MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY

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business to electronic options. Course Objectives The major objectives of this course are to: " define e-commerce and compare and contrast it from e-business; " identify some business applications of e-commerce; " identify, define and differentiate the various forms of e-commerce; 1. answer the question of the extent to which e-commerce helps consumers; 2. have an idea how business relationships can be transformed by e-commerce; i. define what is Internet; ii. know how the Internet is relevant to e-commerce; *0 identify the benefits of intranet in e-commerce; *1 know how to develop and create an intranet; i.differentiate m-commerce from e-commerce; ii.know some of the products and services available in m-commerce; " identify the strategic goals of e-commerce strategy; " answer the question of the components of an e-commerce strategy; " know the use of the Internet in the distribution of software; " know what is Internet distribution chain; " know the various types of security measures for e-commerce; " have a basic understanding of how to set up security measures; " know the numerous forms of challenges facing e-commerce; " know in what ways e-commerce has been useful to small scale businesses in developing countries; iv MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY " know the roles of government in e-commerce initiatives; and " identify the kind of government policies to favour e-commerce. Credit Units This course attracts three credit units Study Units The study units of this course are as follows: Module 1 Unit 1 Concepts and Definitions Unit 2 Types and Benefits of E-Commerce Unit 3 Applications and Use in E-Payment Systems Unit 4 Internet and E-Commerce Unit 5 Intranet and E-Commerce Module 2 Unit 1 Mobile Commerce Unit 2 E-Commerce Strategies Unit 3 Economics of E-Commerce: Case of Software Distribution over Internet Unit 4 E-Commerce Security Module 3 Unit 1 E-Commerce Challenges Unit 2 E-Commerce in Developing Countries Unit 3 Government and E-Commerce (Case of Developing Countries) Unit 4 Company Case Studies Course Assessment v MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY i.Assignments = 30% ii.Examination = 70%. vi MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY Course Code MBE 705 Course Title Fundamentals of E-Commerce/Strategy Course Developer/Writer Gerald .C. Okereke Eco Communications Inc. Ikeja, Lagos Course Editor Mr. E. Eseyin National Open University of Nigeria Programme Leader Dr. O. J. Onwe National Open University of Nigeria Course Coordinator Mr. Timothy O. Ishola National Open University of Nigeria NATIONAL OPEN UNIVERSITY OF NIGERIA vii MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY National Open University of Nigeria Headquarters 14/16 Ahmadu Bello Way Victoria Island Lagos Abuja Office No. 5 Dar es Salaam Street Off Aminu Kano Crescent Wuse II, Abuja Nigeria e-mail: centralinfo@nou.edu.ng URL: www.nou.edu.ng Published by National Open University of Nigeria Printed 2008 ISBN: 978-058-270-3 All Rights Reserved viii MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY CONTENTS PAGE Module 1&&&&&&&&&&&&&&&&&&&.. 1 Unit 1 Concepts and Definitions&&&&&&&& 1 Unit 2 Types and Benefits of E-Commerce&&&& 15 Unit 3 Applications and Use in E-Payment Systems.. 27 Unit 4 Internet and E-Commerce&&&&&&&& 41 Unit 5 Intranet and E-Commerce&&&&&&&& 55 Module 2&&&&&&&&&&&&&&&&&&&&. 66 Unit 1 Mobile Commerce&&&&&&&&&&&. 66 Unit 2 E-Commerce Strategies&&&&&&&&&. 81 Unit 3 Economics of E-Commerce: Case of Software Distribution over Internet&.. 90 Unit 4 E-Commerce Security&&&&&&&&&&103 Module 3&&&&&&&&&&&&&&&&&&&&..117 Unit 1 E-commerce Challenges&&&&&&&&&.117 Unit 2 E-commerce in Developing Countries&&&...130 Unit 3 Government and E-commerce (Case of Developing Countries)&&&&&&.141 Unit 4 Company Case Study&&&&&&&&&&.152 ix MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY MODULE 1 Unit 1 Concepts and Definitions Unit 2 Types and Benefits of E-Commerce Unit 3 Applications and Use in E-Payment Systems Unit 4 Internet and E-Commerce Unit 5 Intranet and E-Commerce UNIT 1 CONCEPTS AND DEFINITIONS CONTENTS 1.0 Introduction 2.0 Objectives 3.0 Main Content 3.1 Early Development 3.2 What is E-Commerce? 3.3 Statistics 3.4 Is E-Commerce the Same as E-Business? 3.5 Business Applications 3.6 Forms 3.7 What Forces are Fueling E-Commerce? 3.7.1 Economic Forces 3.7.2 Market Forces 3.7.3 Technology Forces 3.8 What are the Components of a Typical Successful E-Commerce Transaction Loop? 4.0 Conclusion 5.0 Summary 6.0 Tutor-Marked Assignment 6.0 References/Further Readings 1.0 INTRODUCTION In the emerging global economy, e-commerce and e-business have increasingly become a necessary component of business strategy and a strong catalyst for economic development. The integration of information and communications technology (ICT) in business has revolutionized relationships within organizations and those between and among organizations and individuals. Specifically, the use of ICT in 1 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY business has enhanced productivity, encouraged greater customer participation, and enabled mass customization, besides reducing costs. With developments in the Internet and Web-based technologies, distinctions between traditional markets and the global electronic marketplace-such as business capital size, among others-are gradually being narrowed down. The name of the game is strategic positioning, the ability of a company to determine emerging opportunities and utilize the necessary human capital skills (such as intellectual resources) to make the most of these opportunities through an e-business strategy that is simple, workable and practicable within the context of a global information milieu and new economic environment. With its effect of leveling the playing field, e-commerce coupled with the appropriate strategy and policy approach enables small and medium scale enterprises to compete with large and capital-rich businesses. On another plane, developing countries are given increased access to the global marketplace, where they compete with and complement the more developed economies. Most, if not all, developing countries are already participating in e-commerce, either as sellers or buyers. However, to facilitate e-commerce growth in these countries, the relatively underdeveloped information infrastructure must be improved. Among the areas for policy interventions are: " High Internet access costs, including connection service fees, communication fees, and hosting charges for websites with sufficient bandwidth; " Limited availability of credit cards and a nationwide credit card system; " Underdeveloped transportation infrastructure resulting in slow and uncertain delivery of goods and services; " Network security problems and insufficient security safeguards; " Lack of skilled human resources and key technologies (i.e., inadequate professional IT workforce); " Content restriction on national security and other public policy grounds, which greatly affect business in the field of information services, such as the media and entertainment sectors; " Cross-border issues, such as the recognition of transactions under laws of other ASEAN member-countries, certification services, improvement of delivery methods and customs facilitation; and 2 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY " The relatively low cost of labor, which implies that a shift to a comparatively capital intensive solution (including investments on the improvement of the physical and network infrastructure) is not apparent. It is recognized that in the Information Age, Internet commerce is a powerful tool in the economic growth of developing countries. While there are indications of e-commerce patronage among large firms in developing countries, there seems to be little and negligible use of the Internet for commerce among small and medium sized firms. E-commerce promises better business for SMEs and sustainable economic development for developing countries. However, this is premised on strong political will and good governance, as well as on a responsible and supportive private sector within an effective policy framework. This primer seeks to provide policy guidelines toward this end. 2.0 OBJECTIVES At the end of this unit the student is expected to: " know areas of policy intervention " trace the early developments of technologies associated with e-commerce " define e-commerce and compare and contrast it from e-business " identify some business applications of e-commerce " know the forms of e-commerce and the forces driving e-commerce. 