E-Commerce Notes

Unit 1
Introduction to E-Commerce

Concept of Traditional Commerce

Commerce is simply the process of buying and selling, or exchanging the products and
services between and among organizations and individuals. Every commercial transaction
involved following three main components: -
 Product or service
 Process
 Delivery agent

The commerce in which all above components are physical is called traditional commerce.
Traditional commerce normally buys, sells or exchanges products and services within a
single industry and in some cases, within geographical area. It relies on operating business
hours during a specific period of time and requires housing inventory or occupying a retail
store. Traditional commerce is based on the following facts:-
 It needs to hire sales executive, sales manager, accountants, and other staffs.
 It does not share information with the competitors.
 It operates business within a certain period of time.
 It often relies on face to face interaction with customers.
 Its success is based on word of mouth, networking and consumer referrals for new
and repeat business.

Concept of E-Commerce
E-commerce is a commerce doing business transactions over the internet, but is more than
first buying and selling the goods. It is commonly known as electronic marketing. It consists
of buying and selling goods and services over an electronic system such as the internet.
E-commerce is the purchasing, selling & exchanging goods and services over computer
network or internet through which transactions or terms of sale are performed electronically.
The e-commerce is based on the following facts: -
 It needs to deploy a sophisticated website to facilitate order, payment and delivery or
at least any one of these dimensions.
 It operates at any time.
 It shares information such as price of products with the competitors.
 It often relies on efficient services to customers.
 It success is based on reduction in cost by lowering overheads.

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Traditional Commerce vs. E-Commerce
Similarities
•Both aim to deliver a valued product or service
•Both want to serve a large audience
•Both strive to quickly deliver products and services

Differences:

S. No. Traditional Commerce E-commerce

1. It is conducted at physical place, i.e. It is conducted at digital network, i.e.
market. website.
2. It supports face to face interaction It supports screen to face interaction which
which may take more time and helps to increase sales and decrease cost.
increase cost.
3. Information about purchasing Information about purchasing behavior of
behavior of customers cannot be customers can be stored and used in e-
stored in traditional commerce. commerce.
4. Paper cash or cheque is used to make Payment process is settled by using digital
payment. money.
5. It is easy to maintain customer It is difficult to maintain customer relation.
relation.
6. It takes long period to make decisionWith e-commerce, speed of decision
by organization and unable to take making can be reduced to a minute from a
competitive advantage. month and organization can take
competitive advantage.
7. The physical store is not always The web store is always expected to be
opened. opened.

E-commerce terminologies and fundamentals

1. E-business: It is the application of information and communication technologies to
support all the activities of business.
2.
3. E-marketing: It is the process of building an online presence, showcasing a company
and providing detailed information.

4. E-operation: It is the process of streamlining of business processes and steps to

enhance business efficiencies between functional departments of a company.

5. E-market: It is a place where shoppers and sellers meet electronically. E.g.

plastic.com, employease.com, etc.

6. Portal: It is a website that offers a broad array of resources and services, such as e-
mail, search engines, etc. E.g. garden.com, America Online, Yahoo!, etc.

7. Electronic catalogue: It is a list of products and services offered by the sellers.

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8. Electronic auction: It is computerized version of traditional auctions where buyers
bid against each other. E.g. bazee.com, ebay.com, etc.

9. E-shop/ E-store front: It is single company's website where products and services are
sold. E.g. walmart.com, bhatbhateni.com, etc.

10. E-mall: It is an online shopping center where many stores are located. E.g.
shopping24.de, shopping.yahoo.com, etc.

11. Cookies: It is a small text files stored on your computer when visiting a site that
record preference for a particular site.

12. Chargeback: It is form of customer protection provided by issuing banks, allows

cardholder to file complain about regarding fraud transactions on their statement.

13. E-tailing: It is virtual stores which act as catalog and products of merchants and
usually include a shopping cost.

14. Out of the box: It refers to an application suitability to be rapidly interested in an

existing system.

15. Customer Relation Management (CRM): It refers to practices, strategies and

technologies that companies use to manage and analyze customer interactions and
data throughout the customer lifestyle, within the goal of improving business
relationship with customers and driving sales growth.

16. E-check: It is a form of payment that deducts fund directly from our account. It is
usually managed by third party.

17. Shopping cost: It is software that keeps track of items visitors picks to buy from your
site.

18. Gateway: It is a network point that act as an entrance to another network.

19. P2P: It is a process whereby computers can trade information between each other
directly without assistance of third party.

20. Supply Chain management (SCM): A supply chain is a network of facilities and
distribution options that performs the function of procurement of materials,
transformation of these materials into intermediate and finished products, and the
distribution of these finished products to customers.

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SEVEN UNIQUE FEATURES OF E-COMMERCE TECHNOLOGY
1. Ubiquity: In traditional commerce, a marketplace is restricted i.e. we can be in
limited physical area to buy or sell. Whereas E-Commerce is ubiquitous meaning that
it is available just about everywhere, at all times. It make possible to shop from your
desktop, at home, at work or even from your car, using mobile commerce. The result
is called a market space - a marketplace extended beyond traditional boundaries and
removed from a temporal and geographic location. From a consumer perspective,
ubiquity reduces transaction costs – the costs of participating in a market. To transact,
it is no longer necessary that you spend time and money traveling to a market.

2. Global Reach: Unlike traditional commerce, e-commerce technology permits

commercial transaction to cross cultural and national boundaries far more
conveniently and cost effectively. As a result, the potential market size for e-
commerce merchants is roughly equal to the size of the world’s online population.

3. Universal Standards: One strikingly unusual feature of e-commerce technologies is

that the technical standards of the Internet, and therefore the technical standards for
conducting ecommerce, are universal standards – they are shared by all nation around
the world. In contrast, most traditional commerce technologies differ from one nation
to the next. For instance, television and radio standards differ around the world, as
doe’s cell telephone technology. The universal technical standards of e-commerce
greatly lower market entry cost –the cost merchants must pay just to bring their goods
to market.

4. Richness: With the use of e-commerce technology merchant can present their
message in effective way. Information richness refers to the complexity and content
of the message.

5. Interactivity: E-Commerce technologies are interactive, meaning they allow two-

way communication between merchant and consumer. Television, for instant, cannot
ask the viewer any questions, enter into a conversation with a viewer, or request
customer information be entered into a form. In contrast, all of these activities are
possible on an e-commerce Web site. Interactivity allows an online merchant to
engage a consumer in a ways similar to a face-to-face experience, but on a much more
massive, global scale.

6. Information density: The Internet and the Web vastly increase information density –
the total amount and quality of the information available to all market participants,
consumers and merchants alike. E-commerce technologies reduce information
collection, storage, processing and communication costs. At the same time, these
technologies increase greatly the accuracy and timeliness of information – making
information more useful and important than ever. As a result, information becomes
more plentiful, cheaper and of higher quality.

7. Personalization/Customization: E-commerce technologies permit personalization:

Merchants can target their marketing message to specific individuals by adjusting the
message. The technology also permits customization – changing the delivered
product or service based on a user’s preference or prior behavior.

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E-COMMERCE FRAMEWORK
E-Commerce framework is based on sound business and market understanding. Framework
tells about the detail of how e-commerce can take place. It defines actually how e-commerce
is implemented, how online trading and business can be done. It defines important
components that should be present to some transaction.

The framework for e-Commerce consists of three parts as shown in below figure: -

Fig: Generic Framework of Electronic Commerce

1. The first part consists of a variety of electronic commerce applications including both
inter- and intra-organizational and electronic market examples such as Supply Chain
Management, Video on-Demand, Procurement and purchasing, On-line marketing
and advertising, Home shopping etc.

2. The second part of the building blocks of the infrastructure consists of:
 Common business services, for facilitating the buying and selling process.
 Messaging and information distribution, as a means of sending and
retrieving information (ex-EDI, e-mail, P2P file transfer)
 Multi-media content and network publishing, for creating a product and a
means to communicate about it.
 Information Superhighway infrastructure consisting of telecommunication,
cable operator, ISPs, Wireless technologies and Internet.

3. The third part consists of the public policy and technical standards necessary to
support the applications and the infrastructure.
 Public policies govern issues like universal access, privacy, and information
pricing. The public policy infrastructure affects not only the specific business
but also direct and indirect competitors. It should take into consideration of:
 Cost of accessing information
 Regulation to protect consumers from fraud and protect their right to
privacy.
 Policies of global information traffic to detect information pirating and
obscene sites.
 Technical Standards governs issues like technology for communication and
as well as for Internet.

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Elements of E-commerce Applications
All e-commerce application basically follows client server model. Clients are the machines
requesting services and servers are machines providing services to the client. Basically all e-
commerce application has four basic elements:

Telephone
Game service
Video service

Computer Corporate
Internet
service
service Information
Television provider delivery
Libraries
server
Tablets
Electronic
Printers Video service publishing

Fig: Elements of E-commerce application

(1) Consumer access device

(2) Multimedia content
(3) Network service provider
(4) Information delivery server

Consumer access device

These are client machines used for accessing the e-commerce applications. Some examples of
consumer access devices are personal computers, telephone, printers, mobile phones, two-
way television, etc. These are used for entertainment on demand including video, games,
news on-demand, electronic retailing via catalogs, etc.

Multimedia content
It can be considered as both fuel and traffic for e-commerce applications. The technical
definition of multimedia is the use of digital data in more than one format, such as the
combination of text, audio, video, images, graphics, numerical data, holograms and
animations in a computer file or document. Multimedia is associated with hardware
components in different networks. The accessing of multimedia depends on the hardware
capabilities of the customer.

Network service provider

Network is the backbone of e-commerce. E-commerce needs a network infrastructure to
transport the contents. Such network infrastructure is provided by the combination of telecom
networks, cable TV networks, wireless networks such as satellites, microwaves, etc.
basically, e-commerce need high capacity interactive electronic pipelines for simultaneously
supporting large number of e-commerce application.

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Information delivery servers
E-commerce needs different servers to store and distribute large amount of digital contents to
consumers. These servers captures, processes, manages and delivers text, images, audio and
video. There may be different server for providing services like game server, multimedia
server, government server, etc. these server must be able to handle thousands of simultaneous
users and are made up of high-end symmetric multiprocessors, clustered architecture and
massive parallel systems.

Benefits of E-commerce
The benefits of e-commerce can be seen to affect three major stakeholders: organizations,
consumers and society.

Benefits to Organizations
 It helps to expand the marketplace to national and international markets.
 It decreases the cost of creating, processing, distributing, storing and restoring paper-
based information.
 It helps organization to provide better customer services and hence improves the
brand image of the company.
 It supports business process reengineering (BPR) efforts and provides organizations
with integrated departments and increased flexibility.
 It lowers telecommunications cost by enabling other forms of communications such
as email.

Benefits to Consumers
 It enables consumers to shop or do other transactions 24 hours a day, all year round
from all most any location.
 It provides user more options and quicker delivery of products and services especially
with digitized products.
 It provides user more options to compare and select the cheaper and better option.
 Consumers can receive relevant and detailed information in seconds, rather than in
days or weeks.
 Commerce increases competition among the organizations and as a result organization
provides substantial discounts to customers.

Benefits to Society
 It enables more individual to work at home, and to do less travelling for shopping,
resulting in less traffic on the roads and low air pollution.
 It helps in reducing cost of products so less affluent people can also afford the
products.
 It has enabled access to services and products to rural areas as well which are
otherwise not available to them.
 It helps government to deliver public services like health care, education, social
services at reduced cost and in improved ways.

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Limitations of E-Commerce
Most of the limitations of e-commerce stem from the newness and rapidly developing pace of
the underlying technologies. It can be classified into two major categories: technical
limitations and non-technical limitations.

Technical limitations
 There can be lack of system security, reliability or standards owing to poor
implementation of e-commerce.
 Software developing industry is still evolving and keeps changing rapidly.
 Special type of web server or other software might be required by the vendor setting
the e-commerce environment apart from network server.
 Sometimes it becomes difficult to integrate e-commerce software or website with the
existing application databases.
 In many countries, network bandwidth might cause an issue as there is insufficient
telecommunication bandwidth available.

Non-technical limitations
 The cost of creating or building e-commerce application in-house may be high.
 User may not trust the site being unknown faceless seller which makes difficult to
make user switch from physical store to online or virtual store.
 Difficult to ensure security or privacy on online transactions.
 Lack of touch or feel of products during online shopping which makes it not suitable
for some products.
 E-commerce application are still evolving and changing rapidly.
 Internet access is still not cheaper and is inconvenient to use for many potential
customers like one living in remote village.

Mobile commerce (M-commerce)

Mobile commerce (m-commerce) is defined as all activities related to a potential commercial
transaction conducted through communications networks that interface with wireless or
mobile devices.

