DMC 1980

MCA
(DISTANCE MODE)
DMC 1621 ELECTRONIC COMMERCE
COURSE MATERIAL
Centre for Distance Education

Anna University Chennai Chennai 600 025
Author Dr .R.Bask ar an r. ka ra
Sr.Lecturer Department of Computer Science and Engineering Anna University Chennai Chennai - 600 025
Reviewer Dr .R.K annan r.R.K .R.Kannan

Professor Department of Computer Science and Engineering Anna University Chennai Chennai - 600 025
Editorial Board Dr .T .V .Geetha Dr.T .T.V .V.Geetha

Dr .H.P eer u Mohamed Dr.H.P .H.Peer eeru

Professor Department of Management Studies Anna University Chennai Chennai - 600 025
Dr .C . Chella ppan Dr.C .C. Chellappan

Dr .A.K annan r.A.K

Copyrights Reserved (For Private Circulation only)
ACKNOWLEDGEMENTS
The author has drawn inputs from several sources for the preparation of this course material, to meet the requirements of the syllabus. The author gratefully acknowledges the following resources 1. Kalakota & Whinston Frontiers of Electronic Commerce, Eleventh Indian Reprint 2003, Pearson Education. 2. Elias M.Awad, Electronic Commerce, PHI ,1st edition, March 2002. 3. David Whitley, E-Commerce, Strategy, Technologies and Applications, Tata Mc Graw Hill, 2001. 4. http://www.wikipedia.com 5. www.w3schools.com
Dr.R.BASKARAN Author
DMC1621 ELECTRONIC COMMERCE
1. INTRODUCTION Networks and Commercial Transactions - Internet and Other Novelties - Electronic Transactions Today Commercial Transactions - Establishing Trust - Internet Environment - Internet Advantage - World Wide Web. 2. SECURITY TECHNOLOGIES Why Internet Is Unsecure - Internet Security Holes - Cryptography : Objective - Codes and Ciphers - Breaking Encryption Schemes - Data Encryption Standard - Trusted Key Distribution and Verification - Cryptographic Applications - Encryption - Digital Signature - Nonrepudiation and Message Integrity. 3. ELECTRONIC PAYMENT METHODS Traditional Transactions : Updating - Offline and Online Transactions - Secure Web Servers - Required Facilities - Digital Currencies and Payment Systems - Protocols for the Public Transport - Security Protocols - SET Credit Card Business Basics. 4. ELECTRONIC COMMERCE PROVIDERS Online Commerce Options - Functions and Features - Payment Systems : Electronic, Digital and Virtual Internet Payment System - Account Setup and Costs - Virtual Transaction Process - InfoHaus - Security Considerations CyberCash: Model - Security - Customer Protection - Client Application - Selling through CyberCash. 5. ONLINE COMMERCE ENVIRONMENTS Servers and Commercial Environments - Payment Methods - Server Market Orientation - Netscape Commerce Server - Microsoft Internet Servers - Digital Currencies - DigiCash - Using Ecash - Ecash Client Software and Implementation - Smart Cards - The Chip - Electronic Data Interchange - Internet Strategies, Techniques and Tools. TEXT BOOK 1.Pete Loshin, Electronic Commerce, 4th Edition, Firewall media, An imprint of laxmi publications Pvt. Ltd., New Delhi, 2004. REFERENCES 1. Jeffrey F.Rayport and Bernard J. Jaworski, Introduction to E-Commerce, 2nd Edition, Tata Mc-Graw Hill Pvt., Ltd., 2003. 2. Greenstein, Electronic Commerce, Tata Mc-Graw Hill Pvt., Ltd., 2000.
CONTENTS
UNIT I INTRODUCTION TO E-COMMERCE
1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 1.14 WHAT IS E-COMMERCE ? E-COMMERCE VS BUSINESS E-COMMERCE VS E-BUSINESS TYPES OF E-COMMERCE 1.4.1 What is B2B e-commerce? B2C E COMMERCE WHAT IS B2G E-COMMERCE ? WHAT IS C2C E-COMMERCE ? WHAT IS M-COMMERCE ? WHAT FORCES ARE FUELING E-COMMERCE ? SESAMi. NET : LINKING ASIAN MARKETS THROUGH B2B HUBS WHAT ARE THE COMPONENTS OF A TYPICAL E-COMMERCE TRANSACTION ? HOW IS THE INTERNET RELEVANT TO E-COMMERCE ? HOW IMPORTANT OF INTRANET FOR A BUSINESS ENGAGING IN E-COMMERCE ? USE OF E-COMMERCE HELPFUL TO THE CONSUMER 1.14.1 Business relationships transformation through e-commerce 1.14.2 E-commerce link customers, workers, suppliers, distributors and competitors THE INTERNET ENVIRONMENT 1.15.2 Punchout from Procurement Systems toWCBE and WCS MPE 1.15.3 Punchout from WCBE and WCS MPE to External Suppliers INTERNET ADVANTAGE 1 2 2 3 3 6 7 7 8 9 9 10 11 12 13 14 14 15 19 22 31
1.15
1.6
UNIT II SECURITY TECHNOLOGIES

2.1 2.2 WHY INTERNET IS INSECURE ? INTERNET SECURITY HOLES ?
i
35 35
2.3
CRYPTOGRAPHY 2.3.1 Objective 2.3.2 Symmetric Cryptography 2.3.4 Public Key Cryptography 2.3.5 Modern Cryptography Systems: A Hybrid Approach 2.3.6 Digital Signatures 2.3.7 Digital Certificates
38 38 38 39 39 40 42
UNIT III ELECTRONIC PAYMENT METHODS

3.1 3.2 3.3 3.4 3.5 DIGITAL CURRENCY E-COMMERCE PAYMENT SYSTEM FINANCIAL CYBER-MEDIARIES SECURITY PROTOCOLS CREDIT CARD BASICS 3.5.1 How credit cards work? 3.5.2 Interest Chagres 3.5.3 Benefits to Customers 3.5.4 Grace Period 3.5.5 Secured Credit Cards 3.5.6 Prepaid Credit Cards 3.5.7 Features 3.5.8 Security 3.5.9 Problems 3.5.10 Profits and Losses 3.5.11 Operating Costs 3.5.12 Chagre Offs 3.5.13 Rewards 3.5.14 Fraud 51 52 53 54 55 55 56 57 57 60 61 61 62 62 64 64 64 65 65
UNIT IV ELECTRONIC COMMERCE PROVIDERS

4.1 4.2 4.3 ELECTRONIC FUND TRANSFER CARD BASED EFT0 TRANSACTION TYPES
ii
67 68 68
4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15
AUTHORISATION AUTHENTICATION FIRST VIRTUAL PAYMENT SYSTEM INTERNET EXCHANGE POINT INTERCHANGE OF TRAFFIC ACROSS AN INTERNET EXCHANGE POINT CYBER CASH SECURITY MODEL ACL BASED SECURITY MODEL CONSUMER PROTECTION VIRTUAL TERMINAL SECURITY CONSIDERATIONS BASIC PRINCIPLES 4.15.1 Confidentiality 4.15.2 Integrity 4.15.3 Availability 4.15.4 Authenticity 4.15.5 Non-Repudiation 4.15.6 Risk Management 4.15.7 Controls 4.15.8 Security Classification For Information 4.15.9 Access Control 4.15.10 Cryptography 4.15.11 Defense in Depth 4.15.12 Process
69 69 70 71 72 72 73 73 73 74 74 75 75 75 76 76 76 76 78 79 80 81 82 83
UNIT V ONLINE COMMERCE ENVIRONMENTS

5.1 SERVER ENVIRONMENT 5.1.1 In hardware 5.1.2 In software 5.1.3 Server Hardware 5.1.4 Server Operting Systems 5.1.5 Server on the Net COMMERCIAL ENVIRONMENT
iii
5.2
89 89 90 90 91 92 92
5.3 5.4 5.5 5.6 5.7 5.8
PAYMENT METHODS 5.3.1 Security key BUSINESS PROCESS ORIENTATION (BPO) MICROSOFT INTERNET SECURITY AND ACCELARATOR SERVER DIGITAL CURRENCY RISK IN DIGITAL CURRENCY SMART CARDS
93 95 95 98 100 101 106
iv
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UNIT I
NOTES
INTRODUCTION TO E-COMMERCE
1.1 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 any form of business transaction in which the parties interact electronically rather than by physical exchanges or direct physical contact. 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. 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 Asias percentage share in worldwide e-commerce revenue from 5% in 2000 to 10% in 2004 (See Figure 1.1).
Figure 1.1 Worldwide E-Commerce Revenue, 2000 and 2004 (as a % share of each country/region)
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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. 1.2 E-COMMERCE VS BUSINESS 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 ones 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: The transformation of an organizations processes to deliver additional customer value through the application of technologies, philosophies and computing paradigm of the new economy. 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 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. 1.3 E-COMMERCE VS 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 1.1).
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Table 1.1 Internet Economy Conceptual Frame

Internet Economy Layer Layer 1 Internet Infrastructure Companies that provide the enabling hardware, software, and networking equipment for internet and for the world wide web Layer 2 Internet Applications Infra structure Companies that make software products that facilitate web transactions: companies that provide web development design and consulting services Internet Commerce Applications Web Development Software internet Consultants Online Training Search Engine Software Web Enabled Data bases Multimedia Applications Layer 3- Internet intermediaries companies that link e- commerce buyers and sellers companies that provide web companies that provide web content companies that provide marketplaces in which e-commerce transactions can occur Market Makers In Vertical Industries Online Travel Agents Online Brokerages Content Aggregators Online Advertisers Internet Ad Brokers Portals/ Content Providers Layer 4- Internet Commerce Companies that sell products or services directly to consumers or businesses
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Types of companies
Networking Hardware / Software Companies Line Acceleration Hardware Manufacturers PC and Server Manufacturers Internet Backbone Providers Internet Service Providers (ISPs) Security vendors Fiber Optics Makers Cisco AOL AT&T Qwest
E-Tailers Online Entertainment and Professional services Manufacturers Selling Online Aidines Selling Online Tickets Fee/ Subscription Based Companies
Examples
Adobe Microsoft IBM Oracle
e-Steel Travelocity eTrade Yahoo! ZDNet
Amazon Com Dell
Based on Centre for Research in Electronic Commerce, University of Texas, Measuring the Internet Economy, 6 June 2000; available from http:// www.Internetindicators.com 1.4 TYPES OF E-COMMERCE The major different types of e-commerce are: business-to-business (B2B); businessto-consumer (B2C); business-to-government (B2G); consumer-to-consumer (C2C); and mobile commerce (m-commerce). 1.4.1 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
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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, XMLenabled 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). eMarketer projects an increase in the share of B2B e-commerce in total global ecommerce 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 1.2).
Figure 1.2. Share of B2B and B2C E-Commerce in Total Global E-Commerce (2000 and 2004)
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Likewise B2B growth is way ahead of B2C growth in the Asia-Pacific region. According to a 2001 e-Marketer estimate, B2B revenues in the region are expected to exceed $300 billion by 2004. Table 1.2 shows the projected size of B2B e-commerce by region for the years 20002004. Table 1.2 Projected B2B E-Commerce by Region, 2000-2004 ($billions)
2000 North America Asia/Pacific Rim Europe Latin America Africa / Middle East TOTAL 2001 2002 563.9 121.2 132.7 17.4 5.9 841.1 2003 964.3 199.3 334.1 33.6 10.6 1,541.9 2004 1,600.8 300.6 797.3 58.4 17.7 2,774.8 As a % of worldwide B2B Commerce. 2004 57.7 10.8 28.7 2.1 0.6 100.00
NOTES
159.2 316.8 36.2 26.2 2.9 1.7 68.6 52.4 7.9 3.2
226.2 448.9
The impact of B2B markets on the economy of developing countries is evident in the following: 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-markets ability to process sales through online auctions. Third, online processing improves inventory management and logistics. 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. 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 emarket reveals market price information and transaction processing to participants. The
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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. 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. 1.5 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 pertains 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%.
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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 brick-andmortar structure for a firm. In the case of information goods, B2C e-commerce is even more attractive because it saves firms 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. 1.6 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 reduce 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. 1.7 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 Buyer Leads & Want Ads).
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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 travelers 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. 1.8 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 wire line 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 onthe-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 1.3). Table 1.3 Forresters M-Commerce Sales Predictions, 2001-2005
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1.9 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. 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 intranets. Among the companies with efficient corporate intranets are Procter and Gamble, IBM, Nestle and Intel. 1.10 SESAMi. NET : LINKING ASIAN MARKETS THROUGH B2B HUBS SESAMi.NET is Asias 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 worlds 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. 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. Brazils Submarino19: Improving Customer Service through the Internet Brazils 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
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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. Technology forces. 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. 1.11 WHAT ARE THE COMPONENTS OF A TYPICAL E-COMMERCE TRANSACTION ? 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
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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 doesnt 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).
NOTES
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 ecommerce 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. 1.12 HOW IS THE INTERNET RELEVANT TO E-COMMERCE ? The Internet allows people from all over the world to get connected inexpensively and reliably. As a technical infrastructure, it is a global collection of networks, connected to share information using a common set of protocols. Also, as a vast network of people and
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information, the Internet is an enabler for e-commerce as it allows businesses to showcase and sell their products and services online and gives potential customers, prospects, and business partners access to information about these businesses and their products and services that would lead to purchase. Before the Internet was utilized for commercial purposes, companies used private networks-such as the EDI or Electronic Data Interchange-to transact business with each other. That was the early form of e-commerce. However, installing and maintaining private networks was very expensive. With the Internet, e-commerce spread rapidly because of the lower costs involved and because the Internet is based on open standards. 1.13 HOW IMPORTANT OF INTRANET FOR A BUSINESS ENGAGING IN E-COMMERCE ? An intranet aids in the management of internal corporate information that may be interconnected with a companys e-commerce transactions (or transactions conducted outside the intranet). Inasmuch as the intranet allows for the instantaneous flow of internal information, vital information is simultaneously processed and matched with data flowing from external e-commerce transactions, allowing for the efficient and effective integration of the corporations organizational processes. In this context, corporate functions, decisions and processes involving e-commerce activities are more coherent and organized. The proliferation of intranets has caused a shift from a hierarchical command-and control organization to an information-based organization. This shift has implications for managerial responsibilities, communication and information flows, and workgroup structures. Adv of E Commerce for business E-commerce serves as an equalizer. It enables start-up and small- and mediumsized enterprises to reach the global market. 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 brickand-mortar company.) However, this does not discount the point that without a good e-business strategy, ecommerce 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.
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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. 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 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 mass customization 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 customers specifications. This can work more effectively if a companys manufacturing process is advanced and integrated into the ordering system. E-commerce allows network production. 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). 1.14 USE OF 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.
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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. 1.14.1 Business relationships transformation 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). 1.14.2 E-commerce link customers, workers, suppliers, distributors and competitors E-commerce facilitates organization networks, wherein small firms depend on partner 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 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 upstream (with a companys suppliers) and downstream (with a companys 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.30
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Figure 1.3 Old Economy Relationships vs. New Economy Relationships 1.15 THE INTERNET ENVIRONMENT As previously explained, with the rapid growth of the Internet, organizations are increasingly using the Web to conduct business with greater speed, reach, and efficiency. This transformation is especially prevalent in business-to-business (B2B) commerce and trade. Many of the Fortune 500 companies have adopted e-procurement systems such as Ariba (see sidebar, Ariba), Commerce One, and mySAP. Many others participate as buyers in e-marketplaces, such as Commerce One MarketSet, Ariba Hosted Market Place, and IBMs WebSphere Commerce Suite, Marketplace Edition (WCS MPE, or MPE for short), among others. B2B buyers have diverse procurement systems, such as those offered by Ariba, Commerce One, and SAP, among others. Each of these procurement systems uses different B2B protocols for interaction with seller systems. Many of these protocols are proprietary and specific to the procurement system. For example, as illustrated in Fig 1.4. Ariba uses the punchout process between the Ariba Order Request Management System (ORMS) and seller systems using their Commerce XML (cXML, or Commerce Extensible Markup Language) specification for the messages. Commerce One uses XML Common Business Library (xCBL) as the format of messages, and mySAP uses the Open Catalog Interface (OCI; for a process similar to punchout) between buyer and seller systems.
Figure 1.4: Business-to-business procurement environment

