E-Commerce PYQs Unit-1

Q1. What is E-commerce? explain its merit and demerit. How traditional business is
different from electronic business?
Answer: E-commerce, short for electronic commerce, refers to the buying and selling of goods and
services over the internet. It encompasses a wide range of activities, from online retail stores to
online auctions, business-to-business trading platforms, and online marketplaces. Here's a
breakdown of its merits and demerits:

Merits of E-commerce:

1. Global Reach: E-commerce allows businesses to reach customers worldwide, breaking down
geographical barriers and expanding market reach.

2. Convenience: Both consumers and businesses benefit from the convenience of e-commerce.
Customers can shop from the comfort of their homes at any time, while businesses can operate 24/7
without the constraints of traditional store hours.

3. Cost-Effectiveness: E-commerce often requires lower overhead costs compared to brick-and-

mortar stores. There's no need for physical retail space, fewer staff members may be required, and
marketing efforts can be more targeted and efficient.

4. Accessibility: E-commerce makes it easier for small and medium-sized businesses to enter the
market and compete with larger corporations. With the right platform and marketing strategies,
even startups can gain visibility and attract customers.

5. Data-driven Insights: E-commerce platforms generate vast amounts of data that businesses can
use to analyze consumer behavior, preferences, and trends. This data-driven approach enables
businesses to make informed decisions and tailor their offerings to meet customer needs more
effectively.

Demerits of E-commerce:

1. Security Concerns: E-commerce transactions involve the exchange of sensitive information such as
credit card details, which can make consumers vulnerable to fraud and identity theft if proper
security measures are not in place.

2. Lack of Personal Interaction: Unlike traditional retail experiences, e-commerce lacks the personal
touch and face-to-face interaction that some customers value. This can make it challenging for
businesses to build trust and loyalty with their customers.

3. Shipping Delays and Costs: While e-commerce offers convenience, shipping delays and costs can
be a drawback for both businesses and consumers. Issues such as damaged goods, lost packages, or
delayed deliveries can impact customer satisfaction.

4. Digital Divide: Not everyone has equal access to the internet or the necessary technology to
participate in e-commerce. This digital divide can exclude certain demographics from benefiting fully
from online shopping experiences.
 5. Intense Competition: The barrier to entry in e-commerce is relatively low, leading to a crowded
marketplace with intense competition. Businesses must constantly innovate and differentiate
themselves to stand out from the competition.

Traditional business, on the other hand, typically refers to brick-and-mortar establishments that
operate in physical locations without a significant online presence. The main differences between
traditional and electronic businesses include:

1. Presence: Traditional businesses operate in physical locations such as stores, offices, or factories,
while electronic businesses primarily operate online through websites, apps, or digital platforms.

2. Reach: Traditional businesses are limited to serving customers within a specific geographic area,
whereas e-commerce businesses can reach customers globally.

3. Overhead Costs: Traditional businesses often have higher overhead costs due to expenses such as
rent, utilities, and maintenance of physical spaces, while e-commerce businesses can reduce these
costs by operating online.

4. Interaction: Traditional businesses provide face-to-face interaction with customers, allowing for
personalized service and immediate assistance, whereas e-commerce businesses rely on digital
communication channels, which may lack the same level of personal interaction.

5. Flexibility: E-commerce businesses offer greater flexibility in terms of operating hours and
scalability compared to traditional businesses, which may be bound by conventional operating hours
and physical limitations.

Q2. What is E-commerce? Explain its features and models with example
SHTP, SET.

Answer: E-commerce, short for electronic commerce, is essentially buying and

selling goods or services over the internet. It uses various technologies like mobile
commerce, online payment systems, supply chain management, and marketing to
function [Investopedia: E-commerce Defined].

Here are some key features of e-commerce:

 Convenience: Shop from anywhere, anytime with just a few clicks.

 Wider Selection: Browse a vast product catalog compared to physical stores.
 Competitive Prices: Compare prices easily across different online retailers.
 Faster Transactions: Quicker checkout process compared to traditional stores.

