How Does e-Commerce Work?

A customer goes through your on-line catalog, selects the items she wants, goes to the checkout page, enter her credit card number, and clicks the submit button. What happens between clicking the submit button and seeing the purchase confirmation page?

In fact, what happens is remarkably similar to what happens when someone gives a waiter their credit card at a restaurant or gives their credit card over the phone to a mail-order company. There are some critical differences, however.

Here's a quick summary of the process:

1. The information about the purchase (items selected, name, address, phone number, credit card number) is sent via a secure connection to the web site transaction server.
2. The transaction server sends the credit card information over a private line to the card-processing system, which issues an "Accept" or "Decline" for that transaction. This card-processing system is the same one a restaurant or mail-order company uses to authorize a purchase.
3. Once the transaction server gets an "Accept" on the credit card, it submits the order to the company ordering system.

Many of the differences in e-commerce relate to the problem of credit-card fraud. While fraud is a problem in e-commerce (as it is in all credit-card transactions), it is a manageable problem if you take proper precautions. See our page on security for more details.

All right, it works. But how safe is it and how much does it cost?