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Ariba With purchasing managers facing the prospect of tighter corporate budgets, developers Verticalnet Inc., PeopleSoft Inc., and Ariba Inc. are each readying software that they indicate will enable their customers to better manage spending. The goal is to enable companies to more closely tie the process of finding sources of raw goods, negotiating the price for those products, and closing the loop with electronic settlement. Verticalnet has recently released an enhanced Spend Management module as well as the next version of its Metaprise collaborative planning and order management suite. Spend Management introduces a supplier score card and enhanced reporting and analytics, which will let suppliers see through a Web browser how they are serving buyer and performance metrics, such as actual costs versus standard spending. New functionality in Metaprise, which comes from the companys acquisition of Atlas Commerce Inc., facilitates the process of improving requisitions and managing purchase orders. Enhanced logistics functionality integrates shipping updates with third-party logistics providers. Meanwhile, PeopleSoft, of Pleasanton, California, recently announced the general availability of its strategic sourcing suite. The company unveiled PeopleSoft Strategic Sourcing as a collaborative solution that helps companies manage the complex bidding and negotiation process in the procurement of direct goods, services, and large capital expenditures, according to officials. Separately, Ariba, of Sunnyvale, California, recently unveiled its Spend Management Suite, which has been in beta testing. The suite consists of new and enhanced software modules for analysis, sourcing, and procurement to help companies manage their spending before, during, and after the procurement process-stages that Ariba refers to as find it, get it, and keep it. In the find-it category, the new Ariba Analysis module gathers procurement information, which typically resides in the Ariba Buyer platform, accounts payable, and ERP planning systems. It then generates reports to help companies find potential savings. The second new module, called Ariba Contracts, falls into the get-it and keep-it categories, by focusing on the administration of contractsthose being used successfully and those requiring renegotiation. Integrated with Ariba Buyer and Enterprise Sourcing, the module helps companies track and manage contract life cycles. Ariba Invoice, the third new module, automates every stage in the invoicing process to help companies reduce reconciliation cycle times and lets suppliers upload invoices into Ariba Supplier Network and transmit them back to buyers. Many other protocols for B2B processes, many proprietary to procurement and other systems, and others customized for specific partners are being defined and implemented. In addition to the procurement systems, which typically reside within the
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firewall of the buying organizations, marketplaces are being set up on the Internet through which buyers can access a large number of suppliers, typically for specific industry segments. Many of these marketplaces use the same or similar technology to connect to procurement and supplier systems and offer buyers at small and medium-sized businesses access to suppliers. Meanwhile, standards bodies are defining protocols and message formats for B2B processes. One of the early processes was that defined by the Open Buying on the Internet (OBI) consortium, a precursor of the punchout process. The RosettaNet consortium used OBI as a starting point and defined Partner Interchange Processes (PIPs), including both flows and XML-based message formats for interactions between partners. The electronic business XML (ebXML) framework (sponsored by the United Nations Center for the Facilitation of Procedures and Practices for Administration Commerce and Transport [UN/ CEFACT] and the Organization for the Advancement of Structured Information Standards [OASIS]) includes a messaging service, a Collaborative-Protocol Agreement (CPA) specification, and a Business Processes Specification Schema. These are all used for enabling the interaction between business processes. The Web services approach defines both a messaging and a remote procedure call mechanism using Simple Object Access Protocol (SOAP). On top of SOAP, the Web Services Description Language (WSDL) defines a Common Object Request Broker Architecture (CORBA) interface definition language (IDL)-like interface for Web-based B2B remote procedure calls. And, the Universal Description, Discovery, and Integration (UDDI) consortium has defined a directory mechanism for registering and locating businesses on the Web, with an optional WSDL interface specification. The Open Application Group (OAG) has defined Business Object Documents (BODs) for the content of B2B messages. Some of these originally disparate efforts are now coming together. For example, the RosettaNet consortium has announced that they will move to the ebXML messaging protocol, and OAG has announced that they will support ebXML. In spite of these efforts, however, the number of B2B protocols continues to grow. This proliferation of B2B protocols gives rise to several connectivity requirements and problems, as illustrated in Figure 1.5. First, from a suppliers point of view, suppliers need to connect to the many customer procurement systems and private marketplaces, using various B2B protocols. Second, private marketplaces (and, over time, procurement systems as well) need to connect to procurement systems, using different B2B protocols. Third, private marketplaces need to connect to suppliers that may support different B2B protocols. Fourth, private marketplaces need to connect to each other, in order to access suppliers connected to other marketplaces, or to access services offered at other marketplaces.
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Figure 1.5: Business-to-business connectivity requirements Now, lets look at the connectivity requirements for suppliers and private marketplaces, and how suppliers and marketplaces relying on IBMs WebSphere Commerce Business Edition (WCBE), WebSphere Commerce Suite, and Marketplace Edition (WCS MPE) can interoperate within the environment for B2B procurement. Simple B2B connectivity using punchout processes as supported by WCBE are also discussed. Next, marketplace connectivity for emerging asynchronous processes and distributed trading mechanisms, as supported by WCS MPE, are discussed. Finally, the last part of this chapter discusses connectivity, how to use a B2B protocol exchange, and how many of these protocols can be mapped to each otherthus allowing procurement systems and suppliers to use different protocols. Simple B2B Connectivity Using Punchout Now, lets focus on two of the B2B connectivity problems previously mentioned, and illustrated in Figure 1.5. First, lets discuss the supplier connectivity problem and present a solution based on IBMs WCBE for connectivity of suppliers to diverse procurement systems. Second, a discussion of marketplace connectivity takes place, as well as a presentation of a solution based on IBMs WebSphere Commerce Suite and Marketplace Edition (WCS MPE) for connectivity of marketplaces to diverse procurement systems and diverse supplier systems. Most procurement systems and private marketplaces support the notion of punchout (albeit sometimes using a different term, such as RoundTrip, used by Commerce One). A buyer at a procurement system or marketplace selects a remote supplier, and the buyer is automatically logged on to the supplier catalog server and presented with a catalog customized for his organization, with prenegotiated prices. The buyer shops at the site, as the items selected for purchase are being stored in a shopping cart. On checkout, the shopping cart
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contents are sent back to the buyers procurement system for approval. The procurement system provides workflow for approvals and, on approval, a purchase order is sent from the procurement system to the supplier. Additional messages may be exchanged between the supplier and the procurement system, such as shipping notices and invoices. By having punchout capability, suppliers and marketplaces can interoperate with procurement systems or marketplaces, with significant benefits to both suppliers and buyers. For example, IBMs WCBE is a solution for the business-to-consumer trade, whereas WCS MPE supports the private trading exchange customers. Customers can connect to the WCBE Web site, browse through the catalog, and place orders. In the case of WCS MPE, customers have the benefit of working with various trading mechanisms, such as request for quotations (RFQs), auctions, reverse auctions, and exchanges. It is especially useful, given the emerging trends in the industry, that the WebSphere Commerce products have punchout capability and can interoperate with buyers procurement systems and marketplaces. Although WCS MPE supports aggregation of suppliers catalogs, certain suppliers may have enormous catalogs and their systems may include complex configuration tools. Often, it is not feasible to offload supplier catalogs into external marketplaces. Thus, suppliers often have their supply-side Web sites enabled for punchout, and expect WCS MPE to initiate punchout to the supplier Web site. Catalog aggregation in the current WCS MPE product is done using the WebSphere Catalog Manager (WCM) product. WCM supports the loading of catalog data into an electronic marketplace (eMP) database, transforming catalog data from ASCII, spreadsheet, and XML formats into a canonical XML format, and extracting catalog data from any relational database. More enhancements to support industrial catalogs are planned for future versions of WCM. Many large corporations have relatively independent subsidiaries and are classic examples of customers that require support for both receiving punchout requests and initiating punchout requests. Such corporations often have aggregated supplier catalogs across their subsidiaries, so their customers see a unified company-wide catalog and require support for receiving punchout requests from the buyers procurement systems to the aggregated catalog. They also require punchout initiation functionality to connect from their aggregatedcatalog server to individual catalogs supported by their subsidiaries. 1.15.2 Punchout from Procurement Systems to WCBE and WCS MPE For example, IBMs Commerce Integrator is a generic framework that enables WCBE and WCS MPE to handle business-to-business transactions using industry standard protocols. It offers customers the opportunity to integrate their systems with the procurement systems own network of high-volume buyers. Commerce Integrator provides an integrated,
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scalable system that enables suppliers with WCBE to participate as a supplier in the procurement systems marketplace, to increase sales and to enhance their business-tobusiness presence on the Web. Specifically:
Suppliers maintain a single catalog within WCBE and use that catalog to enable their own Web presence as well as to participate in the procurement systems network. Suppliers can take advantage of WCBE connectivity to supply chain management systems, retail business systems, and order management backend systems to automatically flow orders from the buyers procurement system. Suppliers can take advantage of the updated business-to-business features of the WCBE product for using and maintaining information about buyer organizations, buyer-specific catalogs and price lists, and contract pricing.
Figure 1.6 illustrates a high-level view of a typical punch-out flow in which WCBE interoperates with an e-procurement system, which includes the following steps:
Figure 1.6 Typical punchout flow using WCBE and Commerce Integrator. 1. An agent in the buyer organization logs on to the procurement system using the user ID (identifier) and password, and then selects an external catalog. The procurement system authenticates the buyer agent. 2. The procurement system constructs a request to access the external supplier catalog using a user ID and other buyer organization credentials. 3. The Member Subsystem of Commerce Integrator authenticates the buyer agent against the buyer organization data stored in the WCBE database. If successful, the buyer agent is presented with a catalog customized for the buyer organization. 4. The buyer agent browses the catalog in the WCBE database while a shopping cart is created. On checkout, the shopping cart is submitted to WCBE, and a quote is recorded in the database.
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5. Commerce Integrator picks up the quote from WCBE. 6. Commerce Integrator sends the quote to the buyer in the format required by the buyers procurement system. An authorized agent for the buyer is prompted for acceptance of the quote. 7. The authorized agent approves the quote. An order from the procurement system is sent to Commerce Integrator. 8. Commerce Integrator forwards the order to WCBE Further messages, such as advance shipment notices and invoices (not shown in Figure 2.3) are sent from WCBE to the procurement system. Although the punchout flow is similar for most procurement systems, the message format is different for different procurement systems. For example, Ariba uses cXML messages, mySAP uses Hyper Text Markup Language (HTML) name-value pairs, Metiom uses the OBI electronic data interface (EDI) message formats, and Commerce One uses xCBL message formats. There are some differences between the flows, as outlined previously in the B2B protocol exchange. To handle these differences, Commerce Integrator includes some protocol-specific functions, in addition to functions common to all protocols. As shown in Figure 1.6, incoming messages are handled by a common servlet, which identifies the protocol and calls protocol-specific functions that map the message to a common internal format. Then, WCBE commands, shared by all punchout protocols, are invoked. Responses are converted from the common format into protocol-specific formats by Commerce Integrator. Figure 1.7 shows a B2B gateway. The function of the B2B gateway is to provide a means of connecting remote trading partners over the Internet, each using its protocol of choice. Clearly, this functionality facilitates the integration of interenterprise business processes. Although the B2B gateway may support additional functions, such as business process management, audit trails, and intraenterprise connectivity, it is beyond the scope of this chapter to elaborate further on these functions.
NOTES
Figure 1.7: WCBE Commerce Integrator architecture. The protocol associated with an incoming message is identified by the URL to which the request is sent. The use of a single servlet for all requests should have no negative performance impact, because the servlet engine launches a new thread for each request.
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Performance bottlenecks would only be caused by undue contention for shared resources. Were such contention present, it would impact multiple servlets in the same manner as a single servlet. Because the servlet is merely the entry point for requests that quickly fan out to different parts of the server, it is unlikely that the degradation of reliability from the use of a single servlet would be significant. There are two scenarios of interest: one in which there is no separate B2B gateway and one in which there is a gateway present. When there is no B2B gateway, protocolspecific requests are sent to Commerce Integrator, and appropriate commands are invoked. If a B2B gateway is present, the incoming requests are mapped into a common canonical format, and then Commerce Integrator invokes appropriate WCBE commands. Thus, there is a synergistic relation between WCBE/Commerce Integrator and the gateway. 1.15.3 Punchout from WCBE and WCS MPE to External Suppliers A traditional electronic marketplace (eMP) or a private trading exchange (PTX), such as IBM WCS MPE, provides various trading mechanisms: RFQs, contract-based buying, fixed-price buying, auctions, exchange, and so forth. It also provides support for aggregated catalogs. Both buyers and sellers begin by using the catalog to select a product to buy or to sell. When sellers offer products for sale, they specify the method of purchase to be used: RFQ, contracted price, fixed price, auction, or exchange. Buyers must purchase products using the method specified by the seller (with the exception of RFQ, which they can initiate). Aggregating the catalog at the eMP site offers advantages including: it makes a parametric search across suppliers possible, and it enables small businesses, which do not have the infrastructure to host catalogs, to engage in e-commerce. However, aggregating catalogs has its own limitations, including:

