Babu Ram Dawadi

E-Business The Internet is a powerful channel that presents new opportunities for an organization to: Touch customers Enrich products and services with information Reduce costs

E-Business Business Model: set of planned activities designed to result a profit in a market place. Business plan: document that describes a firms business model How do e-commerce and e-business differ? E-commerce – the buying and selling of goods and services over the Internet E-business – the conducting of business on the Internet including, not only buying and selling, but also serving customers and collaborating with business partners E-commerce business model: aims to use and leverage the unique qualities of internet and web

E-Business Industries Using E-Business

E-Business Models E-business model – an approach to conducting electronic business on the Internet

E-Business Models

Business-to-Business (B2B) Electronic marketplace (e- marketplace) – interactive business communities providing a central market where multiple buyers and sellers can engage in e-business activities

Business-to-Consumer (B2C) Common B2C e-business models include: e-shop – a version of a retail store where customers can shop at any hour of the day without leaving their home or office e-mall – consists of a number of e-shops; it serves as a gateway through which a visitor can access other e-shops

Business types: Brick-and-mortar business: operates in a physical store without an Internet presence. Pure-play (virtual) business - a business that operates on the Internet only without a physical store. Examples include Amazon.com and Expedia.comClick-and-mortar business Click-and-mortar business – a business that operates in a physical store and on the Internet

Consumer-to-Business (C2B) Priceline.com is an example of a C2B e-business model The demand for C2B e-business will increase over the next few years due to customer’s desire for greater convenience and lower prices

Consumer-to-Consumer (C2C) Online auctions Electronic auction (e-auction) - Sellers and buyers solicit consecutive bids from each other and prices are determined dynamically Forward auction - Sellers use as a selling channel to many buyers and the highest bid wins Reverse auction - Buyers use to purchase a product or service, selecting the seller with the lowest bid

Consumer-to-Consumer (C2C) C2C communities include: Communities of interest - People interact with each other on specific topics, such as golfing and stamp collecting Communities of relations - People come together to share certain life experiences, such as cancer patients, senior citizens, and car enthusiasts Communities of fantasy - People participate in imaginary environments, such as fantasy football teams and playing one-on-one with Michael Jordan

E-Business Benefits and Challenges E-Business benefits include: Highly Accessible - Businesses can operate 24 hours a day, 7 days a week, 365 days a year Increased Customer Loyalty - Additional channels to contact, respond to, and access customers helps contribute to customer loyalty Improved Information Content- In the past, customers had to order catalogs or travel to a physical facility before they could compare price and product attributes. Electronic catalogs and Web pages present customers with updated information in real-time about goods, services, and prices Increased Convenience - E-business automates and improves many of the activities that make up a buying experience Increased Global Reach - Businesses, both small and large, can reach new markets Decreased Cost - The cost of conducting business on the Internet is substantially smaller than traditional forms of business communication

E-Business Benefits and Challenges E-business challenges include: Protecting consumers Leveraging existing systems Increasing liability Providing security Adhering to taxation rules

E-Business Benefits and Challenges There are numerous advantages and limitations in e-business revenue models including: Transaction fees License fees Subscription fees Value-added fees Advertising fees

Case 7-Eleven’s Dream Team 7-Eleven Japan has integrated its online site 7dream.com with its physical stores Through the 7dream.com Web site, 7-Eleven Japan enables consumers to choose from an online assortment of 100,000 products which are picked up from one of 8,400 store locations

e-Payment System----- 

Payments, Protocols and Related Issues SET Protocol is for Credit Card Payments Electronic Cash and Micropayments Electronic Fund Transfer on the Internet Stored Value Cards and Electronic Cash Electronic Check Systems

Security requirements Payments, Protocols and Related Issues (cont.) yAuthentication: A way to verify the buyer’s identity before payments are made yIntegrity: Ensuring that information will not be accidentally or maliciously altered or destroyed, usually during transmission yEncryption: A process of making messages indecipherable except by those who have an authorized decryption key yNon-repudiation: Merchants need protection against the customer’s unjustifiable denial of placed orders, and customers need protection against the merchants’ unjustifiable denial of past payment

Security Schemes Secret Key Cryptography (symmetric) Scrambled Message Original Message Sender Internet Scrambled Message Key sender (= Key receiver ) Encryption Original Message Receiver Key receiver Decryption

Electronic Credit Card System on the Internet The Players yCardholder yMerchant (seller) yIssuer (your bank) yAcquirer (merchant’s financial institution, acquires the sales slips) yBrand (VISA, Master Card)

