E-Commerce

Introduction
Business conducted on the web Buyers and sellers interact electronically
It refers to all activities of purchase and sales of goods or services over internet.
 Marketing
 Sales
 Payment
 customer services
It was identified as the facilitation of commercial transactions electronically, using
technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT).
EDI: Electronic Data Interchange
 EDI is the exchange of “documents” – usually financially related documents such as
purchase orders, invoices, etc. – between businesses, in a common format, from
one computer to another computer.
 EDI is the structured transmission of data between organizations by electronic
means.
 Set of hardware, software, and standards that accommodate the EDI process
 The information used in EDI is organized according to a specified format set by
both companies participating in the data exchange
 Before EDI was adopted, documents were sent back and forth through the mail, via
fax
 Unfortunately, once received, the information still had to be manually rekeyed at
the other end into the receiver’s systems for processing, fulfillment, shipping,
billing, etc.
 EDI eliminates manual processing, replacing it with ‘packets’ of digitized, formatted
data that is sent and received directly, computer-to-computer. With a fully
integrated EDI system, the process can look like —no paper, no people, and almost
no time:
History of E-Commerce
 The history of E-commerce is history of how Information Technology has transformed
business processes
 EDI (Electronic Data Interchange) is widely viewed as the beginning of E-commerce if we
consider E-Commerce as the networking of business communities and digitalization of
business information
 The growth and acceptance of credit cards, automated teller machines (ATM) and
telephone banking in the 1980s were also forms of electronic commerce.
 Another form/example of E-Commerce was the airline reservation system, for example
Travicom in the UK.
 By the end of 2000, many European and American business companies offered their
services through the World Wide Web.
 Since then people began to associate a word “E-Commerce" with the ability of
purchasing various goods through the Internet using secure protocols and electronic
payment services.

 While the Internet speeds up transaction times, another advantage it has over EDI
transactions conducted over a private network is , the connect charges applicable.
 Traditionally, VAN providers charge for EDI on a per-transaction basis. Organisations that
use EDI therefore tend to send transactions in a batch to their customers once a day.
  Over the Internet where all connect charges are fixed, Organisations can afford to send
transactions at any time they want to, thus enabling real time commerce.
Advantages of E-commerce
 Faster buying/selling procedure, as well as easy to find products.
 Buying/selling 24/7.
 Low operational cost
 Easy to start and manage a business.
 No need of physical company set-ups.
 Customers can easily select products from different providers without moving around
physically.
Disadvantages of E-commerce
 Security/ Privacy: It is difficult to ensure the security or privacy on online transactions
 There are many hackers who look for opportunities, and thus an ecommerce site,
service, payment gateways, all are always prone to attack.
 The software development industry is still evolving and keeps changing rapidly.
 In many countries/states, network bandwidth might cause an issue.
 Many persons prefer shopping for social contacts, touch and feel before buying items.
Types of E-comerce
 B2B (Business-to-Business)
 B2C (Business-to-Consumer)
 C2B (Consumer-to-Business)
 C2C (Consumer-to-Consumer)

BUSINESS TO BUSINESS (B2B)

 B2B can be open to all interested parties or limited to specific, pre-qualified participants
(private electronic market).
 Companies doing business with each other such as manufacturers selling to distributors
and wholesalers selling to retailers.
Business-to-Consumer (B2C)
 It refers to a business platform, involving a business entity and consumers. It is a retail
version of ecommerce. Selling goods or services through web based shops. It is based on
the concept of ‘shopping at convenience’
 It provides direct selling through online.
 the first examples of B-to-C e-commerce were [Link] and [Link] in the USA

