BBA-108

E-Commerce
Unit-3 & 4
Digital Payment Requirements
The Government of India has been taking several measures to promote and encourage
digital payments in the country. As part of the ‘Digital India’ campaign, the government
aims to create a ‘digitally empowered’ economy that is ‘Faceless, Paperless, Cashless’.
There are various types and modes of digital payments. Some of these include the use of
debit/credit cards, internet banking, mobile wallets, digital payment apps, Unified
Payments Interface (UPI) service, Unstructured Supplementary Service Data (USSD),
Bank prepaid cards, mobile banking, etc.
Digital payment methods are often easy to make, more convenient and provide customers
the flexibility to make payments from anywhere and at anytime. These are a good
alternative to traditional methods of payment and speeden up transaction cycles. Post
demonetization, people slowly started embracing digital payments and even small time
merchants and shop owners started accepting payments through the digital mode.
Digital Payment
Digital payment occurs when goods or services are purchased through the use of various
electronic mediums. There is no use of cash or cheques in this type of payment method.
Requirements for Digital Payment Systems
The success or failure of any on-line payment systems depends not only on technical
issues but also on user’s acceptance. The user’s acceptance depends on a number of
issues such as advertisement, market position, user preferences etc.
1. Atomicity
Atomicity guarantees that either the user’s on- line payment transaction is completed or it
does not take place at all. If the current on-line payment transaction fails then it should be
possible to recover the last stable state. This feature resembles the transactional database
systems, in which either a transaction is committed or rolled back.
2. Anonymity/Privacy
 Anonymity suggests that the identity, privacy and personal information of the individuals
using the on- line payment methods should not be disclosed. In some on- line payment
methods, it is possible to trace the individual’s payment details. In case of purchases
using Debit Card, it is possible to find out the purchase details as that information is
registered at the vendor and the bank’s databases. So some on- line payment systems like
Debit cards are not anonymous systems. In some other payment systems, anonymity can
be weak as the efforts to get the purchase details of the user can be more expensive than
the information itself. There are privacy laws in several countries to guarantee the privacy
of the user and protect the misuse of personal information by the financial institutions.
3. Scalability
As the on- line payment methods are getting more and more acceptance of the users, the
demand for on- line payment infrastructure will also be increasing rapidly. Payment
systems should handle the addition of users without any performance degradation. To
provide the required quality of service without any performance degradation, the payment
systems need a good number of central servers. The central servers are needed to process
or check the payment transactions. The growing demand for the central servers, limits the
scalability of the on- line payment systems.
4. Security
Security is one of the main concerns of the on- line payment methods and it is one of the
crucial issues which decide the general acceptance of any on- line payment methods.
Internet is an open network without any centralized control and the on- line payment
systems should be protected against any security risks to ensure a safe and reliable
service to the users. When users are paying on- line they want to be sure that their money
transaction is safe and secure. On the other hand, banks and payment companies and
other financial institutions want to keep their money, financial information and user
information in a secure manner to protect it against any possible misuse.
5. Reliability
As in any other business activity, even in on- line payment methods, the user expects a
reliable and an efficient system. Any on- line payment system would fail, despite of it’s
advanced technological features, if it fails to get the users acceptance and pass their
 reliability tests. There are many reasons, which can make the system unreliable to the
users. Some of them are Security threats, poor maintenance and unexpected breakdowns.
6. Usability
Usability is an important characteristic of an interactive product like on- line payments.
On-line payment systems should be user friendly and easy to use. Any on- line payment
system with complicated procedures, complex payment process and other associated
complications with the payment environment, can’t get users acceptance. Poor usability
of a web shopping or a payment method could also discourage on- line shopping. To
make the online payments simple and user friendly, some of the on- line payment
systems allow the users to make payments with minimum authorization and information
inputs.
7. Inter operability
In on- line payment Technologies, different users prefer different payment systems. The
different payment systems use different kinds of currencies and the payment systems
should support interoperability between them. If a payment system is inter operable, then
it is open and allows other interested parties to join without confining to a particular
currency. In the real life situation, there should be some sort of mutual agreement
between various on- line payment systems to provide the interoperability. Interoperability
can be achieved by the means of open standards for data transmission protocols and
infrastructure. An interoperability system can gain much acceptance and high level of
applicability than individually operating payment systems.
Because of the rapid technological changes, it’s not always easy to get interoperability
between various payment systems.
Electronic Payment System, Types of Electronic Payment System

An e-payment system is a way of making transactions or paying for goods and services
through an electronic medium, without the use of checks or cash. It’s also called an
electronic payment system or online payment system. Read on to learn more.
The electronic payment system has grown increasingly over the last decades due to the
growing spread of internet-based banking and shopping. As the world advances more
 with technology development, we can see the rise of electronic payment systems and
payment processing devices. As this increase, improve, and provide ever more secure
online payment transactions the percentage of check and cash transactions will decrease.
METHODS OF ELECTRONIC PAYMENT SYSTEM
One of the most popular payment forms online is credit and debit cards. Besides them,
there are also alternative payment methods, such as bank transfers, electronic wallets,
smart cards or bitcoin wallet (bitcoin is the most popular crypto currency).
E-payment methods could be classified into two areas, credit payment systems and cash
payment systems.
1. Credit Payment System
 Credit Card — A form of the e-payment system which requires the use of the card
issued by a financial institute to the cardholder for making payments online or through an
electronic device, without the use of cash.
 E-wallet — A form of prepaid account that stores user’s financial data, like debit and
credit card information to make an online transaction easier.
 Smart card — A plastic card with a microprocessor that can be loaded with funds to
make transactions; also known as a chip card.
2. Cash Payment System
 Direct debit — A financial transaction in which the account holder instructs the bank to
collect a specific amount of money from his account electronically to pay for goods or
services.
 E-check — A digital version of an old paper check. It’s an electronic transfer of money
from a bank account, usually checking account, without the use of the paper check. E-
cash is a form of an electronic payment system, where a certain amount of money is
stored on a client’s device and made accessible for online transactions.
 Stored-value card — A card with a certain amount of money that can be used to perform
the transaction in the issuer store. A typical example of stored-value cards are gift cards.
Advantages of electronic payment systems
(i) Time savings- Money transfer between virtual accounts usually takes a few minutes,
while a wire transfer or a postal one may take several days. Also, you will not waste your
time waiting in lines at a bank or post office.
(ii) Expenses control- Even if someone is eager to bring his disbursements under control,
it is necessary to be patient enough to write down all the petty expenses, which often
takes a large part of the total amount of disbursements. The virtual account contains the
history of all transactions indicating the store and the amount you spent. And you can
check it anytime you want. This advantage of electronic payment system is pretty
important in this case.
