E-COMMERCE RR INTRODUCTION Electronic Commerce (E-Commerce) is a general concept covering any form of business transaction or information exchange executed using information and communication technologies. There are three categories of e-commerce as follows: Electronic Markets It is virtual Tepresentation of physical market, An electronic market is the use of information and ‘communications technology to present a range of. offerings available in a market segment so that the buyer can compare the prices and other attributes of the offerings and make a purchase decision. Electronic Data Interchange (EDI) EDI provides a standardized system for coding trade transactions so that they can be communicated directly from one computer system to another without need for printed orders and invoices and the delays and errors implicit in paper handling. EDI allows paperless transaction. EDI is used by organizations that make a large number of regular transactions. EDI standard are decided by ANSI (American National Standard Institute) Internet Commerce Information and communications technologies can also be used to advertise and make one-off sales of a wide range of goods and services. DEFINITION A fairly broad definition of Electronic Commerce is given below: “Electronic commerce is the process of doing business electronically. It involves the automation of a variety of business-to-business and business-to-consumer transactions through reliable and secure connections.”Boe eee st ; Computer Systems and Applications (T.¥.B.Com.: SEM-y) FEATURES Ubiquity Ubiquity means found everywhere, E-commerce is available just about everywhere. With E. commerce it is possible to shop from desktop, at office, at home, even when you are traveling, There is no need to visit the physical market place. Global Reach E-commerce technology permits commercial transactions to cross the national boundaries and it can reach to any corner of the glob. Universal Standards One unusual feature of e-commerce technologies is that the technical standards of the Internet are universal standards- they are shared by all nations around the world. Richness Itrefers to richness in providing information to the consumer. Information about a product is provided to the consumer by using Audio/video. Interactivity E-commerce allows two way communications between merchant and consumer. Communication can be with E-mail or on line chatting etc. Information Density Internet is making information more useful and important than ever. Information becomes more plentiful, less expensive and of higher quality. Personalisation Merchants can target their marketing messages to specific individuals by adjusting the message toa person’s name, interest and past purchases. Social Networking Merchant can allow the user to create and share contents in the form of text, videos, music or photos with worldwide community. Using these forms of communication, users are able to create new social networks and strengthen existing ones. ADVANTAGES Overcome Geographical Limitations Ifyou have a physical store, you are limited by the geographical area that you can service. With an e-commerce website, the whole world is your playground.E-Commerce Gain New Customers With Search Engine Visibility apes wast ; 7 aes oe e ao by branding and relationships. In addition to these two drivers, online y traffic from search engines. It is not unusual for customers to follow a ie hi adn gnaine results, and land up on an e-commerce website that they have never heard of. This additional source of traffic can be the tipping point for some e-commerce businesses. Lower Costs One of the most tangible positives of commerce is the lowered cost. A part of these lowered costs could be passed on to customers in the form of discounted prices. Advertising cost, shop cost, Online purchase cost, Investment : cost can be reduced with e-commerce and therefore the cost of the product is less, Locate the Product Quicker It is no longer about pushing a shopping cart to the correct passageway or exploration for the desired product. On an e-commerce website, customers can click through intuitive navigation or use a search box to immediately narrow down their product search. Some websites remember customer preferences and shopping lists to facilitate repeat purchase, Eliminate Travel Time and Cost It is not unusual for customers to travel long distances to reach their preferred physical store. E- commerce allows them to visit the Same store virtually, with a few mouse clicks. Provide Comparison Shopping E-commerce facilitates comparison shopping. There are several online services that allow customers to browse multiple e-commerce merchants and find the best prices. Enable Deals, Bargains, Coupons, and Group Buying Though there are physical equivalents to deals, bargains, coupons, and group buying, online shopping makes it much more convenient. Provide Abundant Information There are limitations to the amount of information that can be displayed in a physical store. It is difficult to equip employees to respond to customers who require information across product lines. E-commerce websites can make additional information easily available to customers, Most of this information is provided by vendors, and does not cost anything to create or maintain. Create Targeted Communication Using the information that a customer provides in the registration form, and by placing cookies on the customer's computer, an e-commerce merchant can access a lot of information about its customers, This, in turn, can be used to communicate relevant messages. An example: If you are searching for a certain product on Amazon.com, you will automatically be shown listings of other similar products. In addition, Amazon.com may also email you about related products.