M-commerce is defined as buying and selling of goods and services through wireless
handheld devices such as mobile phones, personal digital assistants (PDAs), mp3 players,
digital cameras, handheld gaming devices and computers. Industries affected by m-commerce
are: -
 Financial services
 Telecommunications
 Service/retail
 Information services

Applications of m-commerce
 Mobile banking
 Mobile entertainment
 Mobile marketing
 Mobile shopping
 Mobile ticketing

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E-commerce vs. M-commerce
S.No. E-commerce M-commerce
1. E-commerce refers to the activities of buying M-commerce refers to the process of
and selling products and service with the use buying and selling products and
of electronic systems such as the internet. services with the use of
internet/cellular data or wireless
handheld devices.
2. It uses the devices like computer, laptop, etc. It uses the handheld devices like
mobile phones, iPads, tablets, etc.
3. It has smaller connectivity. It has larger connectivity owing to the
bigger number of mobile users.
4. It reaches to the places where the electricity It reaches to the broader places due to
and internet are available. its portability.
5. It is less costly for the creation of web store It is more costly for the creation of
and the use of internet. mobile app and the use of cellular
data.
6. Payment is done through credit cards. Payment is done through cellars' rates,
mobile banking or user's credit card.
7. The use of internet in e-commerce is The use of internet in m-commerce is
mandatory. not mandatory.

i. Pure E-commerce
 Concerns business whose transactions are carried out on internet.
 All activities like exchange, payment, information flow are performed
digitally or in digital network.
 Rely on virtual agents for supply and exchange.
 Brick and mortar.

ii. Partial E-commerce

 We use digital network to carry out the flow of information but
services are given in physical mode, i.e. we must depend upon
traditionally supply chain management.
 Payment can also be settled digitally or physically.
 Click and mortar.

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E-commerce Matrix
Business Consumer

Business B2B B2C

C2B C2C
Consumer

Types of E-commerce
There are many different ways to categorize E-commerce. It can be categorized on the basis
of transaction types or on the basis of relationship between entities involved in the
transaction. E-commerce can be classified on the basis of transaction partners as follows: -

1. Business-to-Business (B2B)
2. Business-to-Consumer (B2C)
3. Consumer-to-Consumer (C2C)
4. Consumer -to- Business (C2B)

B2B E-Commerce
B2B e-commerce is simply defined as e-commerce between companies. This is a type of e-
commerce that deals with relationships between and among businesses. About 80% of e-
commerce is of this type, and most experts predict that B2B e-commerce will continue to
grow faster than any other types of e-commerce. Website following B2B e-commerce model
sells its product to an intermediate buyer who sells the product to the final customer. For
example: a wholesaler places an order from the company's website and after receiving the
consignment, sells the end product to the final customer who comes to buy the product at
wholesaler's retail outlet. Amazon.com, metalsite.com, verticalnet.com, SHOP2gether.com,
etc. are the websites that use B2B e-commerce model.

Benefits of B2B:
1. Direct interaction with customers: This is the greatest advantage of e-business.

2. Focused sales promotion: This information gives authentic data about the likes,
dislikes and preferences of clients and thus helps the company bring out focused sales
promotion drives which arc aimed at the right audience.

3. Building customer loyalty: It has been observed that online customers can be more
loyal than other customers if they are made to feel special and their distinct identity is

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 recognized and their concerns about privacy are respected. It has also been found that
once the customers develop a binding relationship with a site and its product, they do
not like to shift loyalties to another site or product.

4. Scalability: This means that the Web is open and offers round-the-clock access. This
provides an access never known before, to the customer. This access is across
locations and time zones. Thus a company is able to handle many more customers on
a much wider geographical spread if it uses an e-business model. The company can
set up a generic parent site for all locations and make regional domains to suit such
requirements. Microsoft is using this model very successfully.

5. Savings in distribution costs: A company can make huge savings in distribution,

logistical and after-sales support costs by using e-business models. Typical examples
are of computer companies, airlines, and telecom companies.

Processes for Business-to-Business Transactions and Models:

B2B interactions involve much more complexity than B2C. For instance, typical B2B
transactions include, among others, the following steps:

i. Review catalogues
ii. Identify specifications
iii. Define requirements
iv. Post request for proposals (REP)
v. Review vendor reputation
vi. Select vendor
vii. Fill out purchase orders (PO)
viii. Send PO to vendor
ix. Prepare invoice
x. Make payment
xi. Arrange shipment
xii. Organize product inspection and reception

Due to the large number of transactions involved, business-to-business operations can be too
risky if e-business sites cannot guarantee adequate quality of service in terms of performance,
availability, and security.

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B2C E-commerce
The B2C model involves transaction between business organizations and consumers. It
applies to any business organization that sells it product or services to consumers over the
internet. These sites display information in an online catalog and store it in a database. The
B2C model also includes services like online banking, travel services and health information.
Website following B2C model sells its product directly to a customer. A customer can view
products shown on the website of business organization. The customer can choose a product
and order the same. Website will send notification to the business organization via email and
organization will dispatch the product/goods to the customer. Amazon.com, autobytel.com,
eDiets.com, pets.com, etc. are the websites that use B2C e-commerce model.

Benefits of B2C:
1. Inexpensive costs, big opportunities: Once on the Internet, opportunities are immense
as companies can market their products to the whole world without much additional
cost.

2. Globalization: Even being in a small company, the Web can make you appear to be a
big player which simply means that the playing field has been level led by e- business.
The Internet is accessed by: millions of people around the world, and definitely, they
are all potential customers.

3. Reduced operational costs: Selling through the Web means cutting down on paper
costs, customer support costs, advertising costs, and order processing costs.

4. Customer convenience: Searchable content, shopping carts, promotions, and

interactive and user-friendly interfaces facilitate customer convenience. Thus,
generating more business, customers can also see order status, delivery status, and get
their receipts online.

5. Knowledge management: Through database systems and information management,

you can find out who visited your site, and how to create, better value for customers.

Processes in B2C (How Does B2C Work?)

B2C e-commerce is more than just an online store. It really is about managing the entire
process, but just using technology as a tool for order processing and customer support. The
B2C process is explained as follows:

1. Visiting the virtual mall: The customer visits the mall by browsing the online
catalogue which shows an organized manner of displaying products and their related
information such as price, description and availability. Finding the right product
becomes easy by using a keyword search engine. Virtual malls may include a basic to
an advanced search engine, product rating system, content management, customer
support systems, bulletin boards, newsletters and other components which make
shopping convenient for shoppers.

2. Customer registers: The customer has to register to become part of the site's shopper
registry. This allows the customer to avail of the shop's complete services. The
customer becomes a part of the company's growing database and can use the same for
knowledge management and data mining.

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 3. Customer buys products: Through a shopping cart system, order details, shipping
charges, taxes, additional charges and price totals are presented in an organized
manner. The customer can even change the quantity of a certain product. Virtual
malls have a very comprehensive shopping system, complete with check-out forms.

4. Merchant processes the order: The merchant then processes the order that is
received from the previous stage and fills up the necessary forms.

5. Credit card is processed. The credit card of the customer is authenticated through a
payment gateway or a bank. Other payment methods can be used as well, such as
debit cards, prepaid cards, or bank-to-bank transfers.

6. Operations management: When the order is passed on to the logistics people, the
traditional business operations will still be used. Things like inventory management.
Total quality management, warehousing, optimization and project management
should still be incorporated even though it is an e-business. Getting the product to the
customer is still the most important aspect of e-commerce.

7. Shipment and delivery: The product is then shipped to the customer. The customer
can track the order/delivery as virtual malls have a delivery tracking module on the
website which allows a customer to check the status of a particular order.

8. Customer receives: The product is received by the customer, and is verified. The
system should then tell the firm that the order has been fulfilled.

9. After-sales service: After the sale has been made, the firm has to make sure that it
maintains a good relationship with its customers. This is done through customer
relationship management or CRM.

C2C E-commerce
The C2C model involves transaction between consumers. Here, a consumer sells directly to
another consumer. Websites like hmrobazaar.com, bazee.com, eBay.com, etc. are common
examples that provide a consumer to advertise and sell their products online to another
consumer. However, it is essential that both the seller and the buyer must register with these
sites. While the sellers needs to pay a fixed fee to the online auction house to sell their
product, the buyer can bid without paying any fee. The site brings buyer and sell together to
conduct deals. Website following C2C business model helps consumer to sell their assets like
residential property, car, motorcycles, etc. or rent a room by publishing their information on
website. Website may or may not charge the consumer for its services.

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C2B E-commerce
The C2B model involves the transaction that is conducted between a consumer and a business
organization. In this kind of transaction, the consumer decides the price of a particular
product rather than the supplier. This category includes individuals who sell products and
services to organization. For example: monster.com is a website on which a consumer can
post his bio-data for the service he can offer. Any business organization that is interested in
deploying the services of the consumer can contact him and then employ him, if suitable. It
also includes the transactions where a consumer approaches website showing multiple
business organizations for a particular service and places an estimate of amount he/she wants
to spend for a particular service. Business organization that fulfills the consumer's
requirement within specified budget approaches the customer and provides its services. For
example- priceline.com is the web application that adopts C2B model.

E-commerce sites used in Nepal

1. YesKantipur.com
2. Muncha.com
3. Esewa.com
4. Foodmandu.com
5. Metrotarkari.com
6. Harilo.com
7. Sabikomart.com
8. Bhatbhatenionline.com
9. Rojeko.com
10. Hellopaisa.com
11. Ipay.com
12. Paybill.com
13. Ticketsewa.com

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 Unit 2
The Network Infrastructure for-commerce

Introduction to information Superhighway (I-Way)

I-Way is also known as interactive or multimedia superhighway. I-Way means a high
capacity interactive two way electronic pipeline to the home or office that is capable of
simultaneously supporting a large number of electronic commerce applications. It is the
global information communications network that includes the internet and the other networks.
It provides interactive phone connectivity between users and service providers and between
users and other users; and the connectivity is only possible through communication.
Communication describes a process in which one device transfer data, instruction and the
information to other device.

Component of I-Way
Various components contained in I-way can be broadly divided into three categories:
Consumer access equipment, Access roads/media and Global distribution network.

Access Roads

Telecom Based
Access Roads
Global
Consumer
Cable TV Based Information
Access
Access Roads Distribution
Equipment
Network
Wireless Based
Access Roads

Computer Based
Online System

Fig: Components of I-Way

A. Consumer Access Equipment

These are the devices at consumer end and enables consumers to access the network. It
consists of hardware and software. Hardware components includes devices such as
computers, modems, routers, switches, etc. for computer networks, set-top boxes, TV signal
descrablessers, etc. for television network, pag cell phones, etc. for cellular networks and so
on; and software systems installed in those hardware devices includes browsers, operating
systems, etc. the type of consumer access equipment used depends upon the communication
mode used. These equipments are also called premise equipments or terminal equipments.

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B. Access Roads/Media (Local on Ramps)
These are the network structure that provides the linkage between businesses, homes, and
school to global information distribution network. This component is often called the last
mile in telecommunication industry. Access roads providers can be divided into four
categories: -
(1) Telecom based access roads: Telecom industries provides high speed electronic
pipeline which is capable for carrying large volume of audio, video, and text data.
These industries provide network infrastructure for long distance and local telephone
communication. This infrastructure is useful for ecommerce application to be
connected with global distribution network. Main limitation of telecom based access
road is it continues to depend on analog transmission of data although the industry is
rapidly introducing advanced digital transmission technologies.

(2) Cable TV based access roads: Cable television also provides high capacity broadband
network infrastructure to connect large number of customers with their system. These
systems adopt digital transmission of data and have a lot of unutilized capacity which
can be useful for transmitting information from e-commerce applications to
customers. Cable TV based can be of two types: wired cable TV and wireless cable
TV.

In wired cable TV based system, systems connects customers mainly by using coaxial
cables but in recent days they are replacing trunk lines from optical fibers whereas
local loops are based on coaxial cable. Now cable TV companies have started to use
wireless communication to connect customer homes in cost effective way rather than
using optical fiber or coaxial cable based on interconnection. Direct broadcast satellite
(DBS) is used for wireless cable TV transmission.

(3) Wireless based access roads: Wireless operators provides network infrastructure by
using radio frequencies which are Omni-directional waves and have high penetration
power. The rapid growth in technology has impacted the wireless industry in a
number of ways:
 Apart from voice calls, the cellular technology today have facilitated short
messaging services (SMS) using alphanumeric display and the multimedia
services.
 Internet connectivity using the cellular networks has been made possible.
 Applications have been developed to facilitate mobile workers to exchange
messages and data from their while on the road.

Thus wireless based access enables customers to access ecommerce application from
anywhere at any time and ecommerce service providers can provide content and
services to customers on the basis of location.

