ecommerce and online payments ari koponen

Operations Logistics/WS

Research Seminar on Telecommunications

BusinessT-109.7510

spring 2006 eCommerce and Online

paymentsAri Koponen


Agenda

•eCommerce and different eCommerce types

•Online Payments

•Security Issues related to Online Payment

•SSL & SET protocols

•Case Finnair

•Conclusions


What is e-Commerce ?

• Conducting of business transactions…• Sharing of business information, delivery

of information/goods… • Maintaining business and customer

relationships via an electronic network…• E-Commerce affects the way that

business interactions occur, influences how end customers negotiate, order, and pay for goods and services…


What is e-Commerce ?

•Majority of businesses have a presence on the Web

•Global market has attracted millions of businesses and organizations to the Internet and e-commerce

•E-commerce enables businesses to provide services to customers, partners, employees, and the general public.

•Internet is driving the development of a new generation of information systems.


e-Commerce Benefits•Easy comparison shopping

•Reduced costs and increased competition

•Convenience

•24 × 7 × 365 operation

•Global access

•Lower entry barriers

•Increased market (customer) knowledge


e-Commerce Disadvantages•Hidden costs

•Vulnerability to technical failure

•Lack of security

•Invasion of privacy

•Low service levels

•Legal issues


Tradional vs. eCommerce

eCommerceTraditionalIssue

Can reach all 275 millionpeople in the US, or a large portion of the world

Usually a local event. Reaching 10-50K people

Website can process

millions of orders per day

1 Seller can handle only

hundred of people per day

Instant Can take up to 7 business

days

Traditionally or Instantly by

email or download pick up in Person, Mail…

IT –cost of the webpage Employee salaries

Advertising

Sales “counter”

Fund transfer

Delivery

Costs


Different eCommerce types

•Business to Consumer (B2C)– Retail Sales– Customer Support

•24 x 7 access to customers•Global marketing•Mass customization of products/services•Lower costs and higher profits

– No reduced storefront related costs– Eliminate the “middleman” (wholesale…) – Business process efficiencies– Technical Challenges

• International commerce• Multi-lingual content management• Cost effective distribution and fulfillment



•Business to business (B2B)– Many issues are the same as for B2C electronic commerce,

but …– Larger volume orders; ongoing contracts– Established, focused relationships– Joint-planning and partnerships– More precise record keeping (e.g. shipping docs, funds

transfer)– Integration with internal systems desirable– Integration along the value chain (with suppliers) desirable)– Automating supply – Increasing business efficiency – Technical Challenges

• International commerce • Automation of custom, non-consistent processes



– Individual selling to individual By means of electronic auctions or classified ads

– Auctions where buyers and sellers will probably never meet face-to-face

– Sellers post descriptions and buyers submit bids electronically

•Consumer to Consumer (C2C)


eCommerce and different eCommerce types

•Mobile Commerce (m-Commerce)– Access to:

• information, goods and services any time and in any place by mobile device.

– Purchase of• tickets for events, public transport, pay for parking or

carwash, download music or games. – m-commerce features:

• Portability - The customer can access services and be reached anywhere anytime.

• Trustworthiness - Sensitive information can be stored securely on the mobile device, secure transactions can be carried out.

• Localization - Information and services can be adapted to the user‘s position.

• Access to user profiles - Information and services can be adapted to the user‘s preferences.


eCommerce success area •Adult•Travel / Tourism• Retail - items that don’t need personal touch - objectivity in product quality and performance

– music, books, gifts, Computers, electronic items– Auctions

•Real Estate - houses and investment properties.•Customer support services•More efficient and effective processes between businesses

(B 2 B)


eCommerce, not so successful areas•Items which require “touch and trial”

– Luxury goods– Clothes - beyond T-shirts

•Groceries - it works for some people but market is restricted

Note: Many OFF line factors determine success of Online service.

– i.e. if the target segment is elderly => they rather do business the old fashion way (money in the mattress)


Agenda


•Online Payments



•Case Finnair

•Conclusions


Online payments methods

•Virtual credit cards– ePayment systems in which a credit card issuer gives a special

transaction number that can be used online in place of regular credit card numbers

•eWallets– Software component in which a user stores credit card numbers

and other personal information; when shopping online, the user simply clicks the eWallet to automatically fill in information needed to make a purchase

•Smart cards– Electronic card containing an embedded microchip that enables

predefined operations or the addition, deletion, or manipulation of information on the card

– Used to purchase products and services, control access to accounts

•eCash (digital cash): – eCash is purchased from an online currency server– Digital equivalent of paper currency and coins, which enables

secure and anonymous purchase of low-priced items


Online payments software

•Software has typically following components– Front-end

• For Visitors and Customers– Web-based by definition

– Backend• For enterprise business managers

– Merchandisers, Account Managers, Customer Support, etc.