Consumer-to-business (C2B)
It is a business model where an end user or consumer makes a product or service that
an organization uses to complete a business process
The C2B methodology completely transposes the traditional business-to-consumer (B2C)
model, where a business produces services and products for consumer consumption
CONSUMER TO CONSUMER (C2C)
 It facilitates the online transaction of goods or services between two people.
 It represents a consumer business platform, where one consumer acts a resource person
selling goods in an online medium to other consumers at a price.
 Though there is no visible intermediary involved but the parties cannot carry out the
transactions without the platform which is provided by the online market maker such as
eBay.
 It has helped in creating a market for second hand goods.
E-COMMERCE EXAMPLES
  An individual purchases a book on the Internet.
 A government employee reserves a hotel room over the Internet.
 A business buys office supplies on-line or through an electronic auction.
 A manufacturing plant orders electronic components from another plant within the
company using the company's intranet.
Concerns of ecommerce
 The factors affecting the growth of E Business as follows:
o IT and Security factors
o Customer perception & Attitudes
o Technological factors
o General factors
o Internet factors
Information Technology & Security factors
 Major problem for growth of e business all over world is the security of online data
 Ensuring security of payments and privacy of online transactions is key to widespread
acceptance of e commerce
 Virus, spyware, worms etc increases fear
 Denial of Service attacks
 Internet provides greater access to data not only to legitimate users, but also hackers,
discontented employees, corporate spies.
Customer perception and attitude
 Lack of trust among customers for online business
 Not sure of product quality
 No touch & feel of product
 Indian customers has attitude to bargain products
 Impatience to wait for receiving the purchased product
Technological factors
 E business partners find it hard to invest & update with new technologies
 Bandwidth: Transmission capacity of a communication channel is a major barrier
for products that require more graphical & video data.
 Rapidly changing technologies & emerging of new technologies
 Storing information, data mining, processing orders has impact
 High costs of developing, purchasing new software, licensing of software,
Integration into existing systems
General factors
 Lack of awareness & understanding the value of e business & security involved in
it
 Need for insurance of high cost products
 Lack of IT knowledge to purchase online
 Leaders of many SMEs have less literacy in computers & IT area

Internet factors
 E business depends on speed, bandwidth of communication. Internet
connections yet to reach many rural areas.
 Broadband connections are limited to urban & sub-urban areas.
 low credit card population.
Internet
 The Internet is a global, interconnected computer network in which every computer
connected to it can exchange data with any other connected computer.
 The Internet is the physical connection of millions of networks.
  The Web uses the Internet for its existence.
 The Web consists of hypertext embedded on Web pages that are hosted on Web sites.

A Web site is a collection of related Web documents that are made available to the public.
The index page, or home page, is the first page of a Web [Link] pages are individual Web
documents. Hypertext is a way of presenting information so that the order in which it’s read is
left up to the reader. Hyperlinks are underlined or highlighted words that can be used to view
another document or Web page. Hypermedia refers to a link to multimedia, such as music and
movies.
Web browsers display a Web document and enable users to link to other Web pages.
 The first browsers were text-only.
 Mosaic was the first graphical browser.
Web servers respond to the requests of browsers. They find and send requested resources back
to the browser.
Web Addresses (URLs)
Web addresses are an addressing system that identifies where a Web resource is located.
The uniform resource locator (URL) is the standard used to identify Web resources.
The URL consists of:

Internet Protocols
 Transmission control protocol (TCP) – A standard that defines how one computer can
communicate and exchange data with another computer on the Internet.
 Internet protocol (IP) – Defines the Internet’s addressing scheme.
 IP address – Each computer connected to the Internet is given an address composed of
numbers and periods. Example: [Link]
Domain Names
 Domain Name System (DNS) – Enables users to type names of Web sites and Web pages
as well as IP addresses. Example: [Link] or [Link]
 Domain name registration – Enables individuals, businesses, and organizations to
register their Web sites with InterNIC.
 The last part of the domain name gives the type of organization that maintains the site.
Examples: .com, .net, .edu, and .gov.
Intranets and Extranets
 Intranet – An internal networking system within a company
o They function like the Internet
o They are for internal use only and are not available to those outside the company
 Extranet – An intranet that can be used by outside sources who access it over the
Internet
Encryption
The process of transforming plain text or data into cipher text that cannot be read by anyone
other than the sender and the receiver.
The purpose of encryption is
 to secure stored information and
to secure information transmission.
Encrypting plaintext results in unreadable text called ciphertext.
Substitution cipher is where every occurrence of a given letter is systematically replaced by
another letter
Transposition cipher changes the ordering of the letters in each word in some systematic way
Decryption
The process of reverting ciphertext to its original plaintext is called decryption.