(4) Computer based online system: The internet is the global system of interconnected
mainframe, personal and wireless computer networks that use the protocol suit
TCP/IP to link billions of devices worldwide. It is a network of networks that consists
of millions of private, public, academic, business and government networks of local to
global scope, linked by a broad array of electronic, wireless and optical networking
technologies. Internet, intranets and extranets are providing online services 24-hour
computer based supermarkets to customers. It targets a wide range of ecommerce

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 applications such as video on demand, home shopping email, video conferencing and
many more.

C. Global Information Distribution Network (GIDN)

The global information distribution networks consist of the infrastructure crossing the
countries and continents. They include the long distance telephone lines, satellite networks,
and the internet. Long distance telephone connectivity is provided through cable by the inter-
exchange carriers. Long distance cellular networks are using the wireless technologies to
connect the consumers worldwide. Satellite networks play the vital role in the communication
industry. They have advantages over the terrestrial networks in that they are accessible from
any point of the globe. They can provide broadband digital services to many points without
the cost acquiring wire/cable installation. They can add receiving and sending sites without
significant additional costs.

Internet as a network infrastructure

In general, networking is the practice of linking two or more computing devices together for
the purpose of sharing data. Networks are built with a mix of computer hardware and
software. Networks are used to make work and communication more efficient. A network
connects computers, but can also connect other devices such as shared printers, removal
media drivers and other equipments.

The public internet is a world-wide computer network, i.e. a network that interconnects
millions of computing devices throughout the world. Most of these computing devices are
traditional desktop PCs, Unix-based workstations, and so called 'servers' that store and
transmit information such as www pages and email messages. Increasingly, non-traditional
controlling devices such as web TVs, mobile, computers, pagers and toasters are being
connected to the internet. In the technical language, all of these devices connected to internet
are called hosts or end systems. The internet applications with which many of us are familiar
such as www and email are a network application programs that run on such end system.

End systems as well as most other "pieces" of the internet, run protocols that control the
sending and receiving of information within the internet, TCP (the Transmission Control
Protocol) and IP (the Internet Protocol) are the two most important protocols in the internet.
The internet's principle protocols are collectively known as TCP/IP protocol suite. End
systems are connected together by communication links. Links are made up of different types
of physical media: coaxial cable, copper wire, fiber optics and radio spectrum (wireless).
Different links can transmit data at different rates. The link transmission rate is often called
the link bandwidth, and is typically measured in bits/second.

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Intranet
An intranet is a private network that uses internet protocols, network connectivity and
possibly the public telecommunication system to securely share the part of an organization's
information or operations with its employees. Sometimes, the term refers only to most visible
services, the internal website. Basically, it uses same concepts and technologies of the
internet running on TCP/IP protocol suit. The HTTP, FTP and SMTP are very commonly
used protocols for intranets. The information is accessed through browsers. The intranet must
be platform independent and there is need to install special software on clients.

Advantages:
 It helps employees to quickly locate information and applications relevant to their
roles and responsibilities.
 It can be used to connect many business processes in the organization which helps to
improve efficiency and effectiveness of business process.
 It can serve as the powerful tool for communication within an organization.
 Employees can access and exchange documents, pictures, charts, maps, etc. over
intranet.
 An intranet can be used as application warehouse and hence avoids many
maintenance and support problems.

Disadvantages:
 Management could loss control of the material provided in the intranet.
 There could be security concerns with who accesses the intranet, plus abuse of
intranet by the users.
 Intranets may cause "information overload" delivery too much information to handle.

Applications of Intranet:
Organizations are implementing a broad range of intranet uses. Several common functional
intranet business applications include:
 Marketing
 Finance
 Human resources
 Sales
 Manufacturing
 Training
 Customer information

Intranet application support communication and collaboration, web publishing, business

operations and management, and intranet management. These application s can be integrated
with existing IS resources and applications, and extended to customers, suppliers and
business partners.

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Extranet
An extranet is a private network that uses internet protocols, network connectivity, and
possibly the public communication system to securely share the part of an organization's
information or operations with suppliers, partners, customers and other businesses. It can be
viewed as part of a company's intranet that is extended to users outside company. Basically, it
is "a private network over the internet". It is used to designate "private parts" of a website.
The only registered users can navigate and it requires security and privacy. The firewall
server manages user, security and privacy management of system. It uses the Virtual Private
Networks (VPN) that tunnels through the public network which makes more secure and
private.

Advantages:
 It helps to improve organization productivity.
 It cuts down meeting time.
 It allows information to be viewed at times convenient for external users,
 Authorized users have immediate access to the latest information.
 It helps to improve relation with the customers.

Disadvantages:
 Expensive to implement and maintain,
 Security can be a big concern when dealing with the valuable information.
 It can reduce personal contact with customers.

Internet Protocol Suite

The internet protocol suite is the computer networking model and set of communication
protocols used on the internet and similar computer networks. It is commonly known as
TCP/IP, because its important protocols, the Transmission Control Protocol (TCP) and the
Internet Protocol (IP), were the first networking protocols defined in this standard.

TCP/IP provides end-to-end connectivity specifying how data should be packetized,

addressed, transmitted, routed and received at the destination. This functionality is organized
into four abstraction layers which are used to sort all related protocols according to the scope
of networking involved. From lowest to highest, the layers are the Link layer, the Internet
layer, the Transport layer and the Application layer.

The TCP/IP model and related protocol models are maintained by the Internet Engineering
Task Force (IETF).

1. Application Layer
The application layer is the scope within which applications create users data and
communicate this data to other applications on another or the same host. The
applications or processes make use of the services provided by the underlying, lower
layers, especially the transport layer which provides reliable or unreliable pipes to
other processes. The communication partners are characterized by the application
architecture, such as the client-server model and peer-to-peer networking. This is the
layer in which all higher level protocols such as HTTP, FTP, SMTP and telnet
operates. Processes are addressed via ports which essentially represent services.

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 2. Transport Layer
The transport layer performs host-to-host communications on either the same or
different hosts and on either the local network or remote networks separated by
routers. It provides a channel for the communication needs of applications. The User
Datagram Protocol (UDP) is the basic transport layer protocol, providing an
unreliable datagram service. The Transmission Control Protocol provides flow-
control, connection establishment and reliable transmission of data.

3. Internet Layer
The internet layer has the task of exchanging datagrams across network boundaries. It
provides a uniform networking interface that hides the actual topology (layout) of the
underlying network connections. It is, therefore, also referred as the layer that
establishes internetworking; indeed, it defines and establishes the internet. This layer
defines the addressing and routing structures used for the TCP/IP protocol suite. The
primary protocol in this scope is the Internet protocol, which defines the IP addresses.
Its function in routing is to transport datagrams to the next IP router that has the
connectivity to a network closer to the final data destination,

4. Link Layer
The link layer defines the networking methods within which the scope of the local
network link on which hosts communicates without intervening routers. This layer
includes the protocols used to describe the local network topology and the interface
needed to effect transmission of Internet layer datagrams to next neighbor hosts.

 The Hyper Text Transfer Protocol (HTTP) is used to transfer files that are web pages
of the World Wide Web (WWW).
 The File Transfer Protocol (FTP) is used for downloading and uploading the files.
 The Simple Mail Transfer Protocol (SMTP) is used for the transfer of mail messages
and attachment.
 The Telnet is used for logging on remotely to network hosts.

Software Agents
Software agent is a persistent, goal-oriented and intelligent computer program that reacts to
its environment and runs without continuous direct supervision to perform some function for
an end user or another program.

Features of Intelligent Agents: -

i. Autonomous: Once launched, it must be able to work independently without guidance
of its creator or owner.

ii. Learning: Agent must have capacity to learn from environment in which it is running.

iii. Reasoning: Agents must have capacity of making rule based on reasoning in changing
environment and needs to learn from reasoning.

iv. Co-operation: Agents must be able to interact with other agents that are working with
same or similar problems.

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Types of Software Agents
Software agents can be static or dynamic. They are: Static software agent and Dynamic
software agent.

A. Static Software Agent

Static agent simply sits on computer and actively monitors the environment. Static
agent does not roam around but use embedded knowledge to assist in filtering and
processing of incoming transaction. E.g. –a mail agent executes in background and is
activated only when there is incoming mail message, then after processing the mail
the agent goes to sleep state until event request processing.

B. Dynamic Software Agent

Dynamic agent can execute command independently while living on a remote server,
only reporting back to its home base when the given task is accomplished. E.g. –a
dynamic agent can search for the cheapest price ticket available for required route on
required date, find the amount available on user's bank account, communicate with
the agents of different sellers then purchase ticket for its owner by choosing the best
deal, and then lastly notifies the owner.

Broadband Technology
The term broadband commonly refers to high-speed internet access that is always on and
faster than the traditional dial-up access. Broadband includes several high-speed transmission
technologies, such as: -

1. Digital Subscriber Line

2. Cable Modem
3. Fiber
4. Wireless
5. Satellite
6. Broadband over power lines (BPL)

Digital Subscriber Line (DSL)

DSL is a wireless transmission technology that transmits data faster over traditional copper
telephone lines already installed to homes and businesses. DSL based broadband provides
transmission speed ranging from several hundred Kbps to millions of bits per second (Mbps).
The availability and speed of DSL service may depend on the distance from home or business
to the closest telephone company facility.

Following are the types of DSL transmission technologies: -

1. Asymmetrical Digital Subscriber Line (ADSL)
ADSL is primarily used by residential customers, such as internet surfers, who
receives a lot of data but do not send much. ADSL typically allows faster speed in the
downstream direction then the upstream direction. It allows faster downstream data
transmission over the same line used to provide voice service, without disrupting
regular telephone calls on that line.
Advantages:
 There is no need of extra access infrastructure.

22
  ADSL does not tie up our phone line while we are on internet.
 There is no need to 'dial-up' the internet.
Disadvantages:
 ADSL is not available everywhere-our local telephone exchange must be
ADSL embedded.
 If the premise is more than 3.5 cm away from the exchange, ADSL may have
poor bandwidth.
 In addition, ADSL may be unavailable where it has used a technology pain
gain on the phone line.

2. Symmetrical Digital Subscriber Line(SDSL)

SDSL is typically used by businesses for services, such as video conferencing, which
need significant bandwidth both upstream and downstream.

Cable Modem
A cable modem is a mechanism offering high-speed data access. It is a device that enables
users to connect their computers to a cable TV network in order to access the internet. Cable
TV, which has been used to bring television program to home, becomes a popular source for
interacting with the internet and other new trends in multimedia (such as voice over IP) as a
broadband technology.

Most cable modems are external devices that have two connections: one to the cable wall
outlet and the other to a computer. They provide transmission speed of 1.5 Mbps or more.

Fiber
Fiber optic technology converts electrical signals carrying data to light and sends the light
through transparent glass fiber about the diameter of a human hair. Fiber transmits data at
speeds exceeding current DSL or cable modem speeds, typically by tens or even hundreds of
Mbps. The actual speed varies depending on a variety of factors, such as how close to the
computer the service provider brings the fiber and how the service provider configures the
service, including the amount of bandwidth used. The same fiber providing the broadband
can also simultaneously deliver voice (VoIP) and video services, including video-on-demand.

Wireless
Wireless broadband connects a home or business to the internet using a radio link between
the customer's location and the service provider's facility. Wireless broadband can be mobile
or fixed. Wireless technologies using longer-range directional equipment provide broadband
service in remote or sparsely populated areas where DSL or cable modem would be costly to
provide. Speeds are generally comparable to DSL and cable modem. An external antenna is
usually required.

Satellite
Just as satellites orbiting the earth provide necessary links for telephone and television
service, they can also provide links for broadband. Satellite broadband is another form of
wireless broadband and is also useful for serving remote or sparsely populated areas.
Downstream of upstream speeds for satellite broadband depend on several factors, including
the provider and service package purchased, the consumer's line of sight to the orbiting
satellite and the weather. Typically a consumer can expect to receive (download) at speed of
about 500 Kbps and send (upload) at the speed of about 80 Kbps. These speeds may be

23
slower than DSL and cable modem, but they are about 10 times faster than the download
speed with dial-up internet access. Service can be disrupted in extreme weather conditions.

Broadband over Power Line (BPL)

BPL is the delivery of broadband over the existing low- and medium-voltage electric power
distribution network. BPL speeds are comparable to DSL and cable modem speeds. BPL can
be provided to homes using existing electrical connections and outlets. BPL is an emerging
technology that is available in very limited areas. It has significant potential because power
lines are installed virtually everywhere, alleviating the need to build new broadband facilities
for every customers.

Communication Technologies
a. Wireless fidelity (Wi-Fi)
Wi-Fi is designed for communication between devices such as computers, printers
and scanners. It is typically used to setup private wireless networks in home or office,
allowing us to move our PC or laptop while still having access to the internet and our
printer and other devices.

