The Internet Encyclopedia (Volume 3)

P1: JDV

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CREDITCARDPROCESSING ANDCORRESPONDINGSET PHASES 251

a payment gateway digital certificate for each credit card

brand that it services.

Phase 1: The Shopping Experience

A cardholder visits a merchant’s site, browses through the

online catalog, and makes decisions about which goods

to purchase for delivery.

Phase 2: Item Selections

As the cardholder selects goods to purchase, he or she adds

the goods to the shopping cart that the merchant server

uses, and the system dynamically tallies up the sale.

Phase 3: Check Out

Just as a shopper pushes his shopping cart to the cash

register, the merchant server responds in kind when the

cardholder proceeds to “Check Out.” The shopping cart

program adds up the costs of the items in it, adds sales

tax, computes delivery and handling fees, and presents a

list of selected items and the total back to the customer.

When the cardholder is satisfied with the order, he or she

proceeds to the payment selection phase.

Phase 4: Form of Payment Selection

With order totals still displayed on the screen, the con-

sumer is given a choice of payment options. Assume the

cardholder has selected a SET-enrolled Visa Card as the

form of payment.SET is now initiated.

Phase 5: Payment Initiation Processing

By virtue of selecting a SET-enabled Visa payment, the

merchant server sends a special message to the card-

holder’s browser, telling the e-wallet towake up.This

wakeup message tells the e-wallet to prompt the con-

sumer to enter a secret password to unlock the wallet.

The wakeup message also initiates the first SET payment

processing message pair, called the Payment Initializa-

tion Request, which is generated and sent back to the

merchant SET POS software (a component of the mer-

chant server cash register functions). With a successful

payment initialization response, the e-wallet then creates

a SET purchase request message. This message has two

components—a purchase order piece and a payment in-

structions piece. The merchant POS software can only

read the purchase order. The payment instructions, con-

taining information about the cardholder’s Visa account,

can only be deciphered and processed by the acquiring

bank systems.

Phase 6: Payment Authorization Request

Along with the payment instructions, the merchant’s SET

POS software prepares a SET authorization request mes-

sage intended for Bank B’s payment gateway. The message

contains the details about the amount of sale, the mer-

chant account requesting it, and the previously created

payment instructions component that the cardholder e-

wallet software generated in Phase 5. When the authoriza-

tion request is deciphered, the payment gateway creates a

standard authorization request and places it on the bank’s

back-end private interchange network, which locates the

cardholder’s account at Bank A. With an approval code

from Bank A to proceed with the sale, the payment gate-

way responds with a SET authorization response that tells

the merchant’s POS software to complete the sale. The

Purchase

Request

Purchase

Response

PAYMENT AUTHORIZATION

Initialization

Request

Initialization

Response

Merchant

Sends

Certificate(s)

Merchant

Processes

Request

Message

Cardholder

Initiates

Request

Cardholder

Receives

Response

and

Sends

Request

Cardholder

Receives

Purchase

Response

Cardholder

Computer

Merchant

Computer

Figure 1: SET payment authorization flow between card-

holder and merchant.

POS system then creates a purchase response message in-

tended for the cardholder’s e-wallet to confirm the sale

and produce an electronic version of a receipt or record

of charge.

Phase 7: Delivery of Goods

When the merchant POS system notifies the merchant’s

back office that a new order is ready for shipment, a ship-

ping record is prepared and the merchant’s POS system is

informed of the business event via a data entry form.

Phase 8: Capture and Settlement

With the successful authorization code from Phase 6, the

merchant’s SET POS software received a capture record

(SET calls these tokens). With the sale completed and the

goods delivered, the POS software can initiate a capture

request to finalize the sale with Bank B’s payment gate-

way system. With each capture response, the settlement

file grows, awaiting the merchant’s decision to deposit

these receipts into his or her merchant account at Bank

B in exchange for funds transfer. Settlement file or batch

processing is also carried-out via the Internet using SET’s

batch administration message pairs, designed specifically

for those purposes.

See Figures 1 and 2 for illustrations of the flow for

a SET payment authorization request/response message.

Figure 1 illustrates the flow between cardholder and the

merchant. Figure 2 illustrates the flow between the mer-

chant and the payment gateway.

Although SET’s actual processing work is identical

to the work initiated via a POS terminal operating on

a private network, SET makes it possible to use the

Internet through its cryptography and message-passing