— 4 Computer Systems and Applications (7.¥.B.Com.: SEM.y, Remain Open All the Time Store timings are now 24/7/365. E-commerce websites can run all the time. From the merchants point of view, this increases the number of orders they receive. From the customer's point of view, an "always open" store is more convenient. Create Markets for Niche Products Buyers and sellers of niche products can find it difficult to locate each other in the physica] world. Online, it is only a matter of the customer searching for the product in a search engine. One example could be purchase of obsolete parts. Instead of trashing older equipment for lack of spares, today we can locate parts online with great ease. DISADVANTAGES E-commerce Lacks Personal Touch Not that all physical retailers have a personal approach, but there are several retailers who value human relationship. As a result, shopping at those retail outlets is reassuring and refreshing. Clicking on "Buy Now," and piling up products in virtual shopping carts, is just not the same, E-commerce Delays Goods Unless you are using a website to merely order a pizza online, e-commerce websites deliver take a lot longer to get the goods into your hands. Even with express shipping, the earliest you get goods is "tomorrow." An exception to this rule is in the case of digital goods, e.g. an e-book or a music file. In this case, e-commerce might actually be faster than purchasing goods from a physical store. Some Goods Cannot Be Purchased Online Despite its many conveniences, there are goods that you cannot buy online. Most of these would be in the categories of "perishable" or "odd-sized." E-commerce Does Not Allow You to Experience the Product Before Purchase You cannot touch the fabric of the garment you want to buy. You cannot check how the shoe feels on your feet. You cannot "test" the perfume that you want to buy. In many cases, customers want to experience the product before purchase. E-commerce does not allow that. If you buy a music system, you cannot play it online to check if it sounds right? If you are purchasing a home-theatre system, you would much rather sit in the "experience center" that several retail stores set up. Anyone Can Set Up an E-commerce Website We live in an era where online storefront providers bring you the ability to set up an ¢ commerce store within minutes. But if anybody can set up a store, how do I know that the store Iam purchasing from is genuine? The lowered barriers to entry might be a great attraction to the aspiring e-commerce entrepreneur. But for the buyer, reliability can be an issue. This could lead customers to restrict their online purchases to famous e-commerce websites.E-Commerce Security ane siden! in Hine purchase, you have to provide at least your credit card information and ie ep aty cases, &-commerce websites are able to harvest other information about your online behavior and prefe is it identity theft. Preferences. This could lead to credit card fraud, or worse, TYPES Raw Material supplier Manufacturer Distributor Retailer + Consumer SS B2B we. BOCs), Business-to-Business (B2B) It is a form of electronic commerce in which products or services are sold from a firm to another firm. It is performed in much higher volumes than B2C. For Example: Intel is selling micro processors to Dell or Reebok is selling shoes to Flipkart are the examples of B2B. Web site Examples: shop2gether.com, Quill.com, Business-to-Consumer (B2C) It is a form of electronic commerce in which products or services are sold from a firm directly to consumers. For Example: Dell is selling a laptop to me ot Flipkart is selling Reebok shoes to a customer are the examples of B2C. Web Site Examples: amazon.com, flipkart.com Consumer-to-Consumer (C2C) It is a form of electronic commerce in which products or services are sold from one consumer to another consumer with the help of online market maker such as the auction site eBay. For Example: Smita is buying an iPod from Anita on ebay or I am selling a car to Mr. Ramzan on olx are the examples of C2C. Web site Examples: ebay.com, olx.in. Peer-to-Peer (P2P) It is a form of electronic commerce in which user can share files and computer resources directly without having to go through a central Web server. For Example: I am sharing music track with my Friend or My friend is sharing a video clip with Me are the examples of P2P. ‘Web site Examples: BitTorrent.com, gnutella. BUSINESS MODELS Advertising Revenue A Web site that offers its users contents, services, and/or products also provides a forum for advertisements and receives fees from advertisers. Web sites, those are able to attract the greatest viewer ship are able to charge higher advertising rates. Number of people visiting a web Site is known as Hits. Web site Examples: Yahoo.com, Google.comee eae ee i. | Computer Systems and Applications (T.