Wi-Fi uses radio waves to provide wireless high-speed internet and network
connections. It allows electronic devices to connect to the wireless LAN (WLAN)
network, mainly using the 2.4 GHz ultra high frequency (UHF) and 5 GHz SHF ISM
radio bands. A WLAN is usually password protected, but may be open, which allows
any device within its range to access the resources of the WLAN network.

b. Wide Area Wireless

A wireless wide area network (WWAN) is a specific type of network that sends
wireless signals beyond a single building or property. WWAN may use various types
of cellular network systems to send signals over a longer distance. Large telecom
provides larger types of networks often require some types of encryption or security
that a local area network (LAN) may not need. A WWAN often differs from wireless
local area network (WLAN) by using mobile telecommunication cellular technologies
such as LTE, WiMax, UMTS, CDMA, GSM, cellular digital packet data (CDPD) and
Mobitex to transfer data. Main technologies are:-

 Global System for Mobile Communication (GSM): GSM is a second

generation (2G) digital network, operating in the 900 MHz and the 1800 MHz
frequency band. It is digital cellular technology used for transmitting mobile
voice and data services. It is the most widely accepted standard in
telecommunications and it is implemented globally.

 Code Division Multiplexing Access (CDMA): CDMA is a digital cellular

technology used for mobile communication. CDMA cellular systems are
deemed superior to frequency division multiple access (FDMA) and time
division multiple access (TDMA). It constantly provides better capacity for
voice and data communications, allowing more subscribers to connect at any
time. It is common platform on which 3G technologies are built.

 WiMax: It is acronym for Worldwide Interoperability for Microwave Access

and is based on wireless MAN technology. It is wireless technology for the

24
 delivery of IP centric services over a wide area. It uses radio waves to transmit
signals. WiMax system is expected to deliver broadband access services to
residential and enterprise customers in an economical way.
Advantages:
 Flexibility
 Scalability
 Wireless can be used in places where it is not possible to run cables or drill
holes
 Provides connection even when users are away from office or home

Disadvantages:
 High initial investment compared to ADSL
 Some wireless technology may require line-of-sight between transmitting and
receiving parts. This can be problem in some areas.
 Wireless suffers from potential security risk.

c. UMTS (3G)
Universal Mobile Telecommunications System (UMTS) is a third generation (3G)
mobile cellular technology for network based on the GSM standard developed by the
3GPP (3rd Generation Partnership Project). It aims to offer higher-bandwidth, packet-
based transmission of text, voice, video and multimedia needed to support data-
intensive applications. Once UMTS is fully implemented, computer and phone users
can be constantly connected to internet and have access to a consistent set of services
worldwide. Integrating the functions of a whole range of different equipments, the
new 3G-enabled mobile phone can be used as a phone, a computer, a television, a
paper, a video conferencing, a newspaper, a diary and a credit card.

d. LTE (4G)
LTE stands for Long Term Evolution is a fourth generation (4G) wireless
communication standard developed by the 3rd Generation Partnership Project (3GPP)
that is designed to provide 10x the speeds of 3G networks for mobile devices such as
smartphones, tablets, notebooks, etc. LTE refers to a standard for smooth and efficient
transition towards more advanced leading-edge technologies to increase the capacity
and speed of wireless data networks. 4G technologies are designed to provide IP-
based voice, data and multimedia streaming at speeds of at least 100 Mbit per second
and up to as fast as 1 Gbit per second.

e. Bluetooth
Bluetooth is a global wireless communication standard that connects devices together
over a certain distance like headset and phone, speaker and PC, etc. Using a single
chip with built-in radio transmission circuitry, bluetooth is an expensive wireless
supporting local area networks (LAN).

A bluetooth device uses radio waves instead of wire or cables to connect the phone or
computer. A bluetooth product like a headset or watch contains tiny computer chip
with a bluetooth radio and software that makes it easy to connect. When two
bluetooth devices want to talk to each other, they need to pair. Bluetooth is
particularly convenient in certain situation-for example, when transferring files from
one mobile phone to another without cables. Sending music and photos between PC
and a mobile phone is another useful application.

25
 Unit 3
Electronic Data Interchange (EDI)

Concept of EDI
Electronic data interchange (EDI) is the computer-to-computer exchange of business
documents in a standard electronic format between business partners. By moving from paper-
based exchange of business document to one that is electronic, business enjoys major benefits
such as reduced cost, increased processing speed, reduced errors and improved relationships
with business partners.

EDI vs. E-mail

Both EDI and E-mail are used to transfer the data and message from one business terminal to
other terminal. We can analyze as a similar application system but the application process is
different.

Following are the differences between EDI and E-mail: -

S. No. EDI E-mail

1. It is direct computer to computer
exchange of data from one business
partner/organization to another
business partner/organization.
2. It transfers data in structured format.
3. No human intervention is required in
receiver side.
4. EDI needs the synchronization of
receiver and sender.
5. EDI is normally used in business
transaction.
6. In case of EDI, the receiver computer
must always be online at the time of
data transmission.
7. EDI is faster than E-mail.
8. EDI is considered as evidence in the
court.
It is exchange of message from one user to
another user by using some intermediate
mail server.
It transfers data in unstructured format.
Human intervention is required at the
receiver side.
In E-mail speed synchronization is not
needed between receiver and sender.
E-mail is normally used for messaging.
In case of E-mail, computer does not need
to be online at the time of data
transmission.
E-mail is slower than EDI.
E-mail is not considered as evidence in the
court.

26
EDI benefits
a. Time delays: Paper documents may take days to transport from one location to
another, while manual processing methodologies necessitate steps like keying and
filing that are rendered unnecessary through EDI.

b. Labor costs: In non-EDI systems, manual processing is required for data keying,
document storage and retrieval, sorting, matching, reconciling, envelope stuffing,
stamping, signing, etc. While automated equipment can help with some of these
processes, most managers will agree that labor costs for document processing
represent a significant proportion of their overhead. In general, labor-based processes
are much more expensive in the long term EDI alternatives.

c. Accuracy: EDI systems are more accurate than their manual processing counterparts
because there are fewer points at which errors can be introduced into the system.

d. Information Access: EDI systems permit many users access to a vast amount of
detailed transaction data in a timely fashion. In a non-EDI environment, in which
information is held in offices and file cabinets, such dissemination of information is
possible only with great effort, and it cannot hope to match an EDI system's
timeliness. Because EDI data is already in computer-retrievable form, it is subject to
automated processing and analysis. It also requires far less storage space.

e. Simplicity and Security: EDI standards specify how data will be formatted and when
it can be found. Therefore, it is not difficult to use. At the same time, it is much less
likely to lose information transmitted through EDI then information sent via mail.
EDI can be only accessed by authorized users, and then there are audit trials and
archives of data. EDI data cannot be easily changed by unauthorized users. It is also
not subject to viruses.

Benefits to Suppliers

 Elimination of problems and delays caused by order entry errors

 Personnel reductions
 Inventory reductions
 Improved cash flow

Benefits to Buyers

 Lower inventory levels

 Quick order acknowledgement
 Time spent matching invoices to purchase orders and re-keying invoices into an
Account Payable System is reduced

27
How EDI works
There are five basic steps or processes which will happen during a typical EDI transaction.
These steps together with the EDI standards make the exchange of data possible between two
trading partners.

Preparation of electronic
Processing electronic
documents
documents
(1)
(5)

Outbound
Communication Inbound
translation
translation
(3)
(2)
(4)

Step 1 Preparation of Electronic Document

The first step in the sequence of EDI is the collection of information and data. The
way to collect the required information should be same as the way to do it in the
traditional system. However, instead of printing out the data on paper in tradition, the
system has to build an electronic file.

Step 2 Outbound Translation

This step translates the electronic file or database into an EDI standard format
according to the specification of the corresponding document. Now the data will be in
structured format.

Step 3 Communication
The computer should connect and transmit those data files to pre-arranged value
added network (VAN) automatically. The VAN should then process each file and
route to appropriate mailboxes according to the destination set in the file.

Step 4 Inbound Translation

The designated company should be able to retrieve the file from their electronic
mailboxes in a constant period and then reverse the process by translating the file
from the standard format into the specific format required by the company's
application software.

Step 5 Processing Electronic Document

The internal application system of the designated company can process the received
documents. All the resulted documents corresponding to the received transaction
should use the same processor steps to the transaction initiator.

28
EDI Application in Various Field
Some applications or areas where EDI are used are as follows: -

i. International Trade
ii. Financial Sector
iii. Health Care and Insurance
iv. Manufacturing or Retailing Procurement
v. Quick response
vi. Legal issues

International Trade
EDI is organized for business application. So, it is closely linked with international trade. In
the international trade, EDI has a great role. It attempts to facilitate the smooth flow of
information. To control and regulate the physical movement like movement of goods,
vehicles, etc. business house need strong and believable papers, which has been the main stay
for carrying trade related information. EDI is expected to reduce the entry barriers for small
traders. Small and medium sized traders are confined to the margin of international trade
because of access to information and information networks. It reduces transaction expenses
and paper work. It provides quicker service for import/export of goods and improves
customer service through quick track and trace.

Financial Institution
Electronic transmission of payments and remittance information can be transfer by using
financial EDI. This has established the relationship between payers, payee and their
respective banks. This helps in fast processing of issuing, mailing and processing of cheque
on bank. Financial EDI helps to reduce paper work for invoice payments, bank transfer. It
works on automated way between the suppliers, customers, business partners and banks.

Health Care and Insurance

EDI is becoming a permanent fixture in both insurance and health care industries as medical
providers, patients and payers. It reduces administrative cost of health care. Moreover, EDI
enables doctors to communicate with other physicians, laboratories, hospitals and other
health care setting. Using EDI software, service providers prepares the forms and submits
claims via communication lines to the value added network service provider. The company
then edits sorts and distributes form to the payer. If necessary, the insurance company can
electronically route transactions to the third party for price valuation. Claims submission also
receives reports regarding claim status & request for additional information

Manufacturing/Retailing Procurement
EDI is heavily used for manufacturing and retail procurement. They are used to support quick
response for retailers, manufacturing companies and use Just-In-Time (JIT) system to manage
the stock/inventory. They calculate the required parts and services needed each day based on
the production. EDI changes the whole manufacturing environment. It provides any volume
of data transmission immediately for the production quickly. A major benefit of EDI is
stream linked cash flow. When a company receives invoice, it pays for parts that are actually
in use, in product ready to be sold, instead of paying for large costly items stored in
inventory.

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Quick Response (QR)
QR means better service and availability of wider range of products for retailers and
suppliers. By using EDI, QR reduces the lead time. If the ROL of first company falls down, it
automatically triggers a chain of events and orders the items from other company. EDI
system is automatically control and establishes the relationship to supplier, retailer and the
manufacturing system on automated system which is the application of QR.

Legal Issues
Business messages between independent firms can have legal implications. However, that
legal issue is more important for some transactions than for others. Business use EDI to issue
instruction to and make commitments with outside parties. EDI is often used to form legally
binding contracts.

Security and Privacy issues of EDI

Any transaction whether conventional or online has some security issues involved in it. They
are:-
 There is no hard copy of document that can be filed or distributed.
 There is no provision for signature authorizing the transaction.
 There is need to verify that data was received exactly as it was sent.
 The data needs to be protected from intruders,
 The activity needs to be tracked.

EDI for E-commerce

The economic advantage of EDI is widely recognized. But until recently, companies have
been able to improve only discrete processes such as automating the accounts payable
functions or the fund transfer process. Companies are realizing that to truly improve their
productivity they need to automate their external processes as well as their internal processes.

New EDI services for e-commerce are seen as the future bridge that automates external and
internal business processes, enabling companies to improve their productivity on a scale.
They present information management solutions that allow companies to link their trading
community electronically– order entry, purchasing, accounts payable, funds transfer, and
other systems interact with each other throughout the community to link the company with its
suppliers, distributors, customers, banks, and transportation and logistics operations. Another
goal of new EDI services is to reduce the cost of setting up an EDI relationship. Most
successful EDI implementations are either in long-term partnerships or among a limited
number of partners.

30
 Unit 4
Network Security

Introduction
Network security is the process of taking physical and software preventive measures to
protect the underlying networking infrastructure from unauthorized access, misuse,
malfunction, modification, destruction or improper disclosure. This creates a secure platform
for computers, users and programs to perform their permitted critical functions within a
secure environment. Network security involves the authorization of access to data in a
network, which is controlled by the network administrator.

Main threats to the networking system

1. Direct attack
The hacker logs on a computer system and runs application as if he/she is a authentic
user of the system. This type of attack is mainly done by stealing or guessing
passwords.

2. Denial of service
The hacker does something to preview the normal question of a network server.
Common forms of denial or rejection are 'eating up bandwidth' and 'connecting
server'.