Credit Card payment Step 1: customer sends a purchase order with an encrypted credit card number (encrypted with credit card company’s bank’s key)to the merchant. Step 2: the merchant send the amount of purchase with the customer’s credit card number (encrypted) to the credit card company’s bank. The bank decrypts the card number, authenticates signature and check credit balance on the card Step 3: if it is ok, it checks with credit card company to see if card is ok

SET Protocol…. Step 4: credit card company OKs the transaction and signs it showing customers transaction details in customer account Step 5: the bank when it receives the signed authorization from the credit card company sends a message to the merchant to honour the purchase order and credits the merchant account by appropriate amount Step 6: the merchant accepts customer’s purchase order and informs him about delivery details Step 7: at the end of the month the credit card company sends a consolidated bill to the customer

Merchant Customer Bank Credit Card Company Step 1: Send P.O. Step 2: check C.C. and signature Step 3: C.C. OK? Step 4: OK Step 5: OK transaction And Merchant credit account Step 6: Delivery Details Step 7: Bill to Customer

Electronic Fund Transfer (EFT) on the Internet An Architecture of Electronic Fund Transfer on the Internet Internet Payer Cyber Bank Bank Cyber Bank Payee Automated Clearinghouse VAN Bank VAN Payment Gateway Payment Gateway

Financial EDI It is an EDI used for financial transactions EDI is a standardized way of exchanging messages between businesses EFT can be implemented using a Financial EDI system Safe Financial EDI needs to adopt a security scheme used for the SSL protocol Extranet encrypts the packets exchanged between senders and receivers using the public key cryptography

Electronic Cash and Micropayments Smart Cards yThe concept of e-cash is used in the non-Internet environment yPlastic cards with magnetic stripes (old technology) yIncludes IC chips with programmable functions on them which makes cards “smart” yOne e-cash card for one application yRecharge the card only at designated locations, such as bank office or a kiosk. Future: recharge at your PC ye.g. Mondex & VisaCash

Smart Cards Smart card processors hold more information than credit card magnetic strips –Store credit-card numbers, contact information, etc. –Contact smart cards Placed in smart-card reader for information transfer –Contactless smart cards Antenna enables information transfer Faster than contact smart card Security –Password protection –Security designations assigned to information –Encryption

Smart Card Example -- Mondex Smart-card-based, stored-value card (SVC) Subsidiary of MasterCard Secret chip-to-chip transfer protocol Value is not in strings alone; must be on Mondex card Loaded through ATM –ATM does not know transfer protocol; connects with secure device at bank Spending at merchants having a Mondex value transfer terminal

Mondex Makes Shopping Easy Shopping with Mondex Adding money to the card Payments in a new era of electronic shopping Paying on the Internet

Electronic Money DigiCash yThe analogy of paper money or coins yExpensive, as each payment transaction must be reported to the bank and recorded yConflict with the role of central bank’s bill issuance yLegally, DigiCash is not supposed to issue more than an electronic gift certificate even though it may be accepted by a wide number of member stores

Stored Value Cards Electronic Money (cont.) yNo issuance of money yDebit card — a delivering vehicle of cash in an electronic form yEither anonymous or onymous yAdvantage of an anonymous card xthe card may be given from one person to another yAlso implemented on the Internet without employment of an IC card

Smart card-based e-cash Can be recharged at home through the Internet Can be used on the Internet as well as in a non-Internet environment Ceiling of Stored Values To prevent the abuse of stored values in money laundry S$500 in Singapore; HK$3,000 in Hong Kong Multiple Currencies Can be used for cross border payments Electronic Money (cont.)

Contactless IC Cards Proximity Card Used to access buildings and for paying in buses and other transportation systems Bus, subway and toll card in many cities Amplified Remote Sensing Card Good for a range of up to 100 feet, and can be used for tolling moving vehicles at gates Pay toll without stopping (e.g. Highway 91 in California)

Electronic Check Systems

Electronic Checkbook Electronic Check Systems (cont.) yCounterpart of electronic wallet yTo be integrated with the accounting information system of business buyers and with the payment server of sellers yTo save the electronic invoice and receipt of payment in the buyers and sellers computers for future retrieval yExample : SafeCheck yUsed mainly in B2B

Five Security Tips Don’t reveal your online Passcode to anyone. If you think your online Passcode has been compromised, change it immediately. Don’t walk away from your computer if you are in the middle of a session. Once you have finished conducting your banking on the Internet, always sign off before visiting other Internet sites. If anyone else is likely to use your computer, clear your cache or turn off and re-initiate your browser in order to eliminate copies of Web pages that have been stored in your hard drive. Bank of America strongly recommends that you use a browser with 128-bit encryption to conduct secure financial transactions over the Internet.