3.0 MAIN CONTENT 3.1 Early Development The meaning of electronic commerce has changed over the last 30 years. Originally, electronic commerce meant the facilitation of commercial transactions electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These were both introduced in the late 1970s, allowing businesses to send commercial documents like purchase orders or invoices electronically. The growth and acceptance of credit cards, automated teller machines (ATM) and telephone banking in the 1980s were also forms of electronic commerce. From the 1990s onwards, electronic commerce would additionally include enterprise resource planning systems (ERP), data mining and data warehousing. 3 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY Perhaps it is introduced from the Telephone Exchange Office, or maybe not. The earliest example of many-to-many electronic commerce in physical goods was the Boston Computer Exchange, a marketplace for used computers launched in 1982. The first online information marketplace, including online consulting, was likely the American Information Exchange, another pre-Internet online system introduced in 1991. 3.2 What is E-Commerce? Electronic commerce or e-commerce refers to a wide range of online business activities for products and services. It also pertains to cany form of business transaction in which the parties interact electronically rather than by physical exchanges or direct physical contact. d E-commerce is usually associated with buying and selling over the Internet, or conducting any transaction involving the transfer of ownership or rights to use goods or services through a computer-mediated network. Though popular, this definition is not comprehensive enough to capture recent developments in this new and revolutionary business phenomenon. A more complete definition is: E-commerce is the use of electronic communications and digital information processing technology in business transactions to create, transform, and redefine relationships for value creation between or among organizations, and between organizations and individuals. 3.3 Statistics International Data Corp (IDC) estimates the value of global e-commerce in 2000 at US$350.38 billion. This is projected to climb to as high as US $3.14 trillion by 2004. IDC also predicts an increase in Asia 9s percentage share in worldwide e-commerce revenue from 5% in 2000 to 10% in 2004 (See Figure 1). 4 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY Figure 1: Worldwide E-Commerce Revenue, 2000 and 2004 (as a % share of each country/region) Asia-Pacific e-commerce revenues are projected to increase from $76.8 billion at year-end of 2001 to $338.5 billion by the end of 2004. Figure 2: Online Revenues Company Online Revenues (in billions of dollars) Amazon.com 3.12 Office Depot 1.60 Staples 0.95 Gateway, Inc. 0.76 Costco Wholesale 0.45 Barnesandnoble.com 0.41 Buy.com 0.40 QVC.com 0.35 Spiegel Group 0.33 J.C. Penny 0.32 3.4 Is E-Commerce the Same as E-Business? 5 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY While some use e-commerce and e-business interchangeably, they are distinct concepts. In e-commerce, information and communications technology (ICT) is used in inter-business or inter-organizational transactions (transactions between and among firms/organizations) and in business-to-consumer transactions (transactions between firms/organizations and individuals). In e-business, on the other hand, ICT is used to enhance one 9s business. It includes any process that a business organization (either a for-profit, governmental or non-profit entity) conducts over a computer-mediated network. A more comprehensive definition of e-business is: cThe transformation of an organization 9s processes to deliver additional customer value through the application of technologies, philosophies and computing paradigm of the new economy. d Three primary processes are enhanced in e-business: 1. Production processes , which include procurement, ordering and replenishment of stocks; processing of payments; electronic links with suppliers; and production control processes, among others; 2. Customer-focused processes , which include promotional and marketing efforts, selling over the Internet, processing of customers 9 purchase orders and payments, and customer support, among others; and 3. Internal management processes , which include employee services, training, internal information-sharing, video-conferencing, and recruiting. Electronic applications enhance information flow between production and sales forces to improve sales force productivity. Workgroup communications and electronic publishing of internal business information are likewise made more efficient. Is the Internet economy synonymous with e-commerce and e-business? The Internet economy is a broader concept than e-commerce and e-business. It includes e-commerce and e-business. The CREC (Center for Research and Electronic Commerce) at the University of Texas has developed a conceptual framework for how the Internet economy works. The framework shows four layers of the Internet economy-the three mentioned above and a fourth called intermediaries (see Table 1). 6 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY Table 1: Internet Economy Conceptual Frame Based on Centre for Research in Electronic Commerce, University of Texas, "Measuring the Internet Economy," 6 June 2000. 3.5 Business Applications Some common applications related to electronic commerce are: " E-mail and messaging " Documents, spreadsheets, database " Accounting and finance systems " Orders and shipment information " Enterprise and client information reporting " Domestic and international payment systems " Newsgroup " On-line Shopping 7 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY " Messaging " Conferencing 3.6 Forms Contemporary electronic commerce involves everything from ordering "digital" content for immediate online consumption, to ordering conventional goods and services, to "meta" services to facilitate other types of electronic commerce. On the consumer level, electronic commerce is mostly conducted on the World Wide Web. An individual can go online to purchase anything from books, grocery to expensive items like real estate. Another example will be online banking like online bill payments, buying stocks, transferring funds from one account to another, and initiating wire payment to another country. All these activities can be done with a few keystrokes on the keyboard. On the institutional level, big corporations and financial institutions use the internet to exchange financial data to facilitate domestic and international business. Data integrity and security are very hot and pressing issues for electronic commerce these days. 3.7 What Forces are Fueling E-Commerce? There are at least three major forces fuelling e-commerce: economic forces, marketing and customer interaction forces, and technology, particularly multimedia convergence. 