3. Loss of privacy
Sensitive and important data are tapped during transfer.

4. Data modification
Hackers try to correct data that may damage the interest of legitimate party, i.e. a
hacker changes a credit transaction amount from 1000 to 10.

5. Masquerade
The attacker pretends to be some legitimate server or company by creating a website
of similar address, thereby to collect information.

6. Information gathering
By using some scanning tools, hacker collects information and cracks them.

Dimension of E-commerce Security

1) Integrity: prevention against unauthorized data modification
2) Non-repudiation: prevention against one party from breaking promise or agreement
3) Authenticity: authentication of data source
4) Confidentiality: protection against unauthorized data disclosure
5) Privacy: provision of data control and disclosure
6) Availability: prevention against data delays or removable

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Data and Message Security
The lack of data and message security on the Internet has become a high- profile problem due
to the increasing number of merchants trying to spur commerce on the global network. For
instance, credit card numbers in their plain text form create a risk when transmitted across the
Internet where the possibility of the number falling into the wrong hands is relatively high.

Would you be willing to type in your credit card number knowing the risk? Even worse,
would you expose your customers to that risk? In short, the lack of business transaction
security is widely acknowledged as a major impediment to widespread e- commerce.

Historically, computer security was provided by the use of account passwords and limited
physical access to a facility to bona fide users. As users began to dial in from their PCs and
terminals at home, these measures were deemed sufficient. With the advent of remote users
on internetworks, commercial transactions, mobile computers, and wireless technologies,
simple password schemes are not sufficient to prevent attacks from sophisticated hackers.

Interestingly, the security problems plaguing network administrators resemble the problems
facing transaction-based electronic commerce. Credit card numbers are similar to passwords
in many ways. A growing threat on today's public (and sometimes even private) networks is
the theft of passwords and other information that passes over them. Today's hacker has an
array of tools to reach and manipulate information from remote sites as well as to engage in
unauthorized eavesdropping. Unsuspecting and amateur users logging into remote hosts are
the most vulnerable.

Transaction security issues can be divided into two types: data and message security. These
are discussed below.

Data Security:
Electronic data security is of paramount importance at a time when people are considering
banking and other financial transactions by PCs. Also, computer industry trends toward
distributed computing, and mobile computers, users face security challenges. One major
threat to data security is unauthorized network monitoring, also called packet sniffing.

Sniffer attacks begin when a computer is compromised and the cracker installs a packet
sniffing program that monitors the network to which the machine is attached. The sniffer
program watches for certain kinds of network traffic, typically for the first part of any Telnet,
FTP, or login sessions— sessions that legitimate users initiate to gain access to another
system. The first part of the session contains the log-in ID, password, and user name of the
person logging into another machine, all the necessary information a sniffer needs to log into
other machines. In the course of several days, the sniffer could gather information on local
users logging into remote machines. So, one insecure system on a network can expose to
intrusion not only other local machines but also any remote systems to which the users
connect.

The fact that someone can extract meaningful Information from network traffic is nothing
new. Network monitoring can rapidly expand the number of systems intruders are able to
access, all with only minimal impact on the systems on which the sniffers are installed and
with no visible impact on the systems being monitored. Users whose accounts and passwords
are collected will not be aware that their sessions are being monitored, and subsequent
intrusions will happen via legitimate accounts on the machines involved.

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Message Security:
Threats to message security fall into three categories:

1. Confidentiality
2. Integrity
3. Authentication

1. Message Confidentiality
Confidentiality is important for uses involving sensitive data such as credit card numbers.
This requirement will be amplified when other kinds of data, such as employee records,
government files, and social security numbers, begin traversing the network. Confidentiality
precludes access to, or release of, such information to unauthorized users.

The environment must protect all message traffic. After successful delivery to their
destination gateways, messages must be removed (expunged) from the public environment.
All that remains is the accounting record of entry and delivery, including message length,
authentication data, but no more. All message archiving must be performed in well-protected
systems.

The vulnerability of data communications and message data to interception is exacerbated

with the use of distributed networks and wireless links. The need for securing the
communications link between computers via encryption is expected to rise.

2. Message and System Integrity-

Business transactions require that their contents remain unmodified during transport. In other
words, information received must have the same content and organization as information
sent. It must be clear that no one has added, deleted, or modified any part of the message.

While confidentiality protects against the passive monitoring of data, mechanisms for
integrity must prevent active attacks involving the modification of data. Error detection codes
or checksums, sequence numbers, and encryption techniques are methods to enhance
information integrity. Encryption techniques such as digital signatures can detect
modifications of a message.

3. Message Sender Authentication/Identification-

For e-commerce, it is important that clients authenticate themselves to servers, that servers
authenticate to clients, that both authenticate to each other. Authentication is a mechanism
whereby the receiver of a transaction or message can be confident of the identity of the
sender and/or the integrity of the message. In other words, authentication verifies the identity
of an entity (a user or a service) using certain encrypted information transferred from the
sender to the receiver.

Authentication in e-commerce basically requires the user to prove his or her identity for each
requested service. The race among various vendors in the e-commerce today is to provide an
authentication method that is easy to use, secure, reliable, and scalable. Third party
authentication services must exist within a distributed network environment where a sender
cannot be trusted to identify itself correctly to a receiver. In short, authentication plays an
important role in the implementation of business transaction security.

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Firewalls and its Types
A firewall is a system designed to prevent unauthorized access to or from a private network.
Firewalls can be implemented in both hardware or software, or a combination of both. All
messages entering of leaving the private network pass through the firewall, which examines
each message and blocks those that do not meet the specified security criteria. Hardware
firewalls can be purchased as a stand-alone product but are also typically found in routers,
and should be considered as an important part of system and network set-up. Software
firewalls are installed on the computer and can customize it; allowing some controls over its
function and protection features. A software firewall will protect the computer from outside
attempts to control or gain access to the computer.

Uses of firewall:
1. To protect and insulate the applications, services and machines of your internal
network from unwanted traffic coming from the public internet.
2. To limit or disable access from hosts of the internal network to services of the public
internet
3. To support network address translation (NAT) which allows your internal network to
use private IP addresses and share a single connection to the public internet

Following are the types of firewalls: -

 Packet Filters
 Application Gateways
 Circuit-Level Gateways
 Stateful Inspection Firewall

Packet Filters
It is a technique where routers have Access Control Lists (ACLs) turned on. It receives
packets and evaluates them according to a set of rules that are usually in the form of access
control list. It is sometimes called screening router. These packets may be forwarded to their
destinations, dropped with a return message to the originator describing what happened. By
default, a router will pass all traffic sent to it, and will do so without any sort of restriction.
Employing ACLs is a method for enforcing your security policy with regard to what sorts of
access you allow the outside world to have to your internal network and vice versa.

There is less overhead in packet filtering than with an application gateway because the
feature of access control is performed at lower OOI layer. It is often faster than application
layer because it is done with routers, which are specialized computer optimized for tasks.

Application Gateways
The first firewalls were application gateways and are sometimes known as proxy gateways.
These are run with special software to act as a proxy server. Clients behind firewall must be
proximitized in order to use the internet services. Traditionally, these have been the most
secure because they do not allow anything to pass by default, but need to have the programs
written and turned on in order to begin passing traffic.

Application layer firewalls work on the application level of the TCP/IP stack (i.e. all browser
traffic or FTP traffic) and may intercept all packets travelling to or from an application. On
inspecting all packets for improper content, firewalls can restrict or prevent outright the
spread of networked computer worms and Trojans.

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Circuit-Level Gateways
Circuit level gateway works at the session layer of OSI model or transport layer of TCP/IP
protocol suite. The TCP handshaking between packets for determining whether a session
requested is legitimate or not is monitored by Circuit level gateway. The information that is
passed to a remote computer through a circuit level gateway will appear as if originated from
the gateway. This means it applies security mechanisms when TCP or UDP connection is
established. Once connection has been made, packets can flow between the hosts without
further checking.

A circuit gateway does not permit an end-to-end TCP connection; rather, the gateway sets up
two TCP connections, one between itself and a TCP user on an inner host; and another itself
and a TCP user on an outside host. Once the two connections are established, the gateway
typically relays TCP segments from one connection to the other without examining the
contents. The security function consists of determining which connections will be allowed.

Stateful Inspection Firewall

A Stateful firewall keeps track of the state of network connections (such as TCP streams or
UDP connection0 and is unable to hold significant attributes of each connection memory.
These attributes are collectively known as the state of connection, and may include such
detail as the IP addresses and ports involved in the connection and the sequence numbers of
the packets traversing the connection. Stateful inspection monitors incoming and outgoing
packets over time, as well as the state of connection and stores the data in dynamic state
tables. This cumulative data is evaluated so that filtering decisions would not only be based
on administrator-defined rules as in packet filters, but also on context that has been built by
previous connections as well as previous packets belonging to the same direction.

Malicious software
Malicious software, commonly known as malware, is any software that brings harm to
computer system. It can be used to disrupt computer operation, gather sensitive information
or gain access to private computer systems. Malware can be in the worm of worms, viruses,
Trojans, etc. which steal protected data, delete documents or add software not approved by a
user. Malware takes partial to full control of our computer to do whatever the malware
creator wants. Some form of attacks includes attachments in e-mail, browsing a malicious
website that installs software after the user clicks ok on a pop-up.

Worms
This type of malware uses network resources for spreading. This class was called
worms because of its peculiar features to creep from computer using network, mail
and other informational channels. The biggest danger of a worm is its capability to
replicate itself in your system, so it could send out hundreds or thousands of copies
itself, creating huge devastating effect. Father Christmas is an example of worm.

Virus
A computer virus is a program that inserts itself into one or more files and then
performs some (possibly null) action. Computer virus works on two phases:
1. The first phase, in which the virus inserts itself into a file, is called insertion
phase.

35
 2. The second phase, in which it performs some action, is called the execution
phase.
Almost all viruses are attached to an executable, which means the virus may exists on
our computer but it is actually cannot infect your computer unless we run or open the
malicious program. It is important to note that a virus cannot be spread without a
human action to keep it going. Because a virus is spread by human action, people
unknowingly continue the spread of a computer virus by sharing infecting files or
sending emails with viruses as attachments in the email. The Brain or Pakistani virus
written for IBM PCs is an example of this category.

Trojan Horse
Trojan horses are the files that claim to be something desirable but, in fact, malicious
code or logic. The Trojan horse at first glance will appear to be useful but will
actually do damage once installed or run by your computer. Receivers of a Trojan
horse are usually tricked into opening them because they appear to be receiving
legitimate software or files from a legitimate source. It creates a backdoor on your
computer that gives malicious users to your system, possibly allowing confidential or
personal information to be compromised. A program named waterfall.scr serves as
the simple example of a Trojan horse.

Hacking
A hacker is someone who seeks and exploits weaknesses in a computer system or computer
network. Hackers must be motivated by a multitude of reasons such as protest, challenges,
enjoyment or to evaluate those weaknesses to assist in removing them. Hacking practice can
either be ethical or unethical. The activity where one breaks into the system but do not violate
its security and credentials is called ethical hacking. The term hacker does not mean criminal
or bad guy. Actually, hackers are the persons with flawless programming skills and hands-on
knowledge on both computer hardware and software.

Following are the types of hackers:

Black hats: Black hat hackers are type of hackers that violate computer security for
personal gain such as stealing credit card numbers or harvesting personal data for sale
to identity thieves, etc. Popular media normally focus on black hats.

White hats: White hat hackers are the opposite of the black hat hackers. They are the
ethical hackers, expert in compromising computer security system who uses their
abilities for good, ethical and legal purposes rather than bad, unethical and criminal
purposes. For example, many white hat hackers are employed to test organizations
computer security system.

Gray hats: Gray hat hackers fall somewhere between a black hat and a white hat. A
gray hat does not work for their own personal gain but they may technically commits
crimes and do arguably unethical things.

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Antivirus
Antivirus are most common name of anti-malware application that is a type of software
program designed to prevent, detect and remediate malware infections on individual
computing devices and IT systems. Antimalware software protects against infection caused
by many types of malware, including viruses, worms, Trojan horses, etc. Antimalware
software can be installed on an individual computing device, gateway server or dedicated
network appliance. Some examples of anti-malware software tools are: Avast Anti-virus,
Avira Anti-virus, AVG Anti-virus, Norton Anti-virus, etc.

Anti-virus software typically uses two different techniques to accomplish this: Examining
files to look for known viruses by means of virus dictionary and to identifying suspicious
behavior from any computer program which might indicate infection. Most commercial
antivirus uses both these approaches with an emphasis on the virus dictionary approach.