(iii) Reduced risk of loss and theft- You can not forget your virtual wallet somewhere
and it can not be taken away by robbers. Although in cyberspace there are many
scammers, in one of the previous articles we described in detail how to make your e-
currency account secure.
(iv) Low commissions- If you pay for internet service provider or a mobile account
replenishment through the UPT (unattended payment terminal), you will encounter high
fees. As for the electronic payment system: a fee of this kind of operations consists of 1%
of the total amount, and this is a considerable advantage.
(v) User-friendly- Usually every service is designed to reach the widest possible
audience, so it has the intuitively understandable user interface. In addition, there is
always the opportunity to submit a question to a support team, which often works 24/7.
Anyway you can always get an answer using the forums on the subject.
(vi) Convenience- All the transfers can be performed at anytime, anywhere. It’s enough
to have an access to the Internet.
Disadvantages of electronic payment systems
(i) Restrictions- Each payment system has its limits regarding the maximum amount in
the account, the number of transactions per day and the amount of output.
(ii) The risk of being hacked- If you follow the security rules the threat is minimal, it
can be compared to the risk of something like a robbery. The worse situation when the
system of processing company has been broken, because it leads to the leak of personal
data on cards and its owners. Even if the electronic payment system does not launch
plastic cards, it can be involved in scandals regarding the Identity theft.
The problem of transferring money between different payment systems- Usually the
majority of electronic payment systems do not cooperate with each other. In this case,
you have to use the services of e-currency exchange, and it can be time-consuming if you
still do not have a trusted service for this purpose. Our article on how to choose the best
e-currency exchanger greatly facilitates the search process.
(iii) The lack of anonymity- The information about all the transactions, including the
amount, time and recipient are stored in the database of the payment system. And it
means the intelligence agency has an access to this information. You should decide
whether it’s bad or good.
(vi) The necessity of Internet access- If Internet connection fails, you can not get to
your online account.
Concept of e-Money

Broadly, electronic money is an electronic store of monetary value on a technical device.

The definition of electronic money is becoming more scientific and specific with
developments associated with it. The European Central Bank defines e-money in the
following words. “E-money can be defined as amount of money value represented by
a claim issued on a prepaid basis, stored in an electronic medium (card or
computer) and accepted as a means of payment by undertakings other than the
issuer” (ECB).
E money is a monetary value that is stored and transferred electronically through a
variety of means – a mobile phone, tablet, contactless card (or smart cards), computer
hard drive or servers. Electronic money need not necessarily involve bank accounts in
transaction but acts as a prepaid bearer instrument. They are often used to execute small
value transactions.
Electronic Money
Scrip or money that is exchanged only through electronically is referred to as electronic
money. Electronic Money is also referred as e – money, Electronic Cash, Digital Money,
 Electronic Currency, Digital Currency, e – currency, Digital Cash, and Cyber Currency.
Electronic Money uses Internet, Digital Stored Value systems, and Computer Networks.
Some of the examples of electronic money are Direct Deposit, EFT (Electronic Funds
Transfer), Virtual Currency, and Digital Gold Currency.
TYPES OF ELECTRONIC CURRENCIES
There are two types of electronic currencies namely: Hard Electronic Currency and Soft
Electronic Currency-
 Hard Electronic Currency does not allow reversing charges i.e. it supports only Non –
Reversible transaction. The advantage of this type is that it reduces the operating cost of e
– currency system.
 Soft Electronic Currency allows payment reversals. The payment is reversed only in
case of dispute or fraud. The payment reversible time will be 72 hrs or even more. Some
examples of this type are Credit Card and Pay Pal.
Electronic Money systems are developing day by day. Some of the developments are: it
can be used with Secured Credit Cards for wide range facilities and the bank accounts
that are linked can be used with an internet to exchange currency with Secure
Micropayment system like Pay Pal.
Different Systems of Electronic Money
Electronic Money includes three different systems namely
1. Centralized Systems,
2. Decentralized Systems, and
3. Offline Anonymous Systems.
Centralized Systems
There are many centralized systems that directly sell their e – currency to end users is
Web Money, Pay Pal, Hub Culture Ven, and CashU but Liberty Reserve sells only via
3rd party digital currency exchangers.
Decentralized Systems
Electronic Money includes some decentralized systems. They are:
Bitcoin, and Ripple Monetary System.
 (i) Bitcoin: – Bitcoin is a Peer to Peer Electronic Money system with maximized
inflation limit.
(ii) Ripple Monetary System: – Ripple Monetary system is a system that is developed to
distribute electronic money system independent to local currency.
Offline Anonymous System
Offline Anonymous System can be done ‘offline’. In this electronic money system, the
merchants do not need to have interaction with banks before receiving currency from the
users. Instead of that, the merchants can collect spent money by users and deposits the
money later to the bank. The merchant can deliver his storage media in bank for
exchanging the electronic money to cash.
Infrastructure Issues and Risks in EPS
Infrastructure is necessary for the successful implementation of electronic payments.
Proper Infrastructure for electronic payments is a challenge.
1. For electronic payments to be successful, there is the need to have reliable and cost
effective infrastructure that can be accessed by majority of the population.
2. Electronic payments communication infrastructure includes computer network. such as
the internet and mobile network used for mobile phone.
3. In addition, banking activities and operations need to be automated. A network that links
banks and other financial institutions for clearing and payment confirmation is a pre-
requisite for electronic payment systems. mobile network and Internet are readily
available in the developed world and users usually do not have problems with
communication infrastructure.
4. In developing countries, many of the rural areas are unbanked and lack access to critical
infrastructure that drives electronic payments.
5. Some of the debit cards technologies like Automated Teller Machines (ATMs) are still
seen by many as unreliable for financial transactions as stories told by people suggested
that they could lose their money through fraudulent deductions, debits and other lapses
for which the technology had been associated with by many over the last few years.
6. Telecommunication and electricity are not available throughout the country, which
negatively affect the development of e-payments. The development of information and
communication technology is a major challenge for e-payments development. Since ICT
is in its infant stages in Nepal, the country faces difficulty promoting e-payment
development.
RISKS IN ELECTRONIC PAYMENT SYSTEMS
Electronic payments allow you to transfer cash from your own bank account to the bank
account of the recipient almost instantaneously. This payment system relies heavily on
the internet and is quite popular due to the convenience it affords the user. It would be
hard to overstate the advantages of electronic payment systems, but what about the risks?
Certainly they exist, both for financial institutions and consumers.
