Electronic Commerce Transactions

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Electronic Commerce Transactions

• Week 11

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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

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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

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Aspects of Traditional Electronic Commerce
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Relative Significance of E-commerce in Different
Countries
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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

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Level of E-commerce Sophistications
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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)

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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

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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)

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E-commerce Enablers

• Internet standards
• Bandwidth development
• World Wide Web
• Diversification and proliferation of internet
  access
• Development of off the shelf e-commerce products

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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)

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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

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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

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Non-credit of Pre-paid Systems

• Digital, virtual or electronic cash
• Microtransactions or micropayments such as
  Millicent
• Debit cards
• Smartcards

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Post-paid or Credit-based Systems

• Digital/electronic cheques
• Credit cards such as Visa or MasterCard

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Requirements for Security Systems

• Authentication
• Privacy and confidentiality
• Integrity
• Non-repudiability
• Availability

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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

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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

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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

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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

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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

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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

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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