It does not preserve each suppliers unique brand and Web site design (it requires direct links to the suppliers Web pages). It supports only static content rather than promoting dynamic, up-to-date information. It provides limited support for suppliers with very large catalogs. It provides no support for product configurators (needed for complex products). It provides limited support for suppliers with fast changing catalogs or pricing[1].
Thus, in situations in which there is a need for product configurators, or if the catalog contains fast changing products and prices, the suppliers have to maintain catalogs at their own sites and not aggregate the catalog onto an eMP. In the common eMP approach, a buyer has access to only the sellers who participate in the marketplace with which the buyer is registered. Similarly, a seller cannot sell goods and services in a marketplace different from the one with which the seller is registered. Now, lets look at a mechanism
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called punchout, in which a buyer in a private marketplace can punch out to a remote supplier to buy fixed-price and contract price offerings. Figure 1.8 shows the flow for setting up a punchout process (steps 1 to 7) from a procurement system (or marketplace) to a supplier site; for example, a WCBE site. Remote suppliers are listed at the procurement system. They may provide their entire catalog remotely using punchout. Alternatively, a supplier may provide a local catalog at the procurement site, with links for specific functions or details. For example, a supplier may use punchout for system configuration, or for parts of the supplier catalog that may change frequently. As shown in Figure 1.6, after selecting a remote supplier for initial or further shopping (step 1), a login request (step 2) is sent to the remote supplier as an XML document, encapsulating the user and organization credentials as well as a URL for postback to the procurement system (used at step 7, as shown in Figure1.7). The remote supplier authenticates this request and returns a URL (step 3) with embedded user information. The clients browser is redirected (step 4) to this URL, allowing the buyer to directly shop (step 5) at that remote site using the appropriate catalog for the buyers organization. At the end of the shopping session, a quote representing the shopping cart is sent back to the client (step 6) and posted back to the procurement system (step 7) at the postback URL referred to previously.
NOTES
Figure 1.8: Typical punchout request flow. After the purchase request (in XML format) is received back at the procurement system (step 7), it is parsed and added to the buyers requisition. The buyer then submits the requisition for approval. After submission, the buyer can then view the submitted requisition and its status, and modify the requisition, if so desired.
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Subsequently, the approver views the submitted requisitions and, optionally, may punch out to the supplier to view details of the requisition. The approver can modify the requisition, if so desired. If the approver rejects the requisition, the status is so indicated, and can be viewed by the buyer. If the requisition is approved, it is converted into one or more purchase orders (POs), and is sent to the supplier(s). The PO is sent as an XML document, in the format required by the supplier. If the remote suppliers system is based on WCBE, the PO is formatted in a common canonical format. Also, if it is an Ariba-compliant supplier, it is formatted in cXML. And, if the format is different, a B2B protocol exchange can be used to convert the PO to the desired format and protocol. When the remote supplier acknowledges the receipt of the PO, the state of the order at the procurement system is updated. Subsequently, additional messages may be sent by the supplier to the procurement system to indicate further events, such as issuing an advance shipping notice. Marketplace Connectivity for Asynchronous Processes As illustrated in Figure 1.9, IBMs WCS MPE provides different trading mechanisms, such as fixed-price buying, contract-based buying, RFQs, auctions, and exchanges[1]. Also, the punchout mechanism can be used for remote supplier integration when dealing with fixed and contract pricing. However, the more advanced trading mechanisms, including RFQs, auctions, and exchanges, cannot be supported by the basic punchout mechanism. This is because the flows between WCS MPE and the remote suppliers for fixed and contract pricing are synchronous, and occur during a real-time session with the buyer, thus making them amenable to the online punchout process. RFQs, auctions, and exchanges involve asynchronous interactions between WCS MPE and the supplier. Next, lets look at how such asynchronous processes are handled. RFQs are used as a typical example. Similar flows and XML document interchanges can be used for other asynchronous trading mechanisms.
Figure 1.9 Trading mechanisms in WCS MPE In WCS MPE, an RFQ is a trading mechanism used when a buying organization attempts to obtain a special price for a purchase, or when a buying organization cannot find an acceptable offering in the eMP aggregated catalog that meets its needs. The RFQ may be issued in order to obtain a special price based on quantity for well-defined items or
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for a group of items. The RFQ may also be issued for unique items based on the buyers description. The request is sent to one or more selling organizations, and these may submit a bid on the RFQ. The selling organizations respond to the RFQ and the buying organization may select one or more winning responses. The result of the RFQ process could be an order placed by the buyer or a contract could be created for the negotiated price. Figure 1.10 shows this process flow in WCS MPE.
NOTES
Figure 1.10 RFQ process flows in WCS MPE. Now, lets look at two different mechanisms for extending the RFQ process to a distributed environment. The first mechanism, referred to as local RFQ, exploits the advantages of aggregating the catalogs at the eMP site, while distributing only the RFQ process. The second mechanism, which is referred to as remote RFQ, allows buyers to connect to a remote WCBE at a supplier or a remote WCS MPE and issue an RFQ. For local RFQs, the catalog is hosted at the WCS MPE site where the buyer is registered. Figure 1.11 shows the process flow for this configuration. The configuration includes the following parties:
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Figure 1.11 RFQ process flow for local RFQ.

One or more buyers An eMP where the buyers are registered One or more remote eMPs One or more sellers registered on the remote eMP
The flow starts with the buyer browsing the catalog on the eMP and creating an RFQ. The RFQ is sent as an XML message to the remote eMP. Upon receiving the RFQ, the remote eMP notifies the target sellers. Each seller views the RFQ and creates a response for it. The asynchronous responses are then sent to the eMP as XML messages. The buyer can check the status of the RFQ at any time. The buyer views the RFQ responses by logging on to the eMP, evaluates them, and selects a winner. Selecting a winner leads either to a purchase order or a negotiated contract. The order or the contract is then sent to the remote eMP or remote seller as an XML message. This solution has the advantages of an aggregated catalog and allows buyers on one eMP access to sellers on a remote eMP, and vice versa. It has, however, the previously mentioned limitations of aggregated catalogs. For remote RFQs, the catalog is hosted either on the remote eMP where the seller is registered, or on the remote sellers Web site. Figure 1.12 shows the process flow for this configuration. This configuration also involves four parties. The flow starts with the buyer selecting on the local eMP a registered remote eMP or a remote seller. The eMP connects the buyer to the remote eMP site. The buyer browses the catalog on the remote eMP and creates an RFQ template. The RFQ template is then sent as an XML message to the eMP. The RFQ template received from the remote eMP is converted into RFQ by providing additional information. It can then be optionally submitted for approval. Finally, it is sent to
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the remote eMP or remote seller as an XML message. The remote eMP notifies the target sellers. The sellers view the RFQ and create responses for it. The responses are then sent to the local eMP as XML messages. The buyer views the RFQ responses by logging on to the eMP, evaluates them, and selects a winner. Selecting a winner leads either to an order or to a negotiated contract. The order or the contract is then sent to the remote eMP or remote seller as an XML message.
NOTES
Figure 1.12 RFQ process flow for remote RFQ. This solution overcomes the limitations of aggregated catalogs for such asynchronous trading mechanisms, and allows buyers on one eMP access to sellers on a remote eMP, and vice versa. This comes at the price of losing the advantages of aggregated catalogs. Connectivity Using a B2B Protocol Exchange As previously mentioned, some suppliers participating in a private marketplace prefer to keep the catalog contents to themselves and not participate in an aggregated catalog hosted by the marketplace. As B2B connectivity becomes increasingly popular, the number of protocols for engaging in B2B transactions continues to grow. Given this growing babelization, it is likely that businesses and marketplaces that need to communicate will be using different protocols. For example, IBM built the B2B/M2M Protocol Exchange, a prototype capable of converting between different protocols. Now, lets look at how the exchange could be used to enable punchout between a buyer and a supplier using different protocols. Although this example is limited to punchout,
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the protocol exchange can cover many other common B2B interactions, such as shopping cart processing and order processing. Suppliers participating in a marketplace may have catalog systems already in place supporting existing standard or proprietary formats. These formats may vary from supplier to supplier. Thus, Supplier A may support cXML punchout messages, Supplier B may support OCI punchout messages, and Supplier C may support some other format. The marketplace punchout function must send punchout messages in the format and protocol that a specific supplier is capable of processing. The B2B protocol exchange is a tool that allows suppliers to interact with buyers whose protocols would otherwise be incompatible. Unlike some kinds of protocol conversions, most B2B protocol conversions cannot be achieved in a stateless manner, that is, in a manner in which the protocol converter has no knowledge of prior events or message exchanges. This is because many of the protocols refer to the session state or to prior messages. In other words, a B2B protocol involves not only message formats, but also message flow and the state of the interchange process between business partners. Thus, session state management is required along with message format translation. A block diagram of a typical environment is shown in Figure 1.13. In this illustration, Buyer 1 and Supplier 1 use protocol A, whereas Buyer 2 and Supplier 2 use protocol B. Information exchange between Buyer 1 and Supplier 2, or between Buyer 2 and Supplier 1, requires the use of the protocol exchange. The presence of the exchange is transparent to buyers as well as suppliers. When Buyer 1 and Supplier 2 are interoperating, Supplier 2 appears to Buyer 1 to be a protocol A supplier, and Buyer 1 appears to Supplier 2 to be a protocol B buyer.
Buyer 1 Protocol A
Supplier 1 Protocol A
Protocol Exchange
Buyer 2 Protocol B
Supplier 2 Protocol B
Figure 1.14 Typical B2B environment using protocol conversion.
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Now, lets look in some detail at a punchout operation such as an Ariba cXML punchout between a buyer and a supplier that use the same protocol. The data flow is illustrated in Figure 1.14, shown earlier. The numerals refer to the process steps described here. To purchase from a network catalog, the buyer typically uses a browser to interact (step 1) with the procurement system, and through the procurement system, establishes a connection to a network catalog hosted on the suppliers behalf. The procurement system thus sends a login request (step 2; a cXML PunchOutSetupRequest) to the supplier system. The login request contains the credentials (userid/password) of the procurement system, a session identifier (<BuyerCookie> in cXML), and the postback URL, which is the HTTP URL at which the procurement system accepts the completed purchase requests (in step 7). The supplier system authenticates the request and responds (step 3) with the URL for accessing the network catalog (in a cXML PunchOutSetupResponse). The procurement system then redirects the browser to the network catalog URL (step 4), and the buyer connects directly to the network catalog system (step 5) bypassing the procurement system. As previously described in some detail, the punchout operation illustrated in Figure 1.15 (between a buyer and a supplier) uses the same protocol. In the event the buyer and supplier use different protocols, they will be unable to support a punchout interoperation unless some mechanism such as the protocol exchange is used. The data flow is shown in Figure 1.16.
NOTES
Figure 1.15 Punchout request flow with protocol conversion.

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When using a protocol exchange for this mapping, the procurement system is configured to treat the exchange as the supplier system. The initial login request is sent to the exchange rather than the target supplier system. The processing required at the exchange at this point may be fairly involved. Typically, the protocol conversion involves two different authentication domains (the source protocol and the target protocol). The exchange must validate the incoming credentials and generate the outgoing credentials for the target protocol domain. In addition, the incoming request typically has an associated session ID (BuyerCookie), which must be recorded and mapped to an equivalent session ID in the target protocol. Also, the postback URL must be saved, and the URL of the exchange must be substituted in the outgoing message. Finally, the target supplier system must be identified, and the converted request must be passed as a new login request (step 2b) to the target supplier system. When the login response (step 3a) is received by the exchange, the response is converted into a protocol A response by the exchange and is returned to the procurement system (step 3b). The procurement system redirects (step 4) the browser to the network catalog site, and the shopping session (step 5) takes place directly between the buyers browser and the network catalog site. At checkout time, the browser accepts the contents of the shopping cart in protocol B format (step 6), and sends it to the exchange (step 7a) rather than to the procurement system, due to the substitution of the exchange URL for the procurement system URL in the protocol A login response. In order to process the checkout, the exchange creates a new checkout page, with the shopping cart converted into the protocol A format, and returns this page to the buyers browser (step 7b). The target URL of the checkout button on this page is the postback URL of the procurement system, which was saved during the translation of the login request in step 2a. The buyer is instructed to perform a second checkout operation (step 7c), which causes the purchase request to be submitted to the procurement system for approval. The second checkout may be hidden from the user by using scripting (JavaScript) in the HTML page generated by the exchange. This particular punchout description is one example of how the exchange flows might operate. Specific protocol flows will vary in the exact details. The protocol exchange runtime is constructed from a set of common protocol objects (Login, ShoppingCart, Order), with plugins for specific functions of the various protocols. For example, the mySAP inbound logon plugin accepts a mySAP logon request and converts it to an internal logon object. The cXML outbound logon plugin converts the logon object into a cXML PunchOutSetup Request. The various shopping cart plugins convert shopping carts in different protocols into a common ShoppingCart object. The exchange also contains code to map between credential domains (from Ariba Network IDs to mySAP OCI userid/ password). Finally, there is a state management framework to maintain the state of a session and keep track of message content (such as the postback URL), which must be extracted from one message, temporarily saved, and replaced in a subsequent message.
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The B2B interaction between two parties is defined within the protocol exchange as a series of plugin transformations to be performed. One plugin accepts a message and turns it into a common object. A subsequent plugin takes the object and issues it as a message in a different protocol. There is no implicit assumption, for example, that a cXML punchout to a supplier will result in the supplier returning the shopping cart in cXML format, or that a shopping cart returned in cXML format is to be followed by an order to the supplier in cXML. This flexibility is necessary to accommodate some of the interactions that are common today. As an example, the SAP Open Catalog Interface allows the shopping cart to be returned in either XML or HTML, depending on the configuration of the buyers procurement system. Some of the private buyer and supplier marketplaces are implemented using combinations of different protocols. A supplier might expect an OBI logon from which it might return a cXML shopping cart to the purchasing system. And, the subsequent order may have to be transmitted in EDI, because the suppliers EDI order processing system was in place, running over a value added network long before the supplier had implemented any B2B interactions over the Internet. Finally, it is hoped the various electronic commerce dialects will someday coalesce into a smaller and more concise set. But until then, it seems that something like a B2B protocol exchange will be required to bridge the communication gap between prospective trading partners. 1.6 INTERNET ADVANTAGE There many advantages to using the internet such as:
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Email. Email is now an essential communication tools in business. It is also excellent for keeping in touch with family and friends. The advantages to email is that it is free ( no charge per use) when compared to telephone, fax and postal services.
Information. There is a huge amount of information available on the internet for just about every subject known to man, ranging from government law and services, trade fairs and conferences, market information, new ideas and technical support.
Services. Many services are now provided on the internet such as online banking, job seeking and applications, and hotel reservations. Often these services are not available offline or cost more.
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Buy or sell products. The internet is a very effective way to buy and sell products all over the world.
Communities. Communities of all types have sprung up on the internet. Its a great way to meet up with people of similar interest and discuss common issues.
Advantages Communication: The foremost target of internet has always been the communication. And internet has excelled beyond the expectations .Still; innovations are going on to make it faster, more reliable. By the advent of computers Internet, our earth has reduced and has attained the form of a global village. Now we can communicate in a fraction of second with a person who is sitting in the other part of the world. Today for better communication, we can avail the facilities of email; we can chat for hours with our loved ones. There are plenty messenger services in offering. With help of such services, it has become very easy to establish a kind of global friendship where you can share your thoughts, can explore other cultures of different ethnicity. Information Information is probably the biggest advantage internet is offering. The Internet is a virtual treasure trove of information. Any kind of information on any topic under the sun is available on the Internet. The search engines like Google, yahoo is at your service on the Internet. You can almost find any type of data on almost any kind of subject that you are looking for. There is a huge amount of information available on the internet for just about every subject known to man, ranging from government law and services, trade fairs and conferences, market information, new ideas and technical support, the list is end less. Students and children are among the top users who surf the Internet for research. Today, it is almost required that students should use the Internet for research for the purpose of gathering resources. Teachers have started giving assignments that require research on the Internet. Almost every coming day, researches on medical issues become much easier to locate. Numerous web sites available on the net are offering loads of information for people to research diseases and talk to doctors online at sites such as, Americas Doctor. During 1998 over 20 million people reported going online to retrieve health information. Entertainment Entertainment is another popular raison dtre why many people prefer to surf the Internet. In fact, media of internet has become quite successful in trapping multifaceted entertainment factor. Downloading games, visiting chat rooms or just surfing the Web are some of the uses people have discovered. There are numerous games that may be
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downloaded from the Internet for free. The industry of online gaming has tasted dramatic and phenomenal attention by game lovers. Chat rooms are popular because users can meet new and interesting people. In fact, the Internet has been successfully used by people to find life long partners. When people surf the Web, there are numerous things that can be found. Music, hobbies, news and more can be found and shared on the Internet. Services Many services are now provided on the internet such as online banking, job seeking, purchasing tickets for your favorite movies, guidance services on array of topics engulfing the every aspect of life, and hotel reservations. Often these services are not available offline and can cost you more. E-Commerce Ecommerce is the concept used for any type of commercial maneuvering, or business deals that involves the transfer of information across the globe via Internet. It has become a phenomenon associated with any kind of shopping, almost anything. You name it and Ecommerce with its giant tentacles engulfing every single product and service will make you available at your door steps. It has got a real amazing and wide range of products from household needs, technology to entertainment. The Web [WWW] The Web uses the client/server model where browsers are the clients connecting to Web servers through TCP/IP (Transmission Control Protocol/Internet Protocol). The first generation Web applications were mostly read-only and static: the client and the server exchanged HTML documents through HTTP protocol. HTTP is a stateless Remote Procedure Call that: establishes a client/server connection, transmits and receives parameters including a returned file,and breaks the client/server connection. Web has a client/server architecture, where a browser runs on the client such as Netscape or Microsoft Explorer and a Web server like Apache server runs on the server machine. In the early days of the Web, there was processing neither on the client nor on the server. A user accessed only static documents which are the pages that exist on the Web server and are simply delivered to the Web browser However in 1995 W3C published HTML 2.0 which included forms that made it possible to use Web interactively A Web form, is an HTML page with one or more data entry fields and a mandatory Submit button.
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Interactive Web
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UNIT II
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SECURITY TECHNOLOGIES
2.1 WHY INTERNET IS INSECURE ? Theft of Personal information If you use the Internet, you may be facing grave danger as your personal information such as name, address, credit card number etc. can be accessed by other culprits to make your problems worse. Spamming Spamming refers to sending unwanted e-mails in bulk, which provide no purpose and needlessly obstruct the entire system. Such illegal activities can be very frustrating for you, and so instead of just ignoring it, you should make an effort to try and stop these activities so that using the Internet can become that much safer. Virus threat Virus is nothing but a program which disrupts the normal functioning of your computer systems. Computers attached to internet are more prone to virus attacks and they can end up into crashing your whole hard disk, causing you considerable headache. Pornography This is perhaps the biggest threat related to your childrens healthy mental life. A very serious issue concerning the Internet. There are thousands of pornographic sites on the Internet that can be easily found and can be a detrimental factor to letting children use the Internet. Though, internet can also create havoc, destruction and its misuse can be very fatal, the advantages of it outweigh its disadvantages. 2.2 INTERNET SECURITY HOLES ? Emergence of Cyber Crime Unfortunately, not all of you are using the Internet in a positive way. The Internet has not only allowed you to communicate around the world, it has also opened up the doors
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for electronic crime. The Computer Security Institutes (CSIs) 2002 Computer Crime and Security Survey raised the level of awareness and aided in determining the scope of cyber crime. This survey of large corporations revealed that 73 percent of the respondents detected the unauthorized use of their computer systems in the last year. During the past few years, the most serious financial losses due to attacks have occurred through theft of proprietary information and financial fraud, according to CSI. Sixty-nine respondents in CSIs 2002 Computer Crime and Security Survey reported a total loss of $99,019,000 in theft of proprietary information while 87 respondents reported a total loss of $88,229,000 in financial fraud. These 2002 totals were higher than the combined totals of the previous six years! The survey also confirmed that the following trends have evolved over the past few years:

A broad spectrum of attacks has been spotted. Cyber attacks are hitting organizations from the inside and outside. Huge financial losses are reported due to cyber attacks. Information security technologies are not the sole solution to prevent these attacks
Outside Attacks Internet users are starting to realize the severity of these attacks. In the past eight years, the CSI has found that people are more aware of attacks happening, rather than being in denial. The following types of attacks have been recognized in the wide spectrum of cyber crime. Unauthorized Intrusion Networks that are not 100 percent protected are prime targets for external intrusion. Between 380 and 500 Web page hacks occur every week at small Web sites; whereas, on larger sites, the magnitude is greater. The New York Times Web site was recently brought down for 12 hours and then vandalized. Information that is tampered with leads to financial losses, service disruptions for a companys site, and potentially irreparable damage to the corporate brand. Service Denial Similar to unauthorized intrusion, malicious denial of service also results in the loss of revenue and reputation. Big name Internet companies, such as Hotmail, Yahoo!, and Amazon.com, recently experienced denial-of-service (DoS) attacks. Hotmails site shut down for six consecutive days, not only preventing seven million users from accessing it, but also scarring the reputation of Hotmail.
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Malicious Downloads The Email Bomb, including the I LOVE YOU and Melissa viruses, have plagued email addresses. More recently, Microsofts computer system was hacked by a Trojan horse called QAZ, due to a few machines being unprotected. Security experts confirm that this is all it takes and are hoping for this to be a lesson for other companies to keep their antivirus software updated and educate their employees on good security practices Inside Attacks Recently, more media attention has been placed on the sexy cyberattacks previously cited, rather than insider attacks. But, in reality, more of the widespread attacks are now coming from insiders. CSI confirmed this when it reported that the majority of the attacks in the past year have been from insider abuse and unauthorized access.And, insiders are not just trustworthy employees. Business partners, subsidiaries, and third-party suppliers have the same access as traditional employees of a company. Threats Due to Lack of Security According to the SANS Institute, the answer to the preceding question is Yes! SANs has developed the following three lists of mistakes people make that enable attackers. End Users: The Five Worst Security Mistakes 1. Opening unsolicited e-mail attachments from unreliable sources 2. Forgetting to install security patches, including ones for Microsoft Office, Microsoft Internet Explorer, and Netscape 3. Downloading screen savers or games from unreliable sources 4. Not creating or testing backups 5. Using a modem while connected through a local area network Corporate Management The Seven Top Errors That Lead to Computer Security Vulnerabilities 1. Not providing training to the assigned people who maintain security within the company 2. Only acknowledging physical security issues while neglecting the need to secure information 3. Making a few fixes to security problems and not taking the necessary measures to ensure the problems are fixed 4. Relying mainly on a firewall 5. Failing to realize how much money intellectual property and business reputations are worth
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6. Authorizing only short-term fixes so problems remerge rapidly 7. Pretending the problem will go away if ignored. IT Professionals The Ten Worst Security Mistakes 1. Connecting systems to the Internet before hardening them 2. Connecting test systems to the Internet with default accounts/passwords 3. Failing to update systems when security holes are found 4. Using unencrypted protocols for managing systems, routers, firewalls, and PKI 5. Giving users passwords over the phone or changing them when the requester is not authenticated 6. Failing to maintain and test backups 7. Running unnecessary services 8. Implementing firewalls with rules that do not prevent dangerous incoming or outgoing traffic 9. Failing to implement or update virus detection software 10. Failing to educate users on what to do when they see a potential security problem 2.3 CRYPTOGRAPHY 2.3.1 Objective Public Key Cryptography and Digital Certificates This part of the chapter presents background technical information on cryptographic systems. This includes Public Key Cryptography (PKC) and the system underlying SSL the basis for every e-commerce trust infrastructure. Encryption is the process of transforming information before communicating it to make it unintelligible to all but the intended recipient. Encryption employs mathematical formulas called cryptographic algorithms, or ciphers, and numbers called keys, to encrypt or decrypt information 2.3.2 Symmetric Cryptography Until recently, symmetric encryption techniques were used to secure information transmitted on public networks. Traditional, symmetric cryptographic systems are based on the idea of a shared secret. In such a system, two parties that want to communicate securely first agree in advance on a single secret key that allows each party to both encrypt and decrypt messages.
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Symmetric cryptography has several drawbacks. Exchanging secret keys is unwieldy in large networks. Furthermore, the sharing of secret keys requires both senders and recipients to trust, and, therefore, to be familiar with, every person they communicate with securely. Also, symmetric systems require a secure channel to distribute the secret keys in the first place. If there is indeed such a secure channel, why not use it to send the entire secret message? In todays Web-based systems involving many participants and transitory interactions with strong cryptography requirements, such symmetric key-based systems are highly impractical as a means for agreeing upon the necessary secrets to begin communicating securely. This problem, the key agreement, or key distribution problem, is part of a larger problem that is central to the modern understanding of cryptographic systemsthe key management problem (described in greater detail later in the chapter). Together, they represent the fundamental challenge in designing effective cryptography systems for modern computing systems. Symmetric key encryption plays an important role in the SSL protocol, along with asymmetric public key encryption. 2.3.4 Public Key Cryptography Todays public key, or asymmetric cryptography systems are a considerable improvement over traditional symmetric cryptography systems in that they allow two parties to exchange data privately in the presence of possible eavesdroppers, without previously agreeing on a shared secret. Such a system is a called asymmetric because it is based on the idea of a matched cryptographic key pair in which a cryptographic key is no longer a simple shared secret, but rather is split into two subkeys, the private key and public key. Abstractly, a participant wanting to receive encrypted communications using an asymmetric cryptography system first generates such a key pair, keeping the private-key portion as a secret and publishing the public-key portion to all parties that want to encrypt data for that participant. Because encrypting data requires only access to the public key, and decrypting data requires the private key, such a system in principle can sidestep the first layer of complexity in the key management problem because no shared secret need be exchanged. 2.3.5 Modern Cryptography Systems: A Hybrid Approach In fact, a combination of both public key and traditional symmetric cryptography is used in modern cryptographic systems. The reason for this is that public key encryption schemes are computationally intensive versus their symmetric key counterparts. Because symmetric key cryptography is much faster for encrypting bulk data, modern cryptography systems typically use public key cryptography to solve the key distribution problem first, then symmetric key cryptography is used to encrypt the bulk data.
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Such a scheme is used by todays SSL protocol for securing Web transactions and by secure e-mail schemes such as Secure/Multipurpose Internet Mail Extensions (S/MIME) that are built into such products as Netscape Communicator and Microsoft Internet Explorer. The Key Management Problem Underlying every cryptographic system is a set of practical problems and questions involving privacy, security, and overall confidence in the underlying confidentiality features of the system. In principle, the techniques of asymmetric and symmetric cryptography are sufficient to resolve the security questions and properties previously described. For example, todays Web browsers use the public key of a Web site in order to send credit card numbers over the Web. Similarly, one can protect access to files and data using a private symmetric key to scramble the information before saving it. However, in practice, each of these problems requires a certified public key in order to operate correctly without third parties being able to interfere. This leads to a second set of questions. For example, how can you be sure that the public key that your browser uses to send credit card information is in fact the right one for that Web site, and not a bogus one? And, how can you reliably communicate your public keys to your correspondents so that they can rely on it to send you encrypted communications? What is needed in order to address such concerns is the notion of a secure binding between a given entity that participates in a transaction and the public key that is used to bootstrap secure communication with that entity using asymmetric public key cryptography. The next part of the chapter describes how a combination of digital signatures and X.509 digital certificates (which employ digital signatures), including SSL certificates, fulfills this role in e-commerce trust systems. 2.3.6 Digital Signatures Digital signatures are based on a combination of the traditional idea of data hashing with public key-based encryption. Most hash functions are similar to encryption functions. In fact, some hash functions are just slightly modified encryption functions. Most operate by grabbing a block of data at a time and repeatedly using a simple scrambling algorithm to modify the bits. If this scrambling is done repeatedly, then there is no known practical way to predict the outcome. It is not, in general, practical for someone to modify the original data in any way while ensuring that the same output will emerge from the hash function. These hash-based signature algorithms use a cryptographically secure hash function, such as Message Digest 5 (MD-5) or Secure Hash Algorithm (SHA), to produce a hash value from a given piece of data. Because the digital signature process is central to the idea of a digital certificate (and in turn, the digital certificate is the primary tool to ensure e-commerce security), its useful to look at a diagram of the process. Figure 2.1 illustrates the steps taken by a sender in
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forming a digitally signed message, as well as the steps a recipient takes in verifying that the signed message is valid.
NOTES
Figure 2.1 Steps in forming and verifying a digitally signed message The first step is to take the original message and compute a digest of the outgoing message using a hashing algorithm. The result is a message digest, which is typically depicted as a long string of hexadecimal digits (and manipulated by software as binary data). In the next step, the sender uses his private key to encrypt the message digest. The original message content, together with the encrypted digest, forms a digitally signed message, as depicted in the center of Figure 2.1. This digitally signed message is suitable for delivery to the recipient. On receipt, the receiver verifies the digital signature using an inverse set of steps: first, the encrypted digest is decrypted using the senders public key. Next, this result is compared to an independent computation of the message digest value using the hashing algorithm. If the two values are the same, the message has been successfully verified. No actual encryption of the message content itself need take place. Only the digital signature itself is encrypted while the message is in transit (unless, of course, there are privacy concerns, in which case the message content should be encrypted as well). Why is a digital signature compelling evidence that only the intended signer could have created the message? For example, what if interlopers were to change the original message? It was not encrypted, after all, and could have been changed by a third party in transit. The answer is that if such a change had been made, then the decrypted, original message digest wouldnt have matched the recomputed one for the changed data in the
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message. Verification of the digital signature would fail. Similarly, the creation of a bogus signature is impractical because an interloper doesnt have the appropriate private key. 2.3.7 Digital Certificates A digital certificate is an electronic file that uniquely identifies individuals and Web sites on the Internet and enables secure, confidential communications. It associates the name of an entity that participates in a secured transaction (for example, an e-mail address or a Web site address) with the public key that is used to sign communication with that entity in a cryptographic system. Typically, the signer of a digital certificate is a trusted third party or certificate authority (CA; such as VeriSign). In addition, all participants who use such certificates agree it is a point of secure storage and management of the associated private signing key. The CA issues, creates, and signs certificates, as well as possibly playing a role in their distribution. Using digital certificates simplifies the problem of trusting that a particular public key is in fact associated with a participating party, effectively reducing it to the problem of trusting the associated CA service. Digital certificates, therefore, can serve as a kind of digital passport or credential. This approach represents an advance in the key management problem, because it reduces the problem of bootstrapping trust to the problem of setting up (or in todays marketplace, selecting as a vendor) the appropriate CA functionality. All parties that trust the CA can be confident that the public keys that appear in certificates are valid. Use of Signer Certificates in Browsers Digital certificates already play a fundamental role in Internet-based cryptography systems. For example, consider the case of a secure Web transaction that takes place when a user visits a Web storefront to make a credit card purchase. When the users browser accesses a secure page, a public key from the Web store has already been delivered to the client browser in the form of an X.509 digital certificate. All this happens transparently to the user at the time the secure connection is set up. The browser trusts the certificate because it is signed, and the browser trusts the signature because the signature can be verified. And, why can it be verified? Because the signers public key is already embedded in the browser software itself. To see this in the particular case of a browser, begin by clicking on the Security icon on the main toolbar, as shown in Figure.
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Figure 2.2 The Security toolbar button in a typical browser Under Certificates, choose Signers, and scroll down the list, as shown in Figure.. A window similar to that shown in should appear.
Figure 2.3 Security Info page
Figure 2.4 The list of certificate signers hard coded to be trusted in a typical browser.
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Next, select a particular certificate and click on the Edit button. A display similar to the one shown in Figure should appear.
Figure 2.5 A VeriSign CA certificate embedded in a typical browser. This is a representation of an X.509 digital certificate. Although X.509 certificates come in three different versions (such as the one displayed in Figure), they are the ones that are most commonly encountered in todays cryptography systems. Such a certificate consists of the following fields to identify the owner of the certificate and the trusted CA that issued the certificate.

