Introduction
E-commerce is synonymous with e-business and entails the buying and selling of goods and services on the internet especially the World Wide Web. E-commerce constitutes several components necessary for it to run. E-commerce is based on several critical components. These components are in four broad categories that enable e-commerce to run on the web. These categories are the website, the merchant account, payment transaction software, a secure server connection, and a shopping cart.
Globalization
Globalization has ensured a borderless world. Globalization encompasses the greater movement of people, services, capital among others. This movement is not new but has been there for ages however, recent advancements in technology and the decline in trade barriers have led to the increased speed of exchange. Globalization has offered new markets and widened existing ones which translate into bigger profits and more wealth for individuals and countries. The benefits of globalization far much outweigh the problems it presents. It has led to faster growth of economies for those countries engaging in the international economy. Open economies have grown at a faster rate in comparison to closed economies.
Cheap imports make the variety of goods available to consumers and have helped in the betterment and improvement of locally produced goods as a result of the competition. Economic gains of globalization have led to the realization of better health and the provision of clean water increases the life expectancy of people in the process. This has seen global life expectancy double in less than a hundred years.
International political and economic wrangles between countries have been easily abated due to the spirit of interdependence fuelled by globalization. This has in turn led to an increase in international trade as trading partners bolster peace amongst themselves. Perhaps the most important factor that has facilitated globalization and subsequent increase in international trade is the improved technology. Technology advancement has caused a reduction in costs and prices thus changing the world’s mode of communication.
ASPs (Internet-based application service providers)
This term refers to firms that offer services online (or via the internet). It also refers to those companies that supply software applications and software-related services online. In addition, the ASP makes available this application to online customers via the internet and bills the users. ASPs have several advantages over the traditional approaches and these include:
- ASPs use a pay-as-you-go model that is less expensive when compared to lump-sum payments that are available to large organizations with high-frequency requirements.
- ASPs have less expensive start-up costs because an individual organization only pays for internet usage.
- ASPs are easy to set up as all a company needs is a browser to start enjoying the services.
- The need for additional IT personnel which tend to be very expensive is eliminated by ASPs.
- ASP also does away with the need for focused (IT) applications. This is because ASP can support more than one application at the same time.
ASPs rise was motivated by the need to reduce the high costs of specialized software. Nowadays, the feature has helped lower this cost making it possible for small companies to acquire the software (Botha 2004 p.32).
Online banking
Online baking is a term coined to refer to the payment and performing of transactions over the internet via the bank and other secure websites. This has ensured that you only need an internet connection to access bank services from anywhere and at any time. Online buyers and suppliers can easily access their accounts around the clock from the confines of their homes. People no longer have to do banking on their own and can easily transfer funds from one account to another. Online banking only requires you to have a personal computer and a modem and you will be able to connect to your account. Several methods are available for you to bank online.these include:
Internet-based
This method allows a person to access his or her account via home-based internet.
Bank software
Here, your bank issues you with software that you install into your personal computer which allows you a secure connection to the bank’s network and access your account.
Online banks offer a variety of services to their customers. These services are:
- Checking account balances
- Online account transfers
- Loan status
- Investments tracking
- Online loan applications
- Paying for bills
- Account information downloads
Online banking offers several services to customers such as access from any location on the globe, you can work offline, better control of your money and 24 hours account access.
E-cash
Electronic cash is similar to physical cash in that it is portable, transferable, and is anonymous. In addition, electronic cash has the other property of being obtained fraudulently in a similar manner to physical cash (Varadharajan & Mu 1999 p.54). Just as physical cash operates in a system involving three entities –merchant, customer, and bank, so does electronic cash. However, instead of coins and notes used in physical cash, electronic cash uses re-usable bit strings. E-cash has security properties that enable identity detection of double-spending, has the capability of conducting payments for transactions with minimal chances of tracing and is difficult to forge.
Electronic cash circulates in three different transaction processes that occur during withdrawing, paying, and in deposits. A withdrawal transaction is carried out when a customer identifies himself or herself and authenticates an account with the bank and is then allowed to withdraw physical money from the bank. In carrying out a purchase, a customer with a given bank presents the electronic cash to a merchant while paying for items.
The merchant in turn receives physical money by depositing the electronic cash with the bank and getting hard cash in return. E-cash has the advantage of carrying out payments minus a third party i.e. without involving the bank (Varadharajan & Mu 1999 p.55). E-cash needs to satisfy several other properties such as being independent (Opplinger 2002 p. 255). Banks are given the mandate to mint digital coins. These digitally minted coins contain a digitally signed serial number and a private key making each coin unique.
