A payment gateway allows the customer to make a purchase by credit card and have it processed in real-time. The payment gateway sends a request for authorization directly to the computers of the credit card holder's bank. On authorization, the funds are captured. After a holding period of around 4 weeks, the funds are disbursed to the merchant. This leads to substantial savings in time for the merchant in that he need not seek authorization by phone from his bank. To date, no locally based payment gateway is available to merchants based in Hong Kong . Payment gateways are usually based in the U.S. or Europe and are available for merchants based in their respective countries only. Although this can be got round by opening a “Shell” company in the U.S. , this process is tedious and expensive. As from last year, several payment gateways have begun to take in customers based in Hong Kong at a reasonable cost. These include 2checkout.com [41] and Worldpay [37]. Some like 2checkout.com will take in new merchants without doing a background check but whereas others like Worldpay would require a company registration certificate and also a thorough background check. The quality of the service provided varies enormously, particularly in the case of fraud screening.
(4). The issue of credit card fraud
Credit card fraud is one of the most destabilizing factors in e-commerce. The banks and credit card companies regard e-commerce as a high-risk activity, and thus the merchant is liable for all the loss sustained through credit card fraud. To add insult to injury, the merchant also has to pay a charge-back fee of around US$20-30 for every fraudulent transaction as a reimbursement to the banks for the time spent in investigation. Typically, the buyer makes a purchase with a credit card issued by a bank in a particular country and asks the goods to be sent to another person in another country. There are also other means of checking the validity of the purchase e.g. by verifying that the invoice address given is correct and also that the customer has entered the correct 3 or 4 letter security code.
4.1.5. TURNKEY Approach
Setting up a web site and integrating it with a carting system and a payment gateway could be a very daunting and complicated task for the uninitiated. For this reason, a number of TURNKEY approaches are on the market offering a combination of the above elements in a single package. The most common combination is to offer web hosting with a shop-front/shopping cart system offered by hypermart.net and retineada.com. Another combination involves combining a shopping cart with the payment gateway such as 2checkout.com. Packages are becoming available whereby web hosting, shop-front, and payment gateway is combined into one package. A good example of this is the ‘click and build' [4] system offered by Worldpay [37].