E-commerce operates in various models, depending on the nature of the

transactions. Here are a few common ones with examples of security protocols used
for safe transactions:

 Business-to-Consumer (B2C): This is the most common model where businesses

sell directly to consumers. Examples: Amazon, Flipkart.
o Security Protocol: Secure Sockets Layer (SSL) - Encrypts communication between
web browser and server for secure data exchange.
 Business-to-Business (B2B): Businesses sell products or services to other
businesses. Example: [invalid URL removed], used by businesses to connect with
suppliers.
o Security Protocol: Secure Electronic Transaction (SET) - Uses digital certificates to
authenticate both buyer and seller for secure transactions.
 Consumer-to-Consumer (C2C): Individuals sell directly to other consumers.
Examples: eBay, Etsy.
o Security Protocol: Both SSL and buyer/seller reputation systems are used on these
platforms to ensure secure transactions.

Q3.Explain various types of E-commerce systems along with there pros

and cons.

Answer: There are several main types of e-commerce systems, each catering to
different business models and customer interactions. Here's a breakdown of some
common ones with their pros and cons:

1. Business-to-Consumer (B2C):
o Pros:
 Wide reach and global audience.
 Easy to set up and manage compared to B2B.
 Lower barriers to entry for smaller businesses.
 Can leverage data to personalize customer experience.
o Cons:
 High competition can lead to price wars.
 Customer acquisition costs can be high.
 Managing returns and customer service can be challenging.
o Example: Amazon, where consumers directly purchase a wide variety of products.
2. Business-to-Business (B2B):
o Pros:
 Higher margins compared to B2C.
 More stable and predictable customer base.
 Stronger relationships built with business partners.
o Cons:
 Requires complex systems for order processing and logistics.
 Longer sales cycles compared to B2C.
 Limited customer base.
o Example: Alibaba, a platform connecting businesses for wholesale trade.
3. Consumer-to-Consumer (C2C):
o Pros:
 Allows individuals to sell used goods or handmade crafts.
 Low overhead costs for sellers.
 Wide variety of unique products.
o Cons:
 Issues with product quality and authenticity can arise.
 Seller reliability can be a concern for buyers.
 The platform may take a commission on each sale.
o Example: eBay, where individuals can list and sell items to other consumers.
4. Subscription-based:
o Pros:
 Predictable recurring revenue stream.
 Fosters customer loyalty and engagement.
o Cons:
 Requires high customer acquisition and retention focus.
 Needs to provide ongoing value to justify subscription cost.
o Example: Dollar Shave Club, where customers receive razors delivered to their door
at regular intervals.
5. Dropshipping:
o Pros:
 Low upfront costs for business owners.
 Wide variety of products without holding inventory.
o Cons:
 Lower profit margins compared to holding inventory.
 Less control over product quality and shipping times.
o Example: Many online retailers use dropshipping models where the supplier ships
directly to the customer.
 Choosing the right e-commerce system depends on your business goals, target
market, and resources. Each system has its own set of advantages and
disadvantages, so carefully consider your needs before making a decision.

Q4: Discuss the electronic payment system. Explain its types and features.

Answer: Electronic payment systems, or e-payments for short, are the digital
alternatives to cash and checks. They allow for the transfer of money between
parties electronically, streamlining transactions and offering various conveniences.
Here's a breakdown of e-payment systems:

Types of E-payment Systems:

 Account-based Systems:
o Debit Cards: Linked directly to your bank account, deducting funds at the time of
purchase.
o Credit Cards: Allow borrowing money up to a credit limit, requiring repayment later
with interest.
o Net Banking: Enables online payments directly from your bank account using login
credentials.
 Value-based Systems:
o Mobile Wallets: Apps like Google Pay or Apple Pay store credit card or bank
account information for secure contactless payments.
o Prepaid Cards: Loaded with a specific amount beforehand, for online transactions
or restricted purchases.
 Direct Transfer Systems:
o Unified Payments Interface (UPI): (India-specific) Allows instant money transfers
between bank accounts using a virtual payment address (VPA).
o Immediate Payment Service (IMPS): (India-specific) Enables interbank transfers
24/7, with near real-time settlement.
Features of E-payment Systems:
 Convenience: Make payments anytime, anywhere with an internet connection or
mobile device.
 Security: Encryption and authentication protocols protect financial information
during transactions.
 Speed: Transactions are processed electronically, leading to faster settlements
compared to checks.
 Record Keeping: E-payments provide a digital record of transactions for easier
budgeting and tracking.
 Wider Acceptance: E-payments are increasingly accepted by businesses, both
online and in physical stores.
Additional Points to Consider:
 Transaction Fees: Some e-payment systems may have associated fees, like per-
transaction charges or monthly service fees.
 Security Concerns: While secure, e-payments require vigilance against phishing
scams and malware.
 Internet Reliance: Not all e-payment systems work offline, and internet connectivity
may be necessary for some transactions.

