PRACTICAL FILE

OF
E - Commerce

Submitted To: Submitted By:

MRS: SHREETY CHAKRABORTY HARSH KUMAR

(HOD MANAGEMENT DEPARTMENT) BBA 6th SEM

REG NO: 2111141016

FARIDABAD COLLEGE OF ENGINEERING

AND MANAGEMENT

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 INDEX
S.NO TOPIC PAGE NO.

1 Introduction Of E-Commerce 3

2 Types Of E-Commerce 4-5

3 Application Areas Of E-Commerce 6

4 Benefit Of E-Commerce 7-9

5 Limitation Of E-Commerce 10-11

6 Electronic Payment System 12-14

7 Security Of E-Commerce 15-17

8 Concept Of Paytm 18-22

9 Practicals 23-39

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 Introduction

E-commerce means using the Internet and the web for business transactions and/or commercial
transactions, which typically involve the exchange of value (e.g., money) across organizational
or individual boundaries in return for products and services. Here we focus on digitally enabled
commercial transactions among organizations and individuals. E-business applications turn into
e- commerce precisely, when an exchange of value occurs. Digitally enabled transactions include
all transactions mediated by digital technology and platform; that is, transactions that occur over
the Internet and the web.

The history of E-commerce begins with the invention of the telephone at the end of last century.
EDI (Electronic Data Interchange) is widely viewed as the beginning of ecommerce if we
consider ecommerce as the networking of business communities and digitalization of business
information. Large organizations have been investing in development of EDI since sixties. It has
not gained reasonable acceptance until eighties. The meaning of electronic commerce has
changed over the last 30 years.

Originally, electronic commerce meant the facilitation of commercial transactions electronically,

using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer
(EFT). These were both introduced in the late 1970s, allowing businesses to send commercial
documents like purchase orders or invoices electronically. The growth and acceptance of credit
cards, automated teller machines (ATM) and telephone banking in the 1980s were also forms of
electronic commerce. Another form of E-commerce was the airline and railway reservation
system.

Online shopping, an important component of electronic commerce was invented by Michael

Aldrich in the UK in 1979. The world’s first recorded business to business was Thomson
Holidays in 1981. The first recorded Business to consumer was Gates head SIS/Tesco in 1984.
During the 1980s, online shopping was also used extensively in the UK by auto manufacturers
such as Ford, General Motors and Nissan. The systems used the switched public telephone
network in dial-up and leased line modes

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 Types of E-Commerce Models

Electronic commerce can be classified into four main categories. The basis for this simple
classification is the parties that are involved in the transactions. So the four basic electronic
commerce models are as follows:-

1. Business to Business
This is Business to Business transactions. Here the companies are doing business with
each other. The final consumer is not involved. So the online transactions only involve
the manufacturers, wholesalers, retailers etc.

2. Business to Consumer
Business to Consumer. Here the company will sell their goods and/or services directly to
the consumer. The consumer can browse their websites and look at products, pictures,
read reviews. Then they place their order and the company ships the goods directly to
them. Popular examples are Amazon, Flipchart, and Jabong etc.
3. Consumer to Consumer
Consumer to consumer, where the consumers are in direct contact with each other. No
company is involved. It helps people sell their personal goods and assets directly to an
interested party. Usually, goods traded are cars, bikes, electronics etc. OLX, Quikr etc.

4. Consumer to Business
This is the reverse of B2C, it is a consumer to business. So the consumer provides a good
or some service to the company. Say for example an IT freelancer who demos and sells
his software to a company. This would be a C2B transaction.

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5. Government To Business
e-commerce is generally defined as commerce between companies and the public sector
it refer to the use of the internet for public procurement, licensing procedure and other
government related operation. Example: A business pay taxes, file reports or sell goods
and services to government agencies.

6. Business to Government refers to trade between the between the business sector as a
supplier and a government body as a customer and includes the segment of b2b marking
known as “public sector marking”. Example : Dell .com |supplies computer to public
sector organisation

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 Applications of E – Commerce

 Retail and wholesale:

E-commerce has a number of applications in retail and wholesale.

E-retailing or on-line retailing is the selling of goods from Business-to-Consumer through

electronic stores that are designed using the electronic catalog and shopping cart model.
Cybermall is a single Website that offers different products and services at one Internet
location. It attracts the customer and the seller into one virtual space through a Web
browser.