3.7.1 Economic Forces One of the most evident benefits of e-commerce is economic efficiency resulting from the reduction in communications costs, low-cost technological infrastructure, speedier and more economic electronic transactions with suppliers, lower global information sharing and advertising costs, and cheaper customer service alternatives. Economic integration is either external or internal. External integration refers to the electronic networking of corporations, suppliers, customers/ clients, and independent contractors into one community communicating in a virtual environment (with the Internet as medium). Internal integration, on the other hand, is the networking of the various departments within a corporation, and of business operations and processes. This allows critical business information to be stored in a digital form that can be retrieved instantly and transmitted electronically. Internal integration is best exemplified by corporate 8 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY intranets. Among the companies with efficient corporate intranets are Procter and Gamble, IBM, Nestle and Intel. Case 1: SESAMi.NET: Linking Asian Markets through B2B Hubs SESAMi.NET is Asia 9s largest B2B e-hub, a virtual exchange integrating and connecting businesses (small, medium or large) to trading partners, e-marketplaces and internal enterprise systems for the purpose of sourcing out supplies, buying and selling goods and services online in real time. The e-hub serves as the center for management of content and the processing of business transactions with support services such as financial clearance and information services. It is strategically and dynamically linked to the Global Trading Web (GTW), the world 9s largest network of trading communities on the Internet. Because of this very important link, SESAMi reaches an extensive network of regional, vertical and industry-specific interoperable B2B e-markets across the globe. 3.7.2 Market Forces Corporations are encouraged to use e-commerce in marketing and promotion to capture international markets, both big and small. The Internet is likewise used as a medium for enhanced customer service and support. It is a lot easier for companies to provide their target consumers with more detailed product and service information using the Internet. Case 2: Brazil 9s Submarino19: Improving Customer Service through the Internet Brazil 9s Submarino is a classic example of successful use of the Internet for improved customer service and support. From being a local Sao Paulo B2C e-commerce company selling books, CDs, video cassettes, DVDs, toys, electronic and computer products in Brazil, it expanded to become the largest company of its kind in Argentina, Mexico, Spain and Portugal. Close to a third of the 1.4 million Internet users in Brazil have made purchases through this site. To enhance customer service, Submarino has diversified into offering logistical and technological infrastructure to other retailers, which includes experience and expertise in credit analysis, tracking orders and product comparison systems. 3.7.3 Technology Forces 9 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY The development of ICT is a key factor in the growth of e-commerce. For instance, technological advances in digitizing content, compression and the promotion of open systems technology have paved the way for the convergence of communication services into one single platform. This in turn has made communication more efficient, faster, easier, and more economical as the need to set up separate networks for telephone services, television broadcast, cable television, and Internet access is eliminated. From the standpoint of firms/businesses and consumers, having only one information provider means lower communications costs. Moreover, the principle of universal access can be made more achievable with convergence. At present the high costs of installing landlines in sparsely populated rural areas is a disincentive to telecommunications companies to install telephones in these areas. Installing landlines in rural areas can become more attractive to the private sector if revenues from these landlines are not limited to local and long distance telephone charges, but also include cable TV and Internet charges. This development will ensure affordable access to information even by those in rural areas and will spare the government the trouble and cost of installing expensive landlines. 3.8 What are the Components of a Typical Successful E-Commerce Transaction Loop? E-commerce does not refer merely to a firm putting up a Web site for the purpose of selling goods to buyers over the Internet. For e-commerce to be a competitive alternative to traditional commercial transactions and for a firm to maximize the benefits of e-commerce, a number of technical as well as enabling issues have to be considered. A typical e- commerce transaction loop involves the following major players and corresponding requisites: The Seller should have the following components: " A corporate Web site with e-commerce capabilities (e.g., a secure transaction server); " A corporate intranet so that orders are processed in an efficient manner; and " IT-literate employees to manage the information flows and maintain the e-commerce system. Transaction partners include: 10 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY Banking institutions that offer transaction clearing services (e.g., processing credit card payments and electronic fund transfers); National and international freight companies to enable the movement of physical goods within, around and out of the country. For business-to- consumer transactions, the system must offer a means for cost-efficient transport of small packages (such that purchasing books over the Internet, for example, is not prohibitively more expensive than buying from a local store); and Authentication authority that serves as a trusted third party to ensure the integrity and security of transactions. Consumers (in a business-to-consumer transaction) who: " Form a critical mass of the population with access to the Internet and disposable income enabling widespread use of credit cards; and " Possess a mindset for purchasing goods over the Internet rather than by physically inspecting items. Firms/Businesses (in a business-to-business transaction) that together form a critical mass of companies (especially within supply chains) with Internet access and the capability to place and take orders over the Internet. Government , to establish: " A legal framework governing e-commerce transactions (including electronic documents, signatures, and the like); and " Legal institutions that would enforce the legal framework (i.e., laws and regulations) and protect consumers and businesses from fraud, among others. " And finally, the Internet , the successful use of which depends on the following: " A robust and reliable Internet infrastructure; and " A pricing structure that doesn 9t penalize consumers for spending time on and buying goods over the Internet (e.g., a flat monthly charge for both ISP access and local phone calls). 