Overall, electronic payment systems offer a secure, convenient, and efficient way to
manage your finances in today's digital world. The variety of options available allows
you to choose the system that best suits your needs and preferences.

Q5: How smart card, debit card and credit card differ from each other?

Answer: Here's a breakdown of how smart cards, debit cards, and credit cards differ:

Function:
 Smart Card: A broad term for any card with an embedded microchip that can store
and process data. Smart cards can be used for various purposes, including
identification (ID cards), public transportation passes, and even some credit and
debit cards.
 Debit Card: A payment card linked directly to your checking account. When you use
a debit card, funds are deducted immediately from your account. Debit cards can
also be used for ATM withdrawals.
 Credit Card: A payment card that allows you to borrow money up to a credit limit set
by the issuer. You need to repay the borrowed amount, usually with interest, within a
specific timeframe.
Source of Funds:
 Smart Card: Doesn't necessarily involve funds itself. It acts as a secure storage
device for information.
 Debit Card: Spends money directly from your bank account.
 Credit Card: Allows you to borrow money from the credit card issuer.
Security:
 Smart Card: May have additional security features compared to magnetic stripe
cards, but security depends on the specific implementation.
 Debit Card: Typically relies on a PIN (Personal Identification Number) for
verification. Some may also have chip and pin technology for added security.
 Credit Card: Uses a PIN or signature for verification. Chip and pin technology is
becoming more common for credit cards as well.
Examples of Use:
 Smart Card: Employee ID badges, student ID cards, transit passes, some
contactless payment cards.
 Debit Card: Everyday purchases at stores, online transactions, ATM withdrawals.
 Credit Card: Larger purchases, building credit history, travel expenses (may have
additional benefits like travel insurance).
Additional Points:
 Not all debit cards are smart cards, but many newer ones are equipped with chips for
enhanced security.
 Smart card technology can be integrated into other devices like smartphones for
contactless payments.
 Credit card use can incur interest charges if the balance isn't paid in full within the
grace period.

In summary, smart cards are a broader category that can encompass debit and
credit cards with chip technology. Debit cards allow you to spend your own money,
while credit cards provide access to borrowed funds. Choose the card that best suits
your spending habits and financial goals.

Q6: Explain NEFT and RTGS.

Answer: NEFT (National Electronic Funds Transfer) and RTGS (Real Time Gross
Settlement) are both electronic payment systems used for transferring funds
between bank accounts in India. They are operated by the Reserve Bank of India
(RBI) and offer different features and functionalities. Here's an explanation of NEFT
and RTGS:

1. NEFT (National Electronic Funds Transfer):

- Timing: NEFT operates on a deferred settlement basis, meaning that transactions

are settled in batches at set intervals throughout the day. Currently, NEFT operates
in half-hourly batches from 8:00 AM to 7:00 PM on weekdays (except for the second
and fourth Saturdays of the month) and from 8:00 AM to 1:00 PM on Saturdays.

- Transaction Limits: NEFT does not have any minimum or maximum transaction
limits. However, individual banks may impose their own limits on NEFT transactions.

- Settlement: NEFT transactions are settled on a net basis, meaning that

transactions are accumulated and processed in batches at scheduled intervals.
Settlement typically occurs within two hours of the batch cut-off time.

- Charges: NEFT transactions are charged at nominal fees, which vary depending
on the transaction amount. Many banks offer NEFT services free of charge for online
transactions initiated through internet banking platforms.