¥.B.Com.: SEM. yy 6 Subscription Revenue i it i scription fee for access ite that offers its users contents or services charges a subscripti 0 eel of its offerings. They may charge monthly/ annual subscription fee. The conten offered by such site, must be a high-value-added, premium-offering that neither is Teadily available elsewhere nor easily replicated. Examples: Consumerreports.org, Dalalstreet.com Transaction Fee Revenue i i ion. le eBay provides an onli A company receives a fee for executing a transaction. For example e le a Sicoo marbaplecs and receives a small transaction fee from the seller if the seller is successfuy} in selling the item. Web site Examples: eBay, sharekhan.com Sales Revenue Companies derive revenue by selling goods, information or services to customers. The percentage of people visiting the site and buy something is known as conversion rate. Web site Examples: Amazon, Flipkart. Affiliate Revenue Sites that steer business to an “affiliate” receive a referral fee or percentage of the revenue from any resulting sales. Web site Example: Mypoints MAJOR B2C MODELS Portal Portals offer users powerful Web search tools as well as an integrated package of content and services, such as news, e-mail, calendars, shopping, music downloads, video streaming and more, all in one place. Today they are marketed as places where consumers will want to start their Web searching and hopefully stay a long time to read news, find entertainment and meet other people. Portals do not sell anything directly. Portals generate revenues primarily by charging advertisers for ad placement, collecting referral fees for steering customers to other sites and charging for premium services. E-TAILER E-tailer is an online retail store. Customer has to connect to the Internet to check what is available with E-tailer and place an order. Some e-tailer are divisions of existing physical stores where as the others operate only in the virtual world. Ectailers are of two types: Pure plays: They exist only in the vi Example: amazon.com, flipkart.com. Bricks and clicks: They have physical stores where th and they also have selling through internet i.e. virtual w. The e-tail revenue model is sales revenue. irtual world; they do not have any physical store. ey sell directly to walk-in customers orld. Example Walmart.comE-Commerce Content Provider Content providers distribute information contents, such as digital video, music, photos, text and artwork, over the web. Content providers make money by charging a subscription fee. The subscription fee can be monthly or yearly etc even it can be micro- payment system i.e. charges will depend upon what you download. Few content providers do not charge for their information; for example many newspapers and magazines. User can access news and information at these sites without paying a rupee. These sites make money through advertising, referral fees etc, However now a day “free content” limited to headlines and text, whereas premium contents-in depth articles or video delivery is sold for a fee. Transaction Broker Sites that process transactions for consumers and earn revenue are called as transaction broker. The largest industries using this model are financial services, travel services and job placement. services. The online transaction broker’s primary aim is savings of money and time. In addition, most transaction brokers provide timely information and opinions. Site such as monster.com offer job searchers a national marketplace for their talents. Online stock brokers charge commissions that are considerably less than traditional brokers. Transaction brokers make money each time a transaction occurs. Market Creator Market creator build a digital environment in which buyers and sellers can meet, display products, search for products and establish prices. The market opportunity for market creators is potentially vast, but only if the firm has the financial resources and marketing plan to attract sufficient sellers and buyers. They earn their revenue by charging for advertisement and transaction fee. Service Provider Service providers offer services online. Services offered are e-mail, photo sharing, video sharing and user generated contents (blogs and social networking sites) are all services provided to customers. Example Google maps, Gmail, Orkut etc. They earn their revenue mainly by charging for advertisement, Community Provider Community provider are sites that creates a digital online environment where people with similar interests can transact (buy and sell goods); share interests, photos, and videos; communicate with like-minded people; and receive interest-related information. Like- minded people can meet and converse much easier, without the limitations of geography and time to hold back participation. They earn their revenue by charging for advertisement and affiliate revenue.Computer Systems and Applications (T.