E-Commerce: Application and Securities

Question 2:
Describe the scope, functions and business applications of internet and extranet. Briefly discuss the organizational applications of E-commerce.

Answer:
Layered System View:

Internet: What is Internet? It is a Global network of computers, (servers or clients) to exchange information. It is a "network of networks" that includes millions of private and public, academic, business, and government networks (local or Global), linked by copper wires, wireless connections, and other technologies.

Hardware and Software of Internet Variety of hardware and software are used to make Internet functional. Modem Device that enables computers to communicate through phone lines. When we start internet the our modem communicates to modem of ISP.

Computer In addition to a modem, you need a client capable of handling multiple data types. Software Two types of softwares required to enable your PC as an Internet PC. Communication software to establish connection Client software for browsing, e-mail, news

Applications of Internet Download programs and files E-Mail Voice and Video Conferencing E-Commerce File Sharing Information browsing Search the web addresses for access through search engine Chatting and many more

Disadvantages of Internet Theft of personal information such as name, address, credit card number etc. Virus threats nothing but a program which disrupts the normal functioning of your system. Spamming refers to receiving unwanted e-mails in bulk, which provide no purpose and needlessly obstruct the entire system. Pornography - This is perhaps the biggest threat related to childrens healthy mental life. A very serious issue concerning the Internet.

Though, internet can also create havoc, destruction and its misuse can be very fatal, the advantages of it outweigh its disadvantages.

Extranet: What is Extranet? Extranet is an Intranet for outside authorized users using same internet technology. Inter-organizational information system. Enable outsiders to work together with companys employees. Open to selected suppliers, customers & other business partners Example: Dealers/distributors have access to product files such as: Product specification Pictures Images, etc.

Components of Extranets Some basic infrastructure components such as the internet including: TCP/IP protocols, E-mail, Web-browsers, External business partners & Tele-commuting employees place order, check status & send E-mail.

Benefits of Extranet Improved quality. Lower travel costs. Lower administrative & other overhead costs. Reduction in paperwork. Delivery of accurate information on time. Improved customer service. Better communication. Overall improvement in business effectiveness.

Disadvantages The suppliers & customer who dont have technical knowledge feel problem. Faceless contact. Information can be misused by other competitors. Fraud may be possible. Technical Employees are required.

Organizational Applications of E-commerce Electronic commerce is the application of communication and information sharing technologies among trading partners to the pursuit of business objectives. E-Commerce can be defined as a modern business methodology that addresses the needs of organizations, merchants, and consumers to cut costs while improving the quality of goods and services and increasing the speed of service delivery. E-commerce is associated with the buying and selling of information, products and services via computer networks. Key element of e-commerce is information processing. The effects of e-commerce are already appearing in all areas of business, from customer service to new product design. It facilitates new types of information based business processes for reaching and interacting with customers online advertising and marketing, online-order taking and on-line customer service etc. It can also reduce costs in managing orders and interacting with a wide range of suppliers and trading partners, areas that typically add significant overhead to the cost of products and services. Virtual enterprises are business arrangements in which trading partners separated by geography and expertise are able to engage in complex joint business activities, as if they were a single enterprise. One example would be true supply chain integration, where planning and forecast data are transmitted quickly and accurately throughout a multi-tier supply chain.

CONSUMER ORIENTED E-COMMERCE APPLICATIONS The wide range of applications for the consumer marketplace can be broadly classified into

Entertainment: Movies on demand, Video cataloging, interactive ads, multi-user games, on-line discussions Financial services and information: Home banking, financial services, financial news Essential services: Home shopping, electronic catalogs, telemedicine, remote diagnostics Educational and training: Interactive education, video conferencing, on-line databases

Question 3:
What types of electronic payment systems are required in E-Commerce? Why are there different types of payments systems? Explain the necessary characteristics and each type of payments systems and give an example each of where it is used?

Answer:
An e-commerce payment system facilitates the acceptance of electronic payment for online transactions. Also known as a sample of Electronic Data Interchange (EDI), e-commerce payment systems have become increasingly popular due to the widespread use of the internetbased shopping and banking.

