank sends authorization to the international payment system (VISA, MasterCard, etc.).
  5. The payment system sends a request to the issuing bank that issued the customer’s card.
  6. The issuing bank whether confirms or rejects the purchase, depending on the presence of available funds in the appropriate account and on other criteria (for instance, the card could have been lost and therefore was blocked by the issuing bank on the request of the card holder). If the purchase (transaction) has been approved, the funds are transferred to the acquiring bank. The answer on the operation accomplishment is sent back to the payment system.
  7. The payment system forwards the issuing bank’s response to the acquiring bank.
  8. The acquiring bank transfers funds, which were received in the step 6, to the merchant account of online store and sends transaction information to the processing center. (Later, the received funds, excluding acquiring bank commissions, are transferred to the internet-merchant current account and thus become available to him).
  9. The information on the completed purchase (transaction) through the gateway becomes available to the online store.
  10. The customer on the internet-merchant web page is informed about the status of the payment (accomplished / not accomplished). In case of successful transaction, the customer has right for obtaining paid product or service.

The above described is a standard procedure of a transaction process. In addition, there is one more procedure connected to the technology 3D Secure.

3D Secure is a processing protocol of online transactions, developed by Visa and approved by MasterCard. It is designed to ensure greater security of internet payments which are made using credit or debit cards.

In the terminology of Visa the protocol is called Verified by Visa, whereas in a MasterCard terminology it is Secure Code.

The difference between the payments of the latter technologies (Verified by Visa or Secure Code) and the classical method is that to the process of online payment another step is added that allows the user to prevent the use of the card by the third parties.

In practical terms, the difference is that in case of 3D Secure the cardholder will have to confirm each transaction with a special password that the cardholder has appointed himself or which is provided by the issuing bank via SMS or a special ordering.