¥.B.Com,. Sey y & SECURITY ISSUES RELATED TO E-COMMERCE Integrity ‘ iit ition being displayed on a Web ity refers to the ability to ensure that informat d Site, quae or received over the Internet has not been changed in any Way by : unauthorized party. Non-denial (Non-repudiation) Non-denial refers to the ability to ensure that e-commerce participants do not deny thei, online actions. Authenticity Authenticity refers to the ability to identify the identity of a person or entity with whom You are dealing on the Internet. Confidentiality (Secrecy) Confidentiality refers to the ability to ensure that messages and data are available only to those who are authorized to view them. Privacy Privacy refers to the ability to control the use of information a customer has provided about hinvher self. The information should not be misused. Availability Availability refers to the ability to ensure that an e-commerce site continues to be function as intended, E-commerce security is designed to protect these six dimensions. When any one of them is compromised, it is a security issue. ENCRYPTION ‘ Toovercome some of the security issues faced by e-commerce encryption is required. % Encryption is a process of. transforming plain text or data into cipher text. * Encryption is performed with the help of a key (cipher). A key (cipher) is any method for transforming plain text to cipher text, % Cipher text means the text that has been encrypted and thus can not be read by anyone other than the sender and the receiver. at + g 8 & E e zg g F g xE-Commerce 9 e = Authentication — Proy sending the message, Vides verification of the identity of the person (or computer) Confidentiality - o; & Fombdentiality - gives assurance that the message was not read by others. DECRYPTION DECRYPTION Decryption is process of transfor Decryption is performed with the i i is transforming cipher text to plain fa Poor Ke (ca) A sea rae ¢ Decryption is Performed by the receiver after receiving the cipher text from the sender. Without decryption the Teceiver cannot Tead the message. Encryption Key and decryption k i it i Generic ‘cy may be same (Symmetric) or it may be different ™ming cipher text into plain text or data Symmetric Key Encryption Insymmetric key ene tyption, both the sender and receiver use the same key to encrypt and decrypt the message, % Itis also known as secret key encryption. This encryption method was used extensively during World War II. % Generally in computer, symmetric key encryption is not used but asymmetric (public) key encryption is used. Encryption can be done by substitution or transposition. + 4 In substitution method every character is replaced by another character whereas in transposition the characters are rearranged. ‘Shared Secret Key Public Key Encryption (Asymmetric) % In this method, two mathematically related digital keys are used: a receiver's public key iver’s private key. + = sit ‘ay kept secret by the owner and the public key is widely circulated,| 10 Computer Systems and Applications (T.¥.B.Com.: SEM. yy 4 Encryption is done by sender using receiver's public key. Decryption is done by receiver with the help of private key. & However, once a public key is used to encrypt a message, that same key can not be used to decrypt a message. © Itis one way irreversible mathematical function. In public key encryption we can be quite sure that the message was not read by a third party (message confidentiality), but there is no authentication of the sender. This means the sender could deny that the message is send by him/her. © Public Key Encryption takes care of only Message Integrity & Message confidentiality. & Public key encryption lacks authenticity, that is there is no guarantee that the sender really is the sender. Because of authenticity even denial also comes into picture. ao Ciphertext Plaintext internet Sender Doge Recipient Public Key Encryption Using Digital Signatures ° % — Toovercome the problem of authentication and non denial faced by public key encryption, the public key encryption is done using digital signature. % Tocheck the confidentiality of a message and ensure it has not been altered in transit, # hash function is also used first to create a digest of the message. [A hash function is an algorithm that produces a fixed-length number called a hash digest.] The sender then encrypts both the hash result and the original message using the receiver's public key to produce a single block of cipher text. & One more step is required. To ensure the authenticity of the message and to ensure non denial, the sender encrypts the entire block of cipher text one more time using sender’s private key. This produces a digital signature (e-signature). This signed cipher text along with the hash digest is send over an Internet. 