Electronic Commerce Transactions Week 11. Objectives What is e-commerce Implementing transactions over the internet Managing security risk Tools for implementing.

Electronic Commerce Transactions

Week 11

Objectives

• What is e-commerce

• Implementing transactions over the internet

• Managing security risk

• Tools for implementing e-commerce

• Consumer and business markets for e-commerce

What is e-commerce

• The sharing of business information, maintaining business relationships, and conducting business transactions by means of telecommunication networks

• E-business denotes a broad holistic concept encompassing internet related technologies on business functions, from human resource management to marketing to corporate strategy

Aspects of Traditional & Electronic Commerce

Fulfillment Cycle step (business-to-business)

Conventional Shopping

Traditional mail order (multiple single-medium channel)

Electronic commerce (single multimedia channel)

Evaluate suppliers and product options

Shops, showrooms

Magazines, flyers Portals, intermediaries, online catalogues

Select & specify product Pick off shelf, take to counter

Order form, letter Online form, e-mail

Send order to supplier - Fax, mail, telephone E-mail, EDI

Supplier checks inventory - Printer form Online database

Generate invoice - Printed form EDI or via credit card

Ship product - Shipper Shipper or online distribution

Confirm receipt Printed form Printed form E-mail

Schedule payment Printed form Printed form EDI, online database

Transfer payment EFT-POS Mail (cheque), telephone (credit card)

EDI, EFT

Relative Significance of E-commerce in Different Countries

Category Country

Superpower United States

Contender Germany, United Kingdom, Japan, Canada

Gateway Singapore, Benelux, Hong Kong

Sprinter Scandinavia/Nordic countries

Straggler France, Australia, Italy, South Korea, Spain

A History of E-commerce

• Electronic Data Interchange – the exchange, using digital media, of standardized business documents such as purchase orders and invoices between buyers and sellers

• Financial EDI – an aspect of the electronic payment mechanism involving transfer of funds from the bank of a buyer to a seller

Level of E-commerce Sophistications

Level Characteristics

Primitive Static web pages or ‘brochurweare’

Searchable site with dynamic pages such as online catalogue

Integration with operational databases, e.g. inventory searching, package tracking, job posting

Customer transaction through the Internet, e.g. selling products and services, buying and selling shares, applying for loans

Advanced Full electronic commerce (i.e. integrated fulfillment cycle of ordering, shipping, billing)

Reasons for the Growth in E-commerce

• Increase in demand for choice (product depth, global reach, price choices)

• Demand for information (detailed product information, inventory, inventory, order status)

• Demand for interactive, online support• Avoidance of travel and parking difficulties for

consumer e-commerce• Elimination of time constraints (that is, opening

hours or delays between placing an order and delivery)

Benefits of E-commerce

• Lower purchasing overhead – especially for small value and repeat orders

• Greater choice (greater product depth and global reach)

• Faster fulfilling cycle time (ordering, shipping, billing)• Greater ability to supply information (inventory, order

status, etc.)• Lower cost than EDI• Ease of swapping between suppliers greater than with

EDI

Benefits for suppliers

• A global reach, leading to more orders• Reduced administration overhead (paperwork automation

leading to a lower cost for each order made)• Reduced asset requirement (physical properties for

companies with a retail network)• Integration between back office and online ‘shopping’

activities• Integration of online ‘shopping’ activities with database

marketing• Less need for distribution via channel (disinter mediation)• Reduced working capital (inventory)

E-commerce Enablers

• Internet standards

• Bandwidth development

• World Wide Web

• Diversification and proliferation of internet access

• Development of ‘off the shelf’ e-commerce products

Inhibitors to E-commerce

• Technophobia• Security fears• Technology not user friendly• Poor performance leading to slow download• Inertia of habitual conventional shopping and

purchasing• Internet access still limited• Entrenched interests (for example, distributors

who may be bypassed)

Payment system requirements

• Be secure• Be easy for buyer and seller to use and

understand• Be straight forward for banks to administer• Be scalable across different currencies and

to different denominations• Have a low costs for implementing

transactions

Consumer Payment Systems

• Purchasers• Merchants• Certified Authority (CA)- body that issues

digital certificates that confirm the identity of purchasers and merchants

• Banks• Electronic token issuer – dependent on

digital certificates for security

Non-credit of Pre-paid Systems

• Digital, virtual or electronic cash

• Microtransactions or micropayments such as Millicent

• Debit cards

• Smartcards

Post-paid or Credit-based Systems

• Digital/electronic cheques

• Credit cards such as Visa or MasterCard

Requirements for Security Systems

• Authentication

• Privacy and confidentiality

• Integrity

• Non-repudiability

• Availability

Methods of Increasing Security

• Encryption– Secret-key (symmetric) encryption– Public-key (asymmetric) encryption

• Digital signatures– Identifies individuals using public key

encryption– Certificate and certificate authorities (CA)– Secure Electronic Transaction

Constraints on Selecting an E-commerce Solution

• Cost• Quality of service

– Performance of service– Downtime– Security– Cards supported– Currencies supported– Time taken to set up an account

Constraints on Selecting an E-commerce Solution

• Transaction method– Traditional (phone/fax/mail)– E-mail– Online transaction

• Number of products required• Volume of sales

– Shopcreator Stall supports up to 10 products– IBM \Home page creator supports 15-500 items– BT StoreFront supports a small to medium number of

products

Constraints on Selecting an E-commerce Solution

• Cost of product• Configurability• Personalization facilities• Integration with back-end systems

– Integration with stock control system to determine availability is vital

– Integration with stock control system will allow price and product information changes to be updated rapidly

– Integration with adequate fulfillment services– Integration with e-mail to conform order to customer

Consumer & Business Markets for E-commerce

• Business-to-business– Familiarity with the technology– Account selling

• Consumer markets– Acceptable Internet access mechanisms– Payment mechanisms perceived as convenient

and secure– An attractive and usable media interface

The Commercial Environment for E-commerce

• Legal status of banks– Non banks are subject to less scrutiny and regulation– Non-banks are at a competitive advantage as they do not carry

the costs of the high level of registration– Non-banks do not report to central bank which leads to

uncertainty and instability in the money supply

• Tariffs and taxation– Value added Tax charged depending on location of supplier

and consumer– Export and import tax implications– Services attract VAT according to where the supplier is

located

Contracts – consumer protection• Location and identity of supplier and in case of contracts

requiring payment in advance his address• The main characteristics of the goods or services• The price of goods or services• Delivery costs• The arrangement of payments, delivery or performance• The existence of right of withdrawal• The cost of using the means of distance communication, where it

is calculated other than the basic rates• The period for which the offer or price remains valid• The minimum duration of the contract and whether the contracts

for the supply of goods are to be permanent or recurrent