 Marketing:
Another application e-commerce is Marketing. Data collection about customer behavior,
preferences, needs and buying patterns is possible through Web and E-commerce. This
helps marketing activities such as price fixation, negotiation, product feature
enhancement and relationship with the customer.

 Finance:
Financial companies are using E-commerce to a large extent. Customers can check the
balances of their savings and loan accounts, transfer money to their other account and pay
their bill through on-line banking or E-banking.

Manufacturing:
E-commerce is also used in the supply chain operations of a company. Some companies
form an electronic exchange by providing together buy and sell goods, trade market
information and run back office information such as inventory control. This speeds up the
flow of raw material and finished goods among the members of the business community.

 Auctions:
Customer-to-Customer E-commerce is direct selling of goods and services among
customers. It also includes electronic auctions that involve bidding. Bidding is a special
type of auction that allows prospective buyers to bid for an item. For example, airline
companies give the customer an opportunity to quote the price for a seat on a specific
route on the specified date and time.

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 Benefits of E – Commerce

(a) To Organizations
1. Reduces Costs
To Establish Store Front the overhead costs to build the physical store front may be
prevented to the suppliers who use e-commerce as their business operation.

2. Monitoring the Consumers’ Buying Habit and Interest

The suppliers can monitor the consumers’ buying habits and interests so that they can
tailors their offer suit to consumers’ needs and keep the ongoing relationship with them.

3. Reaching Global Market

E-commerce allows the suppliers to reach global market segment. In other words, it
allows the suppliers to increase their sales meanwhile decrease the investment costs.

4. Reduces Costs for Inventory Management

With e-commerce, the suppliers can reduce costs to manage their inventory of goods
because they can automate the inventory management using web-based management
system. This method indirectly can save their operational costs.

5. Reduce Labor Costs

The labor costs can be reduced with e-commerce because the sellers can automate their
online store fronts. “Automated order tracking and billing systems cut additional labor
cost, and if the product or service can be downloaded then e-commerce firms have no
distribution costs involved.

6. Reduce Advertising
Costs E-commerce can reduce advertising costs because it is easier to update the
advertisement using software technology. “Print advertising can get expensive as there
may be a need to update regularly, which requires new work be planned and generated.

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(b) To Consumers
1. Wide range of products and services
Electronic commerce through internet enables the customers to choose a product or
service of their choice from any vendor anywhere in the world. Due to space constraint, a
vendor can stock only a minimum amount of goods in the physical store.

2. Convenience
Customers can buy any product from anywhere in the world without moving away from their
workplace or home through internet. Due to bad weather, people may restrict their shopping even
if necessity arises. E-commerce provides convenience to buy goods or services without causing
any physical constraints to the consumers.

3. Saves money
The cost incurred by the business on the middlemen generally falls on the consumer. Since the
middlemen are eliminated, the customer is free from bearing the cost of the middlemen. To attract
customers and to combat competitors, several business organizations offer product and services at
cheaper price.

4. Saves time
Time saving is one of the prime benefits of online shopping. Time taken for selection, buying and
paying for an online product may not take more than 15 minutes; the products are delivered to
customers’ door steps within a week. It saves delivery time for the buyers.

5. Adequate information
Internet is used as a main vehicle to conduct transactions in e-business. Internet allows customers
to search for product information, compare the prices and benefits and finally evaluate its value
before committing purchase.

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(c) To Society

1. Promotes cordial relationship

E-commerce enables people to send gifts, greetings and gift vouchers to friends and relatives
anywhere in the world. This promotes cordial relationship between and among individuals in
the society.

2. Provides a wealth of information

People through internet are able to access any information, say from tourism to financial
products. Access of global information at lower cost, just by click of a button enhances the
knowledge of the people and helps them to transform into a part of a knowledge-based
society.

3. Provides Entertainment
E-commerce helps people to download music, videos and go through latest updates and
reviews. It permits people to book tickets to the movies online.

4. Less pollution
People can buy any product or service from any location through internet without traveling
from their respective home or workplace. Business associates can contact each other from
their locations. It reduces traffic and reduces air pollution and contributes to lessen global
warming.

5. Online education
E-commerce enables the students’ community to learn and acquire knowledge through
online. Students can complete assignments and download information at any time.
Discussions with the tutors and with other students can take place with the help of internet.