Cryptography
Cryptography is the science of using mathematics to encrypt and decrypt data. It enables you to
store sensitive information or transmit it across in secure networks(like the Internet) so that it
cannot be read by anyone except the intended recipient.
Working of cryptography
A cryptographic algorithm is a mathematical function used in the encryption and decryption
process. A cryptographic algorithm works in combination with a key—a word, number, or
phrase—to encrypt the plaintext.
The same plaintext, encrypts to different ciphertext, with different keys.
The security of encrypted data is entirely dependent on two things: the strength of the
cryptographic algorithm and the secrecy of the key.
A cryptographic algorithm, plus all possible keys and all the protocols that make it work,
comprise a cryptosystem.
Cryptographic Methods
 Symmetric (PRIVATE KEY ) ALGORITHM
 Asymmetric (PUBLIC KEY ) ALGORITHM
Symmetric algorithms
In Symmetric algorithms, also called secret-key or private key encryption, one key is used for
both encryption and decryption.
Fast and simple
Key distribution problem-Need secure channel for key distribution
Examples
Data Encryption Standard (DES) is the most widely used symmetric key encryption,
developed by the National Security Agency (NSA) and IBM. Uses a 56-bit encryption key
3DES,AES,IDEA,Blowfish

Asymmetric / Public key Algorithms

Public key cryptography uses two mathematically related digital keys are used: a public key and
a private key.
The private key is kept secret by the owner, and the public key is widely disseminated.
once the keys are used to encrypt a message, the same key cannot be used to unencrypt the
message Furthermore, one cannot be calculated from other. Encryption key is often called the
public key and decryption key is often called the private key.
Advantages: better key management.
Disadvantages: slower, more complex.
Examples: RSA, Diffie-Hellman etc

HASHING
 Hashing is a process which turns a string of characters with variable length into a fixed-
length value which represents the original string.
 is a one-way operation which transforms a stream of data into a more compressed form
called a message digest or hash values.
 recovering the original data stream from the message digest should not be possible.
 All the message digests generated by a given hash function have the same size no
matter what the size of the input value is.


Digital signature
A digital signature is an electronic form of a signature that can be used to authenticate
the identity of the sender of a message and also ensure that the original content of the
message or document that has been sent is unchanged. Digital Signature Certificate can
be presented electronically to prove your identity, to access information or services on
the Internet or to sign certain documents digitally.
Secure Socket Layer
 SSL (Secure Sockets Layer) is a standard security protocol for establishing encrypted links
between a web server and a browser in an online communication.
 The usage of SSL technology ensures that all data transmitted between the web server
and browser remains encrypted.

 SSL was designed by Netscape.

