An electronic transaction is the sale or purchase of goods or
services, whether between
businesses, households, individuals, governments, and other
public or private organisations, conducted over computer-
mediated networks. The goods and services are ordered over
those networks, but the payment and the ultimate delivery of the
good or service may be conducted on or off-line.
Secure Electronic Transaction (SET) was a communications
protocol standard for securing credit card transactions over
insecure networks, specifically, the Internet. SET was not itself a
payment system, but rather a set of security protocols and
formats that enabled users to employ the existing credit card
payment infrastructure on an open network in a secure fashion.
OVERVIEW OF SET
The SET protocol is a security specification introduced by VISA
and MasterCard for secure transaction over the internet. The
main aim of the SET protocol is to ensure confidentiality of
information. Secondly, it ensures the integrity of all the data that
are transmitted during the transaction process. Finally, the SET
protocol provides authentication that both the customer and the
merchant.Both the customer and the merchant are provided with
digital certificates that authenticate their legitimacy to make
transaction over the network.
THE STEPS INVOLVED IN THE
SET PROTOCOL ARE:
1. The customer browses the website of the merchant and
chooses the product.
2. The merchant returns a form containing the list of items along
with total price and order number. A copy of digital certificate is
also sent for the authentication of the merchant.
3. The customer sends the dual signature order information and
the payment information along with customer digital certificate.
The digital certificate is to validate the customer’s authenticity.
The order information confirms that the customer will make the
purchase, whereas the payment information is encrypted by the
public key of the payment gateway which cannot be read by the
4. The merchant forwards the payment information to the
5. The merchant bank then forwards the information to the
Customer Bank for authorization and payment.
6. The Customer Bank sends authorization to the merchant bank
and merchant bank sends the authorization to the merchant.
7. The merchant completes the order and sends it to the
8. The merchant captures the transaction from their bank.
9. The Customer Bank sends a notification to the Customer that
the payment has been processed.
The sequence of events required for a transaction is as follows:
• The customer obtains a credit card account with a bank that
supports electronic payment and SET
• The customer receives a digital certificate signed by the bank.
• Merchants have their own certificates
• The customer places an order with the merchant.
• The merchant sends the customer his public key and a copy of
his certificate so that the customer can verify that it's a valid
• The customer sends the merchant:
1. His certificate.
2. His order details encrypted with the merchant's public key
3. His bank account details encrypted with the bank's public key.
• The merchant requests payment authorization by sending the
1. The payment details encrypted with the bank's public key.
2. The customer's bank account details encrypted with the bank's public
Note that the merchant doesn't know the client's
payment and bank account details:
The bank sends the merchant a confirmation encrypted with the
merchant's public key.
The merchant sends the client the bank's response encrypted
with the client's public key.
The merchant ships the goods or provides the service to the
The merchant sends the bank a transaction request encrypted
with the bank's public key.
The bank transfers the payment to the merchant.
A payment gateway is an e-commerce
application service provider service that
authorizes credit card payments for e-
businesses, online retailers, bricks and clicks, or
traditional brick and mortar.
It is the equivalent of a physical point of sale terminal
located in most retail outlets. Payment gateways protect
credit card details by encrypting sensitive
information, such as credit card numbers, to ensure that
information is passed securely between the customer
and the merchant and also between merchant and the
HERE'S A STEP-BY-STEP
EXAMPLE OF HOW IT WORKS:
1. A buyer purchases an eBay item and enters a credit card number
in eBay checkout.
2. Details about the purchase are sent by eBay checkout to the
payment gateway for processing.
3. The payment gateway forwards transaction information to seller's
4. The seller's bank forwards transaction information to the bank that
issued the buyer's credit card to authorize the transaction.
5. The bank that issued the buyer's credit card either approves or
denies the transaction and sends that information back to the
6.If the transaction is approved, the bank will deposit funds on a
merchant's account at a scheduled time.
7.The payment gateway sends transaction details and response
back to eBay.
8.eBay lets the buyer know if the transaction was approved or
PayPal is an international e-commerce business allowing
payments and money transfers to be made through the Internet.
Online money transfers serve as electronic alternatives to paying
with traditional paper methods, such as checks and money
Shopping cart keeps track of all items that a customer wants
to buy, allowing the shopper to pay for the whole order at
checkout. Most shopping carts are free. Check these free
shopping carts at
In the "shopping cart" model, consumers can select items
while browsing the site that are then added to their virtual
It helps to maximize customers' satisfaction, and
provide a faster, more convenient purchasing method.
The consumers don’t have to leave the comfort of their
homes to make purchases.