11 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY For e-commerce to grow, the above requisites and factors have to be in place. The least developed factor is an impediment to the increased uptake of e-commerce as a whole. For instance, a country with an excellent Internet infrastructure will not have high e-commerce figures if banks do not offer support and fulfillment services to e-commerce transactions. In countries that have significant e-commerce figures, a positive feedback loop reinforces each of these factors. 4.0 CONCLUSION Though several definitions have been advanced for e-commerce, but the basic component of any definition of e-commerce is that business is now done via electronic media. The concept will continue to evolve over time and will always be interwoven with like concepts such as e-business. 5.0 SUMMARY i.In the emerging global economy, e-commerce and e-business have increasingly become a necessary component of business strategy and a strong catalyst for economic development. ii.Electronic commerce or e-commerce refers to a wide range of online business activities for products and services. It also pertains to cany form of business transaction in which the parties interact electronically rather than by physical exchanges or direct physical contact. d iii.While some use e-commerce and e-business interchangeably, they are distinct concepts. In e-commerce, information and communications technology (ICT) is used in inter-business or inter-organizational transactions (transactions between and among firms/organizations) and in business-to-consumer transactions (transactions between firms/organizations and individuals). iv.Contemporary electronic commerce involves everything from ordering "digital" content for immediate online consumption, to ordering conventional goods and services, to "meta" services to facilitate other types of electronic commerce. v.There are at least three major forces fuelling e-commerce: economic forces, marketing and customer interaction forces, and technology, particularly multimedia convergence. vi.E-commerce does not refer merely to a firm putting up a Web site for the purpose of selling goods to buyers over the Internet. For e- commerce to be a competitive alternative to traditional commercial 12 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY transactions and for a firm to maximize the benefits of e-commerce, a number of technical as well as enabling issues have to be considered. 6.0 TUTOR-MARKED ASSIGNMENT List ten business applications associated with e-commerce. 7.0 REFERENCES/FURTHER READINGS Anita Rosen (2000). The E-commerce Question and Answer Book (USA: American Management Association,). MK, Euro Info Correspondence Centre (Belgrade, Serbia), cE-commerce-Factor of Economic Growth. d Thomas L. Mesenbourg, Measuring Electronic Business: Definitions, Underlying Concepts, and Measurement Plans. Definition adapted and expanded from Emmanuel Lallana, Rudy Quimbo, Zorayda Ruth Andam, ePrimer: An Introduction to eCommerce (Philippines: DAI-AGILE, 2000). Lallana, Quimbo, Andam, 4. Cf. Ravi Kalakota and Andrew B. Whinston, (1997). Electronic Commerce: A Manager 9s Guide (USA: Addison Wesley Longman, Inc. cE-commerce/Internet: B2B: 2B or Not 2B? d (Goldman Sachs Investment Research, November 1999), v. 1.1. TA Project, cE-commerce d Traderinasia.com; available from http://www.traderinasia.com/classifieds.html; Internet; accessed 26 September 2002. whatis.com, searchWebServices.com; available from http://whatis.com/ Michael Chait, cIs the Dot-Com Bust Coming to an End? d (July 8, 2002). Reshma Kapadia, cWhat Caused the Dot-Com Bust? d Reid Goldscborough, cViewpoint-Personal Computing: Forget the Dot-Com Bust, There 9s Still Money to Be Made. d 13 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY whatis.com, searchEBusiness.com. Lynda M. Applegate, (2002). Excerpts form the E-business Handbook , The St. Lucie Press. Suganthi, Balachandher and Balachandran, cInternet Banking Patronage: An Empirical Investigation of Malaysia; d Andrea Goldstein and David O 9Connor, E-commerce for Development: Prospects and Policy Issues, (OECD Development Centre, September 2000). Noah Elkin, cDeveloping Countries Meeting e-business Challenge, d February 5, 2003. Emmanuel Lallana, Patricia J. Pascual, and Zorayda Ruth Andam, SMEs and E-commerce: The Philippine Case; Cf. SMEs and E-commerce: The Case of Indonesia, prepared for The Asia Foundation by Castle Asia. Nancy Hafkin and Nancy Taggart, (June 2001). cGender, Information Technology, and Developing Countries: An Analytical Study . Department of Trade and Communications. cAn Infocomms Policy for the Information Economy: A Consultative Paper, d December 2000. Lallana, Pascual and Andam; Cf. SMEs and E-commerce : The Case of Indonesia. 14 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY UNIT 2 TYPES AND BENEFITS OF E-COMMERCE CONTENTS 1.0 Introduction 2.0 Objectives 3.0 Main Content 3.1 What is B2B E-Commerce? 3.1.1 Benefits of B2B E-Commerce 3.1.1.1 Transaction Costs 3.1.1.2 Disintermediation 3.1.1.3 Transparency in Pricing 3.1.1.4 Economies of Scale and Network Effects 3.2 What is B2C E-Commerce? 3.3 What is B2G E-Commerce? 3.4 What is C2C E-Commerce? 3.5 What is M-Commerce? 3.6 Advantages of E-Commerce for Businesses? 3.7 How is E-Commerce Helpful to the Consumer? 3.8 How are Business Relationships Transformed through E-Commerce? 4.0 Conclusion 5.0 Summary 6.0 Tutor-Marked Assignment 7.0 References/Further Readings 1.0 INTRODUCTION The major different types of e-commerce are: business-to-business (B2B); business-to-consumer (B2C); business-to-government (B2G); consumer-to-consumer (C2C); and mobile commerce (m-commerce). 2.0 OBJECTIVES At the end of this unit the student is expected to: " identify, define and differentiate the various forms of e-commerce " know the benefits associated with e-commerce " answer the question of how e-commerce is valuable to consumers " know how to transform business relationships through e-commerce. 15 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY 3.0 MAIN CONTENT 3.1 What is B2B E-Commerce? B2B e-commerce is simply defined as e-commerce between companies. This is the 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 the B2C segment. The B2B market has two primary components: e-frastructure and e-markets. Efrastructure is the architecture of B2B, primarily consisting of the following: " logistics - transportation, warehousing and distribution (e.g., Procter and Gamble); " application service providers - deployment, hosting and management of packaged software from a central facility (e.g., Oracle and Linkshare); " outsourcing of functions in the process of e-commerce, such as Web- hosting, security and customer care solutions (e.g., outsourcing providers such as eShare, NetSales, iXL Enterprises and Universal Access); " auction solutions software for the operation and maintenance of real- time auctions in the Internet (e.g., Moai Technologies and OpenSite Technologies); " content management software for the facilitation of Web site content management and delivery (e.g., Interwoven and ProcureNet); and " Web-based commerce enablers (e.g., Commerce One, a browser-based, XML-enabled purchasing automation software). E-markets are simply defined as Web sites where buyers and sellers interact with each other and conduct transactions. The more common B2B examples and best practice models are IBM, Hewlett Packard (HP), Cisco and Dell. Cisco, for instance, receives over 90% of its product orders over the Internet. Most B2B applications are in the areas of supplier management (especially purchase order processing), inventory management (i.e., managing order-ship-bill cycles), distribution management (especially in the transmission of shipping documents), channel management (i.e., information dissemination on changes in operational conditions), and payment management (e.g., electronic payment systems or EPS). 