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 Limitations of E-Commerce
Though e-commerce offers many advantages to customers, business, society and nation, there
are still some areas of concern that need to be addressed. The following are some of the
limitations or disadvantages of e-commerce.

1. Security The biggest drawback of e-commerce is the issue of security. People fear to
provide personal and financial information, even though several improvements have been
made in relation to data encryption. Certain websites do not have capabilities to conduct
authentic transactions. Fear of providing credit card information and risk of identity limit
the growth of e-commerce.
2. Lack of privacy
Many websites do not have high encryption for secure online transaction or to protect
online identity. Some websites illegally collect statistics on consumers without their
permission. Lack of privacy discourages people to use internet for conducting
commercial transactions,
3. Tax issue
Sales tax is another bigger issue when the buyer and seller are situated in different
locations. Computation of sales tax poses problems when the buyer and seller are in
different states. Another factor is that physical stores will lose business if web purchases
are free from tax.
4. Fear
People fear to operate in a paperless and faceless electronic world. Some of the business
organizations do not have physical existence, People do not know with whom they are
conducting commercial transactions. This aspect makes people to opt physical stores for
purchases.
5. Product suitability
People have to rely on electronic images to purchase products. Sometimes, when the
products are delivered, the product may not match with electronic images. Finally, it may
not suit the needs of the buyers. The lack of ‘touch and feel’ prevent people from online
shopping.

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 6. Cultural obstacles
E-commerce attracts customers from all over the world. Habits and culture of the people
differ from nation to nation. They also pose linguistic problems. Thus, differences in
culture create obstacles to both the business and the consumers

7. High Labour cost

Highly talented and technically qualified workforce are required to develop and manage the
websites of the organization. Since internet provides a lot of job opportunities, business
organizations have to incur a lot of expenses to retain a talented pool of employees,

8. Legal issues
The cyber laws that govern the e-commerce transactions are not very clear and vary from
country to country. These legal issues prevent people from entering into electronic contracts.

9. Technical limitations
Some protocol is not standardized around the world. Certain software used by vendor to show
electronic images may not be a common one. It may not be possible to browse through a
particular page due to lack of standardized software. Insufficient telecommunication bandwidth
may also pose technical problems.

10. Huge technological cost

It is difficult to merge electronic business with traditional business. Technological infrastructure
may be expensive and huge cost has to be incurred to keep pace with ever changing technology.
It is necessary to allocate more funds for technological advancement to remain competitive in the
electronic world.

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 Electronic Payment System

An electronic 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 these increase, improve, and provide ever more secure online payment transactions the
percentage of check and cash transactions will decrease.

Electronic Payment Methods

One of the most popular payment forms online are credit and debit cards. Besides them, there are
also alternative payment methods, such as bank transfers, electronic wallets, smart cards or bit
coin wallet (bit coin 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.

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 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.

Pros and Cons of Using an E-payment System

E-payment systems are made to facilitate the acceptance of electronic payments for online
transactions. With the growing popularity of online shopping, e-payment systems became a must
for online consumers — to make shopping and banking more convenient. It comes with many
benefits, such as:
Reaching more clients from all over the world, which results in more sales.

More effective and efficient transactions — it’s because transactions are made in seconds,
without wasting customer’s time. It comes with speed and simplicity.

Convenience. Customers can pay for items on an e-commerce website at anytime and anywhere.
They just need an internet connected device. As simple as that!

Lower transaction cost and decreased technology costs.

Expenses control for customers, as they can always check their virtual account where they can
find the transaction history.

Today it’s easy to add payments to a website, so even a non-technical person may implement it
in minutes and start processing online payments.

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Payment gateways and payment providers offer highly effective security and anti-fraud tools to
make transactions reliable.

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 Security in E – Commerce
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-Reputability − 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.

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 Measures to ensure Security

Major security measures are following −

 Encryption − It is a very effective and practical way to safeguard the data being
transmitted over the network. Sender of the information encrypts the data using a secret
code and only the specified receiver can decrypt the data using the same or a different
secret code.

 Digital Signature − Digital signature ensures the authenticity of the information. A

digital signature is an e-signature authenticated through encryption and password.

 Security Certificates − Security certificate is a unique digital id used to verify the

identity of an individual website or user.

Security Protocols in Internet

We will discuss here some of the popular protocols used over the internet to ensure secured online
transactions.