(i) The Risk of Fraud
Electronic payment systems are not immune to the risk of fraud. The system uses a
particularly vulnerable protocol to establish the identity of the person authorizing a
payment. Passwords and security questions aren’t foolproof in determining the identity of
a person. So long as the password and the answers to the security questions are correct,
the system doesn’t care who’s on the other side. If someone gains access to your
password or the answers to your security question, they will have gained access to your
money and can steal it from you.
(ii) The Risk of Tax Evasion
The law requires that businesses declare their financial transactions and provide paper
records of them so that tax compliance can be verified. The problem with electronic
systems is that they don’t fit very cleanly into this paradigm and so they can make the
process of tax collection very frustrating for the Internal Revenue Service. It is at the
business’s discretion to disclose payments received or made via electronic payment
systems in a fiscal period, and the IRS has no way of knowing if it’s telling the truth or
not. That makes it pretty easy to evade taxation.
(iii) The Risk of Payment Conflicts
One of the idiosyncrasies of electronic payment systems is that the payments aren’t
handled by humans but by an automated electronic system. The system is prone to errors,
particularly when it has to handle large amounts of payments on a frequent basis with
many recipients involved. It’s important to constantly check your pay slip after every pay
 period ends in order to ensure everything makes sense. Failure to do this may result in
payment conflicts caused by technical glitches and anomalies.
(iv) The Risk of Impulse Buying
Impulse buying is already a risk that you face when you use non-electronic payment
systems. It is magnified, however, when you’re able to buy things online at the click of a
mouse. Impulse buying can become habitual and makes sticking to a budget almost
impossible.
Infrastructure Issues and Risks in EPS
Infrastructure is necessary for the successful implementation of electronic payments.
Proper Infrastructure for electronic payments is a challenge.
1. For electronic payments to be successful, there is the need to have reliable and cost
effective infrastructure that can be accessed by majority of the population.
2. Electronic payments communication infrastructure includes computer network. such as
the internet and mobile network used for mobile phone.
3. In addition, banking activities and operations need to be automated. A network that links
banks and other financial institutions for clearing and payment confirmation is a pre-
requisite for electronic payment systems. mobile network and Internet are readily
available in the developed world and users usually do not have problems with
communication infrastructure.
4. In developing countries, many of the rural areas are unbanked and lack access to critical
infrastructure that drives electronic payments.
5. Some of the debit cards technologies like Automated Teller Machines (ATMs) are still
seen by many as unreliable for financial transactions as stories told by people suggested
that they could lose their money through fraudulent deductions, debits and other lapses
for which the technology had been associated with by many over the last few years.
6. Telecommunication and electricity are not available throughout the country, which
negatively affect the development of e-payments. The development of information and
communication technology is a major challenge for e-payments development. Since ICT
is in its infant stages in Nepal, the country faces difficulty promoting e-payment
development.
RISKS IN ELECTRONIC PAYMENT SYSTEMS
Electronic payments allow you to transfer cash from your own bank account to the bank
account of the recipient almost instantaneously. This payment system relies heavily on
the internet and is quite popular due to the convenience it affords the user. It would be
hard to overstate the advantages of electronic payment systems, but what about the risks?
Certainly they exist, both for financial institutions and consumers.
(i) The Risk of Fraud
Electronic payment systems are not immune to the risk of fraud. The system uses a
particularly vulnerable protocol to establish the identity of the person authorizing a
payment. Passwords and security questions aren’t foolproof in determining the identity of
a person. So long as the password and the answers to the security questions are correct,
the system doesn’t care who’s on the other side. If someone gains access to your
password or the answers to your security question, they will have gained access to your
money and can steal it from you.
(ii) The Risk of Tax Evasion
The law requires that businesses declare their financial transactions and provide paper
records of them so that tax compliance can be verified. The problem with electronic
systems is that they don’t fit very cleanly into this paradigm and so they can make the
process of tax collection very frustrating for the Internal Revenue Service. It is at the
business’s discretion to disclose payments received or made via electronic payment
systems in a fiscal period, and the IRS has no way of knowing if it’s telling the truth or
not. That makes it pretty easy to evade taxation.
(iii) The Risk of Payment Conflicts
One of the idiosyncrasies of electronic payment systems is that the payments aren’t
handled by humans but by an automated electronic system. The system is prone to errors,
particularly when it has to handle large amounts of payments on a frequent basis with
many recipients involved. It’s important to constantly check your pay slip after every pay
period ends in order to ensure everything makes sense. Failure to do this may result in
payment conflicts caused by technical glitches and anomalies.
(iv) The Risk of Impulse Buying
 Impulse buying is already a risk that you face when you use non-electronic payment
systems. It is magnified, however, when you’re able to buy things online at the click of a
mouse. Impulse buying can become habitual and makes sticking to a budget almost
impossible.

ELECTRONIC FUND TRANSFER

Electronic Funds Transfer (EFT) is the electronic transfer of money from one bank
account to another, either within a single financial institution or across multiple
institutions, via computer-based systems, without the direct intervention of bank staff.
EFT transactions are known by a number of names. In the United States, they may be
referred to as electronic checks or e-checks.
Types of Electronic Fund Transfer
The term covers a number of different payment systems, for example:
 Cardholder-initiated transactions, using a payment card such as a credit or debit card
 Direct deposit payment initiated by the payer
 Direct debit payments for which a business debits the consumer’s bank accounts for
payment for goods or services
 Wire transfer via an international banking network such as SWIFT
 Electronic bill payment in online banking, which may be delivered by EFT or paper
check
 Transactions involving stored value of electronic money, possibly in a private currency.
HOW IT WORKS?
EFTs includes direct-debit transactions, wire transfers, direct deposits, ATM withdrawals
and online bill pay services. Transactions are processed through the Automated Clearing
House (ACH) network, the secure transfer system of the Federal Reserve that connects all
U.S. banks, credit unions and other financial institutions.
For example, when you use your debit card to make a purchase at a store or online, the
transaction is processed using an EFT system. The transaction is very similar to an ATM
withdrawal, with near-instantaneous payment to the merchant and deduction from your
checking account.
 Direct deposit is another form of an electronic funds transfer. In this case, funds from
your employer’s bank account are transferred electronically to your bank account, with
no need for paper-based payment systems.
Types of EFT payments
There are many ways to transfer money electronically. Below are descriptions of
common EFT payments you might use for your business.
 Direct deposit lets you electronically pay employees. After you run payroll, you will tell
your direct deposit service provider how much to deposit in each employee’s bank
account. Then, the direct deposit provider will put that money in employee accounts on
payday. Not all employers can make direct deposit mandatory, so make sure you brush up
on direct deposit laws.