16 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY eMarketer projects an increase in the share of B2B e-commerce in total global e-commerce from 79.2% in 2000 to 87% in 2004 and a consequent decrease in the share of B2C e-commerce from 20.8% in 2000 to only 13% in 2004 (Figure 1). Figure 1: Share of B2B and B2C E-Commerce in Total Global E-Commerce (2000 and 2004) Likewise B2B growth is way ahead of B2C growth in the Asia-Pacific region. Accord-ing to a 2001 eMarketer estimate, B2B revenues in the region are expected to exceed $300 billion by 2004. Table 1 shows the projected size of B2B e-commerce by region for the years 2000-2004. Table 1: Projected B2B E-Commerce by Region, 2000-2004 ($billions) Box 1: Benefits of B2B E-Commerce in Developing Markets 3.1.1 Benefits of B2B E-Commerce The impact of B2B markets on the economy of developing countries is evident in the following: 17 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY 3.1.1.1 Transaction Costs There are three cost areas that are significantly reduced through the conduct of B2B e-commerce. First is the reduction of search costs, as buyers need not go through multiple intermediaries to search for information about suppliers, products and prices as in a traditional supply chain. In terms of effort, time and money spent, the Internet is a more efficient information channel than its traditional counterpart. In B2B markets, buyers and sellers are gathered together into a single online trading community, reducing search costs even further. Second is the reduction in the costs of processing transactions (e.g. invoices, purchase orders and payment schemes), as B2B allows for the automation of transaction processes and therefore, the quick implementation of the same compared to other channels (such as the telephone and fax). Efficiency in trading processes and transactions is also enhanced through the B2B e-market 9s ability to process sales through online auctions. Third, online processing improves inventory management and logistics. 3.1.1.2 Disintermediation Through B2B e-markets, suppliers are able to interact and transact directly with buyers, thereby eliminating intermediaries and distributors. However, new forms of intermediaries are emerging. For instance, e-markets themselves can be considered as intermediaries because they come between suppliers and customers in the supply chain. 3.1.1.3 Transparency in Pricing Among the more evident benefits of e-markets is the increase in price transparency. The gathering of a large number of buyers and sellers in a single e-market reveals market price information and transaction processing to participants. The Internet allows for the publication of information on a single purchase or transaction, making the information readily accessible and available to all members of the e-market. Increased price transparency has the effect of pulling down price differentials in the market. In this context, buyers are provided much more time to compare prices and make better buying decisions. Moreover, B2B e-markets expand borders for dynamic and negotiated pricing wherein multiple buyers and sellers collectively participate in price-setting and two-way auctions. In such environments, prices can be set through automatic matching of bids and offers. In the emarketplace, the requirements of both buyers and sellers are thus aggregated to reach competitive prices, which are lower than those resulting from individual actions. 18 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY 3.1.1.3 Economies of Scale and Network Effects The rapid growth of B2B e-markets creates traditional supply-side cost-based economies of scale. Furthermore, the bringing together of a significant number of buyers and sellers provides the demand-side economies of scale or network effects. Each additional incremental participant in the e-market creates value for all participants in the demand side. More participants form a critical mass, which is key in attracting more users to an e-market. 3.2 What is B2C E-Commerce? Business-to-consumer e-commerce, or commerce between companies and consumers, involves customers gathering information; purchasing physical goods (i.e., tangibles such as books or consumer products) or information goods (or goods of electronic material or digitized content, such as software, or e-books); and, for information goods, receiving products over an electronic network. It is the second largest and the earliest form of e-commerce. Its origins can be traced to online retailing (or e-tailing). Thus, the more common B2C business models are the online retailing companies such as Amazon.com, Drugstore.com, Beyond.com, Barnes and Noble and ToysRus. Other B2C examples involving information goods are E-Trade and Travelocity. The more common applications of this type of e-commerce are in the areas of purchasing products and information, and personal finance management, which pertain to the management of personal investments and finances with the use of online banking tools (e.g., Quicken). eMarketer estimates that worldwide B2C e-commerce revenues will increase from US$59.7 billion in 2000 to US$428.1 billion by 2004. Online retailing transactions make up a significant share of this market. eMarketer also estimates that in the Asia-Pacific region, B2C revenues, while registering a modest figure compared to B2B, nonetheless went up to $8.2 billion by the end of 2001, with that figure doubling at the end of 2002-at total worldwide B2C sales below 10%. B2C e-commerce reduces transactions costs (particularly search costs) by increasing consumer access to information and allowing consumers to find the most competitive price for a product or service. B2C e-commerce also reduces market entry barriers since the cost of putting up and maintaining a Web site is much cheaper than installing a cbrick-and-mortar d structure for a firm. In the case of information goods, B2C e-commerce is even more attractive because it saves firms 19 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY from factoring in the additional cost of a physical distribution network. Moreover, for countries with a growing and robust Internet population, delivering information goods becomes increasingly feasible. 3.3 What is B2G E-Commerce? Business-to-government e-commerce or B2G is generally defined as commerce between companies and the public sector. It refers to the use of the Internet for public procurement, licensing procedures, and other government-related operations. This kind of e-commerce has two features: first, the public sector assumes a pilot/leading role in establishing e-commerce; and second, it is assumed that the public sector has the greatest need for making its procurement system more effective. Web-based purchasing policies increase the transparency of the procurement process (and reduces the risk of irregularities). To date, however, the size of the B2G e-commerce market as a component of total e-commerce is insignificant, as government e-procurement systems remain undeveloped. 