Version Serial number Signature algorithm ID Issuer name Validity period Subject (user) name Subject public-key information Issuer unique identifier Subject unique identifier Extensions Digital signature for the preceding fields
Although only a few of the preceding fields (Version, Serial number, Signature algorithm ID, Issuer name, Validity period, Subject (user) name, Subject public-key information, Issuer unique identifier, Subject unique identifier, Extensions and Digital signature for the
ELECTRONIC COMMERCE
preceding fields) that are shown in Figure (version, serial number, issuer name, and subject name) correspond to the display elements in Figure, these basic elements give an idea of what such a typical certificate contains. In other words, the certificate shown in Figure 16.5 contains only a few of the basic fields. A more detailed dump of raw certificate content might look like the following. Certificate: Data: Version: v3 (0x2) Serial Number: 8 (0x8) Signature Algorithm: PKCS #1 MD5 With RSA Encryption Issuer: CN=Root CA, OU=CIS, O=Structured Arts Computing Corporation, C=US Validity Not Before: Fri Dec 5 18:39:01 1997 Not After: Sat Dec 5 18:39:01 1998 Subject: CN=Test User, OU=Test Org Unit, O=Test Organization, C=US Subject Public Key Info: Algorithm: PKCS #1 RSA Encryption Public Key: Modulus: 00:c2:29:01:63:a1:fe:32:ae:0c:51:8d:e9:07:6b:02:fe:ec: 6d:0e:cc:95:4b:dc:0a:4b:0b:31:a3:1a:e1:68:1f:d8:0b:b7: 91:fb:f7:fd:bd:32:ba:76:01:45:e1:7f:8b:66:cd:7e:79:67: 8d:48:30:2a:09:48:4c:9b:c7:98:d2:b3:1c:e9:54:2c:3c:0a: 10:b0:76:ae:06:69:58:ac:e8:d8:4f:37:83:c3:f1:34:02:6d: 9f:38:60:6f:5e:54:4f:71:c7:92:28:fb:0a:b3:44:f3:1a:a3: fe:99:f4:3f:d3:12:e2:f8:3b:03:65:33:88:9b:67:c7:de:88: 23:90:2b Public Exponent: 65537 (0x10001) Extensions: Identifier: Certificate Type Critical: no Certified Usage:
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SSL Client Identifier: Authority Key Identifier Critical: no Key Identifier: a7:84:21:f4:50:0e:40:0f:53:f2:c5:d0:53:d5:47:56:b7:c5: 5e:96 Signature: Algorithm: PKCS #1 MD5 With RSA Encryption Signature: 2d:76:3f:49:5b:53:3a:c5:02:06:a3:67:6d:d9:03:50:57:7f:de:a7:a9: cd:69:02:97:6f:66:6a:7f:95:ea:89:75:7a:fc:b0:26:81:fc:33:bb:60: e8:f7:73:77:37:f8:8a:04:3b:fc:c1:3e:42:40:3d:58:16:17:7e:47:35: 1c:73:5a:ab:72:33:c3:f5:2b:c6:eb:b5:39:52:82:c6:3e:e1:38:c6:39: 8b:ee:e3:9f:b3:b9:29:42:0d:11:a5:79:af:6d:3a:f8:a6:ba:d0:9c:55: 48:0d:75:91:05:0b:47:67:98:32:f3:2d:2e:49:ed:22:ab:28:e8:d6:96: a1:9b Encryption in Digital Signatures Digital Certificates Work In physical transactions, the challenges of identification, authentication, and privacy are solved with physical marks, such as seals or signatures. In electronic transactions, the equivalent of a seal must be coded into the information itself. By checking that the electronic seal is present and has not been broken, the recipient can confirm the identity of the message sender and ensure that the message content was not altered in transit. To create an electronic equivalent of physical security, some vendors use advanced cryptography. Throughout history, most private messages were kept secret with single key cryptography. Single key cryptography is the way that most secret messages have been sent over the centuries. In single key cryptography, there is a unique code (or key) for both encrypting and decrypting messages. Single key cryptography works as follows: Suppose Bob has one secret key. If Alice wants to send Bob a secret message: 1. Bob sends Alice a copy of his secret key. 2. Alice encrypts a message with Bobs secret key. 3. Bob decrypts the message with his secret key.
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Unfortunately, this method has several problems. First, Bob must find a secure method of getting his secret key to Alice. If the secret key is intercepted, all of Bobs communications are compromised. Second, Bob needs to trust Alice. If Alice is a double agent, she may give Bobs secret key to his enemies. Or, she may read Bobs other private messages or even imitate Bob. Finally, if you have an organization with people who need to exchange secret messages, you will either need to have thousands (if not millions) of secret keys, or you will need to rely on a smaller number of keys, which opens the door to compromise. SSL certificate technology employs the more advanced public key cryptography, which does not involve the sharing of secret keys. Rather than using the same key to both encrypt and decrypt data, an SSL certificate uses a matched pair of keys that uniquely complement each other. When a message is encrypted by one key, only the other key can decrypt it. When a key pair is generated for your business, your private key is installed on your server; nobody else has access to it. Your matching public key, in contrast, is freely distributed as part of your SSL certificate. You can share it with anyone, and even publish it in directories. Customers or correspondents who want to communicate with you privately can use the public key in your SSL certificate to encrypt information before sending it to you. Only you can decrypt the information, because only you have your private key. Your SSL certificate contains your name and identifying information, your public key, and the CAs own digital signature as certification. It tells customers and correspondents that your public key belongs to you. Data Encryption Standard DES The Data Encryption Standard (DES) specifies a FIPS approved cryptographic algorithm as required by FIPS 140-1. This publication provides a complete description of a mathematical algorithm for encrypting (enciphering) and decrypting (deciphering) binary coded information. Encrypting data converts it to an unintelligible form called cipher. Decrypting cipher converts the data back to its original form called plaintext. The algorithm described in this standard specifies both enciphering and deciphering operations which are based on a binary number called a key. A key consists of 64 binary digits (Os or 1s) of which 56 bits are randomly generated and used directly by the algorithm. The other 8 bits, which are not used by the algorithm, are used for error detection. The 8 error detecting bits are set to make the parity of each 8-bit byte of the key odd, i.e., there is an odd number of 1s in each 8-bit byte1. Authorized users of encrypted computer data must have the key that was used to encipher the data in order to decrypt it. The encryption algorithm specified in this standard is commonly known among those using the standard. The unique key chosen for use in a particular application makes the results of encrypting data using the algorithm unique.
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Selection of a different key causes the cipher that is produced for any given set of inputs to be different. The cryptographic security of the data depends on the security provided for the key used to encipher and decipher the data. Data can be recovered from cipher only by using exactly the same key used to encipher it. Unauthorized recipients of the cipher who know the algorithm but do not have the correct key cannot derive the original data algorithmically. However, anyone who does have the key and the algorithm can easily decipher the cipher and obtain the original data. A standard algorithm based on a secure key thus provides a basis for exchanging encrypted computer data by issuing the key used to encipher it to those authorized to have the data. Data that is considered sensitive by the responsible authority, data that has a high value, or data that represents a high value should be cryptographically protected if it is vulnerable to unauthorized disclosure or undetected modification during transmission or while in storage. A risk analysis should be performed under the direction of a responsible authority to determine potential threats. The costs of providing cryptographic protection using these standard as well as alternative methods of providing this protection and their respective costs should be projected. A responsible authority then should make a decision, based on these analyses, whether or not to use cryptographic protection and this standard. 4. Approving Authority. Secretary of Commerce. 5. Maintenance Agency. U.S. Department of Commerce, National Institute of Standards and Technology, Computer Systems Laboratory. 6. Applicability. This standard may be used by Federal departments and agencies when the following conditions apply: 1. An authorized official or manager responsible for data security or the security of any computer system decides that cryptographic protection is required; and 2. The data is not classified according to the National Security Act of 1947, as amended, or the Atomic Energy Act of 1954, as amended. Federal agencies or departments which use cryptographic devices for protecting data classified according to either of these acts can use those devices for protecting unclassified data in lieu of the standard. Other FIPS approved cryptographic algorithms may be used in addition to, or in lieu of, this standard when implemented in accordance with FIPS 140-1. In addition, this standard may be adopted and used by non-Federal Government organizations. Such use is encouraged when it provides the desired security for commercial and private organizations. 7. Applications. Data encryption (cryptography) is utilized in various applications and environments. The specific utilization of encryption and the implementation of the DES will be based on many factors particular to the computer system and its
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associated components. In general, cryptography is used to protect data while it is being communicated between two points or while it is stored in a medium vulnerable to physical theft. Communication security provides protection to data by enciphering it at the transmitting point and deciphering it at the receiving point. File security provides protection to data by enciphering it when it is recorded on a storage medium and deciphering it when it is read back from the storage medium. In the first case, the key must be available at the transmitter and receiver simultaneously during communication. In the second case, the key must be maintained and accessible for the duration of the storage period. FIPS 171 provides approved methods for managing the keys used by the algorithm specified in this standard. 8. Implementations. Cryptographic modules which implement this standard shall conform to the requirements of FIPS 140-1. The algorithm specified in this standard may be implemented in software, firmware, hardware, or any combination thereof. The specific implementation may depend on several factors such as the application, the environment, the technology used, etc. Implementations which may comply with this standard include electronic devices (e.g., VLSI chip packages), microprocessors using Read Only Memory (ROM), Programmable Read Only Memory (PROM), or Electronically Erasable Read Only Memory (EEROM), and mainframe computers using Random Access Memory (RAM). When the algorithm is implemented in software or firmware, the processor on which the algorithm runs must be specified as part of the validation process. Implementations of the algorithm which are tested and validated by NIST will be considered as complying with the standard. Note that FIPS 140-1 places additional requirements on cryptographic modules for Government use. Information about devices that have been validated and procedures for testing and validating equipment for conformance with this standard and FIPS 140-1 are available from the National Institute of Standards and Technology, Computer Systems Laboratory, Gaithersburg, MD 20899. 9. Export Control. Cryptographic devices and technical data regarding them are subject to Federal Government export controls as specified in Title 22, Code of Federal Regulations, Parts 120 through 128. Some exports of cryptographic modules implementing this standard and technical data regarding them must comply with these Federal regulations and be licensed by the U.S. Department of State. Other exports of cryptographic modules implementing this standard and technical data regarding them fall under the licensing authority of the Bureau of Export Administration of the U.S. Department of Commerce. The Department of Commerce is responsible for licensing cryptographic devices used for authentication, access control, proprietary software, automatic teller machines (ATMs), and certain devices used in other equipment and software. For advice concerning which agency has licensing authority for a particular cryptographic device, please contact the respective agencies.
NOTES
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10. Patents. Cryptographic devices implementing this standard may be covered by U.S. and foreign patents issued to the International Business Machines Corporation. However, IBM has granted nonexclusive, royalty-free licenses under the patents to make, use and sell apparatus which complies with the standard. The terms, conditions and scope of the licenses are set out in notices published in the May 13, 1975 and August 31, 1976 issues of the Official Gazette of the United States Patent and Trademark Office (934 O.G. 452 and 949 O.G. 1717). 11. Alternative Modes of Using the DES. FIPS PUB 81, DES Modes of Operation, describes four different modes for using the algorithm described in this standard. These four modes are called the Electronic Codebook (ECB) mode, the Cipher Block Chaining (CBC) mode, the Cipher Feedback (CFB) mode, and the Output Feedback (OFB) mode. ECB is a direct application of the DES algorithm to encrypt and decrypt data; CBC is an enhanced mode of ECB which chains together blocks of cipher text; CFB uses previously generated cipher text as input to the DES to generate pseudorandom outputs which are combined with the plaintext to produce cipher, thereby chaining together the resulting cipher; OFB is identical to CFB except that the previous output of the DES is used as input in OFB while the previous cipher is used as input in CFB. OFB does not chain the cipher. 12. Implementation of this standard. This standard became effective July 1977. It was reaffirmed in 1983, 1988, and 1993. It applies to all Federal agencies, contractors of Federal agencies, or other organizations that process information (using a computer or telecommunications system) on behalf of the Federal Government to accomplish a Federal function. Each Federal agency or department may issue internal directives for the use of this standard by their operating units based on their data security requirement determinations. FIPS 46-2 which revises the implementation of the Data Encryption Algorithm to include software, firmware, hardware, or any combination thereof, is effective June 30, 1994. This revised standard may be used in the interim period before the effective date.
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UNIT III
NOTES
ELECTRONIC PAYMENT METHODS

3.1 DIGITAL CURRENCY Electronic money (also known as e-money, electronic cash, electronic currency, digital money, digital cash or digital currency) refers to money or scrip which is exchanged only electronically. Typically, this involves use of computer networks, the internet and digital stored value systems. Electronic Funds Transfer (EFT) and direct deposit are examples of electronic money. Also, it is a collective term for financial cryptography and technologies enabling it. While electronic money has been an interesting problem for cryptography (see for example the work of David Chaum and Markus Jakobsson), to date, use of digital cash has been relatively low-scale. One rare success has been Hong Kongs Octopus card system, which started as a transit payment system and has grown into a widely used electronic cash system. Singapore also has an electronic money implementation for its public transportation system (commuter trains, bus, etc), which is very similar to Hong Kongs Octopus card and based on the same type of card (FeliCa). A very successful implementation is in the Netherlands, known as Chipknip. ALTERNATIVES Technically electronic or digital money is a representation, or a system of debits and credits, used (but not limited to this) to exchange value, within another system, or itself as a standalone system, online or offline. Also sometimes the term electronic money is used to refer to the provider itself. A private currency may use gold to provide extra security, such as digital gold currency. An e-currency system may be fully backed by gold (like e-gold and c-gold), non-gold backed, or both gold and non-gold backed (like e-Bullion and Liberty Reserve). Also, some private organizations, such as the US military use private currencies such as Eagle Cash. Many systems will sell their electronic currency directly to the end user, such as Paypal and WebMoney, but other systems, such as e-gold, sell only through third party digital currency exchangers.
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In the case of Octopus Card in Hong Kong, deposits work similarly to banks. After Octopus Card Limited receives money for deposit from users, the money is deposited into banks, which is similar to debit-card-issuing banks re-depositing money at central banks. Some community currencies, like some LETS systems, work with electronic transactions. Cyclos Software allows creation of electronic community currencies. Ripple monetary system is a project to develop a distributed system of electronic money independent of local currency. OFF-LINE ANONYMOUS ELECTRONIC MONEY In off-line electronic money the merchant does not need to interact with the bank before accepting a coin from the user. Instead he can collect multiple coins Spent by users and Deposit them later with the bank. In principle this could be done off-line, i.e. the merchant could go to the bank with his storage media to exchange e-cash for cash. Nevertheless the merchant is guaranteed that the users e-coin will either be accepted by the bank, or the bank will be able to identify and punish the cheating user. In this way a user is prevented from spending the same coin twice (double-spending). Off-line e-cash schemes also need to protect against cheating merchants, i.e. merchants that want to deposit a coin twice (and then blame the user). Using cryptography, anonymous ecash was introduced by David Chaum. He used blind signatures to achieve unlinkability between withdrawal and spend transactions. In cryptography, e-cash usually refers to anonymous e-cash. Depending on the properties of the payment transactions, one distinguishes between on-line and off-line e-cash. The first off-line e-cash system was proposed by Chaum and Naor. Like the first on-line scheme, it is based on RSA blind signatures. FUTURE EVOLUTION The main focuses of digital cash development are 1) being able to use it through a wider range of hardware such as secured credit cards; and 2) linked bank accounts that would generally be used over an internet means, for exchange with a secure micropayment system such as in large corporations (PayPal). Theoretical developments in the area of decentralized money are underway that may rival traditional, centralized money. Systems of accounting such as Altruistic Economics are emerging that are entirely electronic, and can be more efficient and more realistic because they do not assume a zero-sum transaction model. 3.2 E-COMMERCE PAYMENT SYSTEM An e-commerce payment system facilitates the acceptance of electronic payment for online transactions. Also known as financial electronic data interchange (FEDI), e-commerce
ELECTRONIC COMMERCE
payment systems have become increasingly popular due to the widespread use of the internet based shopping and banking. CREDIT CARDS AND SMART CARDS Over the years, credit cards have become one of the most common forms of payment for e-commerce transactions. In the early years of B2C, many consumers were apprehensive of using their credit cards over the internet because of fear that their credit card numbers would get stolen. However, due to increased security with credit card companies such as VISA, American Express, and MasterCard there is widespread use of credit card use over the internet, especially in North America. Despite this widespread use in North America, there are still a number of countries such as China, India and Pakistan that have some problems to overcome in regard to credit card security. In the meantime, the use of smartcards has become extremely popular. A Smartcard is similar to a credit card; however it contains an embedded 8-bit microprocessor and uses electronic cash which transfers from the consumers card to the sellers device. A popular smartcard initiative is the VISA Smartcard. Using the VISA Smartcard you can transfer electronic cash to your card from your bank account, and you can then use your card at various retailers and on the internet. 3.3 FINANCIAL CYBER-MEDIARIES These are companies that enable financial transactions to transpire over the internet. Types of transactions include: C2C, C2B, and/or B2B. One of the best known and most successful financial cyber-mediaries is PayPal. This free online service allows consumers and/or businesses to send money to anyone with an email address in 45 countries. PayPal is accepted by thousands of businesses worldwide and is the preferred payment method on eBay.com. PayPal is now owned by ebay.com. Many of the mediaries permit consumers to establish an account quickly, and to transfer funds into their online accounts from a traditional bank account (typically via ACH transactions), and vice versa, after verification of the consumers identity and authority to access such bank accounts. Also, the larger mediaries further allow transactions to and from credit card accounts, although such credit card transactions are usually assessed a fee (either to the recipient or the sender) to recoup the transaction fees charged to the mediary. The speed and simplicity with which cyber-mediary accounts can be established and used have contributed to their widespread use, although the risk of abuse, theft and other problemswith disgruntled users frequently accusing the mediaries themselves of wrongful behavioris associated with them. Electronic Bill Presentment and Payment Electronic bill presentment and payment (EBPP) is a fairly new technique that allows consumers to view and pay bills electronically. There are a significant number of bills that
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consumers pay on a regular basis, which include: power bills, water, oil, internet, phone service, mortgages, car payments etc. EBPP systems send bills from service providers to individual consumers via the internet. The systems also enable payments to be made by consumers, given that the amount that appears on the e-bill is correct. Banks in Canada have been offering these online payment services for some time now, and are growing in popularity. Other service providers such as Rogers Communications and Aliant accept major credit cards within the bill payment sections of their websites. This service is in addition to the original EBPP method of a direct withdrawal from a bank account through a bank such as Scotiabank. The biggest difference between EBPP systems and the traditional method of bill payment, is that of technology. Rather than receiving a bill through the mail, writing out and sending a check, consumers receive their bills in an email, or are prompted to visit a website to view and pay their bills. Three broad models of EBPP have emerged. These are 1. Consolidation, where numerous bills for any one recipient are made available at one Web site, most commonly the recipients bank. In some countries, such as Australia, New Zealand and Canada, the postal service also operates a consolidation service. The actual task of consolidation is sometimes performed by a third party and fed to the Web sites where consumers receive the bills. The principal attraction of consolidation is that consumers can receive and pay numerous bills at the one location, thus minimizing the number of login IDs and passwords they must remember and maintain. 2. Biller Direct, where the bills produced by an organization are made available through that organizations Web site. This model works well if the recipient has reasons to visit the billers Web site other than to receive their bills. In the freight industry, for example, customers will visit a carriers Web site to track items in transit, so it is reasonably convenient to receive and pay freight bills at the same site. 3. Direct email delivery, where the bills are emailed to the customers In Box. This model most closely imitates the analog postal service. It is convenient, because almost everyone has email and the customer has to do nothing except use email in order to receive a bill. Email delivery is proving especially popular in the B2B market in many countries. 3.4 SECURITY PROTOCOLS A security protocol (cryptographic protocol or encryption protocol) is an abstract or concrete protocol that performs a security-related function and applies cryptographic methods. A protocol describes how the algorithms should be used. A sufficiently detailed protocol includes details about data structures and representations, at which point it can be used to implement multiple, interoperable versions of a program.
ELECTRONIC COMMERCE
Cryptographic protocols are widely used for secure application-level data transport. A cryptographic protocol usually incorporates at least some of these aspects:

NOTES
Key agreement or establishment Entity authentication Symmetric encryption and message authentication material construction Secured application-level data transport Non-repudiation methods
For example, Transport Layer Security (TLS) is a cryptographic protocol that is used to secure web (HTTP) connections. It has an entity authentication mechanism, based on the X.509 system; key setup phase, where a symmetric encryption key is formed by employing public-key cryptography; and an application-level data transport function. These three aspects have important interconnections. Standard TLS does not have non-repudiation support. There are other types of cryptographic protocols as well, and even the term itself has various different readings; Cryptographic application protocols often use one or more underlying key agreement methods, which are also sometimes they referred to as cryptographic protocols. For instance, TLS employs what is known as the Diffie-Hellman key exchange, which although it is only a part of TLS per se, Diffie-Hellman may be seen as a complete cryptographic protocol in itself for other applications. Cryptographic protocols can sometimes be verified formally on an abstract level. 3.5 CREDIT CARD BASICS A credit card is part of a system of payments named after the small plastic card issued to users of the system. The issuer of the card grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user. A credit card is different from a charge card, which requires the balance to be paid in full each month. In contrast, credit cards allow the consumers to revolve their balance, at the cost of having interest charged. Most credit cards are issued by local banks or credit unions, and are the same shape and size, as specified by the ISO 7810 standard. 3.5.1 How credit cards work? Credit cards are issued after an account has been approved by the credit provider, after which cardholders can use it to make purchases at merchants accepting that card. When a purchase is made, the credit card user agrees to pay the card issuer. The cardholder indicates his/her consent to pay, by signing a receipt with a record of the card details and indicating the amount to be paid or by entering a Personal identification number
DMC 1621
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(PIN). Also, many merchants now accept verbal authorizations via telephone and electronic authorization using the Internet, known as a Card/Cardholder Not Present (CNP) transaction. Electronic verification systems allow merchants to verify that the card is valid and the credit card customer has sufficient credit to cover the purchase in a few seconds, allowing the verification to happen at time of purchase. The verification is performed using a credit card payment terminal or Point of Sale (POS) system with a communications link to the merchants acquiring bank. Data from the card is obtained from a magnetic stripe or chip on the card; the latter system is in the United Kingdom and Ireland commonly known as Chip and PIN, but is more technically an EMV card. Other variations of verification systems are used by eCommerce merchants to determine if the users account is valid and able to accept the charge. These will typically involve the cardholder providing additional information, such as the security code printed on the back of the card, or the address of the cardholder. Each month, the credit card user is sent a statement indicating the purchases undertaken with the card, any outstanding fees, and the total amount owed. After receiving the statement, the cardholder may dispute any charges that he or she thinks are incorrect (see Fair Credit Billing Act for details of the US regulations). Otherwise, the cardholder must pay a defined minimum proportion of the bill by a due date, or may choose to pay a higher amount up to the entire amount owed. The credit provider charges interest on the amount owed (typically at a much higher rate than most other forms of debt). Some financial institutions can arrange for automatic payments to be deducted from the users bank accounts, thus avoiding late payment altogether as long as the cardholder has sufficient funds. 3.5.2 Interest Chagres Credit card issuers usually waive interest charges if the balance is paid in full each month, but typically will charge full interest on the entire outstanding balance from the date of each purchase if the total balance is not paid. For example, if a user had a $1,000 transaction and repaid it in full within this grace period, there would be no interest charged. If, however, even $1.00 of the total amount remained unpaid, interest would be charged on the $1,000 from the date of purchase until the payment is received. The precise manner in which interest is charged is usually detailed in a cardholder agreement which may be summarized on the back of the monthly statement. The general calculation formula most financial institutions use to determine the amount of interest to be charged is APR/100 x ADB/365 x number of days revolved. Take the Annual percentage rate (APR) and divide by 100 then multiply to the amount of the average daily balance (ADB) divided by 365 and then take this total and multiply by the total number of days the amount revolved before payment was made on the account. Financial
ELECTRONIC COMMERCE
institutions refer to interest charged back to the original time of the transaction and up to the time a payment was made, if not in full, as RRFC or residual retail finance charge. Thus after an amount has revolved and a payment has been made, the user of the card will still receive interest charges on their statement after paying the next statement in full (in fact the statement may only have a charge for interest that collected up until the date the full balance was paid...i.e. when the balance stopped revolving). The credit card may simply serve as a form of revolving credit, or it may become a complicated financial instrument with multiple balance segments each at a different interest rate, possibly with a single umbrella credit limit, or with separate credit limits applicable to the various balance segments. Usually this compartmentalization is the result of special incentive offers from the issuing bank, to encourage balance transfers from cards of other issuers. In the event that several interest rates apply to various balance segments, payment allocation is generally at the discretion of the issuing bank, and payments will therefore usually be allocated towards the lowest rate balances until paid in full before any money is paid towards higher rate balances. Interest rates can vary considerably from card to card, and the interest rate on a particular card may jump dramatically if the card user is late with a payment on that card or any other credit instrument, or even if the issuing bank decides to raise its revenue. 3.5.3 Benefits to Customers Because of intense competition in the credit card industry, credit card providers often offer incentives such as frequent flyer points, gift certificates, or cash back (typically up to 1 percent based on total purchases) to try to attract customers to their programs. Low interest credit cards or even 0% interest credit cards are available. The only downside to consumers is that the period of low interest credit cards is limited to a fixed term, usually between 6 and 12 months after which a higher rate is charged. However, services are available which alert credit card holders when their low interest period is due to expire. Most such services charge a monthly or annual fee. 3.5.4 Grace Period A credit cards grace period is the time the customer has to pay the balance before interest is charged to the balance. Grace periods vary, but usually range from 20 to 40 days depending on the type of credit card and the issuing bank. Some policies allow for reinstatement after certain conditions are met. Usually, if a customer is late paying the balance, finance charges will be calculated and the grace period does not apply. Finance charges incurred depend on the grace period and balance; with most credit cards there is no grace period if there is any outstanding balance from the previous billing cycle or statement (i.e. interest is applied on both the previous balance and new transactions). However, there are some credit cards that will only apply finance charge on the previous or old balance, excluding new transactions.
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FITS TO MERCHANTS An example of street markets accepting credit cards For merchants, a credit card transaction is often more secure than other forms of payment, such as checks, because the issuing bank commits to pay the merchant the moment the transaction is authorized, regardless of whether the consumer defaults on the credit card payment (except for legitimate disputes, which are discussed below, and can result in charges back to the merchant). In most cases, cards are even more secure than cash, because they discourage theft by the merchants employees and reduce the amount of cash on the premises. Prior to credit cards, each merchant had to evaluate each customers credit history before extending credit. That task is now performed by the banks which assume the credit risk. For each purchase, the bank charges the merchant a commission (discount fee) for this service and there may be a certain delay before the agreed payment is received by the merchant. The commission is often a percentage of the transaction amount, plus a fixed fee. In addition, a merchant may be penalized or have their ability to receive payment using that credit card restricted if there are too many cancellations or reversals of charges as a result of disputes. Some small merchants require credit purchases to have a minimum amount (usually between $5 and $10) to compensate for the transaction costs, though this is not always allowed by the credit card consortium. In some countries, for example the Nordic countries, banks guarantee payment on stolen cards only if an ID card is checked and the ID card number/civic registration number is written down on the receipt together with the signature. In these countries merchants therefore usually ask for ID. Non-Nordic citizens, who are unlikely to possess a Nordic ID card or driving license, will instead have to show their passport, and the passport number will be written down on the receipt, sometimes together with other information. Some shops use the cards PIN for identification, and in that case showing an ID card is not necessary. PARTIES INVOLVED