Secure Socket Layer (SSL)

It is the most commonly used protocol and is widely used across the industry. It meets following
security requirements −

 Authentication

 Encryption

 Integrity

 Non-reputability

"https://" is to be used for HTTP urls with SSL, whereas "http:/" is to be used for HTTP urls
without SSL.

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Secure Hypertext Transfer Protocol (SHTTP)

SHTTP extends the HTTP internet protocol with public key encryption, authentication, and
digital signature over the internet. Secure HTTP supports multiple security mechanism,
providing security to the end-users. SHTTP works by negotiating encryption scheme types used
between the client and the server.

Secure Electronic Transaction

It is a secure protocol developed by MasterCard and Visa in collaboration. Theoretically, it is

the best security protocol. It has the following components −

 Card Holder's Digital Wallet Software − Digital Wallet allows the card holder to make
secure purchases online via point and click interface.

 Merchant Software − this software helps merchants to communicate with potential

customers and financial institutions in a secure manner.

 Payment Gateway Server Software − Payment gateway provides automatic and

standard payment process. It supports the process for merchant's certificate request.

 Certificate Authority Software − this software is used by financial institutions to issue

digital certificates to card holders and merchants, and to enable them to register their
account agreements for secure electronic commerce.

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 Concept of Paytm

What is Paytm?
Paytm is India’s largest mobile payments, e-wallet, and commerce platform. Though started as a
recharge platform in 2010, Paytm has subsequently changed its business model to a marketplace
and a virtual bank model. It is also one of the pioneers of the cashback business model.
The company has transformed itself into one of the Indian giants dealing in mobile payments,
banking services, marketplace, gold, recharge and bill payments, etc. who serve around 100
million registered users.

Business Model of Paytm

Paytm Business Model is a marketplace-cum-payments-bank business model which also deals in
recharge & bill payments and provide users with an e-wallet and reservation/booking options.

How Paytm Makes Money?

As of May 2017, Paytm has a valuation of ~ $7 Billion which includes a stake of one of the global
leaders of marketplace model, Alibaba.
Paytm Revenue Model can be divided into following categories.
1. Marketplace (Paytm Mall)
2. Recharge Services
3. Bill Payments
4. Payment Solutions
5. Paytm Wallet
6. Digital Gold
7. Paytm Bank

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Paytm Marketplace (Paytm Mall)
Paytm was the first company who took the step of being a mobile-only marketplace in India.
Today, with over 120 million buyers and 2 million daily transactions, Paytm is the most
beneficial marketplace for sellers. Revenue from this subcategory is generated as fees and
commissions from the sellers, which differ for different category of products.

Recharge Services
There was a time when Paytm Business Model consisted just mobile recharge and bill payment
services. Times have changed and online recharge services for mobile subscriptions, TV
channels subscriptions, data-card, and metro card, etc have been added to the revenue model of
Paytm. The company, just like other recharge services providers, charge commissions from these
operators.

Bill Payment
In addition to the recharge facilities, the customers can even pay their electricity, telephone,
water, mobile, broadband, gas, etc. bills on Paytm. Apart from these, Paytm has also partnered
with several education and financial organizations and act as a portal to accept education fees
and insurance instalments.

Payment Solutions
Paytm offers smart payment solutions for online businesses. The payment solutions allow them
to accept online payments through Paytm.

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Paytm Wallet
Ever wondered how Paytm earns even after providing 50-100% cashback? Through the Paytm
wallet, of course. Cashbacks are credited to the users in their Paytm wallets.

Paytm has already rolled out its new marketing strategy where it has planned to focus more on
the digital currency prospects. Hence, all of its core marketing and promotional strategies
enforce the use of Paytm Wallet. This is a very clever move as Paytm will get the first mover
advantage and through its extensive distribution strategy (which is far better than its competitors
like Free charge, Ola Money, etc.), will be able to increase its brand preference. This will
eventually help it to carry out its future plans.

What exactly is Paytm wallet?

Paytm wallet is a semi-closed wallet (approved by RBI) used to store currency in digital form
which can be used to buy goods and services (including financial services) at identified merchant
locations or establishments (like petrol pumps, a supermarket, your barber’s shop, movie hall,
etc.) which have a specific contract with the company to accept these payment instruments.
Paytm wallet doesn’t permit cash withdrawal.

How does Paytm earn through Paytm wallet?

Paytm wallet can be used to pay for almost anything, everywhere. It has created a new market
for digital currency users because of its ease of use. Money can be transferred between the Paytm
wallets of two users with just a few taps on the phone.