3.4 What is C2C E-Commerce? Consumer-to-consumer e-commerce or C2C is simply commerce between private individuals or consumers. This type of e-commerce is characterized by the growth of electronic marketplaces and online auctions, particularly in vertical industries where firms/businesses can bid for what they want from among multiple suppliers. It perhaps has the greatest potential for developing new markets. This type of e-commerce comes in at least three forms: " auctions facilitated at a portal, such as eBay, which allows online real-time bidding on items being sold in the Web; " peer-to-peer systems, such as the Napster model (a protocol for sharing files between users used by chat forums similar to IRC) and other file exchange and later money exchange models; and " classified ads at portal sites such as Excite Classifieds and eWanted (an interactive, online marketplace where buyers and sellers can negotiate and which features cBuyer Leads & Want Ads d). 20 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY Consumer-to-business (C2B) transactions involve reverse auctions, which empower the consumer to drive transactions. A concrete example of this when competing airlines gives a traveler best travel and ticket offers in response to the traveler 9s post that she wants to fly from New York to San Francisco. There is little information on the relative size of global C2C e-commerce. However, C2C figures of popular C2C sites such as eBay and Napster indicate that this market is quite large. These sites produce millions of dollars in sales every day. 3.5 What is M-Commerce? M-commerce (mobile commerce) is the buying and selling of goods and services through wireless technology-i.e., handheld devices such as cellular telephones and personal digital assistants (PDAs). Japan is seen as a global leader in m-commerce. As content delivery over wireless devices becomes faster, more secure, and scalable, some believe that m-commerce will surpass wireline e- commerce as the method of choice for digital commerce transactions. This may well be true for the Asia-Pacific where there are more mobile phone users than there are Internet users. Industries affected by m-commerce include: " Financial services : including mobile banking (when customers use their handheld devices to access their accounts and pay their bills), as well as brokerage services (in which stock quotes can be displayed and trading conducted from the same handheld device); " Telecommunications : in which service changes, bill payment and account reviews can all be conducted from the same handheld device; " Service/retail : as consumers are given the ability to place and pay for orders on-the-fly; and " Information services : which include the delivery of entertainment, financial news, sports figures and traffic updates to a single mobile device. Forrester Research predicts US$3.4 billion sales closed using PDA and cell phones by 2005 (See Table 2). 21 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY Table 2: Forrester 9s M-Commerce Sales Predictions, 2001-2005 3.6 Advantages of E-Commerce for Businesses? E-commerce serves as an cequalizer d . It enables start-up and small- and medium-sized enterprises to reach the global market. Case 1: Leveling the Playing Field through E-commerce: The Case of Amazon.com Amazon.com is a virtual bookstore. It does not have a single square foot of bricks and mortar retail floor space. Nonetheless, Amazon.com is posting an annual sales rate of approximately $1.2 billion, equal to about 235 Barnes & Noble (B&N) superstores. Due to the efficiencies of selling over the Web, Amazon has spent only $56 million on fixed assets, while B&N has spent about $118 million for 235 superstores. (To be fair, Amazon has yet to turn a profit, but this does not obviate the point that in many industries doing business through e-commerce is cheaper than conducting business in a traditional brick-and-mortar company.) However, this does not discount the point that without a good e-business strategy, e-commerce may in some cases discriminate against SMEs because it reveals proprietary pricing information. A sound e-business plan does not totally disregard old economy values. The dot-com bust is proof of this. Case 2: Lessons from the Dot Com Frenzy According to Webmergers.com statistics, about 862 dot-com companies have failed since the height of the dot-com bust in January 2000. Majority of these were ecommerce and content companies. The shutdown of these companies was followed by the folding up of Internet-content providers, infrastructure companies, Internet service providers, and other providers of dial-up and broadband Internet-access services. 22 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY From the perspective of the investment banks, the dot-com frenzy can be likened to a gamble where the big money players were the venture capitalists and those laying their bets on the table were the small investors. The bust was primarily caused by the players 9 unfamiliarity with the sector, coupled with failure to cope with the speed of the Internet revolution and the amount of capital in circulation. Internet entrepreneurs set the prices of their goods and services at very low levels to gain market share and attract venture capitalists to infuse funding. The crash began when investors started demanding hard earnings for sky-high valuations. The Internet companies also spent too much on overhead before even gaining a market share. E-commerce makes cmass customization d possible . E-commerce applications in this area include easy-to-use ordering systems that allow customers to choose and order products according to their personal and unique specifications. For instance, a car manufacturing company with an e-commerce strategy allowing for online orders can have new cars built within a few days (instead of the several weeks it currently takes to build a new vehicle) based on customer 9s specifications. This can work more effectively if a company 9s manufacturing process is advanced and integrated into the ordering system. E-commerce allows cnetwork production. d This refers to the parceling out of the production process to contractors who are geographically dispersed but who are connected to each other via computer networks. The benefits of network production include: reduction in costs, more strategic target marketing, and the facilitation of selling add-on products, services, and new systems when they are needed. With network production, a company can assign tasks within its non-core competencies to factories all over the world that specialize in such tasks (e.g., the assembly of specific components). 4.0 CONCLUSION There are indeed several forms of e-commerce and there is the likelihood that there will be more.in time to come. We need not be bordered muc bwith the types of e-commerce, but its relivance to business. The impacts of e-commerce to business are obvious and more benefits will be seen as more businesses and organizations begins to embrace e-commerce. 