Introduction to Online Payment Processing and PayPal Payment Solutions

Introduction to Online Payment Processing

and PayPal Payment Solutions

**Source: PayPal survey of small to mid-sized businesses, November 2007

51%

Percentage of

consumers who would

have abandoned their

purchase if PayPal

payments were not

available**

14%

Increase in sales for

small to mid-sized

businesses that added

PayPal Express

Checkout*

* Source: PayPal study of small- and medium-sized businesses, 2006

141M

Number of PayPal

accounts worldwide

Pay

Pal

is:

Secure

Simple

Fast

PayPal Helps Bring You New Customers

Drivers of Consumer

Demand for PayPal

Opportunities for

Merchants

The PayPal Opportunity

PayPal Growth

PayPal

helps you grow

your business

Pay

Pal

helps you grow

your business

►

141M accounts

►

31% yoy volume growth

►

190 countries

►

70+ currencies

►

1000s of merchants add

PayPal every year

PayPal is the safer, easier way to get paid by online shoppers

around the world.

PayPal is the safer, easier way to get paid by online shoppers

around the world.

Understanding the Payment Processing Network

Individuals

►

Merchant – seller of goods

►

Customer – buyer of goods

Institutions

►

Customer’s Issuing Bank – provides customer’s credit card

information and verification

►

Merchant’s Acquiring Bank – provides internet merchant

account

►

Processor – authorizes credit card transactions and settles

The Payment Network Provides Processes and Services

Processes

►

Authorization – the process of verifying a

customer’s credit card

►

Settlement – the process of collecting funds from

the customer’s account

Services

►

Payment Processing Service – connects

merchants, customers, and banks through secure

online transactions.

►

Gateway – the secure pipe between the banks

2

Payment

Processing

Service

Authorization Process

1. Customer decides to make an online purchase and inputs credit card information

7

6

5

1

3

4

2. Merchant’s website receives customer information and sends it to a payment processing service

3. Payment processing service routes information to processor

4. Processor routes information to bank that issued customer’s credit card (issuing bank)

5. Issuing bank sends authorization (or declination) to processor

6. Processor routes transaction results to payment processing service

7. Payment processing service sends results to merchant

8. Merchant decides to accept or reject purchase

8

2

Payment

Processing

Service

Settlement Process

1. Merchant informs the payment processing service to settle transactions

2. Payment processing service sends transaction information to the processor

3. Processor checks the information and forwards settled transaction information to the issuing

bank

4. Issuing bank transfers funds to the processor

5. Processor routes funds to the acquiring bank

6. Acquiring bank credits merchant’s bank account

7. Issuing bank includes merchant’s charge on customer’s credit card account

6

4

5

1

3

7

PayPal Provides an All-in-One Solution for Online Merchants

Payment

Processing

Service

Protecting the security of a merchant’s information is

the top priority at PayPal.

Understanding the Risks of Internet Fraud

►

An estimated $2.8B USD

was lost to online fraud

in the U.S. and Canada

in 2005

►

The rate of credit card

fraud for online sales is

three to four times higher

than the overall fraud

rate

►

Authentication is a challenge

►

Hackers can break into a

merchant’s network

►

Hackers can also steal

customer identities

►

Multiple access points for

break-ins

Common Fraud-Related Risks

Using stolen information

to open new credit cards

Issuing unauthorized

credits or payments

Identity

theft

Cash

theft

Accessing a payment

network to complete fraud

Accessing payment

networks

Using a stolen credit

card to purchase

goods and services

Product theft

Chargebacks

A cardholder disputes a

credit card purchase

How to Protect Your Business Against Fraud

Transaction Level

Ensure each transaction you accept and process is

valid, and be careful in reviewing suspicious

transactions because some may be valid.

Account Level

Make sure only authorized users have access to your

payment gateway account, and be alert for suspicious

account access patterns.

Network Level

Ensure your perimeter is defended against

unauthorized access.

1

2

Your Disclosure Policy Tells Customers that You Are

Honest and Dependable

1

Business Description

–

Explains what the company does

3

Shipping Policy

–

Details shipping terms, shipping classes

offered, & expected delivery timeframe

2

Privacy Policy

–

Describes how the company treats and protects

customers’ information

4

Return Policy

–

Provides clear guidelines on how a return is

handled

5

Contact Information

–

Makes it easy for customers to get in

touch with the merchant via different communication channels

Compliance with PCI Data Security Standards Must Be

Followed

Protect Cardholder Data

Maintain a Vulnerability

Management Program

Implement Strong Access

Control Measures

Regularly Monitor and Test

Networks

Maintain an Information

Security Policy

Control Objective

_Requirement

Build and Maintain a Secure

Network

1. Install and maintain a firewall configuration to protect cardholder data

2. Do not use vendor-supplied defaults for system passwords and other security parameters

3. Protect stored cardholder data

4. Encrypt transmission of cardholder data across open, public networks

5. Use and regularly update anti-virus software

6. Develop and maintain secure systems and applications

7. Restrict access to cardholder data by business need-to-know

8. Assign a unique ID to each person with computer access

9. Restrict physical access to cardholder data

10.Track and monitor all access to network resources and cardholder data

11.Regularly test security systems and processes

PayPal Offers the Payment Solution that Meets Your

Business Need

Pay

Pal

Products

Scenario #1

Accept online credit

card payments with

minimal effort

Scenario #2

Build an all-in-one

solution for accepting

web, phone, fax and

mail payments

Scenario #3

Accept PayPal, keep

current payment

processor

Scenario #4

Provide a secure

connection from your

online store to your

merchant account

Website

Payments

Standard

Website

Payments

Pro**

Express

Checkout**

Payflow

Gateway

Selecting the Right Product for Your Business

Product

Website

Payments

Standard

Website

Payments Pro

Express

Checkout

Payflow Gateway

Scenario Accept online credit card payments with minimal effort

Build an all-in-one solution for accepting web, phone, fax and mail payments Accept PayPal, keep current merchant account Establish a secure connection between online store and

merchant account, and keep merchant

account

Internet merchant

account needed?

X

X





Where customers

checkout PayPal PayPal or merchant’s website

PayPal PayPal or merchant’s website

Virtual Terminal

included?

X



X