– Middleware• To interface with existing systems

– Customer, Inventory, Credit, Payment and Order Processing systems


High Level Online Purchasing Architecture

Business layer

Orderprocessing,Inventory,payment

Catalog

Back-end Integration

Local Processing

Supply ChainManagement

Fro

nt-e

nd I

nteg

ratio

n

ExternalPartnerNetwork

Buyers Seller

Business

HomePages

Orderprocessing,Inventory,payment


Agenda


•Online Payments



•Case Finnair

•Conclusions


Internet Fraud Statistics, 2005 (USA)• The total loss in 2005 was $13,863,003,

significantly higher than the $5,787,170 reported losts in 2004.

• The average loss in 2005 was $1,917, also much higher than the $895 average loss in 2004.

Source: National Internet Fraud Watch Information Center. Data is on complaints by consumers.


Internet Fraud Statistics, 2005 (USA)Instance % compl. Average Loss

•Auctions 42% $1155– Goods never delivered or misrepresented

•General Merchandise 30% $2528– Goods never delivered or misrepresented

•Nigerian Scam 8% $6937– False promises of riches

•Fake Checks 6% $4361– Consumers paid with phony checks

•Lotteries 4% $2919– Requests for payment to claim lottery

•Info / Adult services 1% $504– Cost and terms of services not disclosed

Source: National Internet Fraud Watch Information CenterData is on complaints by consumers.


Type of problems 2004

•Delivery 41 %– Partial or non-delivery

•Product 25 %– Non Working, not what was ordered

•Price & Payment 8 %– Hidden Cost

•Redress 7 %– Problem solving, warranty

•Contract Terms 6 %– Return Policy

•Other 13 %


What makes Online Payment more safe?•Integrity

– Data is not changed during the transaction•Non-repudiation

– is a way to guarantee that the sender of a message cannot later deny having sent the message and that the recipient cannot deny having received the message.

– Digital signatures•Authenticity

– Identify yourself and prove that.•Confidentiality

– ensures that information can be read only by authorized entities.•Privacy

– Deals with the rights of individuals and organizations to determine the “who, what, when, where, and how” of data use

•Availability– Services is available with reasonable response time for those (and

only those) whom are authorized to use them.


Agenda


•Online Payments



•Case Finnair

•Conclusions


SSL ,Security Socket Layer

•Developed by Netscape (1994+...)

•Meanwhile extended to “Transport Layer Security” (TLS)

•Works at TCP level•“Applications” includes:

– Handshake, Alert, Cipher Spec Change

•Packets encoded by SSL Record Protocol

•Implemented in web server, browser

IP

TCP

SSL Record

Applications


SSL ,Security Socket Layer

• SSL was created with 3 primary goals in mind:1.Prevent a third party from ‘listening in’

on a web transaction.2.Ensure that data hasn’t been tampered

with, while in route from source to destination.

3.Finally, both parties want to be sure that they are communicating with whom they think they are communicating with.


SET , Secure Electronic Transactions •Developed by Visa and MasterCard •Designed to protect credit card transactions

– Confidentiality:•all messages encrypted

– Trust: •all parties must have digital certificates

– Privacy: •information made available only when

and where necessary


SET Transaction


Agenda


•Online Payments



•Case Finnair

•Conclusions


Case Finnair

•Booking Engine—was replaced by Amadeus’ Planitgo•Between March and Decembers 2005, there were 237950 internet bookings

•January – February 2006, 68179 bookings•Travelers Touch Points

– www.finnair.com,• internet campaigns, Finnair plus online, Internet

Booking Engine– Contact center, booking, cancellations, changes– IVR (Interactive Voice Response), schedule info, vacancies– WAP/ SMS services, Schedules, Flight status, access to

Finnair Plus, eCheck-In– Customer feedback (APJ), Customer feedback

• email, phone, and letter or via the web site

http://www.finnair.com/


Agenda


•Online Payments



•Case Finnair

•Conclusions


Conclusions

•From eCommerce to eBusiness– It covers business processes along the

whole value chain •There is expectations for exponential growth.

•Must in the future for Companies•Building a trust is essential

– “Fraud fight” is a continues process

ecommerce and online payments ari koponen

Documents

business interactions

business days

business b2bmany issues

commerce features

b2c electronic commerce

electronic networkecommerce

millions of businesses

consumer c2cecommerce