If you're uncertain or confused about eCommerce, that's understandable. Good information is hard to come by. It's tough to find a source with the detail you need to make a decision, yet at a technical level of someone who is not a web developer.
This series aims to fill that need. These articles will be written for the average business person who would like to implement an online store or modify an existing store.
In this part of the series, we'll outline the major steps in a typical eCommerce transaction so that we're all using the same framework. This framework will be used in all of the following articles.
The following diagram illustrates the major steps in a typical eCommerce process:
Let's now examine each step.
You have something people will pay for. In the simplest case, this is a single product, service, subscription, donation, etc., that the customer chooses by clicking a button that says "Buy Now", "Subscribe Now" or something similar. In the more general case, you have multiple products and the customer adds their selections to an online Shopping Cart. When they have everything they want, they click a "Checkout" button.
For checkout, you need more information than just what products or services the customer wants. For example, you can't calculate shipping costs and taxes until you know the customer's address. The major items you need to collect in this step are:
- Billing address. Although the customer's billing address could be considered payment information, in practice most businesses collect it here. The billing address is usually the "master address" for a customer, and businesses want to keep that information on-file. In the special case of downloaded products (e.g. software), you'll use the billing address to compute taxes.
- Delivery options. If the product is a physical product, you'll have to get it to the customer somehow. They might pick it up, but more commonly you'll ship or deliver it to them. The customer must usually make a trade-off between speed of delivery and cost. Some products (e.g. software) can be either downloaded or delivered physically (e.g. on CD or DVD); the customer may need to make that choice.
- Shipping address. If you're going to ship or deliver the product, you'll need to collect the shipping name, address and telephone number.
- Payment options. Once you have all of the above information, you can compute the total cost of the order. You might then offer multiple payment options, e.g. check, Purchase Order, credit/debit card or perhaps a payment service (e.g. PayPal).
3. Collect Payment Information
If the customer is paying by check or Purchase Order, you may have the information you need. In that case, you can skip to the step "6. Confirmation".
For a credit or debit card payment, the customer will need to provide:
- Card number
- Name on the card
- Card expiration date
- Security code
In the case of payment services like PayPal, they will need to log into the service in order to use their stored payment information.
4. Route Payment Information
In order to accept credit/debit cards, you need to establish an account (often called a Merchant Account) with a bank or specialized processor. In the flow of credit/debit card processing, they are called the Acquirer.
Each credit/debit card authorization request must be sent to the Acquirer for processing. The interface used to do this is very complex, so almost all such transactions go through what is called a Payment Gateway.
The job of the Payment Gateway is to securely route the authorization request to the Acquirer while simplifying processing for you. You online store software communicates with the Payment Gateway as if it were submitting an online form over a secure (SSL/TLS) connection. The Payment Gateway then handles the details of routing the transaction to the Acquirer and returns the response to your online store software.
5. Authorize Payment
Your Acquirer probably didn't issue the credit/debit card themselves. They need to communicate with the issuing bank to verify that the payment information is correct and that the cardholder is authorized to make the transaction.
Your Acquirer communicates with the issuing bank through the network run by the relevant credit card association, e.g. VisaNet for Visa.
6. Confirm To Customer
Once payment has been approved or declined, the transaction is routed back through the Acquirer and Payment Gateway. The eCommerce software then needs to tell the customer what the result of the authorization was, and may perform other functions such as providing a printable invoice.
Now that we've identified the major steps in the eCommerce process, we can create scenarios that describe typical ways of performing those steps. We'll do that in Part 2 of this series.
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