 Wire transfers are a fast way to send money. They are typically used for large,
infrequent payments. You might use wire transfers to pay vendors or to make a large
down payment on a building or equipment.
 ATMs let you bank without going inside a bank and talking to a teller. You can withdraw
cash, make deposits, or transfer funds between your accounts.
 Debit cards allow you to make EFT transactions. You can use the debit card to move
money from your business bank account. Use your debit card to make purchases or pay
bills online, in person, or over the phone.
 Electronic checks are similar to paper checks, but used electronically. You will enter
your bank account number and routing number to make a payment.
 Pay-by-phone systems let you pay bills or transfer money between accounts over the
phone.
 Personal computer banking lets you make banking transactions with your computer or
mobile device. You can use your computer or mobile device to move money between
accounts.
Security Issues in E-Commerce: Need and Concept
In spite of its advantages and limitations E-commerce has got some security issues in
practical. E-commerce security is nothing but preventing loss and protecting the areas
financially and informational from unauthorized access, use or destruction. Due the rapid
 developments in science and technology, risks involved in use of technology and the
security measures to avoid the organizational and individual losses are changing day to
day. There are two types of important cryptography we follow for secured E-commerce
transactions.
Symmetric (private-key) cryptography: This is an encryption system in which sender
and receiver possess the same key. The key used to encrypt a message is also used to
decrypt the encrypted message from the sender.
Asymmetric (public-key) cryptography: In this method the actual message is encoded
and decoded using two different mathematically related keys, one of them is called public
key and the other is called private key.
Security is an essential part of any transaction that takes place over the internet.
Customers will lose his/her faith in e-business if its security is compromised. Following
are the essential requirements for safe e-payments/transactions :−
 Confidentiality − Information should not be accessible to an unauthorized person. It
should not be intercepted during the transmission.
 Integrity − Information should not be altered during its transmission over the network.
 Availability − Information should be available wherever and whenever required within a
time limit specified.
 Authenticity − There should be a mechanism to authenticate a user before giving
him/her an access to the required information.
 Non-Repudiability − It is the protection against the denial of order or denial of payment.
Once a sender sends a message, the sender should not be able to deny sending the
message. Similarly, the recipient of message should not be able to deny the receipt.
 Encryption − Information should be encrypted and decrypted only by an authorized user.
 Auditability − Data should be recorded in such a way that it can be audited for integrity
requirements.
E-COMMERCE SECURITY CAN BE DIVIDED INTO TWO BROAD TYPES:
(1) Client-Server Security
Client-server securities are popular because they increase application processing
efficiency while reducing costs and gaining the maximum benefit from all resources
working together. These benefits are gained by splitting processing between the client
machine/software and server machine/software. Each process works independently but in
cooperation and compatibility with other machines and applications (or pieces of
applications).
All independent processing must be performed to complete the requested service.
Cooperation of application processing produces another client-server advantage, it
reduces network traffic. Since each node (client and/or server) performs part of the
processing within itself, network communication can be kept to a minimum. For
example, static processes, like menus or edits, usually take place on the client-side. The
server, on the other hand, is responsible for processes like updating and reporting.
(2) Data and Transaction Security
Secure Electronic Transaction (SET) is a system for ensuring the security of financial
transactions on the Internet. It was supported initially by Mastercard, Visa, Microsoft,
Netscape, and others. With SET, a user is given an electronic wallet (digital certificate)
and a transaction is conducted and verified using a combination of digital certificates and
digital signatures among the purchaser, a merchant, and the purchaser’s bank in a way
that ensures privacy and confidentiality. SET makes use of Netscape’s Secure Sockets
Layer (SSL), Microsoft’s Secure Transaction Technology (STT), and Terisa System’s
Secure Hypertext Transfer Protocol (S-HTTP). SET uses some but not all aspects of a
public key infrastructure (PKI).
Electronics Commerce Security Environment
E-COMMERCE SECURITY ENVIRONMENT
E-commerce embodies several business transactions over utilizing electronic systems. E-
commerce website involves internal network which might interface with World Wide
Web. E-commerce introduced external as well as internal risk to both business and
website to which it connected.
External threats to e-commerce website are raised from various sources involving
electronic economic environment as well as risk related to the external internet. Internal
threats come from staff, internal network, management and business processes. The most
 common risk is security-related issues that relate to the interface among the consumer
transactions and network.
Intruders pose a security threat to the network through DoS attack that can overwhelm
site or theft of private financial information after gaining access to the internal system
through vulnerabilities of an e-commerce website. Other security threats related to these
websites are summarised as beneath:
Malicious code threats: These types of threats involve worms, viruses and Trojan
horses.
 Viruses are external threats and have the ability to corrupt files on the website after
finding their direction in the internal network. They might be critical as they completely
harm the computer system and disrupt normal operations of the computer.
 Trojan horse is defined as programming code that performs destructive functions. They
attack computers while downloading something.
Wi-Fi eavesdropping: It is one of the simplest ways in the e-commerce to steal private
information. It is recognized as virtual listening of data that is shared across Wi-Fi
network that is not encrypted. It occurs on personal and public computers as well.
Other Threats: Certain other threats which are raised are data packet sniffing, port
scanning and IP spoofing. An attacker can involve a sniffer to attack an information
packet flow and scan unique data packs. Through IP spoofing, it becomes hard to trace
the intruder. The target is here to modify the source address and provide it such a look
that it must look as though it is derived from another computer.
TECHNIQUES TO COMBAT E-COMMERCE THREATS
Encryption: It is defined as a mechanism of converting normal information into an
encoded content that cannot be read by others except the one who sends or receive this
message.
Having digital certificates: It is known as digital certificate being issued by a
trustworthy third party company. An SSL certificate is essential because it gives a high
authentication level to the website. The main function of this certificate is to secure an e-
commerce website from unintended attacks like Man-in-middle attacks.
Security threats in E-Commerce Environment
In the past few years it’s seemed like there has been a new widespread security breach
every other week. High profile incidents such as Heartbleed and WannaCry and hacks of
notable entities including Sony Pictures and the Democratic National Committee have
brought cyber security to the front of people’s minds. The magnitude of Distributed
Denial of Service (DDoS) attacks has risen with the increased number of devices
connecting to the internet, and as more of the population engages with these devices the
risk of sensitive information being taken advantage of continues to rise.
E-COMMERCE THREATS
Some of the common security threats we may come across:-
(i) Malware
Malware, or malicious software, is any program or file that is harmful to a computer user.
