Electronic Commerce Transactions

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					Electronic Commerce
      Week 11
•   What is e-commerce
•   Implementing transactions over the internet
•   Managing security risk
•   Tools for implementing e-commerce
•   Consumer and business markets for e-
          What is e-commerce
• The sharing of business information, maintaining
  business relationships, and conducting business
  transactions by means of telecommunication
• 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
Fulfillment Cycle step      Conventional      Traditional mail order     Electronic commerce
(business-to-business)      Shopping          (multiple single-medium    (single multimedia
                                              channel)                   channel)
Evaluate suppliers and      Shops,            Magazines, flyers          Portals, intermediaries,
product options             showrooms                                    online catalogues
Select & specify product    Pick off shelf,   Order form, letter         Online form, e-mail
                            take to counter
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
Confirm receipt             Printed form      Printed form               E-mail

Schedule payment            Printed form      Printed form               EDI, online database

Transfer payment            EFT-POS           Mail (cheque), telephone   EDI, EFT
                                              (credit card)
  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
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-
• 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
       Benefits of E-commerce
• Lower purchasing overhead – especially for small
  value and repeat orders
• Greater choice (greater product depth and global
• Faster fulfilling cycle time (ordering, shipping,
• 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’
• Integration of online ‘shopping’ activities with database
• 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
• Development of ‘off the shelf’ e-commerce
      Inhibitors to E-commerce
• Technophobia
• Security fears
• Technology not user friendly
• Poor performance leading to slow download
• Inertia of habitual conventional shopping and
• 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
• Be straight forward for banks to administer
• Be scalable across different currencies and
  to different denominations
• Have a low costs for implementing
   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
• Digital/electronic cheques
• Credit cards such as Visa or MasterCard
       Requirements for Security
•   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
  – 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
    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
 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