23 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY 5.0 SUMMARY i. The major different types of e-commerce are: business-to-business (B2B); business-to-consumer (B2C); business-to- government (B2G); consumer-to-consumer (C2C); and mobile commerce (m-commerce). ii.The impact of B2B markets on the economy of developing countries is evident. iii.Business-to-consumer e-commerce, or commerce between companies and consumers, involves customers gathering information; purchasing physical goods (i.e., tangibles such as books or consumer products) or information goods (or goods of electronic material or digitized content, such as software, or e-books); and, for information goods, receiving products over an electronic network. iv.Business-to-government e-commerce or B2G is generally defined as commerce between companies and the public sector. It refers to the use of the Internet for public procurement, licensing procedures, and other government-related operations. v.Consumer-to-consumer e-commerce or C2C is simply commerce between private individuals or consumers. vi.M-commerce (mobile commerce) is the buying and selling of goods and services through wireless technology-i.e., handheld devices such as cellular telephones and personal digital assistants (PDAs). Japan is seen as a global leader in m-commerce. vii.Internet entrepreneurs set the prices of their goods and services at very low levels to gain market share and attract venture capitalists to infuse funding 6.0 TUTOR-MARKED ASSIGNMENT 1. Briefly discuss the industries affected by m-commerce. 2. Mention five components of the architecture of Business-to-Business form of e-commerce. 24 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY 7.0 REFERENCES/FURTHER READINGS Anita Rosen (2000). The E-commerce Question and Answer Book (USA: American Management Association,). MK, Euro Info Correspondence Centre (Belgrade, Serbia), cE-commerce-Factor of Economic Growth. d Thomas L. Mesenbourg, Measuring Electronic Business: Definitions, Underlying Concepts, and Measurement Plans. Definition adapted and expanded from Emmanuel Lallana, Rudy Quimbo, Zorayda Ruth Andam, ePrimer: An Introduction to eCommerce (Philippines: DAI-AGILE, 2000). Lallana, Quimbo, Andam, 4. Cf. Ravi Kalakota and Andrew B. Whinston, (1997). Electronic Commerce: A Manager 9s Guide (USA: Addison Wesley Longman, Inc. cE-commerce/Internet: B2B: 2B or Not 2B? d (Goldman Sachs Investment Research, November 1999), v. 1.1. TA Project, cE-commerce d Traderinasia.com; available from http://www.traderinasia.com/classifieds.html; Internet; accessed 26 September 2002. whatis.com, searchWebServices.com; available from http://whatis.com/ Michael Chait, cIs the Dot-Com Bust Coming to an End? d (July 8, 2002). Reshma Kapadia, cWhat Caused the Dot-Com Bust? d Reid Goldscborough, cViewpoint-Personal Computing: Forget the Dot-Com Bust, There 9s Still Money to Be Made. d whatis.com, searchEBusiness.com. Lynda M. Applegate, (2002). Excerpts form the E-business Handbook , The St. Lucie Press. Suganthi, Balachandher and Balachandran, cInternet Banking Patronage: An Empirical Investigation of Malaysia. d 25 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY Andrea Goldstein and David O 9Connor, E-commerce for Development: Prospects and Policy Issues, (OECD Development Centre, September 2000). Noah Elkin, cDeveloping Countries Meeting e-business Challenge, d February 5, 2003. Emmanuel Lallana, Patricia J. Pascual, and Zorayda Ruth Andam, SMEs and E-commerce: The Philippine Case; Cf. SMEs and E-commerce: The Case of Indonesia, prepared for The Asia Foundation by Castle Asia. Nancy Hafkin and Nancy Taggart, (June 2001). cGender, Information Technology, and Developing Countries: An Analytical Study . Department of Trade and Communications. cAn Infocomms Policy for the Information Economy: A Consultative Paper, d December 2000. Lallana, Pascual and Andam; Cf. SMEs and E-commerce : The Case of Indonesia. 26 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY UNIT 3 APPLICATIONS AND USE IN PAYMENT SYSTEMS CONTENTS 1.0 Introduction 2.0 Objectives 3.0 Main Content 3.1 How is E-Commerce Helpful to the Consumer 3.2 How are Business Relationships Transformed through E-Commerce 3.3 How does E-commerce Link Customers, Workers, Suppliers, Distributors and Competitors 3.4 What are the Relevant Components of an E-commerce Model? 3.5 What are the Existing Practices in Developing Countries with Respect to Buying and Paying Online? 3.5.1 Traditional Payment Methods 3.5.2 Electronic Payment Methods 3.6 What is an Electronic Payment System? Why is it Important? 3.7 E-Banking 3.8 E-Tailing 3.9 What is Online Publishing? What are its Most Common Applications? 4.0 Conclusion 5.0 Summary 6.0 Tutor-Marked Assignment 7.0 References/Further Readings 1.0 INTRODUCTION Various applications of e-commerce are continually affecting trends and prospects for business over the Internet, including e-banking, e-tailing and online publishing/online retailing. A more developed and mature e-banking environment plays an important role in e-commerce by encouraging a shift from traditional modes of payment (i.e., cash, checks or any form of paper-based legal tender) to electronic alternatives (such as e-payment systems), thereby closing the e-commerce loop. 27 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY 2.0 OBJECTIVES At the end of this unit the student is expected to: " answer the question of the extent to which e-commerce helps consumers " have an idea how business relationships can be transformed by e-commerce " differentiate traditional forms of doing business from the new way of doing business electronically " know the basic components of e-commerce models " define electronic form of payment and its importance " know some applications e-commerce in banking and shopping. 3.1 How is E-Commerce Helpful to the Consumer? In C2B transactions, customers/consumers are given more influence over what and how products are made and how services are delivered, thereby broadening consumer choices. E-commerce allows for a faster and more open process, with customers having greater control. E-commerce makes information on products and the market as a whole readily available and accessible, and increases price transparency, which enable customers to make more appropriate purchasing decisions. 3.2 How are Business Relationships Transformed through E-Commerce? E-commerce transforms old economy relationships (vertical/linear relationships) to new economy relationships characterized by end-to-end relationship management solutions (integrated or extended relationships). 3.3 How does E-commerce Link Customers, Workers, Suppliers, Distributors and Competitors? E-commerce facilitates organization networks, wherein small firms depend on cpartner d firms for supplies and product distribution to address customer demands more effectively. To manage the chain of networks linking customers, workers, suppliers, distributors, and even competitors, an integrated or extended supply chain management solution is needed. Supply chain management (SCM) is defined as the supervision of materials, information, and finances as they move from supplier to manufacturer to wholesaler to retailer to consumer. It involves the coordination and integration of these flows 28 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY both within and among companies. The goal of any effective supply chain management system is timely provision of goods or services to the next link in the chain (and ultimately, the reduction of inventory within each link). There are three main flows in SCM, namely: " The product flow, which includes the movement of goods from a supplier to a customer, as well as any customer returns or service needs; " The information flow, which involves the transmission of orders and the update of the status of delivery; and " The finances flow, which consists of credit terms, payment schedules, and consignment and title ownership arrangements. Some SCM applications are based on open data models that support the sharing of data both inside and outside the enterprise, called the extended enterprise, and includes key suppliers, manufacturers, and end customers of a specific company. Shared data resides in diverse database systems, or data warehouses, at several different sites and companies. Sharing this data cupstream d (with a company 9s