Malware includes computer viruses, worms, Trojan horses and spyware. These malicious
programs can perform a variety of functions, including stealing, encrypting or deleting
sensitive data, altering or hijacking core computing functions and monitoring users’
computer activity without their permission.
(ii) Virus
A computer virus is a type of malicious software program (“malware”) that, when
executed, replicates itself by modifying other computer programs and inserting its own
code. When this replication succeeds, the affected areas are then said to be “infected”
with a computer virus.
Computer viruses currently cause billions of dollars’ worth of economic damage each
year, due to causing system failure, wasting computer resources, corrupting data,
increasing maintenance costs, etc. In response, free, open-source antivirus tools have
been developed, and an industry of antivirus software has cropped up, selling or freely
distributing virus protection to users of various operating systems. As of 2005, even
though no currently existing antivirus software was able to uncover all computer viruses
(especially new ones), computer security researchers are actively searching for new ways
to enable antivirus solutions to more effectively detect emerging viruses, before they
have already become widely distributed.
(iii) Spam
Spam is the electronic equivalent of the ‘junk mail’ that arrives on your doormat or in
your postbox. However, spam is more than just annoying. It can be dangerous –
especially if it’s part of a phishing scam.
Spam emails are sent out in mass quantities by spammers and cybercriminals that are
looking to do one or more of the following:-
(a) Make money from the small percentage of recipients that actually respond to the
message.
(b) Run phishing scams – in order to obtain passwords, credit card numbers, bank
account details and more
(c) Spread malicious code onto recipients’ computers,
(IV) Spyware threats
Spyware is generally loosely defined as software that’s designed to gather data from a
computer or other device and forward it to a third party without the consent or knowledge
of the user. This often includes collecting confidential data such as passwords, PINs and
credit card numbers, monitoring keyword strokes, tracking browsing habits and
harvesting email addresses. In addition to all of this, such activities also affect network
performance, slowing down the system and affecting the whole business process. It is
generally classified into four main categories: Trojans, adware, tracking cookies and
system monitors.
(V) Trojan Horse
A Trojan horse is a destructive program that masquerades as a benign application. Unlike
viruses, Trojan horses do not replicate themselves but they can be just as destructive. One
of the most insidious types of Trojan horse is a program that claims to rid your computer
of viruses but instead introduces viruses into your system.
(VI) Worms
A computer worm is a standalone malware computer program that replicates itself in
order to spread to other computers.[1] Often, it uses a computer network to spread itself,
relying on security failures on the target computer to access it. Worms almost always
cause at least some harm to the network, even if only by consuming bandwidth, whereas
viruses almost always corrupt or modify files on a targeted computer.
 Basics of Encryption and Decryption
ENCRYPTION
In computing, encryption is the method by which plaintext or any other type of data is
converted from a readable form to an encoded version that can only be decoded by
another entity if they have access to a decryption key. Encryption is one of the most
important methods for providing data security, especially for end-to-end protection of
data transmitted across networks.
Encryption is widely used on the internet to protect user information being sent between a
browser and a server, including passwords, payment information and other personal
information that should be considered private. Organizations and individuals also
commonly use encryption to protect sensitive data stored on computers, servers and
mobile devices like phones or tablets.
Benefits of Encryption
The primary purpose of encryption is to protect the confidentiality of digital data stored
on computer systems or transmitted via the internet or any other computer network. A
number of organizations and standards bodies either recommend or require sensitive data
to be encrypted in order to prevent unauthorized third parties or threat actors from
accessing the data. For example, the Payment Card Industry Data Security Standard
requires merchants to encrypt customers’ payment card data when it is both stored at rest
and transmitted across public networks.
Modern encryption algorithms also play a vital role in the security assurance of IT
systems and communications as they can provide not only confidentiality, but also the
following key elements of security:-
 Authentication: The origin of a message can be verified.
 Integrity: Proof that the contents of a message have not been changed since it was sent.
 Non-repudiation: The sender of a message cannot deny sending the message.
Types of Encryption
(1) Symmetric key / Private key
In symmetric-key schemes, the encryption and decryption keys are the same.
Communicating parties must have the same key in order to achieve secure
communication.
(2) Public key
In public-key encryption schemes, the encryption key is published for anyone to use and
encrypt messages. However, only the receiving party has access to the decryption key
that enables messages to be read, Public-key encryption was first described in a secret
document in 1973;, before, then all encryption schemes were symmetric-key (also called
private-key).
DECRYPTION
The conversion of encrypted data into its original form is called Decryption. It is
generally a reverse process of encryption. It decodes the encrypted information so that an
authorized user can only decrypt the data because decryption requires a secret key or
password.
One of the reasons for implementing an encryption-decryption system is privacy. As
information travels over the Internet, it is necessary to scrutinise the access from
unauthorized organizations or individuals. Due to this, the data is encrypted to reduce
data loss and theft. Few common items that are encrypted include text files, images, e-
mail messages, user data and directories. The recipient of decryption receives a prompt or
window in which a password can be entered to access the encrypted data. For decryption,
the system extracts and converts the garbled data and transforms it into words and images
that are easily understandable not only by a reader but also by a system. Decryption can
be done manually or automatically. It may also be performed with a set of keys or
passwords.
There are many methods of conventional cryptography, one of the most important and
popular method is Hill cipher Encryption and Decryption, which generates the random
Matrix and is essentially the power of security. Decryption requires inverse of the matrix
in Hill cipher. Hence while decryption one problem arises that the Inverse of the matrix
does not always exist. If the matrix is not invertible then the encrypted content cannot be
decrypted. This drawback is completely eliminated in the modified Hill cipher algorithm.
Also this method requires the cracker to find the inverse of many square matrices which
is not computationally easy. So the modified Hill-Cipher method is both easy to
implement and difficult to crack.
 E-Commerce Unit-4
E-Commerce application in various industries
E-COMMERCE
E-Commerce, which primarily refers to buying, selling, marketing and servicing of
products or services over internet. Business on the net is classified into B2B (Business to
Business), B2C (Business to Consumer) and C2C (Consumer to Consumer).B2B
transactions are largely between industrial manufacturers, partners, and retailers or
between companies.B2C transactions take place directly between business establishments
and consumers.
B2B sites are essentially the net meeting points for buyers and sellers of the industrial
world. They serve a limited number of customers. The Turnover would be many times
that of the most B2C sites and most importantly they make profits.
B2C sites are offering low value items CDs, Cassettes, Food, Toys, Flowers, and Cards
etc because no complicated logistics are involved.
C2C sites don’t form a very high portion of web-based commerce. Most visible examples
are the auction sites. Basically, if someone has something to sell, then he gets it listed at
an auction sites and others can bid for it.
