The implementation of ECommerce(EC) may require several support services. B2B and B2C
applications require payments and order fulfillment; portals require content.
Figure 4.2 portrays the collection of the major EC services. They include: einfrastructure
(mostly technology consultants, system developers and integrators,
hosting, security, wireless, and networks), e-process (mainly payments and logistics),
e-markets (mostly marketing and advertising), e-communities (different
audiences and business partners), e-services (CRM, PRM, and directory services),
and e-content (supplied by content providers). All of these services support the EC
applications in the center of the figure, and all of the services need to be managed.
Here we will focus on two of the above topics—payments and order fulfillment.
For details on the other services, see Turban et al. (2006).
Payments are an integral part of doing business, whether in the traditional way
or online. Unfortunately, in most cases traditional payment systems are not
effective for EC, especially for B2B. Cash cannot be used because there is no
face-to-face contact. Not everyone accepts credit cards or checks, and some buyers
do not have credit cards or checking accounts. Finally, contrary to what
many people believe, it may be less secure for the buyer to use the telephone
or mail to arrange or send payment, especially from another country, than to
complete a secured transaction on a computer. For all of these reasons, a better
way is needed to pay for goods and services in cyberspace. This better way
is electronic payment systems.
ELECTRONIC PAYMENT SYSTEMS. As in the traditional marketplace, so too in
cyberspace, diversity of payment methods allows customers to choose how they
wish to pay. Here we will look at some of the most popular electronic payment
mechanisms.
Electronic Checks. Electronic checks (e-checks) are similar to regular paper
checks. They are used mostly in B2B (Reda, 2002). First, the customer establishes
a checking account with a bank. When the customer contacts a seller
and buys a product or a service, he or she e-mails an encrypted electronic
check to the seller. The seller deposits the check in a bank account, and funds
are transferred from the buyer’s account and into the seller’s account.
Like regular checks, e-checks carry a signature (in digital form) that can be
verified (see echeck.net). Properly signed and endorsed e-checks are exchanged
between financial institutions through electronic clearinghouses (see eccho.org
and Echecksecure from etroqgroup.com for details).
Electronic Credit Cards. Electronic credit cards make it possible to charge
online payments to one’s credit card account. For security, only encrypted
credit cards should be used. Credit card details can be encrypted by using the
SSL protocol in the buyer’s computer (available in standard browsers). (This
process is described in Online File W4.10.)
Here is how electronic credit cards work: When you buy a book from Amazon,
your credit card information and purchase amount are encrypted in your browser. So the information is safe while “traveling” on the Internet. Furthermore,
when this information arrives at Amazon, it is not opened but is transferred automatically
(in encrypted form) to a clearinghouse, where the information is
decrypted for verification and authorization. The complete process of how e-credit
cards work is shown in Figure 4.3. Electronic credit cards are used mainly in B2C
and in shopping by SMEs (small-to-medium enterprises).
Purchasing Cards. The B2B equivalent of electronic credit cards is purchasing
cards. In some countries companies pay other companies primarily by means
of purchasing cards, rather than by paper checks. Unlike credit cards, where
credit is provided for 30 to 60 days (for free) before payment is made to the
merchant, payments made with purchasing cards are settled within a week.
Purchasing cards typically are used for unplanned B2B purchases, and corporations
generally limit the amount per purchase (usually $1,000 to $2,000).
Purchasing cards can be used on the Internet much like regular credit cards.
They expedite the process of unplanned purchases, usually as part of desktop
purchasing (described earlier).
Electronic Cash. Cash is the most prevalent consumer payment instrument
in offline transactions. Some buyers pay with cash because they do not have
checks or credit cards, or because they want to preserve their anonymity. Traditional
brick-and-mortar merchants prefer cash since they do not have to pay
commissions to credit card companies, and they can put the money to use as
soon as it is received. It is logical, therefore, that EC sellers and some buyers
may prefer electronic cash. Electronic cash (e-cash) appears in three major forms:
stored-value money cards, smart cards, and person-to-person payments.
Stored-Value Money Cards. Although they look like credit cards, storedvalue
money cards actually are a form of e-cash. The cards that you use to
pay for photocopies in your library, for transportation, or for telephone calls are
stored-value money cards. They allow a fixed amount of prepaid money to be
stored. Each time you use the card, the amount is reduced. Millions of travelers,
around the world, pay for transportation with such cards. Some of these
cards are reloadable, and some are discarded when the money is depleted.
Cards with stored-value money can be also purchased for Internet
use. To use such cards, you enter a third-party Web site and provide
an ID number and a password, much as you do when you use a prepaid
phone card. The money can be used only in participating stores
online.
applications require payments and order fulfillment; portals require content.
