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E-commerce Defined:

TEC2441 1 E-commerce Defined E-commerce involves digitally enabled commercial transactions between and among organizations and individuals Digitally enabled transactions include all transactions mediated by digital technology Commercial transactions involve the exchange of value across organizational or individual boundaries in return for products or services

E-commerce vs. E-business:

TEC2441 2 E-commerce vs. E-business Debate among consultants and academics about meanings and limitations of terms e-commerce and e-business We use the term e-business to refer primarily to the digital enablement of transactions and processes within a firm , involving information systems under the control of the firm E-business does not include commercial transactions involving an exchange of value across organizational boundaries

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Types of E-commerce:

TEC2441 5 Types of E-commerce Classified by nature of market relationship Business-to-Consumer (B2C) Business-to-Business (B2B) Consumer-to-Consumer (C2C) Classified by type of technology used Peer-to-Peer (P2P) Mobile commerce (M-commerce)

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TEC2441 8 Yahoo - An Advertising Revenue Model for Yahoo.com

Yahoo – A Subscription Revenue Model for SBC Yahoo! DSL:

Yahoo – A Subscription Revenue Model for SBC Yahoo! DSL TEC2441 9

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TEC2441 10 Yahoo – A Subscription Revenue Model for Yahoo! Plus

Ebay - A Transaction Fee Revenue Model:

Ebay - A Transaction Fee Revenue Model TEC2441 11

Amazon - A Sales Revenue Model :

Amazon - A Sales Revenue Model TEC2441 12

MyPoints - An Affiliate Revenue Model:

MyPoints - An Affiliate Revenue Model TEC2441 13

B2C Business Models :

B2C Business Models Portal model E-trailer/Storefront model Content Provider Transaction Broker Market Creator Service Provider Community Provider TEC2441 14

B2C Business Models :

B2C Business Models TEC2441 15

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Encryption :

Encryption Encryption is the process of transforming plain text or data into cipher text(random text) that cannot be read by anyone outside of the sender and the receiver. The purpose of encryption is :- 1)to secure stored information and 2)to secure information during transmission Encryption can provide four of the six key dimensions of e-commerce security. i.e integrity, non-repudiation , authentication and confidentiality. TEC2441 18

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In this plain text is transformed into random text (unintelligible to hackers) called the “ cipher text” . A key(cipher) is any method for transforming plain text to cipher text. Encryption can be either using substitution or transposition .In substitution cipher, every occurrence of a given letter is replaced systematically by another letter. Eg : If we use the key(cipher)- “letter + 3” Then the word A T T A C K will be transformed to D W W D F N In transposition cipher, the ordering of the letters in each word is changed in some systematic way. TEC2441 19

Symmetric key encryption :

Symmetric key encryption Also called as Secret key encryption .In this types of encryption both the sender and the receiver use the same key to encrypt and decrypt the message. The secret key is send over some communication media or exchange the key in person..Symmetric key encryption requires that both parties share the same key. If the key is lost or stolen the entire encryption system fails. The cipher or keys used to transform plain text in to cipher text are digital strings. Computers store text or other data as binary strings composed of 0’s and 1’s. The strength of modern security protection is measured in terms of the length of binary key used to encrypt the data. It may use keys with 56,128 or 512 binary digits is 2 512 . The most widely used symmetric key encryption on the internet today is the Data Encryption Standard(DES) developed by the National Security Agency (NSA) and IBM it uses a 56 bit encryption key. TEC2441 20

Public key encryption :

Public key encryption In this method, two mathematically related digital keys are used : a public key and a private key. The private key is key secret by the owners and the public key is widely disseminated(circulated). Both keys can be used to encrypt and decrypt a message. However, once the keys are used to encrypt a message, that same key cannot be used to decrypt the message. The mathematical algorithms used to produce the keys are one way functions. A one-way irreversible mathematical function is one in which, once the algorithm is applied, the input cannot be subsequently derived from the output. The key is sufficiently long (128,256 and 512 bit keys) that it would take enormous computing power to derive one key from he other using the largest and faster computer available. Message confidentiality is achieved but message repudiation i.e sender deny of sending the message is not achieved. TEC2441 21

Public Key Cryptography – A Simple Case :

Public Key Cryptography – A Simple Case TEC2441 22

Steps in simple Public key encryption :

Steps in simple Public key encryption 1) The sender creates a digital message(document, spreadsheet etc) 2)The sender obtains the recipient’s public key and applies it to the message. 3)This produce an encrypted cipher text message. 4)The encrypted message is sent over the internet. 5)The recipient uses his/her private key to decrypt the message. TEC2441 23

Digital Signature   :