E-PROCUREMENT
The Internet offers a natural platform to facilitate efficient procurement as numerous
buyers and sellers find each other and transact according to some pre-specified protocols.
The following are the procurement strategies available for a manufacturer.
 Strategic Partnership
 Online Search Strategy
 Combined Strategy
1. Strategic Partnership
Strategic partnership strategy is to develop a long-term supply relationship with a specific
supplier.
2. Online Search Strategy
Online Search Strategy is to shop online for a better price.
3. Combined Strategy
The combined strategy is to combine both – sign a long-term purchase contract with a
supplier up to a certain level, but if necessary additional quantity may be purchased
online.
E-COLLABORATION
We define e-collaboration as business-to-business interactions facilitated by the Internet.
These include information sharing and integration, decision sharing, process sharing and
resource sharing. There are many new cases that examine different elements of
collaboration from information sharing and integration to process and resource sharing.
E-COMMERCE APPLICATION IN BANKING INDUSTRY
New information technologies and emerging business forces have triggered a new wave
of financial innovation – electronic banking (e-banking). The banking and financial
industry is transforming itself in unpredictable ways (Crane and Bodie 1996), powered in
an important way by advances in information technology (Holland and Westwood 2001).
Since the 1980s, commercial banking has continuously innovated through technology-
enhanced products and services, such as multi-function ATM, tele-banking, electronic
transfers and electronic cash cards. Over the past decade, the Internet has clearly played a
critical role in providing online services and giving rise to a completely new channel. In
the internet age, the extension of commercial banking to the cyberspace is an inevitable
development (Liao and Cheung 2003).
E-banking creates unprecedented opportunities for the banks in the ways they organize
financial product development, delivery and marketing via the internet. While it offers
new opportunities to banks, it also poses many challenges such as the innovation of IT
applications, the blurring of market boundaries, the breaching of industrial barriers, the
entrance of new competitors and the emergence of new business models (Saatcioglu et al.
2001, Liao and Cheung 2003). Now the speed and scale of the challenge are rapidly
increasing with the pervasiveness of the internet and the extension of information
economy (Holland and Westwood 2001).
Products Offered
All of the major banks in India have an internet presence offering a range of products
directly to consumers by way of proprietary internet sites. While the initial focus of the
banks has been in the retail-banking sector, there is a growing range of small to medium
enterprise (“SME”) and corporate banking products and services being offered. The
products available include
(a) Funds Transfer and Payment Systems
The major banks offer a range of online financial services including
(i) Payment of bills;
(ii) Transfer of funds;
(iii) Remittances;
(iv) Applications for letters of credit; and
(v) Settlement through the MAS Electronic Payment System.
(b) B2B E-Commerce
At least one of the major commercial banks offers an integrated B2B e-commerce
product directly through its website, involving product selection, purchase order, invoice
generation, and payment. However, integrated B2B products and services are not as yet
generally available directly from the banks.
(c) Securities Placement and Underwriting/Capital Markets Activities
Most commercial banks offer securities services such as online payment for shares and
subscriptions for initial public offerings directly though their websites. However, more
sophisticated online brokering services are generally only available through the banks’
share-broker subsidiaries.
(d) Securities Trading
A full range of online securities services are provided by the specialist securities
subsidiaries of the major commercial banks including online trading.
(e) Retail Banking
All of the major commercial banks have established websites for retail services.
Typically such sites will offer the following services:
(i) A full range of personal account services, including foreign currency accounts;
(ii) Funds transfers;
(iii) Bill payments;
(iv) Credit card services;
(v) Investment services; and
(vi) Online application for loan services including
E-Commerce has provided the platform that enables the implementation of core banking
solutions (CBS). Today all the major banks have gone on to implement CBS. And with
time being a premium among bank customers, banks have been ideating and developing
newer modes of delivering banking services. Today there is a whole plethora of such
platforms available ranging from the ATM to the mobile.
Banks like State Bank of India and its associates are recording over 100,000 transactions
on a daily basis through their 5,000 plus network of ATMs. Incidentally the profile and
usage pattern of ATMs in India matches that of ATMs abroad with an overwhelming
(more than 80%) being used for cash withdrawal. Today with over 20,000 ATMs, India is
recording one of the fastest growth in terms of ATM proliferation, though the per capita
availability of ATMs doesn’t compare anywhere to markets like Japan or the US.
With most banks now providing Internet banking facility, bankers say that customers are
using the bank for a variety of purposes. One commonly used service being booking of
rail tickets. Bankers also say that customers are using bank networks for online shopping.
Most of the online banking channels are linked to major retailers. Estimates also indicate
that today over 40% of the share transactions are being put through the internet.
E-COMMERCE APPLICATION IN TRAVEL INDUSTRY
In India e-commerce is being driven by the growing online travel industry and online
travel bookings have increased substantially after the entry of low cost carriers.
Currently, online travel industry is contributing 50% to the revenue generated by e-
commerce in India. To boot, online travel industry is growing at 125% (compounded
annual growth rate) annually. Generating revenues of around $300-500 million
(Rs.1,350-2,250 crore) currently, the size of the online travel industry is around 2% of the
entire travel industry. Online travel industry is expected to become a $2 billion industry
by 2008. In India, it is basically low cost carriers like Air Deccan and the Railways,
which have significantly led to increased use of e-commerce.
However airline industry is still exploring the advantages of e-commerce. Currently e-
commerce is being used mostly for e-ticketing among the domestic airlines though e-
ticketing penetration in India is as low as 17% against the world average of 49% and 42%
in Asia Pacific. But according to the UN’s International Telecommunication Union,
about 400 million travelers worldwide are expected to book tickets on-line this fiscal.
Air Deccan launched its operations with a 100% web enabled ticketing service and in no
time became India’s largest e-commerce site, with Rs.30 million worth transactions per
day. Electronic ticketing now accounts for 35%-40% of tickets sold by Air Deccan. E-
ticketing not only make tickets more accessible for travelers 24/7 but also eliminates the
need to invest in ticketing offices and other related infrastructure reducing operational
costs. Also travelers could avoid the long queues and save the service charges payable to
travel agents.
Being a 100% e-ticket enabled airline, Kingfisher not only offers e-ticketing but also
electronic check-in, wherein after printing the boarding card on-line the customer can use
web-enabled check-in on the airline’s website and board the plane directly passing
through only mandatory security check at the airport. One of the biggest advantage of e-
ticketing is that one can neither lose an e-ticket nor destroy it by leaving it accidentally in
the pocket. Also e-ticketing environment offers much better degree of connectivity and
reachability.