E-checks
According to Bhasker (2009 p.279), an electronic check is all electronic equipment that can pay and collect deposits and functions from devices such as computers, phones, and ATMs. Electronic checks are providing a very rapid and safe mode of settling financial accounts among and between trading partners. Their processing does not require a pre-arrangement but works over both the public and individual networks through interconnection with the existing bank’s system of clearing and settlement. Electronic checks help businesses reduce fraud, save time and money and at the same time improve customer service.
Electronic checks have become a vital part of global payments have helped reduce the labor-intensive paper checks and are now an acceptable means of payment just like credit cards. Their other benefits include their ability to increase control with their flexible choice express solutions for customized guarantees and easily verifiable programs. With e-checks, it is possible to reduce losses due to their ability to search multiple databases across nations. They also can eliminate errors as they pose accurate information about customers.
With modern technology, electronic checks are made to resemble paper checks apart from the fact that they are electronically operated and use digital signatures during the signing and in the endorsement. Authentication is also carried out using digital certification for the payer, the payer’s bank, and the payer’s bank account. The delivery of electronic checks is through the mail system or is delivered directly to the bank.
E-wallets
E-wallets function similarly to physical wallets. Electronic wallets allow customers to keep electronic cash and other information in a single but safe way. E-cash is site-specific and can only work for a specific site. E-wallets store e-cash. There are several types of e-wallets: server-side e-wallets that are operational among the vendor side, client-side e-wallets operational within the customer’s side and on his or her personal computer, and an e-wallet that is a hybrid between the first two (Zhou 2004 p.75).
E-wallets enable customers to use cyber coins in which they take money from their online accounts and deposit it in the wallet, a process termed binding (Liflander 2000 p.110). The customer then can pay for the goods from the e-cash in the wallet to the merchant. It is important to note that no money moves online apart from information. Further, no amount of money leaves the banking system making it hard for fraudsters. Most e-wallets contain both software and information components. The software component provides the identification and security such as the actual transaction number. E-wallets support other different types of payment modes such as credit cards, debit cards, and electronic checks. It also contains shipping information.
Intermediaries
Electronic (intermediaries) are a distinctive form of e-commerce. It is an electronic bazaar that enables competent buyers to post their demands and requests to either purchase or sell a product online. This feature enables manufacturers to connect with their prospects and customers across the globe by simply using a computer. This feature has the advantage of reducing costs that would have otherwise been incurred during transactions.
Intermediaries enable (small and medium) exporters lacking the ability to engage in (international) trade to get the market for their products. Intermediaries connect between exporters and customers in different geographical regions of the world. They enable effective and efficient trading between an exporter and different customers and suppliers. The intermediary analyses a customer’s preferences for products and also suppliers and industries that distribute the particular goods. This feature of e-commerce helps exporters identify and in turn take advantage of any opportunities that may be prevailing. Because intermediaries have a global network and a lot of experience in conducting international trade transactions, they can access, collect and analyze information rapidly and efficiently (kosari, Banan, Tork and Broumandnia 2010 p.67).
The intermediaries further give updates on the course that businesses are taking, conditions in the market among others. They also offer legal advice to customers locally thus enabling exporters to take full advantage. This feature greatly reduces the hustle that online buyers and suppliers have to go through. It also becomes difficult for exporters who may want to monitor or even safeguard against some opportunistic behavior shown by foreign buyers (Kosari et al 2010 p. 68).
Public Key Encryption
The public domain field of cryptography was steered by Whitfield Diffie and Martin Hellman in the 1970s (Botha 2004 p.52). This was a work of research in which these two researchers tried to crack a way in which ciphers would be made asymmetrical rather than symmetrical. The two scientists wanted the two keys to be so different that it would be different for anyone to compute either. One of these keys is made available in the public domain and is available to users. It can also be published in telephone books and on business cards while at the same time maintaining the due security provided that the second key is kept a secret. This new method of protecting data received acceptance and became known as public-key cryptography.
The public key (encryption) employs a dissimilar key to code (and to decode) the message. The codes however fit together like pieces of a puzzle with the coding parts being made available to the public while the decoding part remains private.
This pair of the key is used in two different ways:
- Authenticating the message through coding using the private key.
- Message is coded using a (public) key and can only be decoded using a (private) key thus observing privacy.
Secure shopping
Botha (2004) sites several features of the internet that make it insecure for online shopping. The internet is an open system making communication paths inherently insecure. This is translated to mean that private information transmitted over the internet might be changed by cyber attackers. The lack of a governing body makes online shopping risky and when coupled with a lack of software standards, shopping becomes even riskier. Most online shopping sites are unsecured due to the high costs incurred making shoppers do so at their own risk (Botha 2004 p. 37). There is also the risk of hacking, errors, emotional injury, denial of service, and theft which have resulted in promoters of e-commerce establishing ways for secure shopping.