4 The receiver of this signed cipher text with the hash digest first uses the sender’s public key to authenticate the message.f-Commerce i 4 Once authenticated, the reco; ‘, ‘ . original message, "ceiver uses his/her private key to obtain the hash result. and a finale step, i ‘ , oe the cals ae applies the same hash function to the original text and knows that message Irena = result sent by the sender. If the result is same, the receiver iSlinalishanae 886 Nas not been changed during transmission. ° igital signature is unique and when if s¢ it ion is i‘ Digital signature changes for a ae ae with hash function is even more unique. Public Key Encryption Usin, Digit : i.e, Message Integrity, Non 8 Digital Signatures takes care of the four security concerns Denial, Authentication and Confidentiality. HHVRL ‘Sinet Aathenticated Ciphertext | Ciphertert Ciphertext — & xdigest C-Ges Gu Sender & & & | & ee Nee * Ad civer's Public Key ‘Sender's Private Key ‘Sender's Public Key Receiver's Private Key (Digital Signature) Note: Earlier digital signature programs required the user to have a digital certificate but with newer programs only digital signature is required. Secure Sockets Layer (SSL) The most common form of securing channels is through the Secure Sockets Layer of TCP/IP. i @ InSSL URL will change from HTTP to HTTPS. A secure communication can be used only with HTTP and it can not be used with non-HTTP messages. Basically, HTTPS tires to make HTTP more secure. % Encryption is based on session key. Session key is unique and it is different for each session. The SSL protocol provides data encryption, server authentication, optional client authentication and message integrity for TCP/IP connections. % SSL provides only server side authentication; client side authentication is optional. In SSL the consumer can order goods or download information products and then claim the transaction never occurred,go: R Computer Systems and Applications (T.¥.B.Com.: SEM. yp PAYMENT SYSTEM Digital Cash @ Itis also called as e-cash. © Itis the very first form of alternative payment systems developed by e-commerce, In these schemes, consumer will deposit money in a bank; bank will issue digital tokens for various denominations of cash and then consumer can spend these at merchants’ sites, The basic idea behind all digital cash systems is payment over the Internet by transmitting unique, authenticated tokens representing cash value from consumer to merchants. Merchant, in turn will deposit these electronic tokens in its bank. Online Stored Value Permits consumers to make instant, online payments to merchants and other individuals based on value stored in an online account. PayPal: © For this you have to open an account with PayPal and deposit some amount init. When you make a payment using PayPal, you have to e-mail the payment to merchant’s PayPal account. © PayPal will transfer the amount from your account to merchants account. e — Issues with PayPal include its high cost, and lack of consumer protections when a fraud occurs or a charge is replicated. Smart Cards: © It is another kind of stored value system based on credit-card-sized plastic cards with embedded chips that store personal information that can be used to support e- commerce payments. © They are not used from home PCs to purchase goods, but can be used to pay for generally small ticket items by swapping the smart card. @ Smart card can hold 100 times more data than a credit card. Smart card also stores information regarding health insurance, personal identifications, blood group, bank accounts etc. © Smart cards also require a password, In foreign countries it is used at highway toll payment system. Digital Accumulating Balance Payment ¢ o od These systems allow users to make micro-payments and purchases on the Web, accumulating a debit balance for which they are billed at the end of the month. Consumers are expected to pay the entire balance by cheque or credit card or cash. This is suitable for purchasing single music track, book, games, ring tones ete.E-Commerce Digital Cheque Payment System ¢ e ¢ ¢ + Itis similar to normal cheque payment system of the banks, ie hee Wants to pay by cheque at a merchant site that offers this service, an onlit ‘orization form appears that mimics the appearance of a Paper cheque. The user is prompted to fill in cheque information, includ i oiler eat i ion, including a valid cheque number, bank To authorize payment, a user must t : 'yp¢ his full name, address and last four digits of social security number. This information is checked against various databases, for fraud, bad cheque etc, A digital cheque is produced after verification and itis delivered to the merchant, The cheque is deposited b c y the merchant and routed to the consumer's bank of payment, just like a normal cheque. Digital cheque is not