E-Commerce Banking Basics

What is it? Buying and selling of products or services over electronic systems such as the Internet and other computer networks (Intranet). It’s more than just online shopping

E-Commerce? E-Commerce is sharing business information, maintaining business relationships and conducting business transaction by means of telecommunications network It is conducting the exchange of information using a combination of structures and unstructured messages across the entire range of networking technologies The Internet’s WWW has been the prime driver of contemporary E-commerce E-commerce enables organizations of all sizes and in all market sectors to improve their competitiveness

Traditional Vs. Electronic Traditional commerce: Firms engages in many other activities in addition to buying and selling their product Traditional commerce include: buyers and sellers using old fashion method to do business Electronic Commerce: Firms has used various electronic communications tools to conduct different kinds of business transactions. Electronic Commerce use technology to moves people around the world

Applications Supply chain management Video on demand Remote banking Procurement and purchasing Online marketing and advertisement Home shopping Auctions

Examples of E-commerce ATM Selling physical goods using websites (example: clothes, shoes, flowers, electronics, etc) Reserving a hotel room, flight, rental car

In-Frastructure Information superhighway infrastructure Internet, LAN, WAN, routers, etc. telecom, cable TV, wireless, etc. Messaging and information distribution infrastructure HTML, XML, e-mail, HTTP, etc. Common business infrastructure Security, authentication, electronic payment, directories, catalogs, etc.

Main Areas of E-Commerce Business to Business (B2B) Transactions conduced between businesses on the web Business to Consumer (B2C) Consumer shopping on the web Business to Government/Government to Business (B2G/G2B) Consumer to Business (C2B)

B2B (Business to Business) Companies doing business with each other such as manufacturers selling to distributors and wholesalers selling to retailers. Pricing is based on quantity of order and is often negotiable.

C2B (Consumer to Business) A consumer posts his project with a set budget online and within hours companies review the consumer’s requirements and bid on the project The consumer review’s the bids and chooses the company that will do the project

C2C (Consumer to Consumer) There are many sites offering free classifieds, auctions, and forums where individuals can buy and sell PayPal: people can send and receive money

B2C (Business to Consumer) Businesses selling to the general public through catalogues utilizing shopping cart software. By dollar amount, B2B wins, however B2C is what the average consumer has in mind when it comes to e-commerce

Advantages Increase sales and decrease sales costs A small firm's promotional message out to potential customers in every country in the world with good ad Reach narrow market segments that are geographically scattered Increases sales opportunities for seller, it also increases purchasing opportunities for the buyers Businesses can identify new suppliers and business partners Provides buyers with a wide range of choices than traditional commerce

Advantages Increased sales Decreased costs Being in the space Reach narrow market segments in geographically dispersed locations Create virtual communities Decreased costs Handling of sales inquiries Providing price quotes Determining product availability Being in the space

Benefits The market for a Web based is not bound by any geographical constraints The transaction cost go down tremendously in a well set up site Better, more inviting, convenient and comprehensive presentation of goods is conducive to greater sales Small and large firms alike have the opportunity to set-up and conduct business on the internet. An inexpensive advertising medium for organizations, it allows organizations an opportunity for publicizing their products and services at minimal cost.

Importance of E-Commerce Decrease in cost of ordering and supply Better contact between customer and supplier Exploration of new markets (rural customers can buy global products) Easy to use and customer friendly

Benefit Society Electronic payments of tax refund, public retirement, and welfare support cost less to issue and arrive securely and quickly when transmitted over the Internet Electronic payments can be easier to audit and monitor than payments made by check, providing protection against fraud and theft losses Electronic commerce enables people to work form home

Disadvantages Many products and services require that a critical mass of potential buyers be equipped and willing to buy through the Internet. Costs and benefits have been hard to quantify Many firms have had trouble recruiting and retaining employees with the technological, design, and business process skills needed to create an effective electronic commerce Firms also have difficulty of integrating existing database and transaction-processing software designed for traditional commerce into the software that enables electronic commerce Firms also face cultural and legal obstacles to conducting electronic commerce

Disadvantages Loss of ability to inspect products from remote locations Rapid developing pace of underlying technologies Difficult to calculate return on investment Cultural and legal impediments

Barriers Access and Connectivity Authentication and Standardization Cyber Laws Technology

Risks Business practices Information protection Transaction Integrity Privacy and Trust Global Efforts Towards Retaining Privacy & Building Trust Web Trust TRUSTe P3P (Privacy Preferences Project)

E-Commerce risks Customer's risks Stolen credentials or password Dishonest merchant Disputes over transaction Inappropriate use of transaction details Merchant’s risk Forged or copied instruments Disputed charges Insufficient funds in customer’s account Unauthorized redistribution of purchased items Main issue: Secure payment scheme

Process of E-Commerce Attract customers Interact with customers Advertising, marketing Interact with customers Catalog, negotiation Handle and manage orders Order capture Payment Transaction Fulfillment (physical good, service good, digital good) React to customer inquiries Customer service Order tracking

Infrastructure for E-Commerce The Internet system of interconnected networks that spans the globe routers, TCP/IP, firewalls, network infrastructure, network protocols The World Wide Web (WWW) part of the Internet and allows users to share information with an easy-to-use interface Web browsers, web servers, HTTP, HTML Web architecture Client/server model N-tier architecture; e.g., web servers, application servers, database servers, scalability

E-commerce Timeline 1970s: Electronic Funds Transfer (EFT) Used by the banking industry to exchange account information over secured networks Late 1970s and early 1980s: Electronic Data Interchange (EDI) for e-commerce within companies Used by businesses to transmit data from one business to another 1990: Tim Berners-Lee writes the first web browser, Worldwide Web 1994: Pizza Hut offers pizza ordering on its Website First online bank opens Attempts were made to offer flower delivery and magazine subscriptions online. 1995: Jeff Bezos launches Amazon.com eBay is founded 1998: Electronic postal stamps can be purchased online

Promise & Threat Impact and Issues of Electronic Commerce The business, societal, and research problematic of E-commerce spans an immense range, which reflects the depth of change being caused by this rapidly expanding mode of doing business. Limitations and Asymmetries of Infrastructure The infrastructure of the Internet, which acts as the current global information infrastructure, has acknowledged problems. The issues turn on the provision of sufficient band width for the surging use that is also moving to multimedia transmissions, and on the problems fostered by the decentralized nature of the Internet.

Statistics

Statistics

Statistics U.S. e-commerce sales totaled $165.4 billion in 2010 up 14.8% from $144.1 billion 2009 4.2% of total retail spending took place online during 2010 up from 3.9% in 2009 Source: U.S. Commerce Department

Statistics e-commerce accounted for 7.6% of total retail sales during 2010 up from 7.0% in 2009 Total retail sales, which includes e-commerce sales, increased 7.0% in 2010 totaling $3.92 trillion Source: InternetRetailer

Payment Systems Role of payment Cash properties: wide accept, convenient, anonymity, untraceable, no buyer transaction cost Online credit card payment, Smart Cards Secure protocols: SSL, SET Internet payment systems Electronic cash, digital wallets Micro-payments Wireless devices

How does echeck work? Exactly same way as paper Check writer "writes" the echeck using one of many types of electronic devices ”Gives" the echeck to the payee electronically. Payee "deposits" echeck, receives credit, Payee's bank "clears" the echeck to the paying bank. Paying bank validates the echeck and "charges" the check writer's account for the check.