Types of E-Payments E-cash Electronic wallets Smart card Credit card

Electronic Cash Primary advantage is with purchase of items less than $10 Credit card transaction fees make small purchases unprofitable Micropayments o Payments for items costing less than $1

E-cash Concept 1. Consumer buys e-cash from Bank 2. Bank sends e-cash bits to consumer (after charging that amount plus fee) 3. Consumer sends e-cash to merchant 4. Merchant checks with Bank that e-cash is valid (check for forgery or fraud) 5. Bank verifies that e-cash is valid

Electronic Cash Issues E-cash must allow spending only once Must be anonymous, just like regular currency Safeguards must be in place to prevent counterfeiting Must be independent and freely transferable regardless of nationality or storage mechanism Divisibility and Convenience Complex transaction (checking with Bank) Atomicity problem

Advantages and Disadvantages of Electronic Cash Advantages More efficient, eventually meaning lower prices Lower transaction costs Anybody can use it, unlike credit cards, and does not require special authorization Disadvantages Tax trail non-existent, like regular cash Money laundering Susceptible to forgery

Electronic Cash Security Complex cryptographic algorithms prevent double spending Anonymity is preserved unless double spending is attempted Serial numbers can allow tracing to prevent money laundering Does not prevent double spending, since the merchant or consumer could be at fault

Electronic Wallets Stores credit card, electronic cash, owner identification and address Makes shopping easier and more efficient o Eliminates need to repeatedly enter identifying information into forms to purchase o Works in many different stores to speed checkout Amazon.com one of the first online merchants to eliminate repeat form-filling for purchases

An Electronic Checkout Counter Form

Electronic Wallets Agile Wallet Developed by CyberCash Allows customers to enter credit card and identifying information once, stored on a central server Information pops up in supported merchants payment pages, allowing one-click payment Does not support smart cards or CyberCash, but company expects to soon eWallet Developed by Launchpad Technologies Free wallet software that stores credit card and personal information on users computer, not on a central server; info is dragged into payment form from eWallet Information is encrypted and password protected Works with Netscape and Internet Explorer Microsoft Wallet Comes pre-installed in Internet Explorer 4.0, but not in Netscape All information is encrypted and password protected Microsoft Wallet Merchant directory shows merchants setup to accept Microsoft Wallet

Entering Information into Microsoft Wallet

Smart Cards Plastic card containing an embedded microchip Available for over 10 years So far not successful in U.S., but popular in Europe, Australia, and Japan Unsuccessful in U.S. partly because few card readers available Smart cards gradually reappearing in U.S.; success depends on: Critical mass of smart cards that support applications Compatibility between smart cards, card-reader devices, and applications

Types of Smart Cards Magnetic stripe Memory cards Optical memory cards Microprocessor cards

Smart Card Applications Ticketless travel Seoul bus system: 4M cards, 1B transactions since 1996 Planned the SF Bay Area system Authentication, ID Medical records Ecash Store loyalty programs Personal profiles Government Licenses Mall parking

Advantages and Disadvantages of Smart Cards Advantages: 1. Atomic, debt-free transactions 2. Feasible for very small transactions (information commerce) 3. (Potentially) anonymous 4. Security of physical storage 5. (Potentially) currency-neutral Disadvantages: 1. Low maximum transaction limit (not suitable for B2B or most B2C) 2. High Infrastructure costs (not suitable for C2C) 3. Single physical point of failure (the card) 4. Not (yet) widely used

Credit Cards Credit card Used for the majority of Internet purchases Has a preset spending limit Currently most convenient method Most expensive e-payment mechanism o MasterCard: $0.29 + 2% of transaction value Disadvantages o Does not work for small amount (too expensive) o Does not work for large amount (too expensive) Charge card No spending limit Entire amount charged due at end of billing period

Credit Card - Processing a Payment Card Order

Credit Card - Open and Closed Loop Systems Closed loop systems Banks and other financial institutions serve as brokers between card users and merchants -- no other institution is involved American Express and Discover are examples Open loop systems Transaction is processed by third party Visa and MasterCard are examples

Credit Card Processing