so successful in e-commerce till today. HOW ONLINE GREDIT CARD TRANSACTION WORKS? Because credit cards are the dominant form of online payment, it is important to understand how they work and to recognize the strengths and weakness of this payment system. Online credit card transactions are processed in much the same way that in-store purchases are, with the major differences being that online merchants never see the actual card being used, no card impression is taken (swapping), and no signature is available. These types of purchases are also called as CNP (Customer Not Present) transactions and are major reason that charges can be disputed later by consumer. % —Insuch case the merchant may loose the money and also the goods. There are five parties involved in an online credit card purchase: Consumer, Merchant, Clearing house, Merchant’s bank, and the Consumer's bank. It works as follows: 1. When a consumer wants make a purchase, he/she adds the item to merchant’s shopping cart. 2. When the consumer wants to pay for the items in the shopping cart a secure tunnel through Internet is created using SSL. Using encryption, SSL secures a session during which credit card information will be sent to the merchant. 3. Once the credit card information of a consumer is received by the merchant, the merchant software contacts a clearing house. 4. A Clearing house will authenticate a credit card and verifies the account balance. The clearing house contacts the issuing bank to verify the account information. 5. Once verified, the issuing bank credits the account’ of the merchant at the merchant bank. 6. The debit to consumer account is transmitted to the consumer in a monthly statement. Limitations of online Credit Card Payment System: The most important limitations involve Security, Merchant Risk, Cost and Social Equity.M Computer Systems and Applications (T.Y.B.Com.: SEM-VI) MERCHANT BANK CONSUMER BANK SECURE ELECTRONIC TRANSACTION (SET) SET is developed by an association led by MasterCard and Visa. SET is actually a protocol designed for handing credit card transactions over Internet. SET ensures the identities of all parties involved in the transaction. SET also encrypts credit card and transaction information before transmitting on the Internet. OTHER LIMITATIONS OF E-COMMERCE eo oe E-commerce as being new technology, one has to be aware of how to use it in the business. E-commerce suffers from Security, Authenticity, Reliability and Accessibility. E-commerce also suffers from bandwidth restrictions therefore sometime it is difficult to use. MOBILE COMMERCE (M-COMMERCE) % M-Commerce is buying and selling of goods and services through wireless handheld devices such as Cell phones and personal digital assistants (PDAs) known as next generation e-commerce. M-commerce helps the users to access the Internet easily through cell phones and PDAs.E-Commerce 1S ¢ Now-a-days cell phones are equipped with Micro browser, Bluetooth technology, E-mail capabilities. + aa x ee behind m-commerce is based on Wireless Application Protocol = IBMand other companies are experimenting with speech recognition software as a way to ensure security for M-commerce transactions. * Wireless Markup Language (WML) is used to create Web pages that can be displayed on small format Web-enabled devices such as cell phones etc. PHISHING * Phishing is the act of attempting to acquire information such as usernames, passwords, and credit card details (and sometimes, indirectly, money) by masked as a trustworthy entity in an electronic communication. Communications is done as if it is from popular social web sites, auction sites, banks, online payment processors or IT administrators are commonly used to lure the unsuspecting public. Phishing is typically carried out by email and it often directs users to enter details at a fake website whose look and feel are almost identical to the legitimate one. ‘Phishing emails may contain links to websites that are infected with malware. Phishing is used to deceive users. % Phishing can be prevented by legislation, user training, public awareness, and technical security measures + # = Test Your Knowledge ~ State whether the following statements are true or false: 1, _ SSL provides both server side authentication as well as client side authentication. 2. In SSL URL will change from HTTP to HTTPS. 3. Incase of Public key encryption, the Public key will convert Cipher Text into Original Message. 4. Portal eas their revenue by selling goods. 5. Public key encryption lacks authentication of the sender. 6. In Public key encryption once the message is converted into Cipher Text, it can not be converted back into original message using the public key. 7. _ Digital signature changes for every document. 8. Encryption covers all the security issues. 9. — E-tailer is online retail shop. 10. Companies derive revenue by selling goods, information or services to customers are called as sales revenue model. 11. E-Commerce gives a global reach to the business. 12, EDI standard are decided by ANSI.