COMP 6125 An Introduction to Electronic Commerce Session 4: E-Commerce In Developing Countries

Introduction There is doubt regarding whether there is enough information on the Web that is relevant and valuable for the average SME in a developing country that would make investment in Internet access feasible Underlying this is the fact that most SMEs in developing countries cater to local markets and therefore rely heavily on local content and information

Introduction there is a need to substantially increase the amount and quality of local content (including local language content) on the Internet to make it useful especially to low- income entrepreneurs

Issues of Electronic Payment Systems Transaction security Absence or inadequacy of legal infrastructures governing the operation of e-payments Lack of developed online banking policies and procedures Undeveloped credit card industry Many developing countries are still cash-based economies

Current Methods Of Payment For Online Transactions Traditional –Bank transfers –Money orders –Cash-on-delivery Electronic Payment –E-cash, e-cheques, smart cards, encrypted credit cards

Impact of B2B E-Commerce Transactions costs Disintermediation Transparency in pricing Economies of scale and network effects

E-banking Includes telephone banking, credit cards, ATMs, direct deposit, electronic bill payments Also includes products mostly in the developing stage, including stored-value cards such as smart cards/smart money, and Internet-based stored value products

E-banking In developing countries, still in early stage of development; most banking carried out using traditional methods However, there is increasing growth of online banking; promise of future growth in this area

Market Factors Affecting E- Banking Development Online a small number of banks offer Internet banking Security issues Preference for personal contact with banks Access to high quality products – Internet services too basic

Uses For Entrepreneurs of Developing Countries Facilitates the access of artisans and SMEs to world markets Facilitates promotion and development of tourism at global level Facilitates marketing of agricultural and tropical products in global market

Uses For Entrepreneurs of Developing Countries Provides avenues for firms in poorer countries to enter into B2B and B2G supply chains Assists service-providing enterprises by allowing them to operate more efficiently and directly provide specific services to customers globally Provides means for acquiring online technical support, requesting maintenance/repairs, ordering replacements parts, software tools and applications, lodging technical inquiries, etc

Uses For Entrepreneurs of Developing Countries Able to partake in discussion groups with persons around the world who are also in the same business/industry –Share information, experiences, solutions to specific technical problems –Valuable to entrepreneurs who are geographically isolated from peers in same business Services sector able to expand market with the increased ability to transact directly with international customers and advertise services

Current Uses Of Internet by SMEs Communication and research; least used for e-commerce for communication purposes (considered very important) Extent is limited by recognition of importance of face-to- face interaction with buyers and suppliers; level of confidence of using for communication with both suppliers and buyers increases only after initial face-to- face interaction In some case, static web sites only advertising company or products

Barriers To Use Unfavourable economic environment High cost of infrastructure and connectivity Security concerns Poor internal communications infrastructure

Barriers To Use Insufficient resources and funds Perceived lack of relevance or value added Lack of supporting banking facilities for online merchant accounts

Role Of Government Establishing laws and policies for e- commerce Be leading-edge user of e-commerce and its applications in operations to encourage mass use

State Of Current Laws and Policies Most developing countries do not have a developed framework in place Issues still unresolved; for example: contract laws not rewritten to include new definitions of writing and signing

Discussion What can be done by governments to promote the use of e-commerce for SMEs? –Strengthening consumer protection –Network infrastructure and localization of content –E-Government –Awareness campaigns –Legal and jurisdictional framework –Pilot projects and initiatives for HRD and capacity building –Establishing a Certification Authority –And more!

Links Reference –“E-Commerce and E-Business/E-Commerce in Developing Countries”, Wikibooks, Of Interest