As per the RBI guidelines, the money deposited by users in Paytm wallet is deposited by Paytm
in an Escrow Account with a partner bank. This escrow account deposit fetches Paytm certain
interest which is decided as per the contract between the bank and Paytm.
The interest from the escrow account is decided on the basis of the average of the deposited
amount in a certain period of time (58 weeks).

But operating a prepaid wallet comes with an expense. Banks and payment gateways charge a
fee equivalent to 1-3% of the money deposited for using their services. This fee can’t be charged
to the customers as it’ll make them choose alternatives like UPI, IMPS, etc. However, the

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interest

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generated through the escrow account deposits is usually more than the expenses incurred which
results in profits to the company.

Digital Gold
Paytm has partnered with gold refiner MMTC-PAMP to launch ‘Digital Gold’ that will allow its
users to buy, sell, and store gold digitally without any additional cost. Users can also get the gold
delivered to their house with just paying a minimal delivery charge.

Gold is considered as the safest investment in India and Paytm has full plans to capitalize on this.
There are bigger plans involved in the introduction of digital gold trade on Paytm. The company
wants its users to have something which they call a Gold Bank account, which will allow users
not only to buy gold, and store it in digital form, but also to use the gold to buy other services on
Paytm
— from recharging to pay utility bills, or book movie tickets to buy shoes and clothes from
Paytm Mall.

Paytm also has plans to connect the customers with the jewelers at a later stage. This will let the
customers get their stored gold converted to finished jeweler and will let Paytm make money by
being an affiliate.

Paytm Bank
Paytm wallet is no more just a semi-closed wallet. The company has revamped itself as a payments
bank.
A payments bank is a digital bank which can accept deposits and give out interests on the deposits
but can’t offer loans to its customers.

Just like the Paytm wallet, users operate Paytm bank using their smartphones. Paytm also issues
debit cards with QR codes which can be scanned at various points.
The bank lets you open zero deposit digital current and savings bank accounts and offers a 4%
p.a. interest on saving bank accounts and overdraft facility on your current bank accounts. There
are no restrictions related to any type of transaction but any balance deposited over ₹1 lakh is
moved to a fixed deposit with a partner bank (which provides 7% interest p.a. to you). How does

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Paytm Bank make money when it can’t carry out lending activities?

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Cross-Selling

Paytm has partnered with other financial institutions and banks to sell their products and
services (like insurance, investments, loans etc.) along with its own. It earns money in the form
of commissions or other forms as per the contract between the parties.

Interest Arbitrage
Paytm bank makes money by depositing the money with some other bank and/or government
deposits which provides interest rates greater than that is provided by Paytm bank.

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PRACTICALS
(a) Online Shopping
Step 1: Open your web browser and search for the shopping website

Step 2: Open Flipkart and you are ready for shopping

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Step 3: Search for your product and open it

Step 4: Fill up the details and click on continue

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Step 5: Select preferable payment option and your order is placed

(b) Demonstration of Fund Transfer

Step 1:

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Step 2:

Step 3:

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Step 4:

Step 5:

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 (c) Demonstration of Internet Banking
Step 1: Open web browser and search for net banking of your Bank.

Step 2: Open the online portal and you are ready for Online Banking.

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Step 3: Choose Net Banking Retail

Step 4: Fill up the credentials

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Step 5: Choose for Other banks under transfer in “Accounts section”.

Step 6: Fill the Payment details, i.e., Amount Payable, Purpose, Payment Type and Click
“Continue”.

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Step 7: Confirm your payment by verifying your “Transaction Password” and “OTP”

Step 8: Your Money Transfer is succeessfull.

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Step 9: Click on Log Out.

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 (d) Demonstration of Mobile Banking

Step 1: Open Mobile Banking Application on your mobile and enter your Passcode

Step 2: Tap “IMPS”

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Step 3: Search and Select the Beneficiary

Step 4: Fill Amount details and tap Next

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Step 5: Tap Confirm

Step 6: Transaction is successful

Step 7: Press Home and Log Out.

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(e) Demonstration of Internet Advertising

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 (f) Demonstration of working of a search engine

Step 1: Open a Web Browser and Search in a search engine

Step 2: Press the search button and the results appear

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 (g) Demonstration of Online Education and Training

Online Training

Online Education

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