Website security has been beefed up in a bid to protect organizations and customers from abuse by both the authorized and the unauthorized persons with access to corporate websites. It is however important to know that total internet security cannot be guaranteed although stringent measures continue to be undertaken. These include digital signatures, certificates and certificate authorities, secure socket layers (SSL), secure electronic transactions (SET), firewalls, and virtual private networks (Botha 2004 p.50).
To a larger extent, secure shopping is guaranteed through encryption that tries to keep documents and communications confidential. This step has been achieved by the use of digital certificates that are encrypted through public keys and that try to verify where a certain message has come from. Certificate authorities have been set up that is trusted by a large populace and that bind public key pair to a given identity. These measures have ensured secure shopping free of theft and hacking.
Online auction sites
Online auction sites operate the same way as traditional auction sites. However, the online auction is more effective in that they allow auctioneers do away with several costs such as those for hiring auction location, employees, and transportation of the objects from place to place. Online auctions are very efficient allowing sellers to reach millions of bidders while only paying a small commission. On the other hand, buyers can access whatever they want from wherever they are.
The auctioneer changes their role to market makers at the same time. This form of market is motivated by liquidations, online items, and the fact that it is possible to sell anything. There are diverse modes of auction sites including reverse auction also called a tendering system that operates in large organizations where many suppliers bid. Bidding is done by submitting proposals for tenders by the prospective suppliers. Business-to-business auction sites connect several large companies allowing them to buy inventory at competitive prices.
Online auction sites provide customers with a wide range of items. Customers can bid on new and used items with the stock cutting across different forms of merchandise. Among the largest online auction sites is eBay that was started way back in 1995 by Pierre Omidyar. Amazon, uBid, e Bid, and overstock are also large bargain online auction sites. In this auction site, the position of an auctioneer is taken by special software while server databases store the information about items traded on the site. Bids are accepted and winners are notified by server-side scripts (Parsons & Oja 2010 p.388).
Debit card protection
Debit cards also termed ATM cards have gained a lot of popularity in the recent past. Debit cards allow their holders to pay for goods and services efficiently and effectively. With the proliferation of cybercrime, users of debit cards are faced with security needs. This has resulted in cardholders preferring to use their cards only for standard ATM withdrawals. This is driven by the fear that online thieves might knock out bank balances. Banks have therefore resorted to initiating safety measures to compel their customer to use the cards (Gurusamy n. d. p.30).
Major companies in the USA like MasterCard international have declared that their debit cardholder shall not be held liable for unauthorized spending of up to $50. As a means of ensuring card security, debit card makers have initiated several measures such as the guard PIN which is a safe Personal identification number that is to be memorized and written down but to be kept a secret. Cardholders are advised to understand their cards and only use them when necessary as any spending is deducted from the main account.
When using a debit card to pay for goods or services, a person is advised to keep safe the receipt as they contain the last four digits of the card. This is in case of thieves crack the code and empty your account (Gurusamy n. d. p.31). Loss of the card must be reported immediately to the bank for blocking and always check for the bank balance and report any unauthorized charges promptly.
Summary
A large percentage of e-commerce is carried out over the internet although there is the physical transportation of the goods. An intermediary acts as a connection between a customer and a supplier. Electronic payment methods exist and are used to boost e-commerce. E-cash is similar to hard cash although it is minted on bit string and stored in an online bank and e-wallets.
Reference List
Bhasker, 2009. Electronic commerce. New York, Tata McGraw-hill.
Botha, J. 2004. E-commerce. South Africa, Juta and Company Ltd.
Gurusamy, n.d. Financial Services, 2E. New York, Tata McGraw-Hill.
Kosari et al, 2010. The Electronic Intermediary and Effects on This for Developing E-Commerce, International Journal of Computer and Network Security vol 2, no 8.
Liflander, R., 2000. The Everything Online Business Book: Use The Internet To Build Your Business. London, Everything books.
Opplinger, R, 2002. Security Technologies for the World Wide Web. London, Artech house.
Parsons, J, J, Oja, D., 2010. New Perspectives on Computer Concepts 2011. London, Cengage learning.
Varadharajan, V, & Mu, Y, 1999. Information and Communication Security: Second International Conference, ICICS’99, Sydney, Australia: Proceedings, Springer.
Zhou, X., 2004. Web Information Systems-WISE 2004: 5th International Conference On Web Information System Engineering. Brisbane Australia, Springer.