1. Virus Dictionary Approach: In the virus dictionary approach, when anti-virus

software examines a file, it refers to a dictionary of known viruses that have been
identified by the author of the anti-virus software. If a piece of code in the file
matches any virus identified in the dictionary, then the anti-virus software can then
either delete the file or attempt to repair the file by removing the viruses itself from
the file. To be successful in medium and long term, the virus dictionary approach
requires periodic online downloads of uploads virus dictionaries.

2. Suspicious Behavior Approach: The suspicious behavior approach does not attempt
to identify known viruses but instead monitors the behavior of all programs. If any
program tries to write data to an executable program, this is flagged as suspicious
behavior and the user is alerted to this and asked what to do. The suspicious behavior
approach therefore provides protection against brand new viruses that do not yet exist
in nay virus dictionaries.

Encryption/Cryptography
Cryptography is the science of providing security for information. It has been used
historically as the means of providing secure communication between individuals,
governments, agencies and military forces.

The method of providing security to online transaction is known as encryption. It is the

standard type of security mechanism through which ecommerce applications are protected
from different threats like hackers, denial of service, packet modification, etc.

Formally, the process of converting the plain text into cipher text is known as encryption and
the process of converting cipher text into the plain text is known as decryption.
Might Unreadable
be text, Plain text Key Cipher text version of
data, plain text
graphics
etc.

37
Types of key
1. Message from this person
Or
2. Message from this session
Or
3. This message

Role of Key in cryptography

 Parameter to an encryption procedure
 Procedures stays the same but produces different results based on different keys

There are two types of encryption or cryptography:-

1) Private key encryption
2) Public key encryption

Public Key Encryption

This encryption is also known as cryptographic method which consists of two types of keys
pairs, i.e. public key and private key. These keys are used to encrypt and decrypt the
message.

Public Key

Plain Text Cipher Text

Private Key

In this process, public key is used to encrypt the message whereas private key is used to
decrypt the message. The public key encryption is made available to everyone but the private
key is kept separate by the owner. It is also known as asymmetric cryptography. It solves
only the secrecy problem, something else is needed for authentication, integrity and non-
repudiation.

Private Key Encryption

This encryption is also known as secret key cryptographic method which uses a single or
shared key for both encryption and decryption.

Same

Plain Text Cipher Text Plain Text

Key Key
encrypt decrypt

38
In this method, the sender uses a separate key to encrypt the message and the receiver uses
the same key to decrypt the message, i.e. a single key is used for both functions. It is also
known as symmetric cryptography or conventional key system.

Difference between public and private key cryptography

S. No. Public key cryptography Public key cryptography
1. In this cryptography, there is two pair of In this cryptography, there is single or
keys, i.e. private and public keys. shared key.
2. Key size is longer. Key size is shorter.
3. Security is strongest or secure. Security is moderate.
4. Bit processing time is slow. Bit processing time is fast.
5. Difficult to implement. Easier to implement.
6. It is also known as asymmetric It is also known as symmetric encryption.
encryption.
7. It can be used in digital signatures and It cannot be used for other systems than
authentication system. retrieving confidentiality.
8. It is useful when communication parties It is useful in systems where it is possible
are at distant location and is difficult to to share secret key by meeting.
share secret key.
9. Number of users involved is large. Number of users is few.
10. For example: RSA encryption For example: DEG encryption

Digital Signature
A digital signature is a mathematical scheme for demonstrating the authenticity of a digital
message or document. A valid digital signature gives a recipient reason to believe that the
message was created by known sender, that the sender cannot deny having sent the message,
and that the message was not altered in transition. Digital signatures are commonly used for
software distribution, financial transactions and in other cases where it is important to detect
forgery or tempering.

Digital signature is a cryptographic method to verify the origin and content of the message. It
is created by public key encryption and has two parts, i.e. signature generation and signature
verification. Digital signature schemes normally, one for signing which involves the user's
secret or private key and one for verifying signatures which involves the user's public key. A
signature provides authentication of a message. Message may be anything, from electronic
mail to a contract. A digital signature schemes typically consists of these algorithms:

1. A key generation algorithm: This algorithm randomly produces pair of public

key and private key, where private key is used to generate signatures and public
key is used to verify signature.

2. A signing algorithm: This algorithm takes a message and private key as input and
produces a signature that can be attached with documents.

3. A signature verifying algorithm: This algorithm takes the message and public
key as input and verifies the validity of attached signature. It either accepts or
rejects the signature.

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Digital Certificate
Digital certificate is authorized certificate which is signed digitally to prove the identity or
right to access the information on the internet. Digital certificates are the electronic counter
parts to driver licenses, passports and membership cards. It can also be issued to a computer
or a network device identifying while communicating. A digital certificate is issued by
Certification Authority (CA) and it normally contains mainly the following information:
 Public key of the certificate owner
 Name of the owner
 Validity "from" and "to" dates
 Name of the issuing authority
 Serial number of the certificate
 Digital signature of the issuing authority
 Digital signature algorithm
 Custom information

Certificate Authority
Certificate authority (CA) is an organization that is trusted to sign digital signatures. CA
verifies identity and legitimacy of company or individual that requested a certificate and if
the verification is successful, CA issues signed certificate. CA is responsible for managing all
aspects of digital certificate issuance, publication, revocation, renewal, etc. In context of
Nepal, Certificate authority is implemented under the supervision of ETA (Electronic
Transaction Act, 2008).

Third Party Authentication

Authentication means verifying the identity of someone (user, device, or entity) who wants to
access data, resources or applications. Validating that identity establishes a trust relationship
for further interaction. A principal is the party whose identity is verified. The verifier is the
party who demands assurance of the principle's identity. Password based systems are widely
used technique to achieve authentication.

In the third party authentication system, the password or encryption key itself never travels
over the network. Rather than authentication server maintains a file of obscure facts about
each registered user. At the log-on time, the server demands the entry of randomly chosen
facts. The server uses it to compute a token. The server then transmits an encrypted message
containing the token, which can be decoded with users key. The message contains an
authentication token that allow users to log on to the network services. Kerberos is a popular
third party authentication protocol.

Secure Socket Layer (SSL)

Secure socket layer (SSL) is a standard security technology for establishing an encrypted
links between a server and a client-typically a web server (website) and a browser, or a mail
server and a mail client. SSL allows sensitive information such as credit card numbers, social
security numbers, and login credentials to be transmitted securely.

40
SSL are protocols that are used to provide secure web communication on the internet or
intranets. Transport Layer Security (TSL) is the standard version of SSL. Following are the
advantages of SSL:

 Mutual authentication: It verifies the identities of both the server and client through
exchange validation of their digital certificate.

 Communication privacy: It encrypts information exchanged between secure servers

and secure clients using a secure channel.

 Communication integrity: It verifies the integrity of the contents of messages

exchanged between client and server, which ensure that messages have not been
altered on route.

Virtual Private Network (VPN)

Virtual private network is a private network that uses internet as the main backbone network.
VPN works by the following parts of network:
i. Firewall
ii. Datagram
iii. Connection
iv. Protocols

The use of certificates for authentication of VPN connections is the strongest form of
authentication available with the Windows Server 2003family. VPN connects remote sites or
users together. The VPN uses virtual connections routed through the internet from the
business's private network to the remote site or employee. By using a VPN, businesses ensure
security-anyone intercepting the encrypted data cannot read it. VPN essentially carves out a
private passage way through the internet. VPN will allow remote offices, company road
warriors and even business partners or customers to use the internet, rather than pricey
private lines to reach company networks. So the companies can save lots of money.

Secure Electronic Transaction (SET)

Secure electronic transaction (SET) is an open encryption and security specification designed
to protect credit card transaction on internet. This was emerged from a call for security
standards by MasterCard and Visa. It is not itself a payment system but the set of security
protocols and formats that enable users to employ the existing credit card payment
infrastructure on an open network. SET protocols provide three services: -
 Provides a secure communication channel among all parties involved in a transaction
 Provides trust by use of digital certificates
 Ensure privacy because the information is only available to parties in a transaction
when and where necessary

Key features of SET

To meet the business requirements, SET incorporates the following features:
1. Confidentiality of information
Cardholder account and payment information is secured as it travels across the
networks. An interesting and important feature of SET is that it prevents the merchant

41
 from learning the cardholder's credit card number. This is only provided to the issuing
bank. Encryption is used to provide confidentiality.

2. Integrity of data
Payment information sent from cardholders to merchants includes order information,
personal data and payment instructions. SET guarantees that these message contents
are not altered in transit. Digital signatures provide message integrity.

3. Cardholder account authentication

SET enables merchants to verify that a cardholder is legitimate user to a valid card
account number. Digital certificates are used for this purpose.

4. Merchant authentication
SET enables cardholders to verify that a merchant has a relationship with a financial
institution allowing it to accept payment cards. Digital certificates are used for this
purpose.

Reason for data and message security

42
 Unit 5
Electronic Payment System

Introduction (Requirement Risk)

Electronic payment system is the alternative to the coin and paper based cash payment system
to easy the user to make payment for their purchased goods or services over the network or
internet and in absence of the physical presence. Electronic payment systems are becoming
central to on-line business process innovation as companies look for ways to serve customers
faster and at lower cost. Emerging innovations in the payment for goods and services in
electronic commerce promise to offer a wide range of new business opportunities.

Present payment systems are too far from ideal payment system because of the higher
transaction cost, more fraudulent activities and multiple parties involved in the payment
processing simultaneously lacks user's acceptance, proper application plans and incompatible
standards/specification. Then good payment system should satisfy the user's acceptance and
merchants in mass scale. Present electronic payment system can be divided in two groups:
electronic cash and debit/credit system or token based and account based system. Tokens and
electronic cash are like physical cash which present the value and credit/debit based system
does not carry value but a message to transfer.

Characteristics of Electronic Payment System

Following are some characteristics of electronic payment system:

1) Applicability: Applicability of payment system is the extent with which it is accepted

as payment. Users should be able to pay for goods and services easily by using the
system.

2) Easy to use: The system should not be complex. A user from the remote area should
be able to use the system.

3) Security: It means e-payment systems should be able to resist attacks. Creation,

modification and over spending of the value (money) should be protected. Integrity of
the value as well as authorization for value should be spent by the concerned user
only.

4) Reliability: It means system should run smoothly in all scenarios. It should be free
from failure.

5) Trust: It means the degree of confidence that the money and the personal information
are safe.

6) Scalability: System should be scalable by the timely changes in the underlying

infrastructure.

7) Convertibility: It means fund represented in one mechanism should be easily

convertible to funds in another mechanism.

43
 8) Efficiency: It means cost of the handling micro-payment should be reasonable.

9) Authorization Type: It is considered good if a payment system is useful in both

online and offline environment.

10) Traceability: System should be able to link spending with the users even if the
identity of the user is anonymous.

Point of Sale (POS)

Point of sale (POS) is the phrase used to refer to the point or location-where a sales
transaction takes place, such as a checkout line or retail counter. A point of sale system is the
term used for the combination of computer hardware and software that actually manages the
sales transaction. It helps to save time and duplication of work, and increase efficiency and
accuracy in inventory, reporting, ordering and providing excellent customer service. The
main industries where POS system being used can be found are retail, service and hospitality
(restaurants, hotels, hair and beauty).

Types of Electronic Payment Systems

The principal classification of EPSs is based on the form of money representation and the
principle of money transfer. Existing payment systems can be divided into two groups: -

 Token-based payment system

 Electronic cash (e.g., DigiCash)
 Electronic checks (e.g.; NetCheque)
 Smart cards or debit cards (e.g., Mondex Electronic Currency Card)

 Credit card-based payment system

 Encrypted credit cards (e.g., World Wide Web form-based encryption)
Third-party
 Authorization numbers (e.g., First Virtual)

Token based payment system

Electronic token are designed as electronic analog of various forms of payments backed by a
bank and financial institutions to handle micro payments. Simply, stated, electronic tokens
are equivalent to cash. Electronic token vary in the protection of privacy and confidentiality
of the transactions.

Benefits of Digital Token Based Payment System

To Buyer
 Convenience of global acceptance, a wide range of payment options and enhanced
financial management tools
 Enhance security and reduce liability for stolen or misused cards
 Consumer protection through an established system of dispute resolution
 Convenient and immediate access to funds on deposit via debit cards

44
To Seller
 Incremental purchase power on that part of the consumer
 Better management of cash flow, inventory and financial planning due to swift bank
payment
 Cost and risk saving by eliminating the need the need to run an in house credit
facility
 Freedom from more cost labor, materials and accounting services that are required in
paper based processing

A. E-Cash (Digital Cash)

Electronic cash (e-cash) is a new concept in on-line payment systems because it combines
computerized convenience with security and privacy that improve on paper cash. Its
versatility opens up a host of new markets and applications. E-cash is an electronic or digital
form of value storage and value exchange that has limited convertibility into other forms of
value. E-cash presents some interesting characteristics that should make it an attractive
alternative for payment over the Internet. It requires intermediaries to convert. At the same
time e-cash presents some characteristics like storability, monetary value, interoperability,
irretrievability and security. E-cash is based on cryptographic systems called digital
signature. It is also called digital cash or DigiCash. The system is based on digital tokens
called digital coins.

