Gartner Research

Enabling Retail Payments on the Internet

Published: 14 February 2000

ID: G0086403

Analyst(s): Kenneth Kerr


Management Summary Enabling an Internet site to conduct e-commerce requires establishing a method for receiving payment information. Managing payment processes is not usually viewed as being central to a company's core business, so parts of the process are often outsourced. Yet, whether it is done in-house or it is outsourced, an effective and low-cost Internet payments process is essential to conducting successful Internet commerce. Merchants conducting Internet commerce need to find the solution that best fits their current and future needs. To help find the best solution, this report covers the key issues related to Internet retail payments. These issues include the following: o Credit cards are the dominant payment method used for Internet purchases and currently account for about 95 percent of electronic Internet retail transactions. Credit card advantages include: they are the most common electronic payment method used for in-store purchases, they require no new security device for online use and they allow consumers to buy on credit. Other payment methods such as online debit cards offer greater security and lower processing fees for merchants, but security, standards, infrastructure and regulatory hurdles stand in the way of immediate adoption and widespread usage. o Merchants need a new Internet merchant account to receive payments on the Web and should expect to pay discount fees that are one-half percent to one percent higher than those paid for in-store sales. o For Internet sales, the liability with chargebacks rests solely on the online merchant. While card issuers and merchant acquirers (banks or processors) are not liable for fraudulent or other chargeback transactions on the Internet, they do incur significant handling costs for chargebacks and thus charge higher discount rates for Internet sales. o To authorize (and sometimes settle) payments in real-time, merchants need to establish gateway connections from their Web storefronts to...

Table Of Contents
  • Management Summary
  • Introduction
  • Internet Payment Methods
    • Current Payment Methods
    • Future Payment Methods
  • Establishing Internet Credit Card Capability
    • Internet Merchant Accounts
    • Internet Gateway Connections
    • Acquiring Bank Processing Charges
    • Chargeback Liability for Internet Sales
  • Mechanics of Internet Credit Card Processing
    • Card Authorizations
    • Transaction Settlement
  • Options for Enabling Internet Payments
    • In-House/Software Solution
    • Outsourced Payment Gateway Solution
    • E-Commerce Hosted Solution
  • Criteria for Evaluating Internet Payment Solutions
  • Payment Security Issues
    • SSL
    • Digital Certificates for User Authentication
  • Online Fraud and Other Chargebacks
  • E-Wallets
    • Consumer E-Wallet Adoption
    • Migration From Client to Server-Side Wallets
    • Interacting With Merchant Sites
    • ECML
    • Branding of E-Wallets by Financial Institutions
  • Enabling the Sale of Digital Goods
  • Conclusions

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