- Use Cases: NEFT is suitable for transferring funds between bank accounts for
non-urgent or routine transactions, such as salary payments, bill payments, and
interbank transfers.

2. RTGS (Real Time Gross Settlement):

- Timing: RTGS operates on a real-time basis, meaning that transactions are

processed individually and settled immediately, without any waiting period. RTGS
operates during regular banking hours on weekdays and half-day on Saturdays, with
extended timings for customer transactions.
 - Transaction Limits: RTGS transactions have minimum and maximum limits set by
the RBI. The minimum transaction amount for RTGS is typically higher compared to
NEFT, while there is no maximum limit for RTGS transactions.

- Settlement: RTGS transactions are settled individually and in real-time, meaning

that funds are transferred instantly and irrevocably from the sender's account to the
recipient's account.

- Charges: RTGS transactions are usually subject to higher fees compared to

NEFT transactions, reflecting the premium service and real-time settlement offered
by RTGS.

- Use Cases: RTGS is ideal for high-value, time-sensitive transactions that require
immediate settlement, such as large business payments, interbank transfers,
securities transactions, and high-value investments.

In summary, NEFT and RTGS are both electronic payment systems used for
transferring funds between bank accounts in India, but they differ in terms of timing,
transaction limits, settlement mechanisms, charges, and use cases. NEFT is suitable
for non-urgent or routine transactions with flexible timing, while RTGS is ideal for
high-value transactions that require immediate settlement.

Q7: Explain Various Indian Payment Model.

Answer: India has a vibrant digital payments landscape, offering a variety of models
to cater to different needs and preferences. Here's a breakdown of some prominent
Indian payment models:

1. Account-Based Systems:
 Debit Cards: Directly linked to your bank account, deducting funds at the point of
purchase. Widely accepted online and in stores.
 Credit Cards: Allow borrowing money up to a credit limit, requiring repayment later
with interest. Offer rewards programs and purchase protection benefits in some
cases.
 Net Banking: Enables online payments directly from your bank account using login
credentials. Secure but requires internet access.
 Unified Payments Interface (UPI): A real-time interbank money transfer system
using a Virtual Payment Address (VPA). Offers instant settlements and works across
different bank accounts. Popular options include PhonePe, Google Pay, and Paytm.
2. Prepaid Instruments:
 Mobile Wallets: Apps like PhonePe or Paytm store credit or debit card information
for secure contactless payments. Often used for peer-to-peer transfers, bill
payments, and in-store purchases via QR codes.
 Prepaid Cards: Loaded with a specific amount beforehand, for online transactions
or restricted purchases (e.g., gift cards, travel cards).
3. Cash Transfer Systems:
 NEFT (National Electronic Funds Transfer): Transfers money between bank
accounts in batches throughout the day. Slower option (2 hours to a full day) but
suitable for non-urgent transfers with no minimum limit (though banks may have
maximum limits).
 RTGS (Real Time Gross Settlement): Transfers money between bank accounts
individually and instantly. Faster option (within seconds) but has a minimum transfer
limit (typically ₹2 lakh) and is ideal for urgent and high-value transactions.
 IMPS (Immediate Payment Service): Another option for 24/7 interbank transfers
with near real-time settlement, but may have higher transaction fees compared to
NEFT.
4. Cash-based Systems:
 Cash on Delivery (COD): Pay for the product upon delivery to a courier or agent.
While convenient for those without digital payment options, it can slow down the
delivery process.
Choosing the Right Model:
 Consider factors like urgency of payment, transaction amount, convenience, and
internet access.
 Account-based systems like UPI and debit cards are popular for everyday
transactions.
 Mobile wallets offer a convenient way for peer-to-peer transfers and small
purchases.
 NEFT and RTGS are suitable for bank transfers depending on urgency and amount.
 Cash remains an option for those without digital access, but COD can be slower.
 Additional Notes:
 The Indian government actively promotes digital payments through initiatives like
Digital India, encouraging wider adoption of cashless transactions.
 New payment models and innovations are constantly emerging, making the Indian
payments landscape dynamic and evolving.