Here's how it works. When you order goods from Kogan with your credit card, after you've completed your purchase you get a web page, replicated in an email message, that says:
"Please verify your order:
In order to keep our prices down, security is very important to us.
We need to ensure that every order is placed by the actual credit card holder. The amount you are charged for your order is slightly less than the invoice total.
Follow these 3 steps to verify your order:
Login to your Internet Banking, or call the phone number on the back of your credit card to find out the EXACT AMOUNT we charged you for this transaction
Enter the EXACT AMOUNT, both dollars and cents
Click "Verify My Order"
Once you have this exact amount, please enter it on the page below and click submit. Your order will be processed immediately."
There is just one small problem. It can take several days for that transaction to hit your credit card. In the case of my ANZ Visa card, about four days, and that delay is not unique to Kogan, it seems to apply to most transactions.
Kogan's information gives you no suggestion that you can expect a delay - which is most unhelpful. So depending on how desperate you are to get whatever it is you have purchased you have no recourse but to repeatedly access your online banking site looking for the transaction.
I have no idea whether Kogan uses this system for every transaction or just for the first one from each customer (I've bought from Kogan on three previous occasions but possibly with a different credit card). I've asked Kogan for comment but none has been forthcoming.
Functionally the Kogan system is very similar to the Australian-developed Merchant Protect system from iSignthis Ltd (formerly Indian Pacific Media), launched in mid 2012. Instead of reducing the value of the transaction by a few cents, the Merchant Protect system splits the value of the transaction randomly into two amounts that sum to the total value of the transaction, and it provides the verification service to the merchant.
Merchant Protect's Scott Minehane told me last week that Kogan was not using its system, which he said was protected by a number of patents. However the idea is simple and can be implemented by multiple different means, so it may be hard to protect by patent.
Minehane declined to name any customers for the Merchant Protect system. He said it was still in beta and would move to a fully commercial stage once patents had been secured. And he claimed that users of the Merchant Protect system would not suffer the several days of delay that I experienced with the Kogan system.
According to the FAQs on the Merchant Protect web site, "Customers with cards issued from any issuer, anywhere in the world are capable of authenticating within minutes. The method of accessing the one time password [ie the values of the two transactions] will depend upon the sophistication of your customer's bank.
Failing that it said: "All customers, no matter whether they have access to real time online banking, have access to automated telephone banking or their bank's customer support."
I can't imagine the transaction being available via an automated phone service any sooner than it hits the web site, and I certainly wouldn't want to wait for a customer service agent unless I was really desperate.
At the very least Kogan should warn you before you commit to pay that you could wait days before your purchase will be shipped. Perhaps also, with a bit of effort, they could come up with a list of which financial institutions process transactions in near real time, and point the finger at the slowest. Then, before you commit, you could have the option of using an alternative payment method that does provide near real time notification of transactions.