eCommerce and Online payments

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Research Seminar on Telecommunications
BusinessT-109.7510spring 2006

• eCommerce and Online payments
• Ari Koponen

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Agenda

• eCommerce and different eCommerce types
• Online Payments
• Security Issues related to Online Payment
• SSL SET protocols
• Case Finnair
• Conclusions

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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

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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.

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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

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e-Commerce Disadvantages

• Hidden costs
• Vulnerability to technical failure
• Lack of security
• Invasion of privacy
• Low service levels
• Legal issues

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Tradional vs. eCommerce
Can reach all 275 million people 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
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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

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Different eCommerce types

• 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

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Different eCommerce types

• Consumer to Consumer (C2C)

• 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

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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 users position.
• Access to user profiles - Information and
  services can be adapted to the users
  preferences.

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eCommerce success area

• Adult
• Travel / Tourism
• Retail - items that dont 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)

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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 gt they
  rather do business the old fashion way (money in
  the mattress)

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Agenda

• eCommerce and different eCommerce types
• Online Payments
• Security Issues related to Online Payment
• SSL SET protocols
• Case Finnair
• Conclusions

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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

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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

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High Level Online Purchasing Architecture
Seller
Buyers
Local Processing
Home Pages
Order processing, Inventory, payment
Back-end Integration
Front-end Integration
Supply Chain Management
Business layer
External Partner Network
Order processing, Inventory, payment
Catalog
Business
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Agenda

• eCommerce and different eCommerce types
• Online Payments
• Security Issues related to Online Payment
• SSL SET protocols
• Case Finnair
• Conclusions

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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.

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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
  Center
• Data is on complaints by consumers.

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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

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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.

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Agenda

• eCommerce and different eCommerce types
• Online Payments
• Security Issues related to Online Payment
• SSL SET protocols
• Case Finnair
• Conclusions

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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

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SSL ,Security Socket Layer

• SSL was created with 3 primary goals in mind
• Prevent a third party from listening in on a
  web transaction.
• Ensure that data hasnt been tampered with, while
  in route from source to destination.
• Finally, both parties want to be sure that they
  are communicating with whom they think they are
  communicating with.

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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

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SET Transaction
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Agenda

• eCommerce and different eCommerce types
• Online Payments
• Security Issues related to Online Payment
• SSL SET protocols
• Case Finnair
• Conclusions

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Case Finnair

• Booking Enginewas 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

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Agenda

• eCommerce and different eCommerce types
• Online Payments
• Security Issues related to Online Payment
• SSL SET protocols
• Case Finnair
• Conclusions

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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