suppliers) and cdownstream d (with a company 9s clients) allows SCM applications to improve the time-to-market of products and reduce costs. It also allows all parties in the supply chain to better manage current resources and plan for future needs. Figure 1: Old Economy Relationships vs. New Economy Relationships 3.4 What are the Relevant Components of an E-Commerce Model? An e-business e-commerce model must have: 1. A shared digital business infrastructure , including digital production and distribution technologies (broadband/wireless networks, content creation technologies and information 29 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY management systems), which will allow business participants to create and utilize network economies of scale and scope; 2. A sophisticated model for operations , including integrated value chains-both supply chains and buy chains; 3. An e-business management model , consisting of business teams and/or partnerships; and 4. Policy, regulatory and social systems -i.e., business policies consistent with e-commerce laws, teleworking/virtual work, distance learning, incentive schemes, among others. Case 1: Dawson 9s Antiques and Sotheby 9s: A Case of Creative Positioning of an E-Business Strategy Dawson 9s Antiques is a 23-year-old small antique business. With the emergence of online auction sites, the owner, Linda Dawson, foresaw the need not only to accommodate the Internet in their business strategy but also to take advantage of it in order to survive as a business. This came with the recognition that many of her clients were exposed to a wide range of antiques from competitors at online auction sites at prices lower than she was charging. Meanwhile, Sotheby 9s, then a growing online auction site (and now one of the largest online auction sites), realized the merit of increasing its auction inventory to attract a bigger audience on the Internet. It revised its Internet strategy by opening its Web site, sothebys.com, to smaller dealers and auction sites instead of competing directly with its competitors in the online auction business. With this approach, Sotheby experienced an exponential growth in its inventory, which attracted a bigger market. Dawson 9s enlistment in Sotheby 9s was instrumental in expanding its client base. To make things easier, Sotheby 9s not only provided the Web site for its members (Dawson 9s included) but also arranged to handle all billing and collection. Under the new strategy, Sotheby 9s enlisted 4,660 members, which translated to an expansion of its auction inventory by five times the previous average stock or about 5,000 lots per week. For Dawson, e-business sales accounted for 25% of total sales in mid-2000 and 50% in January 2001. 3.5 What are the Existing Practices in Developing Countries with Respect to Buying and Paying Online? In most developing countries, the payment schemes available for online transactions are the following: 30 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY 3.5.1 Traditional Payment Methods " Cash-on-delivery. Many online transactions only involve submitting purchase orders online. Payment is by cash upon the delivery of the physical goods. " Bank payments. After ordering goods online, payment is made by depositing cash into the bank account of the company from which the goods were ordered. Delivery is likewise done the conventional way. 3.5.2 Electronic Payment Methods " Innovations affecting consumers, include credit and debit cards, automated teller machines (ATMs), stored value cards, and e-banking. " Innovations enabling online commerce are e-cash, e-checks, smart cards, and encrypted credit cards. These payment methods are not too popular in developing countries. They are employed by a few large companies in specific secured channels on a transaction basis. " Innovations affecting companies pertain to payment mechanisms that banks provide their clients, including inter-bank transfers through automated clearing houses allowing payment by direct deposit. 3.6 What is an Electronic Payment System? Why is it Important? An electronic payment system (EPS) is a system of financial exchange between buyers and sellers in the online environment that is facilitated by a digital financial instrument (such as encrypted credit card numbers, electronic checks, or digital cash) backed by a bank, an intermediary, or by legal tender. EPS plays an important role in e-commerce because it closes the e-commerce loop. In developing countries, the underdeveloped electronic payments system is a serious impediment to the growth of e-commerce. In these countries, entrepreneurs are not able to accept credit card payments over the Internet due to legal and business concerns. The primary issue is transaction security. The absence or inadequacy of legal infrastructures governing the operation of e-payments is also a concern. Hence, banks with e-banking operations employ service agreements between themselves and their clients. The relatively undeveloped credit card industry in many developing countries is also a barrier to e-commerce. Only a small segment of the 31 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY population can buy goods and services over the Internet due to the small credit card market base. There is also the problem of the requirement of cexplicit consent d (i.e., a signature) by a card owner before a transaction is considered valid-a requirement that does not exist in the U.S. and in other developed countries. What is the confidence level of consumers in the use of an EPS? Many developing countries are still cash-based economies. Cash is the preferred mode of payment not only on account of security but also because of anonymity, which is useful for tax evasion purposes or keeping secret what one 9s money is being spent on. For other countries, security concerns have a lot to do with a lack of a legal framework for adjudicating fraud and the uncertainty of the legal limit on the liability associated with a lost or stolen credit card. In sum, among the relevant issues that need to be resolved with respect to EPS are: consumer protection from fraud through efficiency in record-keeping; transaction privacy and safety, competitive payment services to ensure equal access to all consumers, and the right to choice of institutions and payment methods. Legal frameworks in developing countries should also begin to recognize electronic transactions and payment schemes. 3.7 E-Banking E-banking includes familiar and relatively mature electronically-based products in developing markets, such as telephone banking, credit cards, ATMs, and direct deposit. It also includes electronic bill payments and products mostly in the developing stage, including stored-value cards (e.g., smart cards/smart money) and Internet-based stored value products. Payment Methods and Security Concerns: The Case of China In China, while banks issue credit cards and while many use debit cards to draw directly from their respective bank accounts, very few people use their credit cards for online payment. Cash-on-delivery is still the most popular mode of e-commerce payment. Nonetheless, online payment is gaining popularity because of the emergence of Chinapay and Cyber Beijing, which offer a city-wide online payment system. What is the status of e-banking in developing countries? 32 MBE 705 FUNDAMENTALS OF E-COMMERCE/STRATEGY E-banking in developing countries is in the early stages of development. Most banking in developing countries is still done the conventional way. However, there i

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