Figure 4.2 portrays the collection of the major EC services. They include: einfrastructure
(mostly technology consultants, system developers and integrators,
hosting, security, wireless, and networks), e-process (mainly payments and logistics),
e-markets (mostly marketing and advertising), e-communities (different
audiences and business partners), e-services (CRM, PRM, and directory services),
and e-content (supplied by content providers). All of these services support the EC
applications in the center of the figure, and all of the services need to be managed.
Here we will focus on two of the above topics—payments and order fulfillment.
For details on the other services, see Turban et al. (2006).
Payments are an integral part of doing business, whether in the traditional way
or online. Unfortunately, in most cases traditional payment systems are not
effective for EC, especially for B2B. Cash cannot be used because there is no
face-to-face contact. Not everyone accepts credit cards or checks, and some buyers
do not have credit cards or checking accounts. Finally, contrary to what
many people believe, it may be less secure for the buyer to use the telephone
or mail to arrange or send payment, especially from another country, than to
complete a secured transaction on a computer. For all of these reasons, a better
way is needed to pay for goods and services in cyberspace. This better way
is electronic payment systems.
ELECTRONIC PAYMENT SYSTEMS. As in the traditional marketplace, so too in
cyberspace, diversity of payment methods allows customers to choose how they
wish to pay. Here we will look at some of the most popular electronic payment
mechanisms.
Electronic Checks. Electronic checks (e-checks) are similar to regular paper
checks. They are used mostly in B2B (Reda, 2002). First, the customer establishes
a checking account with a bank. When the customer contacts a seller
and buys a product or a service, he or she e-mails an encrypted electronic
check to the seller. The seller deposits the check in a bank account, and funds
are transferred from the buyer’s account and into the seller’s account.
Like regular checks, e-checks carry a signature (in digital form) that can be
verified (see echeck.net). Properly signed and endorsed e-checks are exchanged
between financial institutions through electronic clearinghouses (see eccho.org
and Echecksecure from etroqgroup.com for details).
Electronic Credit Cards. Electronic credit cards make it possible to charge
online payments to one’s credit card account. For security, only encrypted
credit cards should be used. Credit card details can be encrypted by using the
SSL protocol in the buyer’s computer (available in standard browsers). (This
process is described in Online File W4.10.)
Here is how electronic credit cards work: When you buy a book from Amazon,
your credit card information and purchase amount are encrypted in your browser. So the information is safe while “traveling” on the Internet. Furthermore,
when this information arrives at Amazon, it is not opened but is transferred automatically
(in encrypted form) to a clearinghouse, where the information is
decrypted for verification and authorization. The complete process of how e-credit
cards work is shown in Figure 4.3. Electronic credit cards are used mainly in B2C
and in shopping by SMEs (small-to-medium enterprises).
Purchasing Cards. The B2B equivalent of electronic credit cards is purchasing
cards. In some countries companies pay other companies primarily by means
of purchasing cards, rather than by paper checks. Unlike credit cards, where
credit is provided for 30 to 60 days (for free) before payment is made to the
merchant, payments made with purchasing cards are settled within a week.
Purchasing cards typically are used for unplanned B2B purchases, and corporations
generally limit the amount per purchase (usually $1,000 to $2,000).
Purchasing cards can be used on the Internet much like regular credit cards.
They expedite the process of unplanned purchases, usually as part of desktop
purchasing (described earlier).
Electronic Cash. Cash is the most prevalent consumer payment instrument
in offline transactions. Some buyers pay with cash because they do not have
checks or credit cards, or because they want to preserve their anonymity. Traditional
brick-and-mortar merchants prefer cash since they do not have to pay
commissions to credit card companies, and they can put the money to use as
soon as it is received. It is logical, therefore, that EC sellers and some buyers
may prefer electronic cash. Electronic cash (e-cash) appears in three major forms:
stored-value money cards, smart cards, and person-to-person payments.
Stored-Value Money Cards. Although they look like credit cards, storedvalue
money cards actually are a form of e-cash. The cards that you use to
pay for photocopies in your library, for transportation, or for telephone calls are
stored-value money cards. They allow a fixed amount of prepaid money to be
stored. Each time you use the card, the amount is reduced. Millions of travelers,
around the world, pay for transportation with such cards. Some of these
cards are reloadable, and some are discarded when the money is depleted.
Cards with stored-value money can be also purchased for Internet
use. To use such cards, you enter a third-party Web site and provide
an ID number and a password, much as you do when you use a prepaid
phone card. The money can be used only in participating stores
online.
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