Study Guide
Table Of Contents
- PayPal Certified Developer Program Study Guide
- Contents
- List of Tables
- Online Payment Processing
- Internet Security and Fraud Prevention
- Why Every Business Should Be Concerned About Internet Fraud
- Liability for Internet Fraud
- Internet Fraud: What It Is and How It Happens
- Who Is at Risk for Online Fraud
- Reducing Exposure to Fraud
- What Banks and Card Associations Are Doing to Prevent Online Credit Card Fraud
- What PayPal Is Doing to Protect Your Business Against Fraud
- Disclosure and Compliance
- PayPal Fraud Protection Services
- Review Questions
- Getting Started With Account Setup
- API Credentials
- Name-Value Pair (NVP) API
- Express Checkout
- Direct Payment API
- Transactions
- Sandbox Testing
- Answers to Review Questions
- General Reference Information
- Glossary
- Index
Online Payment Processing
How Online Payment Processing Works
1
12 March 2008 PayPal Certified Developer Program Study Guide
Individuals
z Merchant: Someone who sells goods or services.
z Customer: The holder of the payment instrument.
Institutions
z Customer issuing bank: The institution providing the customer’s credit card.
z Acquiring bank: Provides internet merchant accounts required to enable online card
authorization and payment processing.
z Credit card associations: Financial institutions that provide credit card services in concert
with credit card associations such as Visa and MasterCard.
z Processor: A large data center that processes credit card transactions and settles funds for
merchants. A processor can be either a bank or a company dedicated to providing these
services. Ceridian is an example of a payment processor.
Processes and Services
z Authorizations: The process of verifying that customer credit cards are active and have
sufficient available credit limits.
z Settlements: Processing authorized transactions to settle funds into a merchant’s account.
z Payment processing service: A service that connects merchants, customers, and banks
involved in online transactions. A third party, such as PayPal with its secure payment
gateway, usually offers this service.
How Online Payment Processing Works
Online payment processing consists of two principal steps: authorization and settlement.
Authorization verifies that the card is active and the customer has sufficient credit to make the
transaction. Settlement is the process of charging the customer’s card account and transferring
money from the customer’s account to the merchant’s account.
Payment Processing Authorization
During authorization, a bank verifies that holders of a payment instrument, like a credit card,
have sufficient credit or funds to make a purchase. The payment authorization process engages
multiple institutions and services to verify that sufficient credit is available to complete the
transaction as follows:
1. Customer decides to purchase online and inputs credit card information.