e-Commerce Transaction

Coky Fauzi Alfi

Definition

Commerce : “The activity of buying and selling, especially on a large scale” (New Oxford Dictionary of English)

e-Commerce : “The trading of goods and services conducted using the Internet and other electronics media”

e-Commerce versus Commerce

Compare Marketspace

E-Commerce The Internet or other electronics media

Commerce A physical area

Steps

1. Identify suppliers

2. Compare and select products or services

3. Make purchase commitments

4. Complete financial transactions

5. Obtain service

Principles

1. Transparency

2. Reliability

3. Confidentiality and privacy

4. Respect of the intellectual property rights

History

• 1960, businesses were using primitive computer networks to conduct electronic transactions called Electronic Data Interchange (EDI)

• 1982, Transmission Control Protocol and Internet Protocol (TCP/IP)

• 1990, HTML• 1992-1994, Mosaic and Netscape• 1995, Amazon.com goes live. First Virtual and

CyberCash go live too.

EDI and EFT

• Electronic Data Interchange, EDI : The exchange, using electronic media, of standardized business documents such as purchase orders and invoices between buyers and sellers

• Electronic Funds Transfer, EFT : An aspect of the electronic payment mechanism involving transfer of funds from the bank of a buyer to a seller

Private Network

Enterprise A

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Enterprise B

EDI standard documents

EDI Diagram

Levels of e-Commerce Sophistication

Level Characteristics

Primitive Static web pages or ‘brochure ware’

Searchable site with dynamic pages such as an online catalogue

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

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)

The Reasons for Implementing e-Commerce

• A Customer’s standpoint:– Increase in demand for choice (product depth, global

reach, price choices)– Demand for information (detailed product information,

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)

The Reasons for Implementing e-Commerce

• A business customer’s standpoint:– Lower purchasing overhead – especially for small

value and repeat orders– Greater choice (greater product depth and global

reach)– Faster fulfillment cycle time (ordering, shipping,

billing)– Greater ability to supply information (inventory, order

status, etc)– Lower cost than EDI

Exp. Dell Computers

The Reasons for Implementing e-Commerce

• A supplier’s standpoint:– A global reach, leading to more orders– Reduced administration overhead– Integration between back office and online ‘shopping’

activities– Integration of online ‘shopping’ activities with

database marketing– Less need for distribution via channel

– Reduced working capital (inventory)

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

Types of E-Commerce

• Business-to-Business (B2B). Exp. Wal-Mart, Warner-Lambert

• Business-to-Customer (B2C). Exp. Dell, Compaq, Cisco• Consumer-to-Consumer (C2C). Exp. eBay. COM• Consumer-to-business (C2B)• Business-to-Employee (B2E) • Nonbusiness e–Commerce. Exp. Social Security Online

e-Commerce Models

• Brokerage Model– Brokers bring buyers and sellers together to make

transactions happen– They charge a fee or commission for the service

(account or transaction-based)– Exp. e-Tendering.com

• Advertising Model– Acts as an extension of the traditional media

broadcast model.– Exp. Google

e-Commerce Models

• Infomediary Model– Assist buyers and/or sellers understand a market, its

products and prices by gathering related data– Exp. Nielsen/NetRatings

• Merchant Model– Wholesalers and retailers of goods and services.

Sales rely on price lists, and sometimes on auctions– Exp. Mondo Online Store

Payment System Requirements

• Be secure (achieving privacy, authentication, integrity and non-repudiability)

• Be easy for buyer and seller to use and understand

• Be straightforward for banks to administer• Be scalable across different currencies and to

different denominations• Have low costs for implementing transactions

Types of Payment Systems

• Consumer Payment Systems

1.Non-credit or pre-paid systems– Digital, virtual or electronic cash (e-cash). Exp. CyberCash– Microtransaction or Micropayment. Exp. ECoin– Debit cards. Exp. Debit card from Bank Austria– Smartcards. Exp. Visa Cash

2.Post-paid or credit-based systems– Digital/electronic cheques. Exp. Cheques from BankNet– Credit card. Exp. Visa, Mastercard

Types of Payment Systems

• Business Payment Systems– Open Buying on the Internet (OBI)– The Open Trading Protocol (OTP)– Internet-based EDI

Security System Issues

Security System Requirements

• Authentication

• Privacy and confidentiality

• Integrity

• Non-repudiability

• Availability

Methods of Security System

• Encryption1. Secret-key (symmetric) encryption

2. Public-key (asymmetric) encryption

• Digital signature

• Secure Electronic Transaction (SET)

• Firewalls

Secret-key Encryption

Public-key Encryption

End