Digital Signature In general use, a certificate is a document issued by some authority to attest to a truth or to offer certain evidence. A digital certificate is commonly used to offer evidence in electronic form about the holder of the certificate. In PKI(Public key infrastruture ) it comes from a trusted third party, called a certification authority (CA) and it bears the digital signature of that authority. A common use for a digital certificate is to associate or “bind” a person to a public key, which is contained in the certificate. The CA is asserting that this unique public key belongs to one individual; that individual is the person who holds the linked private key. Only the person who holds the private key can decrypt something that’s encrypted with the public key. Digital certificates are also commonly used in electronic commerce, where the owner of a secure site will obtain a digital certificate that’s checked by a browser for a secure session. In this case, the CA is asserting that the public key belongs to the business; it’s bound to the domain. TEC2441 24

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SSL: Secure Sockets layer :

SSL: Secure Sockets layer The most common form of Securing channels of communication is SSL of TCP/IP. When you receive a message form a server on the web that you will be communicating through a secure channel, this means you will be using SSL to establish a secure negotiated session(here URL changes from HTTP to HTTPS). A secure negotiated session is a client-server session in which the URL of the requested document, along with the contents , contents of forms and the cookies exchanged, are encrypted. For ex , your credit card number that you entered into a form would be encrypted. Through a series of handshakes and communications, the browser and the server establish one another ‘s identity by exchanging digital certificates, decide on the strongest shared form of encryption, and then proceed to communicate using an agreed-upon session key. A SESSION KEY is a unique symmetric encryption key chosen just for this single secure session. The SSL protocol provides Data encryption, Server authentication and message integrity for TCP/IP connection. TEC2441 26

Current Online Payment Systems:

TEC2441 27 Current Online Payment Systems Credit cards are dominant form of online payment, accounting for around 80% of online payments in 2002 New forms of electronic payment include: Digital cash Online stored value systems Digital accumulating balance payment systems Digital credit accounts Digital checking

PayPal: The Money’s in the E-mail:

TEC2441 28 PayPal: The Money’s in the E-mail

Digital Cash:

TEC2441 29 Digital Cash One of the first forms of alternative payment systems Not really “cash” – rather, are forms of value storage and value exchange that have limited convertibility into other forms of value, and require intermediaries to convert Many of early examples have disappear; concepts survive as part of P2P payment systems

Examples of Digital Cash:

TEC2441 30 Examples of Digital Cash

Online Stored Value Systems:

TEC2441 31 Online Stored Value Systems Permit consumers to make instant, online payments to merchants and other individuals based on value stored in an online account Rely on value stored in a consumer’s bank, checking or credit card account

Online Stored Value Systems:

TEC2441 32 Online Stored Value Systems

Smart Cards as Stored Value Systems:

TEC2441 33 Smart Cards as Stored Value Systems Another kind of stored value system based on credit-card sized plastic cards that have embedded chips that store personal information Two types: Contact Contactless Examples: Mondex , American Express Blue

Digital Credit Card Payment Systems:

TEC2441 34 Digital Credit Card Payment Systems Extend the functionality of existing credit cards for use as online shopping payment tools Focus specifically on making use of credit cards safer and more convenient for online merchants and consumers Example: eCharge

How an Online Credit Card Transaction Works:

TEC2441 35 How an Online Credit Card Transaction Works Processed in much the same way that in-store purchases are Major difference is that online merchants do not see or take impression of card, and no signature is available (CNP transactions) Participants include consumer, merchant, clearinghouse, merchant bank (acquiring bank) and consumer’s card issuing bank

How an Online Credit Transaction Works:

TEC2441 36 How an Online Credit Transaction Works

The SET (Secure Electronic Transaction) Protocol:

TEC2441 37 The SET (Secure Electronic Transaction) Protocol Authenticates cardholder and merchant identity through use of digital certificates An open standard developed by MasterCard and Visa Transaction process similar to standard online credit card transaction, with more identity verification Thus far, has not caught on much, due to costs involved in integrating SET into existing systems, and lack of interest among consumers

How SET Transactions Work:

TEC2441 38 How SET Transactions Work

Digital Accumulating Balance Payment Systems:

TEC2441 39 Digital Accumulating Balance Payment Systems Allows users to make micropayments and purchases on the Web, accumulating a debit balance for which they are billed at the end of the month Examples: Qpass and iPin

Digital Checking Payment Systems:

TEC2441 40 Digital Checking Payment Systems Extend the functionality of existing checking accounts for use as online shopping payment tools Examples: eCheck , Achex ( MoneyZap )

Limitation of E-commerce :

Limitation of E-commerce 1) Expensive technology: This technology uses internet and for that PC and internet connectivity is required which makes it expensive. 2) Complex Software interface: Using web requires installation of complex software (operating system) and application programs are difficult to understand. 3) Sophisticated skill set: The skills required making effective use of internet and e-commerce capabilities are far more sophisticated then using television and newspaper. 4) Persistent cultural attraction of physical markets and traditional shopping experiences. 5) Persistent global inequality limiting access to telephones and 3epersonal computers. TEC2441 41

M-Commerce Business Models :

M-Commerce Business Models  Takes traditional e-commerce business models and leverages emerging new wireless technologies  Key technologies are telephone-based 3G; Wi-Fi; and Bluetooth  To date, a disappointment in the U.S.  However, technology platform continues to evolve TEC2441 42

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