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More about SET [Ecommerce Notes]

How SET works?
As we all know people today pay for online purchases by usually sending their credit card details to the merchant. There is protocol such as SSL or TLS available that keeps the sender’s credit card details safe from eavesdroppers however are not able to protect merchants from dishonest customers or vice-versa. SET has been developed keeping in mind the limitations of existing protocols. SET requires both cardholders as well as merchants to register before they engage themselves in any transactions. Any card holder can register by contacting a certificate authority. He needs to supply security details and the public half of his proposed signature key to the certificate authority. During the registration authorities verify the applicant. After verification and granting approval authority provides the applicant with a certificate that provides a confirmation that his signature key is valid. All orders and confirmations have a digital signature. This is used to provide authentication in case of any dispute between the parties.

Major participants in a SET system are:
  • Cardholder
  • Merchant
  • Issuer
  • Acquirer
  • Payment gateway
  • Certification authority
Understanding a SET Transaction Following are the sequence of events that are required for a transaction:
  1. Customer needs to obtains a credit card account with a bank which supports electronic payment and SET.
  2. The customer will receives an X.509v3 digital certificate which is duly signed by the bank.
  3. Merchants have their own certificates.
  4. The customer places an order with the Merchant.
  5. The merchant sends a copy of its certificate so that the customer can verify that the store is valid.
  6. The order and payment are sent between the two parties.
  7. The merchant then requests for payment authorization.
  8. The merchant has to confirms the order.
  9. The merchant needs to ship the goods or provide appropriate service to the customer.
  10. The merchant needs to requests payment

Key Role Players in a SET Transaction A SET purchase involves three parties:
  1. The cardholder (One who has to pay)
  2. The merchant
  3. Payment gateway (It is essentially a bank).
Card holder needs to share information as follows with the other two parties:
  • The cardholder needs to shares the order information with the merchant. He does not need to provide this information to the payment gateway.
  • The cardholder shares the payment information with the payment gateway and not with the merchant.
  • A set of dual signature is used to accomplish this partial sharing of information among the parties. It allows all parties to confirm that they are handling the same transaction. This is done as follows:

    • Each party receives the hash of the withheld information.
    • The cardholder needs to sign the hashes of order information as well as payment information.
    • Once the card holder signs both hashes each party needs to verify and confirm that the hashes they possess agree with the hash signed by the cardholder.
    • Further, the cardholder and merchant needs to compute equivalent hashes which payment gateway needs to compare. After comparing payment gateway needs to confirm their agreement on the details withheld from him.

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