Properties of E-cash
 E-cash must have monetary value
 E-cash must be interoperable
 E-cash must be storable and retrieval
 E-cash should not be easy to copy or temper while being exchanged

Advantages:
 Lower transaction cost
 More efficient than cash, checks or credit cards for both consumer and merchant
 E-cash does not require any special authorization, so anyone may use it for almost any
kind of transaction, large or small
 The distance which e-cash must travel in a transfer does not affect the transmission
costs or time as it does with traditional payment methods

Disadvantages:
 Potential collection problems if an internet tax is ever enacted
 Since e-cash does not leave any trial, it could be used in money laundering operations
or a medium of exchange in other illegal activities
 E-cash is susceptible to forgery and double spending abuses

B. Electronic Cheque/Check (E-Cheque/Check)

E-cheque is simply an electronic version of a paper check. An e-check uses the same legal
and business protocols associated with traditional paper checks. E-checks fulfill the needs of
many business organizations, which are previously exchanging paper based cheque based on
vendors, customers and government. Working process of e-check is as same as that of the
traditional cheque payment system. An accountholder will issue the e-check document which

45
contains the information such as name of the accountholder payee name, name of financial
institution; payer account number and amount of payment on the cheque. Most of the
information is encoded form. Like a paper checks, e-checks also bear the digital equivalent of
signature which is also called digital signature.

E-check is a new payment instrument that combines high security, speed, convenience and
processing efficiencies for online transactions. It shares the speed and processing efficiencies
of all electronic payments. When you convert a traditional check into electronic payment, you
can process it through the Automated Clearing House (ACH) Network to save time and
money because e-checks have more security features than a paper check; they better protect
your business and customer.

Advantages:
 Unlike e-check process is simple and similar to traditional check
 Use of digital signature make it secure
 Flourish new business of third-party accounting server
 Financial risk is assumed by the accounting server

Disadvantages:
 Relatively high fixed costs
 It cannot protect anonymity of customers
 It is suitable for the retail transactions by consumers, although useful for government
and B2B

C. Smart Cards
A smart card is credit card sized plastics cards with the memory chips and in some access
with microprocessors embedded in them so as to serve as storage devices for much greater
information than credit card with inbuilt transaction processing capability. It is more durable
but is less expensive. The smart technology is widely used in countries such as Japan,
Germany, Singapore and France to pay for public phone calls, transportation and shipper
loyalty programs. Smart cards can be of two types:

 Relationship-based smart card: It is an enhancement of existing card services

and the new services that a financial institution delivers to its customers via
chip based on card and other devices. These new services may include access
to multiple financial accounts, value added marketing programs or other
information, card holder may want to store on their card such as name, birth
date, personal shopping preferences, etc. This information will enable
merchants to accurately track consumer behavior and develop promotional
programs designed to increase shopper loyalty.

 Electronic purses: It is wallet-sized smart card embedded with programmable

microchip that stores sum of money for people to use instead of cash for
everything from buying food, to making photocopies, to subway fares.
Electronic purse, which replace money, are also known as debit cards or
electronic money.

46
Consumers can load money into an account on the card by using automated teller machine
(ATM) or by placing the card in a slot in a specially equipped computer. Two widely used
smart cards based electronic payment systems are Mondex and VisaCash.

Advantages:

 The first function main advantage of smart cards is their flexibility. Smart cards have
multiple functions which simultaneously can be a ID, a credit card, a stored-valued
cash cards, etc.
 The second main advantage is security. They are encryption devices, so that user can
encrypt and decrypt information without relying on unknown.
 It is portable and has increased data storage capacity.

Disadvantages:
 The plastic card in which the chip is embedded is fairly flexible. The larger the chip,
the higher the probability that normal use could damage it.
 If the account holder's computer hosts malware, the smart card security model may be
broken.
 Smart cards have also been the target security attacks that may exploit weaknesses in
the card's software or hardware.
 Lack of standards for functionality and security.

Credit Card Based Online Payment System

A credit card is termed as payments cards, representing the majority of online payments
because people are familiar with them, and merchants avoid expense of a paper invoicing
system. This card payment is simple anywhere and in any currency, thus it matches the global
reach of the internet. The transaction costs are hidden for users. It is basically met by sellers
and passed on to all customers, not just credit card users. The credit card issuing company
shares the transaction risk; helping overcome consumer's fear and reluctance to buy goods
they have not actually seen, from sellers they do not know. To avoid the complexity with
digital cash and e-checks, consumers and vendors are looking at credit card payment on the
internet as one possible time tested alternative. There are three types of credit cards payment
online:

 Payment using plain credit card detail: The easiest method of payment is the exchange
of unencrypted credit cards over a public network such as telephone line or internet.

 Payment using encrypted credit card: It would make sense to encrypt your credit card
details before sending them out, but even there are certain factors to consider.

 Payment using third-party verification: One solution to security and verification

problems is the introduction of a third-party; a company that collects and approves
payments from one client to another.

A credit card is an account that lends money to the consumer, meaning consumers are
allowed to purchase goods or services on credit. Both consumers and merchants must register
with the bank. The participants involved in credit card payment includes-

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  Customer/Cardholder: The consumer doing the purchase, using credit card that has
been issued by issuer.
 Issuer: The financial institution (i.e. banks) that issues the card to the cardholder. The
issuer guarantees payment for authorized transaction.
 Merchant: The merchant offers the goods and services, has a financial relationship
with the acquirer.
 Acquirer: The financial institution of the merchant. The acquirer processes credit card
authorizations and payments.

Advantages:
 Convenience: Credit cards can save your time and trouble--no searching for an ATM
or keeping cash on-hand.

 Record keeping: Credit card statements can help you track your expenses. Some
cards even provide year-end summaries that really help out at tax time.

 Low-cost loans: You can use revolving credit to save today (e.g., at a one-day sale),
when available cash is a week away.

 Instant cash: Cash advances are quick and convenient, putting cash in your hand
when necessary.

 Build positive credit: Controlled use of a credit card can help you establish credit for
the first time or rebuild credit if you've had problems in the past--as long as you stay
within your means and pay your bills on time.

 Purchase protection: Most credit card companies will handle disputes for you. If a
merchant won't take back a defective product, check with your credit card company.

Disadvantages:
 Overuse: Revolving credit makes it easy to spend beyond your means.

 Paperwork: You'll need to save your receipts and check them against your statement
each month. This is a good way to ensure that you haven't been overcharged.

 High-cost fees: Your purchase will suddenly become much more expensive if you
carry a balance or miss a payment.

 Unexpected fees: Typically, you'll pay between 2 and 4 percent just to get the cash
you need it advance; also cash advances usually carry high interest rates.

 Deepening your debt: Consumers are using credit more than ever before. If you
charge freely, you may quickly find yourself in over your head--as your balance
increases, so do your monthly minimum payments.

 Deepening your debt: Consumers are using credit more than ever before. If you
charge freely, you may quickly find yourself in over your head--as your balance
increases, so do your monthly minimum payments.

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How it works?
Credit card payment processing for the e-commerce electronic payment system takes place in
two phases: authorization, i.e. getting approval for the transaction that is stored with the
order and settlement, i.e. processing the sale which transfers the funds from the issuing bank
to the merchant's account.

Differences between Debit card and Credit card

S.No. Credit Card Debit Card

1. Credit cards are lines of credit. When
you use a credit card, the issuer puts
money toward the transaction. This is
a loan you are expected to pay back
in full (usually within 30 days),
unless you want to be charged
interest.
2. Not required to be connected to a
checking account.
Any time you use a debit card to buy
something, money is deducted from your
account. With a debit card, you can really
only spend the money you have available to
you.
Required to be connected to a checking or
saving account.

3. Somewhat difficult, depending on Easy, with basically no barrier to receiving a

one's credit score and other details. debit card.
4. The credit limit set by the credit However much is in the bank account
issuer. Limits increase or stay the connected to the card.
same over time as a borrower's
creditworthiness changes.
5. If a credit card bill is not paid in full, No interest is charged because no money is
interest is charged on outstanding borrowed.
balance. The interest rate is usually
very high.
6. Overdue fee is low. Some credit card High "overdraft" fees. Possible to overdraw
companies allow overdrawing amount over the account limit.
amount over the maximum credit line
with a fee.

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Risks Associated with Electronic Payment System:
Electronic payment is a popular method of making payments globally. It involves sending
money from bank to bank instantly – regardless of the distance involved. Such payment
systems use Internet technology, where information is relayed through networked computers
from one bank to another. Electronic payment systems are popular because of their
convenience. However, they also may pose serious risks to consumers and financial
institutions.

1. Tax Evasion
Businesses are required by law to provide records of their financial transactions to the
government so that their tax compliance can be verified. Electronic payment however
can frustrate the efforts of tax collection. Unless a business discloses the various
electronic payments it has made or received over the tax period, the government may
not know the truth, which could cause tax evasion.

2. Fraud
Electronic payment systems are prone to fraud. The payment is done usually after
keying in a password and sometimes answering security questions. There is no way of
verifying the true identity of the maker of the transaction. As long as the password
and security questions are correct, the system assumes you are the right person. If this
information falls into the possession of fraudsters, then they can defraud you of your
money.

3. Impulse Buying
Electronic payment systems encourage impulse buying, especially online. You are
likely to make a decision to purchase an item you find on sale online, even though
you had not planned to buy it, just because it will cost you just a click to buy it
through your credit card. Impulse buying leads to disorganized budgets and is one of
the disadvantages of electronic payment systems.

4. Payment Conflict
Payment conflicts often arise because the payments are not done manually but by an
automated system that can cause errors. This is especially common when payment is
done on a regular basis to many recipients. If you do not check your pay slip at the
end of every pay period, for instance, then you might end up with a conflict due to
these technical glitches, or anomalies.

Digital Wallet
A digital wallet refers to an electronic device that allows an individual to make electronic
transactions. This can include purchasing items on-line with a computer or using a
Smartphone to purchase something at a store. An individual's bank account can also be linked
to the digital wallet. They might also have their driver’s license, health card, loyalty card(s)
and other ID documents stored on the phone. The credentials can be passed to a merchant’s
terminal wirelessly via near field communication (NFC). Increasingly, digital wallets are
being made not just for basic financial transactions but to also authenticate the holder's
credentials. For example, a digital wallet could verify the age of the buyer to the store while
purchasing alcohol. The system has already gained popularity in Japan, where digital wallets
are known as "wallet mobiles". Examples of digital wallet are Google Wallet, Apple's

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Passbook, Lemon Wallet, Square Wallet, Isis, PayPal, Bump Pay, Zipmark, eSewa,
Khalti.com, etc.

eSewa
eSwa has been popular web payment system in Nepal and its implication has also been
preferred in mobile platform. eSewa is the digital portal system both in internet and mobile
wallet along with latest services like Western Union having different payment facilities Visa
and debit cards.

Pay with eSewa mobile wallet app

After we have enough funds in our eSewa wallet account then it can be used for buying
mobile recharge cards, top up balance in mobile and, payments for online shopping or offline
stores via website or mobile wallet. Balance can be charge via SMS/mobile banking, internet
e-banking and counter deposit through member banks or fund transfer from nearest eSewa
zone or our friends.

Features:
1) No internet connection required (based on SMS system)
2) No charges in SMS with eSewa function
3) Top up NI with 2% cash back (Rs. 10 to 5000), top up Ncell (Rs.1 to 5000+)
4) Pick up western union
5) Pay NEA bill, phone and utility bills, credit cards and other web payments
6) Facilitates wallet-to-wallet, wallet-to-bank and wallet-to-remittance
7) Instant balance enquiry and notification

EBanking/Internet Banking
The term internet banking can be defined as net banking or ebanking. Net banking is a system
of banking in which customer can view their account details, pay bills and transfer money by
means of internet.

Emerging stage of eBanking in Nepal

Banks are facing with higher operating cost in comparison to reduced bank charges and
interest earned in recent years. To control operating cost, they have increasingly turned
towards automation and electronic networks to replace labor based production systems
especially for taking deposits, dispersing payments and making credit available.

The most prominent example includes ATMs. ATMs facility gives customers direct access to
their deposit account. However, a substantial proportion of bank customers will prefer
personalized services and the opportunity to consult personally with their bankers about a
broad range of financial matters. Other important example is POS (Point of Scale) terminals
in stores and shopping centers that replaced paper based means of paying of goods and
services, and computer networks that rapidly process millions of transaction among branches.