E-COMMERCE APPLICATION IN GOVERNMENT
India is now getting used to e-tendering. The Andhra Pradesh government’s initiative is
now a model for other states. It began in the year 2002 in Andhra Pradesh State
government projects had been stalled by delays in awarding tenders. Cartels regularly
cornered the bulk of government contracts and bids were tampered with after closure. For
N.Chandrababu Naidu, the tech-savy chief minister in a hurry, this was unacceptable. He
needed a way around the mess and predictably by use of technology. Now, 90% of all the
tenders in Andhra Pradesh are completed online. Last year, orders worth Rs.15,000 crore
were placed. While it earlier took anywhere between 90 and 135 days to finalise a tender,
today it takes only 35 days. Northern Railway is planning to implement E-Procurement
(E-Works contracts) System from December 2008.
Globally, e-commerce growth has been led by the popularity of online shopping portals
like amazon.com and ebay.com but in India that has not been the case. It is mainly driven
by the online travel industry and banking sector. For instance, 59% of Indian Internet
users book airline tickets online and the figure is expected to touch 70% next year. Online
rail ticket booking stands at 39% of the total bookings. As far as banking is concerned,
there are 28 million online banking users in India. This figure is expected to go up to over
35 million by 2017-18 that will include both internet and mobile banking users.
According to the Internet and Mobile Association of India (IAMAI), the e-commerce
industry in India is expected to grow to a size of Rs.18,300 crore by 2017 against the
Rs.11,200 crore. The total number of internet users which right now is 400 million is
expected to reach 1000 million by 2020.
Emerging Trends in E-Commerce
In today’s time, all thanks to advancement in technology nothing or no business is
restricted to one place, one city or even one country anymore. Everything is global. In the
past few years e-commerce industry has taken a ride and has come to become the need of
the hour. E-Commerce industry as a whole is evolving at a great pace and as for 2016 and
2017, it has already risen tremendously.
There are new trends emerging in this space, such as-
(1) Moving to Mobile Commerce
As per a recent report, it is predicted that by the end of 2016 almost a third of the world’s
population will have access to Smartphone. Having this feature has become more of a
necessity. E-Commerce stores must fit in all screens in order to enhance customer
experience or they may be losing on some serious business. As per recent Forbes study,
87 % of the gen-X people spend most of their time on digital devices every day than ever.
(2) Choose how you want to pay
Convenient and more payment options new businesses are emerging to facilitate new
payment models to enhance online shopping experience. They aim not only to make
wider options available but also to increase payment security for both buyers and sellers.
In the past few years, many new models and gateways have emerged like e-wallets, Chip
card readers, magnetic cards , EMV and cashback services.
(3) Multi Channel Model
Inspite of booming eCommerce market, retailers have come to an understanding that
Omni Channel /Multiple channel is must for any business model. Though there has been
a lot of buzz on online shopping comfort, in reality it has been recorded that many
customers may surf net all day but at the end do need a brick and mortar store to make
the final purchase. However, new technologies such as instore digital services are
emerging to make the physical store experience better.
(4) Seamless Shopping experience
Many new features are being added by all companies to facilitate seamless shopping for
example stores are now offering easy on the spot or online payments , easy wallets with
discounts and coupons or unique store debit cards .
(5) Social E-commerce
Retailers are adopting social media as their lead sales medium . Social network has come
to play the most important role in the retail world lately , almost 40 % purchases are
made because of social media handles . Thus , social network is sure expected to rise in
the coming time.
(6) Quality rather than quantity
Retailers have come to an understanding that now having more variety will not win them
customers, thus the focus has shifted to enhancing customized shopping experience by
introducing new features. The emphasis is now being laid on unique online features like
virtual trial rooms, zoom in pictures, 360 degree image view.
(7) Customer Relationship
With the increasing variety available the customer loyalty is now completely out of
picture. It requires well integrated technology supporting easy payments and high tech
shopping experience. The focus is now being shifted from discounts to better integrated
technology services.
(8) Customer service
With the increasing online shopping, people are becoming more and more comfortable
with the concept of choosing amongst great variety at the comfort of their own space
anywhere, anytime 24/7 . Thus , there will be a rise in customer support service feature in
the coming time .
(9) Smarter Customers
With more shopping and payment options than ever , customers are more informed and
empowered now the stakes are much highe. It is utmost important to win their trust now
than ever, but maintaining quality and logistics.
(10) Merging online and offline
It has become important to merge online /offline systems to facilitate easy working. A
well integrated technology is crucial.
“Change is the essence of life” in order to survive and make a mark in today’s time
retailers must be extremely flexible and mouldable towards the smart customers changing
needs. It requires tools like social media monitoring , customer feedback & so on . It is
the need today to stay upbeat with the changing trends and technology to stay long.

Mobile Commerce: Economic, Technological and Social Consideration

Mobile commerce is founded upon the increasing adoption of electronic commerce. The
rapid growth of mobile commerce is being driven by a number of positive factors,
including the demand for applications from an increasingly mobile consumer base; the
rapid adoption of online commerce, thanks to the resolution of security issues; and
technological advances that have given wireless handheld devices advanced capabilities
and substantial computing power.
M-Commerce benefits for business
Surely, running a mobile app for ecommerce can’t be the sole guarantee of profit. This is
a great additional value tool to engage customers and offer experiences. Any amount of
investment to make an app, if done wisely, will be justified by loyal customers. Also,
check your competition – if they have app, you should probably too.
Now we are going to name main advantages of m-commerce, with few practical
examples.
(1) Faster purchases
Yes, many sites have mobile versions, though apps are generally 1.5 times faster when
loading data and search results on mobile devices. Moreover, there is no need to pull data
 from a server and so customers can browse and purchase products faster. As mobile
ecommerce apps offer same functionality as desktop apps, people may purchase items
directly within an app.
M-commerce revenue has been rising at 30-40% rate annually since 2014, and by the end
of 2017 is expected to reach $150b total. The biggest retail app Amazon increased
number of customers from 43 million in 2015 to 67 million in 2016. The reason for such
achievements is intuitive mobile browsing, which in turn drives sales up.
(2) Better customer experience
Because it matters. People are well familiar with how smartphones and tablets work, so
they already know how to navigate to desired products in few clicks. In addition to
purchases, customers can share their joy of bought goods with friends, or ask for advice
from community of shopaholics. Smooth customer experience equals better conversion
rates and revenue.