 It provides encryption and authentication between a web client and a web server.
 SSL provides security, and more importantly, peace of mind
 When using SSL, you can be fairly sure that your data are safe from tampering
Secure Socket Layer (SSL) Certificates
If you want to take customer payments on your own site (‘https’), then you need to
purchase an SSL Certificate
 Typically, an SSL Certificate will contain your domain name, your company name and full
address details. It will also contain the expiry date of the certificate and details of who
issued the certificate
 When you have an SSL Certificate installed, your payment site will display:
o A padlock symbol that appears in customer’s web browser when your site is
opened
o The https prefix in front of your URL address in the browser
How does SSL work?
 As a customer enters the secure area of a website to make payment (https), the browser
will retrieve the SSL Certificate and check that it has not expired, it has been issued by a
 trusted certification authority and that it is being used by the website for which it has
been issued.
 If it fails on any one of these checks, the browser will display a warning to the end user.
 SSL begins with a handshake phase that consists of two main steps:
o Negotiating the encryption algorithm
o Authenticating identity (optional)
 After that, encrypted data can be sent.
Negotiating the encryption algorithm:
 SSL session begins with a negotiation between the client and the server about the cipher
suite. The cipher suite includes the public key encryption algorithms, symmetric key
encryption algorithms, hash functions and key sizes to be used.
 The client tells the server which cipher suites it has or available, and the server chooses
the best mutually acceptable cipher suite.
Authenticating the server:
 It is an optional step, but in ecommerce, it is always a good idea to authenticate the
server.
 To authenticate the server, the server presents its public key certificate to the client. If
this certificate is valid, the client can be sure about the identity of the server and the
organization that owns it.
 Practically, the SSL enabled browser maintains a list of trusted Certification Authorities
(CAs) with the public keys of these CAs.
Limitations of SSL in E-commerce:
 SSL is popular today. SSL enabled servers and browsers provide a popular platform for
card transactions.
 The generic design of SSL may cause problems. For example, by using SSL we can
authenticate the customer and the merchant, but we can’t be sure whether the
merchant is authorized to accept payment, nor whether the customer is authorized to
pay money.
 For these reasons we need a protocol that handles authentication and authorization for
card payments transactions. The answer was the SET protocol.
SECURE ELECTRONIC TRANSACTION SET
 On February 1, 1996, Visa International and MasterCard announced together with
others (including Microsoft, IBM, Netscape, SAIC, GTE, RSA, Terisa Systems,and VeriSign),
the development of a single technical standard for safeguarding card payment for
purchases made over open networks. This standard was to be called the SET Secure
Electronic Transaction
 SET is a system for ensuring the security of financial transactions on the Internet. It
involves all players in E-payment
 SET is extremely secure since:
o All sensitive information sent between the three parties is encrypted.
o All three parties are required to authenticate themselves with certificates.
o The merchant never sees the customer's card number in plaintext.
 With SET, a user is given an electronic wallet (digital certificate) and a transaction is
conducted and verified using a combination of digital certificates and digital signatures
among the purchaser, a merchant, and the purchaser's bank in a way that ensures
privacy and confidentiality To handle SET, the customer needs to have an “e-wallet”,
which is a software that runs the client side of the SET protocol and stores customer
payment-card information.
E-PAYMENT SYSTEM (EPS)
 In the e-commerce world, the method of payment is performed electronically
  EPSs enable a customer to pay for the goods and services online by using integrated
hardware and software systems.
 The main objectives of EPS are to increase efficiency, improve security, and enhance
customer convenience and ease of use.
E-PAYMENT SYSTEM (EPS)
 ELECTRONİC FUNDS TRANSFER (EFT)
 PAYMENT CARDS
 CREDIT, DEBIT
 E-CASH/ E-MONEY/DIGTAL CASH/cyber cash
 E-CHECK
 E-WALLETS
Digital cash / E-CASH
 Digital cash is a system of purchasing cash credits in relatively small amounts, storing the
credits in your computer, and then spending them when making electronic purchases
over the Internet
 Digital cash can also be stored on an electronically sensitive card
 E-cash usually operates on a smart card, which includes an embedded microprocessor
chip. The microprocessor chip stores cash value and the security features that make
electronic transactions secure.
 Mondex, ( MasterCard) is a good example of e-cash
 Also known as e-money or digital cash
Electronic Commerce service providers
 Presently many companies are in the process of implementing and developing digital cash
systems, DigiCash, Open Market, Cybercash, First Virtual, NetBill and Mondex are some of
them.
DigiCash
 founded and created by David Chaum in 1990 and is located in Amsterdam. It develops
and license payment technology products
 One of the company’s products is ecash, a prototype for digital cash which has been in
progress since 1995. This system is designed for secure payments from any personal
computer to any other work stations, over email or Internet.
CyberCash
 CyberCash is a system that allows customers to pay by a credit card without revealing
the credit card number to the merchant. To achieve this, a credit card number is sent to
the merchant in an encrypted form.
 The company offers a product called Wallet to its customers. The users who have a
Wallet have access to credit card payment.
 The CyberCash company is located in U.S.A and was founded in 1994 by William Melton
and Daniel