Ebanking is a short form of electronic banking. It is an umbrella term for the process by
which a customer may perform banking transactions electronically without visiting the
physical premises of the financial institution. According to this definition, it is not suppose to
know that the Nepalese financial sector is using ebanking. Ebanking is not a new concept in
Nepal. It is the aspect of modern banking. Nepalese banking are providing internet banking
with different features to its customers.

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 Unit 6
Internet (Online) Marketing Basics

Introduction
Internet marketing, or online marketing, refers to advertising and marketing efforts that use the
Web and email to drive direct sales via electronic commerce, in addition to sales leads from Web
sites or emails. Internet marketing and online advertising efforts are typically used in conjunction
with traditional types of advertising like radio, television, newspapers and magazines. Online
marketing is the exchange of products and services between the buyers and sellers on the
internet. It is also known as e-marketing or internet marketing or online advertising.

Marketing efforts done solely over the Internet. This type of marketing uses various online
advertisements to drive traffic to an advertiser’s website. Banner advertisement pay per click
(PPC), and targeted email lists are often methods used in Internet marketing to bring the most
value to the advertiser. Internet marketing is a growing business mainly because more and
more people use the internet every day. Popular search engines such as Google and Yahoo
have been able to capitalize on this new wave of advertising.

Online advertising is a form of marketing and advertising which uses the Internet to deliver
promotional marketing messages to consumers. It includes email marketing, search engine
marketing (SEM), social media marketing, many types of display advertising (including web
banner advertising), and mobile advertising.

Advantages of Internet Marketing

1) Convenience
2) Global research
3) Multiple customers
4) Less risky process
5) Credibility

Disadvantages of Internet Marketing

1) Technology development/technical limitation
2) Incompatible internet and communication standards
3) Difficult to change customer's behavior in terms of purchasing products
4) More access competition over the markets

Process of e-Marketing
Step 1 Create an internal marketing plan
Step 2 Create a valuable website and maintain it for online visitors
Step 3 Put content of marketing activities in website portals
Step 4 Promote website through PPC methods and other advertising forms
Step 5 Learn feedbacks from customer through SED
Step 6 Maintain qualities of sites and rebuild

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Difference between Internet Marketing (Online) and Offline Marketing
S.No. Online (Internet) Marketing
1. The way of doing marketing by using
any kind of digital technologies is
known as Online marketing.
2. Online marketing provides enhanced
communication with customer,
unlimited competition of eyeballs, ads in
real time on desktops of target group.
3. It takes less time as the business can
post or publish the message in real time.
4. The reach to the offline marketing tools
is unbounded as they use the internet
and the internet is a global network so
research is high.
5. Return on investment is very fast in
internet marketing.
6. It requires fewer workforces.
7. It tools are websites, blogs, social
media, email, etc.
8. It attracts customer through websites.
9. It is less risky.
10. There is interactive and virtual
communication between merchant and
customers.
11. It is more convenient.
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Offline Marketing
The way of doing by using other methods
except online marketing is known as
offline marketing.
Offline marketing provides you
maximum conversion, and provides
multiple ways of marketing.
It takes more time to launch an ad or
campaign.
The reach of the offline marketing tools is
limited to the geographical coverage of
the tools.
Return on investment is very slow in
offline market.
It requires large workforce.
Its tools are newspapers, TV radio,
brochure, flyers, etc.
It attracts customers through campaigns.
It is risky.
There is face to face communication
between merchant and customers.
It is less convenient.
Tools for Online Marketing
Apparently, the web can be used as a powerful internet marketing tool in a number of
different ways to promote online businesses and reach target audience across the globe. There
are several types of internet marketing strategies used by online marketers and many of them
are simple and effective. Following are the different types of internet marketing techniques:

1. Search Engine Marketing [SEM]

SEM is a form of internet marketing that involves the promotion of websites by
increasing their visibility in search engine results pages (SERPs) generally it may be
paid advertising or unpaid advertising. The concept of SEM is that when a consumer
or business person searches the web through either text box or by clicking thorough a
directory hierarchy, he or she is in hunt more. This psychological state is unique
because it signals to the search engine that the person is looking for information, often
of a direct or interact commercial nature. Some examples of search engines are
Google, Yahoo, Bing etc.

2. Social Media Marketing [SMM]

It is a form of internet marketing that implements various social media networks in
order to achieve marketing communication and branding goals. It primarily covers
activities involving social sharing of content, videos and images for marketing
purposes, as well as paid social media advertising. For example: - Facebook, Twitter,
Pinterest, LinkedIn, Location-Based Social Media Tools, YouTube. Social Media
Marketing can help with a number of goals, such as: -
1. Increasing Website Traffic
2. Building Conversion
3. Raising Brand Awareness
4. Creating a brand identity and positive association
5. Improving communication and interaction with key audiences

3. E-Mail Marketing
It is one of the basic marketing tools for online marketing. In E-mail marketing
company send email about their product, its benefits etc. to individual. But this is very
daunting task. Some of E-Mail Marketing Options are: -

a. Mail Chimp: - It is an easy to use tool who wants to focus on business and
ecommerce.

b. My Emma: - Its main specialization is making visual designs for your

email newsletters which are more preferable for marketers who like
visualization rather than just text in their email newsletter.

c. Constant Contact: - It provides free service for certain time.

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Issues with Online Marketing
Different challenges may occur in internet marketing includes info-overload, search engines
only find 40 percent of web, scarcity of attention, etc. Following are some issues of internet
marketing:

1. Marketing Strategies on the web: Brand the website like any other media, co-brand
other products and services, changing rules, content is king, dynamic sites new market
with lower advertising schemes.

2. Web Design: It gives users content, limit info on page, be consistent, break up
content into little pieces, small graphics, use Facebook and online surveys.

3. Attracting Visitors to your sites: Special promotions, cool content people wish to
see or read, free information, personalize, support online and offline reading, cross
marketing and cross selling.

4. Virtual Societies: Syndicate content or technologies to other media or sites, appear

on a portal, and affiliate marketing.

5. Localization: National, religion norms and culture because we use internet globally,
we do not live in a global society; format of data, currency, localize each web site?

6. Promoting your E-business: Announce the site, register with directories, be ready
before launch, have consistent strategy.

7. Banner and Campaigning: Banner ads are small billboards; Banner exchange sites
allow free exposure; Banner selling exchanges; Effectiveness is declining;
Technology allows overriding of banners; Pop up also new approach.

8. Online Measurement: Three tracking methods: counting numbers of user activity,

auditing where trusted third party measures effectiveness, and rating by customers;
how do you count one user? (Spiders, copies of web pages, proxy server); Log file
analyzer; Online rating agencies; Third party auditing.

9. One to One Marketing: Differentiation via technology (identify your customer via
cookies or login, use interactive chats, email, meet needs of the customer); Develop
customer relationships (call handling, sales tracking, transaction support, more
personalized web experiences, all centers); CRM providers: allows you to collect data
or customers and visitors; Advanced personalization technologies zip code analysis,
collaborative filtering, learning agents like Amazon.

10. Direct Marketing: Don't misuse the internet; don't sell lists; Privacy is important;
Use one to one marketing to gain information; Mailing lists and newsletters.

11. Internets Access: Need to choose a domain name; Easy remember; Choose reliable,
high performing, reasonably priced ISP with good tech support; Evaluate connection
speed; Keep low costs; Register domain name, register.com or domain-it.com.

55
Three Key Legal Issues Online Markets need to know are
a. Privacy and Data Collection: You require notifying people before you collect their
personal information. It requires that you need to disclose:
 The kind of information your website or online marketing tactics collect
 How the information may be shared
 The process your customers can follow up to review and change the
information you have about them
 Your policy's effective data and a description of any changes since then Data
to date
 How to make information secure?
 Set up a privacy policy on your website
 Require your customers or website users to agree to it when you collect
information from them
 Once you have collected the data, keep it with a reputable cloud storage
provider
 Protect yourself from library in the case of data loss

b. Intellectual Property Issues: The next legal issue to consider as a marketer is

intellectual property. First, you want to ensure your own intellectual property, such as
trademarks and copyright. Second, you want to ensure that you don't infringe on the
intellectual property of others. If you are sending out marketing mails or contacting
people with flyers or advertisements, the first thing you will need to protect is your
brand or logo. Registering a trademark gives you the exclusive right to use a specific
word, name, design or logo in connection with specific goods and services. It is valid
for certain time and is remarkable if certain requirements are met.

c. Advertising: It requires that advertising and marketing messages must not mislead
consumers or unfairly affect consumers' behavior or decisions about the product or
service. Unfair or deceptive advertising is prohibited, which means that any marketing
must tell the truth and not leave out any relevant information that a consumer would
be interested in. You need to remember:
 Don't use false or misleading header information
 Don't use deceptive subject lines
 Identify the messages as an ad
 Tell recipients where you are located
 Tell recipients how to option out of receiving future email from you
 Monitor what others are doing on your behalf

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 Unit 7
E-environment

Introduction
E-environment can be defined as use of Information Communication Technology for the
better use of resources. This includes the implementation of ICT based systems for access to
and dissemination of environmental data and information. E-Environment is classified on two
types: -

1. Micro Environment: Environment which has a direct contact with business and can
affect day to day activities of business is known as Micro Environment. Micro
Environment is also known as Internal Environment or Task Environment. Internal
Environments affects business functions at short term. Elements of Micro
Environment are: Suppliers, Customers, Marketing Intermediaries etc.

2. Macro Environment: The general environment within the economy that influences
the working, performance, decision making and strategy of all business groups at the
same time is known as Macro Environment. It consists of all those outside forces that
are not under control of firm but have powerful impact on the firm’s functioning. It is
also known as PESTLE Analysis.

Key Differences between Micro and Macro Environment

Following are the major differences between micro and macro environment:

1. Micro Environment has an immediate contact with the firm. Macro Environment is
not specific for particular firm but it has an ability to influence to hamper the business
groups.

2. Micro Environment is known as Internal Environment. External Environment is

known as External Environment.

3. Micro Environment affects particular business only, but Macro Business affect all the
business entities.

4. Micro Environment is controllable whereas, Macro Environment is not controllable.

5. Study of Micro Environment is known as COSMIC Analysis whereas, PESTLE

Analysis is known as study of Macro Environment.

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SLEPT Analysis
SLEPT analysis is a framework of an organization's external environmental influence on it. It
considers five factors affecting the macro environment- Social, Legal, Economic, Political
and Technological. The outcome of SLEPT analysis is overall picture of the macro
environment to identify threats and opportunities that can be used as SWOT analysis. SLEPT
helps to identify and hence take advantage by maximizing opportunities and minimizing
threats. It gives understanding of the broad and long term trends and makes the firm in a
better position for strategic decision making. Following are the SLEPT factors:

Social Factors
This must be understood as parts of the move to the information society include buyer
behavior characteristics such as access to the internet and perceptions about it as
communications tool. Following factors are important in governing adoption of any e-
commerce service:

1. Cost of Access
Value Proposition
2. Ease of Use
3. Security
4. Fear of the Unknown

Legal Factors
It is rules and regulation which controls and safe guards consumer privacy and security of
personal cookies and the use of direct e-mail. It should be considered by e-commerce
managers include: accessibility, domain name, registration, and copyright and data protection
legislation.

Economic and Competitive Factors

E-economy is the dynamic system of interactions between a nation’s citizen, the businesses
and government that capitalize upon technology to achieve social or economic good.

Political Factors
It includes government policies and intervention in the economy such as corruption level,
government stability, trade control, competition regulation, involvement in Trade Unions.

Technological Factor
It includes technological aspect such as research and development activity, technology
incentives, rate of technological change, infrastructure level, access to technology etc. the
great challenge of managing e-commerce is the need to be able to assess which new
technological can be applied to give competitive advantage. Behavior of manager to take
decision regarding can adoption technology can be summarized as: -

1. Cautious, ‘Wait and See’ Approach

2. Risk –Taking, Early Adopter Approach
3. Intermediate Approach

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Approaches to Identifying Emerging Technology
The term emerging technologies refers to those techniques, artifacts or application areas that
are already marked but are not yet fully developed. Four approaches which apply toe-
business technologies for manufacturing and supply chain are:

a. Technology Networking
This involves individuals monitoring trends through their personal network and
technology scouting and then sharing them through an infrastructure and process that
supports information sharing. They facilitate sharing between inside and outside
experts on specific technologies through extranet and face-to-face events.

b. Crowdsourcing
Crowdsourcing facilitates access to a marketplace of ideas from customers, partners
or inventors for organizations looking to solve specific problems.

c. Technology Hunting
This is structured review of new technology through reviewing the capabilities of
start-up companies.

d. Technology Mining
A traditional literature review of technologies describe in published documents.

Technological Issues
Need to be able to access new innovation

Rate of Change: Which new technologies should be adopted?

 Monitoring for new techniques

 Evaluation are we early adopter
 Re-skilling and training
 Are our system secure?

59