To reach these goals, your online shopping app should be:
 Fast
 Convenient
 Interactive
 Exclusive
(3) Direct connection to customers (push notifications)
Shoppers get such alerts when they open a mobile app, and may get them even without
activating an app. 50% of users like notifications, and 80% of users say offers and
rewards make them more loyal to a brand. This is personal communication, if you look at
it from another angle, store to customer directly. Most of people perceive informing
about news or discounts as care, and they want exclusive stuff.
(4) Deeper analytics
Knowing your customers equals prosperity in business these days. Knowing customers
demands data, at least very basic information like age, sex, location, shopping history.
Within your mobile app you may build and set user analytics of various levels of
sophistication. It depends on your business strategy and a budget available to make an
app.
 With such data you will understand your target audience much better, and will be able to
increase sales. Names, phone numbers, emails, buying patterns and lots of other things in
store. For instance, Walmart app that 22 million customers use every month, uses mobile
data, online data and sales data combined to deliver better customer experience. It is a
whole and enormous infrastructure.
(5) Cost reduction and productivity
By reaching your audience faster with a mobile app you obviously cut down marketing
campaign costs. If an app has social media integration, users will do their part too in
spreading the word. You can even earn from placing ads within your app later on.
(6) Store navigation/geolocation
Mobile apps have a much better competitive (technical) in regard to marketing
opportunities. Front and back camera, scanning codes, positioning system for location,
compass, accelerometer, gyroscope and other build-in features can be used for
commercial purposes. One of the top benefits of m-commerce solutions is navigating
users to nearest stores in their vicinity via GPS.
ADVANTAGES OF M-COMMERCE
 Convenience: With just a few clicks on mobile devices, customers can already do
shopping, banking, download media files…and more than that. M-commerce also
benefits retailers by many of their outstanding features compared with responsive website
and mobile site.
 Flexible Accessibility: User can be accessible via mobile devices and at the same time be
accessible online too through logging on to various mobile messengers and other
networking platforms. On the other hand, the user may also choose not to be accessible
by shutting down his mobile device, which at times can be a good thing.
 Easy Connectivity: As long as the network signal is available, mobile devices can
connect and do commerce transactions not only mobile to mobile but also mobile to other
devices. No need for modem or WI-FI connectivity set up.
 Personalization: Each mobile device is usually dedicated to a specific user so that it is
personal. Users can do whatever they want with their handheld devices: modify the
 wallpaper, change view settings or modify contact information as you send emails or e-
payments.
 Time Efficient: Doing M-Commerce transactions do not require the users to plug
anything like personal computer or wait for the laptop to load.
Regulatory and Ethical Considerations in E Commerce
In the Information Age, technology evolves fast and data travels even faster. It can be
difficult for the law to keep up with new technologies and inventive ways to conduct e-
business. Because of this, the law often lags behind, and lawmakers end up drafting laws
to clean up Internet messes instead of preventing them. Take digital file sharing —
dubbed piracy — for example, laws were not created to prevent digital piracy until
millions of albums were stolen and the music industry was crippled. The lag in laws
mean that e-business executives must rely on ethics as they move forward in e-
commerce.
Client Privacy
Internet businesses have a legal obligation to protect the private information of their
customers. E-commerce activity often involves collecting secure data such as names and
phone numbers associated with email addresses. Many e-business activities also involve
transactions, so customer banking or credit card information also ends up stored online.
Legally, it is up to the e-business to store and protect or dispose of this sensitive data. The
Children’s Online Privacy Protection Act, for example, protects the online privacy rights
of children. Under this law, parents have control of what personal information their
children can give to e-businesses.
Advertising Online
Several online marketing issues spring from the inherent anonymity of the Internet. It is
often difficult to know the real identity of an e-business owner. A few online businesses
take advantage of this in unethical or illegal ways. Some e
Businesses track the online activity of their customers so that they can show
advertisements based on the customer’s behavior. Behavioral advertising is not illegal,
and it is not illegal to refrain from disclosing that an e-businesses tracks activity, although
many people consider this nondisclosure unethical.
Copyright Infringements
Due to the Internet’s free flow of information, plagiarism and copyright infringement is a
continual problem. The Digital Millennium Copyright Act addresses plagiarism and
copyright infringement in the specific context of the Internet and e-business. Under this
law, it is illegal to use online technology to copy and distribute legally copyrighted
material, such as photography, articles or books, music or videos.
Net Neutrality
Net neutrality is the hotly debated idea that Internet users should have equal access to all
websites. Most computers retrieve websites at the same speed, depending on the user’s
Internet account settings or service, no matter if the site is a multibillion-dollar company
or a neighbor’s blog. But some Internet providers have the capability to deliver different
websites at different speeds. This is an issue because some websites could pay providers
to deliver their content at faster speeds, while smaller business with less capital might not
be able to afford the faster processing, and the Internet would lose its free-access-for-all
feel. The Federal Communications Commission currently supports net neutrality and
bans providers from participating in any program that offers extra pay for higher speed
access to any websites.
Disintermediation and Reintermediation
Intermediation is one of the most important and interesting e-commerce issue related to
loss of jobs. The services provided by intermediaries are-
(i) Matching and providing information.
(ii) Value added services such as consulting.
The first type of service (matching and providing information) can be fully automated,
and this service is likely to be in e-marketplaces and portals that provide free services.
The value added service requires expertise and this can only be partially automated. The
phenomenon by which Intermediaries, who provide mainly matching and providing
information services are eliminated is called Disintermediation.
The brokers who provide value added services or who manage electronic intermediation
(also known as infomediation), are not only surviving but may actually prosper, this
phenomenon is called Reintermediation.
The traditional sales channel will be negatively affected by disintermediation. The
services required to support or complement e-commerce are provided by the web as new
opportunities for reintermediation. The factors that should be considered here are the
enormous number of participants, extensive information processing, delicate
negotiations, etc. They need a computer mediator to be more predictable.
Legal Issues
Where are the headlines about consumers defrauding merchants? What about fraud e-
commerce websites? Internet fraud and its sophistication have grown even faster than the
Internet itself. There is a chance of a crime over the internet when buyers and sellers do
not know each other and cannot even see each other. During the first few years of e-
commerce, the public witnessed many frauds committed over the internet..
Fraud on the Internet
E-commerce fraud popped out with the rapid increase in popularity of websites. It is a hot
issue for both cyber and click-and-mortar merchants. The swindlers are active mainly in
the area of stocks. The small investors are lured by the promise of false profits by the
stock promoters. Auctions are also conductive to fraud, by both sellers and buyers. The
availability of e-mails and pop up ads has paved the way for financial criminals to have
access to many people. Other areas of potential fraud include phantom business
opportunities and bogus investments.