The Secure Payment System

The Problem

In the digital economy, how get done we stop payments scams where the supplier accepts payments and does not do the observation or services? This is especially important now that we have a global economy connected by the Internet and digital media. What is required is a secure payment system that protects the interest of both the supplier and the buyer. This paper describes such a system.

The Process

We assume that the buyer and seller have made the connection with each other. The buyer wants to purchase the supplier?s product. However, the buyer and supplier are remote from each other but they can communicate via email (any other instantaneous communications channel would do). We also assume that there is an internet site, called the Secure Payment Site (SPS).

Step 1

The buyer logs on to the SPS and pays the agreed amount plus 5% into the site. The site then generates a Despatch Key (a unique sequence of numbers and letters) and emails this to the supplier. The buyer also sets a time limit on despatch and a minimum number of days between despatch and payment.

Step2

The supplier despatches the goods and enters the despatch key on the SPS site. The site then emails the buyer a Satisfied Key and emails this to the buyer. The supplier also sets a time limit on the customer for satisfactory receipt with the minimum being the number of days proposed by the customer.

Step 3

On receipt of the goods, the buyer enters the Satisfied Key on the SPS site. The site generates a payment to the supplier and refunds the 5%.

This is a straightforward payment transaction where nothing goes wrong. At Step 1, the supplier knows that there will be payment if he supplies the goods. At Step 2, buyer knows he can authorise the release of the funds if he is satisfied with the goods.

To understand how this system can protect the interests of both the buyer and the seller, we need to describe the status of the transaction through the Steps and also the exception handling.

Despatch Issues

If the supplier does not enter the Despatch Key into the SPS within the time limit, the transaction is voided and the SPS will refund the amount to the buyer in full.

Satisfaction Issues

Any time after the despatch key is sent and before the time limit set by the supplier, the buyer may put this transaction into a disputed status. Once the time limit set by the supplier has been reached, if no Satisfaction Key has been entered, the funds will automatically paid to the supplier.

Disputed Status and Resolution

When a transaction is in a disputed status, the site automatically generates two unique keys; the Customer Dispute Key and the Supplier Dispute Key. The site will allow both parties to communicate formally through site mail messages. These messages will be recorded to form an audit trail of the discussions. The funds will only be released as follows:-

Using the Supplier Dispute Key, the supplier may okay a monogram to decrease to the buyer; Using the Buyer Dispute Key, the buyer may allow a denomination to cash the supplier; Either class may use to SPS admin to drive a adjustment if all else fails.

Benefits

The Buyer

The buyer benefits are obvious. Such a payment proceeding entrust prevent the ?no-supply? scams. It also gives the supplier more power over the supplier over the quality of the product. If the product supplied is found to be unsatisfactory on receipt, he can immediately put the transaction into dispute and force the supplier to respond. If all money received into the SPS is placed into a client?s trust account, they would be protected legally also from any financial instability in the company operating the SPS.

The Supplier

For the honest supplier or seller, there is the comfort of knowing that the funds will be there to pay for the product if it is satisfactory. Since the buyer has already parted with his money, there is no gain for the buyer to put the payment into dispute.

The Business Opportunity

Most credit cards charge retailers from 3% to 6% of the transaction value. The SPS operator could levy a similar charge on the supplier. Alternatively, the charge could be levied on the buyer as a form of insurance. From a financial point of view, there should be a minimum transaction value, say £12 or $20. Personally, I would favour a fixed charge on the buyer of say £1.20 or $2 with an option of making an additional charge of say £10 if the SPS organisation has to manually intervene to resolve a disputed transaction.

The target market would obviously exclude the well known trusted brands. However, using an SPS system might be quite attractive to smaller, less well-known retailers as well as individuals selling items especially if these retailers want to go global.

Conclusion

Such a system will encourage trading on the net. Not only is this idea likely to make money but also it will help to promote honest trading in the digital economy. How about it?

David Chan is an author with an interest in business organisations, strategies and Communities of Interest. He is a has established several internet businesses. He will be publishing a book on businesses serving Communities of interests in September 2006.