Electronic Commerce Transactions

1
Electronic Commerce Transactions

• Week 11

2
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

3
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

4
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
5
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
6
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

7
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)
8
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)

9
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

10
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)

11
E-commerce Enablers

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

12
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)

13
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

14
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

15
Non-credit of Pre-paid Systems

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

16
Post-paid or Credit-based Systems

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

17
Requirements for Security Systems

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

18
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

19
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

20
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

21
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

22
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

23
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

24
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