Electronic Commerce

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Chapter 5

• Electronic Commerce

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Overview for Today

• Overview of Electronic Commerce
• E-Commerce Growth Pitfalls
• E-Commerce Security
• We wont discuss everything in this chapter, be
  sure to read the rest
• Please ask questions if you have them!

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E-Commerce Application

• Managing traffic flow on Highway 91 near LA,
  California
• Hang tag with chip transmitter
• Prepaid account (much like EZPass)
• Toll road varies from 0.50 to 10.00 to manage
  traffic flow
• Result Saves commuters 40-90 min per day
• What are hidden abilities ??

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Overview of E-Commerce

• When did e-commerce begin?
• What are benefits of E-commerce to
• Consumers?
• Sellers?
• Society?
• Are there any drawbacks?

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A Few Growth Statistics

• 1995 e-mail USPS pc tv
• 1997 50 US households have a computer
• 1999 205 million web users, Datavoice
• Growth rates of up to 20 monthly
• 2000 30 million people used online trading
• 2003 70 S Korean homes have broadband
  connection
• 2003 1.13 billion fixed-line users and 1.16
  billion mobile phone uses of the Internet
• 2008 China US in population internet usage

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More E-Commerce Stats

• As of March 2004 (CNN)
• Sm businesses xact 2B in 2003 (2x 2002)
• 430,000 busn indiv make a living on e-bay
• E-commerce growth rates of 30 per quarter (trad
  sales 5 annually)

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But Thats Not All That Grew

• 2001 50B lost in world-wide shipping fraud each
  year through e-commerce
• 2002 65 of all FTC complaints derive from
  on-line auctions
• CNN Video 3/04 Auctioning Stolen Items
• 2004 10M ID theft victims in US
• Videos ID theft in news, Identity Theft
• Spent 14-16 months and 1000 to fix
• About 11 comes from Internet
• 2005 Data Theft Costs in the US
• Consumers 6B
• Organizations 58B

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Larger Scope Failures

• Numerous .com failures resulting from
• Lack of strategy / Incorrect business models
  (Godiva example of online storefront)
• Extreme competition low prices
• Lack of investor funding
• Inability to attract customers
• Inexperienced management

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Electronic Payments

• Traditional payments dont work well
• Why not?
• What about cash (will cash ever go away?)
• Secure transactions and payments are required
• What does this mean?
• How is security achieved?

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Encryption, Part I

• Single-Key (symmetric encryption)
• Encryption decryption with same key
• This works well until
• Public/Private Key (PGP)
• Uses 2 keys 1) public key shared with all, 2)
  private key held by you alone
• Keys are complimentary
• But how do you know private key holder is who
  they say they are?
• Clipper Chip, DVD Encryption

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Encryption, Part II

• Digital Certificates
• Provided by a Certificate Authority verisign,
  netegrity
• Verifies that a specific public key belongs to a
  specific individual
• Great complement to encryption

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Securing Your Transactions

• Be watchful for SpyWare
• Gathers information about a computer user and
  transmits that information to an external entity
  without your knowledge or consent
• CNN video Spyware Privacy
• Use AdAware, SpyBot, others for removal
• Be wary of public use computers
• Running Programs
• Keyboard Loggers
• Listening Devices

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Avoiding Fraud

• Buyers and sellers never meet face to face
• Higher chance of fraud crime
• Internet stock fraud, recent cases
• Investment firms selling non-existent funds
• Many victims fall prey to social engineering
  and Phishing scams (spam)
• CNN video E-Mail Scams
• The Nigerian Letter or 419 Scam
• PayPal Example http//www.antiphishing.org/phishin
  g_archive/06-25-04_PayPal_(Verify_and_update_your_
  PayPal_information).html
• Always Resolve the IP address http//www.webyield
  .net/domainquery.html

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Buyer Protection

• Look for well-known brand names
• Make sure these sites are authentic
• Assuming the site is legit
• Read refund, warrantee information
• Compare prices The deal of a lifetime is often
  the scam of a lifetime!
• Know your shoppers rights
• They can be found online

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E-Commerce and IBM

• E-commerce statistics in 1998 and 1999
• Sales over the web 3.3B 14B
• Self serve cust xacts 14M 28M (reduction
  in support calls and staff)
• Online Partners 7,000 13,000
• Web Procurement 1B 13B

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Hospitals Use EDI to Cut Costs

• 15,000 purchase orders generated 1 yr
• Average cost of 70 per PO
• EDI can reduce cost to 4 per Purch Order
• Savings of 840,000 per hospital per year!
• Investment required for EDI
• Approximately 8k to 15k

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Important Concepts to Know

• What is Electronic Commerce?
• Preventing Fraud
• Security Authentication

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For Next Time

• For Next Time
• Start Chapter on Security
• Review for Exam (see review sheet)
• Exam on Wed Sept 25th