Electronic Commerce
Transactions
Week 11
Objectives
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What is e-commerce
Implementing transactions over the internet
Managing security risk
Tools for implementing e-commerce
Consumer and business markets for ecommerce
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
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Fax, mail, telephone
E-mail, EDI
Supplier checks inventory
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Printer form
Online database
Generate invoice
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Printed form
EDI or via credit card
Ship product
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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 Ecommerce in Different Countries
Category
Superpower
Contender
Country
United States
Germany, United Kingdom, Japan, Canada
Gateway
Sprinter
Straggler
Singapore, Benelux, Hong Kong
Scandinavia/Nordic countries
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 Ecommerce
• 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
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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
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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
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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 Ecommerce Solution
• Cost
• Quality of service
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Performance of service
Downtime
Security
Cards supported
Currencies supported
Time taken to set up an account
Constraints on Selecting an Ecommerce 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 Ecommerce Solution
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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