Cardholder: The holder of the card used to make a purchase; the consumer. Card-issuing bank: The financial institution or other organization that issued the credit card to the cardholder. This bank bills the consumer for repayment and bears the risk that the card is used fraudulently. American Express and Discover were previously the only card-issuing banks for their respective brands, but as of 2007, this is no longer the case. Merchant: The individual or business accepting credit card payments for products or services sold to the cardholder Acquiring bank: The financial institution accepting payment for the products or services on behalf of the merchant.
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Independent sales organization: Resellers (to merchants) of the services of the acquiring bank. Merchant account: This could refer to the acquiring bank or the independent sales organization, but in general is the organization that the merchant deals with. Credit Card association: An association of card-issuing banks such as Visa, MasterCard, Discover, American Express, etc. that set transaction terms for merchants, card-issuing banks, and acquiring banks. Transaction network: The system that implements the mechanics of the electronic transactions. May be operated by an independent company, and one company may operate multiple networks. Transaction processing networks include: Cardnet, Nabanco, Omaha, Paymentech, NDC Atlanta, Nova, TSYS, Concord EFSnet, and VisaNet. Affinity partner: Some institutions lend their names to an issuer to attract customers that have a strong relationship with that institution, and get paid a fee or a percentage of the balance for each card issued using their name. Examples of typical affinity partners are sports teams, universities, charities, professional organizations, and major retailers.
NOTES
The flow of information and money between these parties always through the card associations is known as the interchange, and it consists of a few steps. TRANSACTION STEPS
Authorization: The cardholder pays for the purchase and the merchant submits the transaction to the acquirer (acquiring bank). The acquirer verifies the credit card number, the transaction type and the amount with the issuer (Card-issuing bank) and reserves that amount of the cardholders credit limit for the merchant. An authorization will generate an approval code, which the merchant stores with the transaction. Batching: Authorized transactions are stored in batches, which are sent to the acquirer. Batches are typically submitted once per day at the end of the business day. If a transaction is not submitted in the batch, the authorization will stay valid for a period determined by the issuer, after which the held amount will be returned back to the cardholders available credit (see authorization hold). Some transactions may be submitted in the batch without prior authorizations; these are either transactions falling under the merchants floor limit or ones where the authorization was unsuccessful but the merchant still attempts to force the transaction through. (Such may be the case when the cardholder is not present but owes the merchant additional money, such as extending a hotel stay or car rental.) Clearing and Settlement: The acquirer sends the batch transactions through the credit card association, which debits the issuers for payment and credits the acquirer. Essentially, the issuer pays the acquirer for the transaction.
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Funding: Once the acquirer has been paid, the acquirer pays the merchant. The merchant receives the amount totaling the funds in the batch minus the discount rate, which is the fee the merchant pays the acquirer for processing the transactions. Chargebacks: A chargeback is an event in which money in a merchant account is held due to a dispute relating to the transaction. Chargebacks are typically initiated by the cardholder. In the event of a chargeback, the issuer returns the transaction to the acquirer for resolution. The acquirer then forwards the chargeback to the merchant, who must either accept the chargeback or contest it.
3.5.5 Secured Credit Cards A secured credit card is a type of credit card secured by a deposit account owned by the cardholder. Typically, the cardholder must deposit between 100% and 200% of the total amount of credit desired. Thus if the cardholder puts down $1000, they will be given credit in the range of $500$1000. In some cases, credit card issuers will offer incentives even on their secured card portfolios. In these cases, the deposit required may be significantly less than the required credit limit, and can be as low as 10% of the desired credit limit. This deposit is held in a special savings account. Credit card issuers offer this because they have noticed that delinquencies were notably reduced when the customer perceives something to lose if the balance is not repaid. The cardholder of a secured credit card is still expected to make regular payments, as with a regular credit card, but should they default on a payment, the card issuer has the option of recovering the cost of the purchases paid to the merchants out of the deposit. The advantage of the secured card for an individual with negative or no credit history is that most companies report regularly to the major credit bureaus. This allows for building of positive credit history. Although the deposit is in the hands of the credit card issuer as security in the event of default by the consumer, the deposit will not be debited simply for missing one or two payments. Usually the deposit is only used as an offset when the account is closed, either at the request of the customer or due to severe delinquency (150 to 180 days). This means that an account which is less than 150 days delinquent will continue to accrue interest and fees, and could result in a balance which is much higher than the actual credit limit on the card. In these cases the total debt may far exceed the original deposit and the cardholder not only forfeits their deposit but is left with an additional debt. Most of these conditions are usually described in a cardholder agreement which the cardholder signs when their account is opened. Secured credit cards are an option to allow a person with a poor credit history or no credit history to have a credit card which might not otherwise be available. They are often offered as a means of rebuilding ones credit. Secured credit cards are available with both
ELECTRONIC COMMERCE
Visa and MasterCard logos on them. Fees and service charges for secured credit cards often exceed those charged for ordinary non-secured credit cards, however, for people in certain situations, (for example, after charging off on other credit cards, or people with a long history of delinquency on various forms of debt), secured cards can often be less expensive in total cost than unsecured credit cards, even including the security deposit. Sometimes a credit card will be secured by the equity in the borrowers home. This is called a home equity line of credit (HELOC). 3.5.6 Prepaid Credit Cards A prepaid credit card is not a credit card, since no credit is offered by the card issuer: the card-holder spends money which has been stored via a prior deposit by the cardholder or someone else, such as a parent or employer. However, it carries a credit-card brand (Visa, MasterCard, American Express or Discover) and can be used in similar ways just as though it were a regular credit card After purchasing the card, the cardholder loads the account with any amount of money, up to the predetermined card limit and then uses the card to make purchases the same way as a typical credit card. Prepaid cards can be issued to minors (above 13) since there is no credit line involved. The main advantage over secured credit cards (see above section) is that you are not required to come up with $500 or more to open an account. With prepaid credit cards you are not charged any interest but you are often charged a purchasing fee plus monthly fees after an arbitrary time period. Many other fees also usually apply to a prepaid card. Prepaid credit cards are sometimes marketed to teenagers for shopping online without having their parents complete the transaction. Because of the many fees that apply to obtaining and using credit-card-branded prepaid cards, the Financial Consumer Agency of Canada describes them as an expensive way to spend your own money. The agency publishes a booklet, Pre-paid cards, which explains the advantages and disadvantages of this type of prepaid card. 3.5.7 Features As well as convenient, accessible credit, credit cards offer consumers an easy way to track expenses, which is necessary for both monitoring personal expenditures and the tracking of work-related expenses for taxation and reimbursement purposes. Credit cards are accepted worldwide, and are available with a large variety of credit limits, repayment arrangement, and other perks (such as rewards schemes in which points earned by purchasing goods with the card can be redeemed for further goods and services or credit card cash back).
NOTES
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Some countries, such as the United States, the United Kingdom, and France, limit the amount for which a consumer can be held liable due to fraudulent transactions as a result of a consumers credit card being lost or stolen. 3.5.8 Security Credit card security relies on the physical security of the plastic card as well as the privacy of the credit card number. Therefore, whenever a person other than the card owner has access to the card or its number, security is potentially compromised. Merchants often accept credit card numbers without additional verification for mail order purchases. They however record the delivery address as a security measure to minimise fraudulent purchases. Some merchants will accept a credit card number for in-store purchases, whereupon access to the number allows easy fraud, but many require the card itself to be present, and require a signature. Thus, a stolen card can be cancelled, and if this is done quickly, no fraud can take place in this way. For internet purchases, there is sometimes the same level of security as for mail order (number only) hence requiring only that the fraudster take care about collecting the goods, but often there are additional measures. The main one is to require a security PIN with the card, which requires that the thief have access to the card, as well as the PIN. An additional feature to secure the credit card transaction and prohibit the use of a lost credit card is the MobiClear solution. Each transaction is authenticated through a call to the user mobile phone. The transaction is released once the transaction has been confirmed by the cardholder pushing his/her pincode during the call. The PCI DSS is the security standard issued by The PCI SSC (Payment Card Industry Security Standards Council). This data security standard is used by acquiring banks to impose cardholder data security measures upon their merchants. 3.5.9 Problems
Fig 3.1 Sample Credit Card
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A smart card, combining credit card and debit card properties. The 3 by 5 mm security chip embedded in the card is shown enlarged in the inset. The contact pads on the card enable electronic access to the chip. The low security of the credit card system presents countless opportunities for fraud. This opportunity has created a huge black market in stolen credit card numbers, which are generally used quickly before the cards are reported stolen. The goal of the credit card companies is not to eliminate fraud, but to reduce it to manageable levels. This implies that high-cost low-return fraud prevention measures will not be used if their cost exceeds the potential gains from fraud reduction. Most internet fraud is done through the use of stolen credit card information which is obtained in many ways, the simplest being copying information from retailers, either online or offline. Despite efforts to improve security for remote purchases using credit cards, systems with security holes are usually the result of poor implementations of card acquisition by merchants. For example, a website that uses SSL to encrypt card numbers from a client may simply email the number from the web server to someone who manually processes the card details at a card terminal. Naturally, anywhere card details become human-readable before being processed at the acquiring bank, a security risk is created. However, many banks offer systems where encrypted card details captured on a merchants web server can be sent directly to the payment processor. Controlled Payment Numbers are another option for protecting ones credit card number: they are alias numbers linked to ones actual card number, generated as needed, valid for a relatively short time, with a very low limit, and typically only valid with a single merchant. The Federal Bureau of Investigation and U.S. Postal Inspection Service are responsible for prosecuting criminals who engage in credit card fraud in the United States, but they do not have the resources to pursue all criminals. In general, federal officials only prosecute cases exceeding US $5000 in value. Three improvements to card security have been introduced to the more common credit card networks but none has proven to help reduce credit card fraud so far. First, the on-line verification system used by merchants is being enhanced to require a 4 digit Personal Identification Number (PIN) known only to the card holder. Second, the cards themselves are being replaced with similar-looking tamperresistant smart cards which are intended to make forgery more difficult. The majority of smartcard (IC card) based credit cards comply with the EMV (Europay MasterCard Visa) standard. Third, an additional 3 or 4 digit code is now present on the back of most cards, for use in card not present transactions. See CVV2 for more information. The way credit card owners pay off their balances has a tremendous effect on their credit history. All the information is collected by credit bureaus. The credit information stays on the credit report, depending on the jurisdiction and the situation, for 1, 2, or even 10 years after the debt is repaid.
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3.5.10 Profits and Losses In recent times, credit card portfolios have been very profitable for banks, largely due to the booming economy of the late nineties. However, in the case of credit cards, such high returns go hand in hand with risk, since the business is essentially one of making unsecured (uncollateralized) loans, and thus dependent on borrowers not to default in large numbers. Costs Credit card issuers (banks) have several types of costs: INTEREST EXPENSES Banks generally borrow the money they then lend to their customers. As they receive very low-interest loans from other firms, they may borrow as much as their customers require, while lending their capital to other borrowers at higher rates. If the card issuer charges 15% on money lent to users, and it costs 5% to borrow the money to lend, and the balance sits with the cardholder for a year, the issuer earns 10% on the loan. This 5% difference is the interest expense and the 10% is the net interest spread. 3.5.11 Operating Costs This is the cost of running the credit card portfolio, including everything from paying the executives who run the company to printing the plastics, to mailing the statements, to running the computers that keep track of every cardholders balance, to taking the many phone calls which cardholders place to their issuer, to protecting the customers from fraud rings. Depending on the issuer, marketing programs are also a significant portion of expenses. 3.5.12 Chagre Offs When a consumer becomes severely delinquent on a debt (often at the point of six months without payment), the creditor may declare the debt to be a charge-off. It will then be listed as such on the debtors credit bureau reports (Equifax, for instance, lists R9 in the status column to denote a charge-off.) The item will include relevant dates, and the amount of the bad debt. A charge-off is considered to be written off as uncollectable. To banks, bad debts and even fraud are simply part of the cost of doing business. However, the debt is still legally valid, and the creditor can attempt to collect the full amount for the time periods permitted under state law, which is usually 3 to 7 years. This includes contacts from internal collections staff, or more likely, an outside collection agency. If the amount is large (generally over $1500 - $2000), there is the possibility of a lawsuit or arbitration. In the US, as the charge off number climbs or becomes erratic, officials from the Federal Reserve take a close look at the finances of the bank and may impose various operating strictures on the bank, and in the most extreme cases, may close the bank entirely.
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3.5.13 Rewards Many credit card customers receive rewards, such as frequent flier points, gift certificates, or cash back as an incentive to use the card. Rewards are generally tied to purchasing an item or service on the card, which may or may not include balance transfers, cash advances, or other special uses. Depending on the type of card, rewards will generally cost the issuer between 0.25% and 2.0% of the spread. Networks such as Visa or MasterCard have increased their fees to allow issuers to fund their rewards system. However, most rewards points are accrued as a liability on a companys balance sheet and expensed at the time of reward redemption. As a result, some issuers discourage redemption by forcing the cardholder to call customer service for rewards. On their servicing website, redeeming awards is usually a feature that is very well hidden by the issuers. Others encourage redemption for lower cost merchandise; instead of an airline ticket, which is very expensive to an issuer, the cardholder may be encouraged to redeem for a gift certificate instead. With a fractured and competitive environment, rewards points cut dramatically into an issuers bottom line, and rewards points and related incentives must be carefully managed to ensure a profitable portfolio. Unlike unused gift cards, in whose case the breakage in certain US states goes to the states treasury, unredeemed credit card points are retained by the issuer. 3.5.14 Fraud The cost of fraud is high; in the UK in 2004 it was over 500 million with CIFAS, the UKs fraud prevention service, indicating that levels of fraud are increasing by around 10 percent per year. When a card is stolen, or an unauthorized duplicate made, most card issuers will refund some or all of the charges that the customer has received for things they did not buy. These refunds will, in some cases, be at the expense of the merchant, especially in mail order cases where the merchant cannot claim sight of the card. In several countries, merchants will lose the money if no ID card was asked for, therefore merchants usually require ID card in these countries. Credit card companies generally guarantee the merchant will be paid on legitimate transactions regardless of whether the consumer pays their credit card bill. REVENUES Offsetting costs are the following revenues INTERCHANGE FEE In addition to fees paid by the card holder, merchants must also pay interchange fees to the card-issuing bank and the card association. For a typical credit card issuer, interchange fee revenues may represent about a quarter of total revenues. These fees are typically from 1 to 6 percent of each sale, but will vary not only from merchant to merchant (large merchants can negotiate lower rates), but also from card to card, with business cards and rewards cards generally costing the merchants more to
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process. The interchange fee that applies to a particular transaction is also affected by many other variables including the type of merchant, the merchants total card sales volume, the merchants average transaction amount, whether the cards are physically present, if the cards magnetic stripe is read or if the transaction is hand-keyed or entered on a website, the specific type of card, when the transaction is settled, and the authorized and settled transaction amounts. Interchange fees may consume over 50 percent of profits from card sales for some merchants (such as supermarkets) that operate on slim margins. In some cases, merchants add a surcharge to the credit cards to cover the interchange fee, enouraging their customers to instead use cash, debit cards, or even cheques. INTEREST ON OUTSTANDING BALANCES Interest charges vary widely from card issuer to card issuer. Often, there are teaser rates in effect for initial periods of time (as low as zero percent for, say, six months), whereas regular rates can be as high as 40 percent. In the U.S. there is no federal limit on the interest or late fees credit card issuers can charge; the interest rates are set by the states, with some states such as South Dakota, having no ceiling on interest rates and fees, inviting some banks to establish their credit card operations there. Other states, for example Delaware, have very weak usury laws. The teaser rate no longer applies if the customer doesnt pay his bills on time, and is replaced by a penalty interest rate (for example, 24.99%) that applies retroactively. FEES CHARGED TO CUSTOMERS The major fees are for

Late payments or overdue payments Charges that result in exceeding the credit limit on the card (whether done deliberately or by mistake), called overlimit fees Returned cheque fees or payment processing fees (eg phone payment fee) Cash advances and convenience cheques (often 3% of the amount). Transactions in a foreign currency (as much as 3% of the amount). A few financial institutions do not charge a fee for this. Membership fees (annual or monthly), sometimes a percentage of the credit limit. Exchange rate loading fees (these may sometimes not be reported on the customers statement, even when they are applied)
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UNIT IV
NOTES
ELECTRONIC COMMERCE PROVIDERS

A transaction is an agreement, communication, or movement carried out between separate entities or objects, often involving the exchange of items of value, such as information, goods, services and money.

Financial transaction Real estate transaction Transaction cost Database transaction Atomic database transaction Transaction processing POS Transaction
Transaction may also refer to Transaction Publishers Transaction, an episode of the Death Note anime series, see List of Death Note episodes Transactional analysis, a psychoanalytic theory of psychology Transactional interpretation, an interpretation of quantum mechanics
4.1 ELECTRONIC FUND TRANSFER Electronic funds transfer or EFT refers to the computer-based systems used to perform financial transactions electronically. The term is used for a number of different concepts:

Cardholder-initiated transactions, where a cardholder makes use of a payment card Direct deposit payroll payments for a business to its employees, possibly via a payroll services company
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Direct debit payments from customer to business, where the transaction is initiated by the business with customer permission Electronic bill payment in online banking, which may be delivered by EFT or paper check Transactions involving stored value of electronic money, possibly in a private currency Wire transfer via an international banking network (generally carries a higher fee) Electronic Benefit Transfer
EFTPOS (short for Electronic Funds Transfer at Point of Sale) is an Australian and New Zealand electronic processing system for credit cards, debit cards and charge cards. European banks and card companies also sometimes reference EFTPOS as the system used for processing card transactions through terminals on points of sale, though the system is not the trademarked Australian/New Zealand variant. 4.2 CARD BASED EFT EFT may be initiated by a cardholder when a payment card such as a credit card or debit card is used. This may take place at an automated teller machine (ATM) or point of sale (POS), or when the card is not present, which covers cards used for mail order, telephone order and internet purchases. Card-based EFT transactions are often covered by the ISO 8583 standard. 4.3 TRANSACTION TYPES A number of transaction types may be performed, including the following:

Sale: where the cardholder pays for goods or service Refund: where a merchant refunds an earlier payment made by a cardholder Withdrawal: the cardholder withdraws funds from their account, e.g. from an ATM. The term Cash Advance may also be used, typically when the funds are advanced by a merchant rather than at an ATM Deposit: where a cardholder deposits funds to their own account (typically at an ATM) Cashback: where a cardholder withdraws funds from their own account at the same time as making a purchase Inter-account transfer: transferring funds between linked accounts belonging to the same cardholder Payment: transferring funds to a third party account
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Enquiry: a transaction without financial impact, for instance balance enquiry, available funds enquiry, linked accounts enquiry, or request for a statement of recent transactions on the account E top-up: where a cardholder can use a device (typically POS or ATM) to add funds (top-up) their pre-pay mobile phone Mini-statement: where a cardholder uses a device (typically an ATM) to obtain details of recent transactions on their account Administrative: this covers a variety of non-financial transactions including PIN change
NOTES
The transaction types offered depend on the terminal. An ATM would offer different transactions from a POS terminal, for instance. 4.4 AUTHORISATION EFT transactions require communication between a number of parties. When a card is used at a merchant or ATM, the transaction is first routed to an acquirer, then through a number of networks to the issuer where the cardholders account is held. A transaction may be authorised offline by any of these entities through a stand-in agreement. Stand-in authorisation may be used when a communication link is not available, or simply to save communication cost or time. Stand-in is subject to the transaction amount being below agreed limits, known as floor limits. These limits are calculated based on the risk of authorising a transaction offline, and thus vary between merchants and card types. Offline transactions may be subject to other security checks such as checking the card number against a hotcard (stolen card) list, velocity checks (limiting the number of offline transactions allowed by a cardholder) and random online authorisation. Before online authorisation was standard practice and credit cards were processed using manual vouchers, each merchant would agree a limit (floor limit) with his bank above which he must telephone for an authorisation code. If this was not carried out and the transaction subsequently was refused by the issuer (bounced), the merchant would not be entitled to a refund. 4.5 AUTHENTICATION EFT transactions may be accompanied by methods to authenticate the card and the card holder. The merchant may manually verify the card holders signature, or the card holders Personal identification number (PIN) may be sent online in an encrypted form for validation by the card issuer. Other information may be included in the transaction, some of which is not visible to the card holder (for instance magnetic stripe data), and some of which may be requested from the card holder (for instance the card holders address or the CVV2 value printed on the card).
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4.6 FIRST VIRTUAL PAYMENT SYSTEM First Virtual Holdings was a company formed in early 1994 to facilitate Internet commerce. The first product offering from First Virtual was an Internet payment system, which was developed quietly and publicly announced as a fully-operational open Internet service on October 15, 1994. First Virtual provided most of the features of both eBay and PayPal before those companies existed. Key people behind First Virtual were Nathaniel Borenstein, Marshall Rose, Einar Stefferud, and Lee Stein. From The New York Times The First Virtual approach is to create an automatic authorization system that requires no previous relationship between buyer and seller. In the era of electronic commerce, the new system may herald a shift comparable to the transition a generation ago, when the members-only department store credit card gave way to use-anywhere cards like Visa and Mastercard. The new company, based in San Diego, is the brainchild of Lee Stein, a San Diego lawyer and accountant who is its president, and three computer scientists long involved with the Internet global web of computer networks. First Virtuals big partners are Electronic Data Systems Inc., a division of General Motors, and First USA, a fast-growing credit card company in Dallas that will issue a Visa card for the new service. First Virtuals system differed in many ways from all other proposed approaches to Internet commerce, most notably in the fact that it did not rely on encryption or any other form of cryptography to ensure the safety of its commercial transactions. Instead, safety was ensured by enforcing a dichotomy between non-sensitive information (which may travel over the Internet) and sensitive information (which never does), and by a buyer feedback mechanism. First Virtuals protocols were built atop existing IETF protocols, and subject to public discussions. The backbone of the system was designed around Internet email and the MIME (Multipurpose Internet Mail Extensions) standard. First Virtual used regular email to communicate with a buyer to confirm charges against their account. Sellers could use either email, Telnet, or automated programs that made use of First Virtuals Simple MIME Exchange Protocol (SMXP) to verify accounts and initiate payment transactions. See and for further discussions of the First Virtuals system. Early rounds of investment came from leading institutions such as First Data, First USA, and GE Capital, leading to a successful IPO in 1996. First Virtual was sold and changed its name to MessageMedia (for $0.60 per share) on December 16, 1998.
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MessageMedia used the FV Email tools with considerable success in its Customer Relations Management Services (CRM) until MessageMedia in turn was forced to sell out to Doubleclick in the dot com crash for US$0.16/share in late 2001. 4.7 INTERNET EXCHANGE POINT An Internet exchange point (IX or IXP) is a physical infrastructure that allows different Internet service providers (ISPs) to exchange Internet traffic between their networks (autonomous systems) by means of mutual peering agreements, which allow traffic to be exchanged without cost. IXPs reduce the portion of an ISPs traffic which must be delivered via their upstream transit providers, thereby reducing the Average Per-Bit Delivery Cost of their service. Furthermore, the increased number of paths learned through the IXP improves routing efficiency and fault-tolerance. The primary purpose of an IXP is to allow networks to interconnect directly, via the exchange, rather than through one or more 3rd party networks. The advantages of the direct interconnection are numerous, but the primary reasons are cost, latency, and bandwidth. Traffic passing through an exchange is typically not billed by any party, whereas traffic to an ISPs upstream provider is. The direct interconnection, often located in the same city as both networks, avoids the need for data to travel to other cities (potentially on other continents) to get from one network to another, thus reducing latency. The third advantage, speed, is most noticeable in areas that have poorly developed long-distance connections. ISPs in these regions might have to pay between 10 or 100 times more for data transport than ISPs in North America, Europe or Japan. Therefore, these ISPs typically have slower, more limited connections to the rest of the internet. However, a connection to a local IXP may allow them to transfer data without limit, and without cost, vastly improving the bandwidth between customers of the two adjacent ISPs. A typical IXP consists of one or more network switches, to which each of the participating ISPs connect. Prior to the existence of switches, IXPs typically utilized FOIRL hubs or FDDI rings, migrating to Ethernet and FDDI switches as those became available in 1993 and 1994. ATM switches were briefly used at a few IXPs in the late 1990s, accounting for approximately 4% of the market at their peak, and there was an abortive attempt by the Stockholm IXP, NetNod, to use SRP/DPT (an ill-fated conjoinment of FDDI and SONET), but Ethernet has prevailed, accounting for more than 95% of all existing Internet exchange switch fabrics. All Ethernet port speeds are to be found at modern IXPs, ranging from 10 Mbit/s ports in use in small developing-country IXes, to ganged 10 Gbit/s ports in major centers like Seoul, New York, London, Frankfurt, Amsterdam, and Palo Alto. When an IXP incurs any operating costs, those costs are typically shared among all of its participants. At the more expensive exchanges, participants pay a monthly or annual fee, usually determined by the speed of the port or ports which theyre using, or much less
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commonly by the volume of traffic which theyre passing across the exchange (fees based on volume of traffic are unpopular because they provide a counterincentive to growth of the exchange). Some exchanges also have a setup fee, to offset the costs of the switch port and any media adaptors (GBICs, SFPs, XFPs, XENPAKs, et cetera) which the new participant requires, and the labor of configuring it to serve them. 4.8 INTERCHANGE OF TRAFFIC ACROSS AN INTERNET EXCHANGE POINT A connection to an IXP does not by itself cause any traffic to be exchanged; it is a physical presence on a shared medium, nothing more. In order to have Internet traffic flow between two participants on an IXP, the two participants must initiate BGP peering between themselves, and choose to announce routes over the peering relationship - either routes to their own addresses, or routes to addresses of other ISPs that they connect to, possibly via other mechanisms. The other party to the peering can then apply route filtering, where it chooses to accept those routes, and route traffic accordingly, or to ignore those routes, and use other routes to reach those addresses. In many cases, an ISP will both have a direct link to another ISP and accept a route (normally ignored) to the other ISP through the IXP; if the direct link fails, traffic will then start flowing over the IXP. In this way, the IXP acts as a backup link. 4.9 CYBER CASH CyberCash, Inc. was an internet payment service for electronic commerce, headquartered in Reston, Virginia. It was founded in August 1994 by Daniel C. Lynch (who served as chairman), William N. Melton (who served as president and CEO, and later chairman), Steve Crocker (Chief Technology Officer), and Bruce G. Wilson. The company initially provided an electronic wallet software to consumers and provided software to merchants to accept credit card payments. Later they also offered CyberCoin, a micropayment system modeled after the NetBill research project at Carnegie Mellon University, which they later licensed. Despite a trial with ESPN.com, CyberCoin never took off, and the focus remained on providing software for consumers and merchants to process credit card payments. In 1995, the company proposed RFC 1898, CyberCash Credit Card Protocol Version 0.8. The company went public on February 19, 1996 with the symbol CYCH and its shares rose 79% on the first day of trading. In 1998, CyberCash bought another online credit card processing company, ICVerify. In January 2000, a teenage Russian hacker nicknamed Maxus announced he had cracked CyberCashs ICVerify application; the company denied this.
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On January 1, 2000, CyberCash fell victim to the Y2K Bug, causing double recording of credit card payments through their system. The company filed for Chapter 11 bankruptcy on March 11, 2001 and its assets and name were acquired by VeriSign a couple of months later. PayPal acquired VeriSigns payment services, including Cybercash. 4.10 SECURITY MODEL A computer security model is a scheme for specifying and enforcing security policies. A security model may be founded upon a formal model of access rights, a model of computation, a model of distributed computing, or no particular theoretical grounding at all. In computer security, an access control list (ACL) is a list of permissions attached to an object. The list specifies who or what is allowed to access the object and what operations are allowed to be performed on the object. In a typical ACL, each entry in the list specifies a subject and an operation: for example, the entry (Alice, delete) on the ACL for file WXY gives Alice permission to delete file WXY. 4.11 ACL BASED SECURITY MODEL In an ACL-based security model, when a subject requests to perform an operation on an object, the system first checks the list for an applicable entry in order to decide whether to proceed with the operation. A key issue in the definition of any ACL-based security model is the question of how access control lists are edited. For each object; who can modify the objects ACL and what changes are allowed. Systems that use ACLs can be classified into two categories: discretionary and mandatory. A system is said to have discretionary access control if the creator or owner of an object can fully control access to the object, including, for example, altering the objects ACL to grant access to anyone else. A system is said to have mandatory access control (also known as non-discretionary access control in the security literature) if it enforces system-wide restrictions that override the permissions stated in the ACL. Traditional ACL systems assign permissions to individual users, which can become cumbersome in a system with a large number of users. In a more recent approach called role-based access control, permissions are assigned to roles, and users are assigned to roles. 4.12 CONSUMER PROTECTION Consumer protection is a form of government regulation which protects the interests of consumers. For example, a government may require businesses to disclose detailed information about productsparticularly in areas where safety or public health is an issue,
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such as food. Consumer protection is linked to the idea of consumer rights (that consumers have various rights as consumers), and to the formation of consumer organizations which help consumers make better choices in the marketplace. Consumer interests can also be protected by promoting competition in the markets which directly and indirectly serve consumers, consistent with economic efficiency, but this topic is treated in Competition law. Consumer protection can also be asserted via non-government organizations and individuals as consumer activism. 4.13 VIRTUAL TERMINAL In open systems, a virtual terminal (VT) is an application service that: 1. Allows host terminals on a multi-user network to interact with other hosts regardless of terminal type and characteristics, 2. Allows remote log-on by local area network managers for the purpose of management, 3. Allows users to access information from another host processor for transaction processing, 4. Serves as a backup facility. ITU-T defines a virtual terminal protocol based on the OSI application layer protocols. However, the virtual terminal protocol is not widely used on the Internet. 4.14 SECURITY CONSIDERATIONS Information security means protecting information and information systems from unauthorized access, use, disclosure, disruption, modification, or destruction. The terms information security, computer security and information assurance are frequently incorrectly used interchangeably. These fields are interrelated often and share the common goals of protecting the confidentiality, integrity and availability of information; however, there are some subtle differences between them. These differences lie primarily in the approach to the subject, the methodologies used, and the areas of concentration. Information security is concerned with the confidentiality, integrity and availability of data regardless of the form the data may take: electronic, print, or other forms. Computer security can focus on ensuring the availability and correct operation of a computer system without concern for the information stored or processed by the computer. Governments, military, corporates, financial institutions, hospitals, and private businesses amass a great deal of confidential information about their employees, customers, products, research, and financial status. Most of this information is now collected, processed and stored on electronic computers and transmitted across networks to other computers. Should confidential information about a businesses customers or finances or new product
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line fall into the hands of a competitor, such a breach of security could lead to lost business, law suits or even bankruptcy of the business. Protecting confidential information is a business requirement, and in many cases also an ethical and legal requirement. For the individual, information security has a significant effect on privacy, which is viewed very differently in different cultures. The field of information security has grown and evolved significantly in recent years. As a career choice there are many ways of gaining entry into the field. It offers many areas for specialization including, Securing network and allied infrastructure, Securing Applications and database(s), Security testing, Information Systems Auditing, Business Continuity Planning and Digital Forensics Science, to name a few. This article presents a general overview of information security and its core concepts 4.15 BASIC PRINCIPLES Key concepts For over twenty years information security has held that confidentiality, integrity and availability (known as the CIA Triad) are the core principles of information security. 4.15.1 Confidentiality Confidentiality is the property of preventing disclosure of information to unauthorized individuals or systems. For example, a credit card transaction on the Internet requires the credit card number to be transmitted from the buyer to the merchant and from the merchant to a transaction processing network. The system attempts to enforce confidentiality by encrypting the card number during transmission, by limiting the places where it might appear (in databases, log files, backups, printed receipts, and so on), and by restricting access to the places where it is stored. If an unauthorized party obtains the card number in any way, a breach of confidentiality has occurred. Breaches of confidentiality take many forms. Permitting someone to look over your shoulder at your computer screen while you have confidential data displayed on it could be a breach of confidentiality. If a laptop computer containing sensitive information about a companys employees is stolen or sold, it could result in a breach of confidentiality. Giving out confidential information over the telephone is a breach of confidentiality if the caller is not authorized to have the information. Confidentiality is necessary (but not sufficient) for maintaining the privacy of the people whose personal information a system holds. 4.15.2 Integrity In information security, integrity means that data cannot be modified without authorization. (This is not the same thing as referential integrity in databases.) Integrity is
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violated when an employee (accidentally or with malicious intent) deletes important data files, when a computer virus infects a computer, when an employee is able to modify his own salary in a payroll database, when an unauthorized user vandalizes a web site, when someone is able to cast a very large number of votes in an online poll, and so on. 4.15.3 Availability For any information system to serve its purpose, the information must be available when it is needed. This means that the computing systems used to store and process the information, the security controls used to protect it, and the communication channels used to access it must be functioning correctly. High availability systems aim to remain available at all times, preventing service disruptions due to power outages, hardware failures, and system upgrades. Ensuring availability also involves preventing DoS attacks (denial-ofservice attacks). In 2002, Donn Parker proposed an alternative model for the classic CIA triad that he called the six atomic elements of information. The elements are confidentiality, possession, integrity, authenticity, availability, and utility. The merits of the Parkerian hexad are a subject of debate amongst security professionals. 4.15.4 Authenticity In computing, e-Business and information security it is necessary to ensure that the data, transactions, communications or documents (electronic or physical) are genuine (i.e. they have not been forged or fabricated.). It is also important for authenticity to validate that both parties involved are who they claim they are. 4.15.5 Non-Repudiation In law, non-repudiation implies ones intention to fulfill their obligations to a contract. It also implies that one party of a transaction cannot deny having received a transaction nor can the other party deny having sent a transaction. Electronic commerce uses technology such as digital signatures and encryption to establish authenticity and non-repudiation. 4.15.6 Risk Management Security is everyones responsibility. Security awareness poster. U.S. Department of Commerce/Office of Security. A comprehensive treatment of the topic of risk management is beyond the scope of this article. We will however, provide a useful definition of risk management, outline a commonly used process for risk management, and define some basic terminology. The CISA Review Manual 2006 provides the following definition of risk management: Risk management is the process of identifying vulnerabilities and threats to the information resources used by an organization in achieving business objectives, and deciding what
ELECTRONIC COMMERCE
countermeasures, if any, to take in reducing risk to an acceptable level, based on the value of the information resource to the organization. There are two things in this definition that may need some clarification. First, the process of risk management is an ongoing iterative process. It must be repeated indefinitely. The business environment is constantly changing and new threats and vulnerabilities emerge every day. Second, the choice of countermeasures (controls) used to manage risks must strike a balance between productivity, cost, effectiveness of the countermeasure, and the value of the informational asset being protected. Risk is the likelihood that something bad will happen that causes harm to an informational asset (or the loss of the asset). A vulnerability is a weakness that could be used to endanger or cause harm to an informational asset. A threat is anything (man made or act of nature) that has the potential to cause harm. The likelihood that a threat will use a vulnerability to cause harm creates a risk. When a threat does use a vulnerability to inflict harm, it has an impact. In the context of information security, the impact is a loss of availability, integrity, and confidentiality, and possibly other losses (lost income, loss of life, loss of real property). It should be pointed out that it is not possible to identify all risks, nor is it possible to eliminate all risk. The remaining risk is called residual risk. A risk assessment is carried out by a team of people who have knowledge of specific areas of the business. Membership of the team may vary over time as different parts of the business are assessed. The assessment may use a subjective qualitative analysis based on informed opinion, or where reliable dollar figures and historical information is available, the analysis may use quantitative analysis. The ISO/IEC 27002:2005 Code of practice for information security management recommends the following be examined during a risk assessment

NOTES
security policy, organization of information security, asset management, human resources security, physical and environmental security, communications and operations management, access control, information systems acquisition, development and maintenance, information security incident management, business continuity management, and regulatory compliance.
DMC 1621
NOTES
In broad terms the risk management process consists of 1. Identification of assets and estimating their value. Include: people, buildings, hardware, software, data (electronic, print, other), supplies. 2. Conduct a threat assessment. Include: Acts of nature, acts of war, accidents, malicious acts originating from inside or outside the organization. 3. Conduct a vulnerability assessment, and for each vulnerability, calculate the probability that it will be exploited. Evaluate policies, procedures, standards, training, physical security, quality control, technical security. 4. Calculate the impact that each threat would have on each asset. Use qualitative analysis or quantitative analysis. 5. Identify, select and implement appropriate controls. Provide a proportional response. Consider productivity, cost effectiveness, and value of the asset. Evaluate the effectiveness of the control measures. Ensure the controls provide For any given risk, Executive Management can choose to accept the risk based upon the relative low value of the asset, the relative low frequency of occurrence, and the relative low impact on the business. Or, leadership may choose to mitigate the risk by selecting and implementing appropriate control measures to reduce the risk. In some cases, the risk can be transferred to another business by buying insurance or out-sourcing to another business. The reality of some risks may be disputed. In such cases leadership may choose to deny the risk. This is itself a potential risk. 4.15.7 Controls When Management chooses to mitigate a risk, they will do so by implementing one or more of three different types of controls. Administrative Administrative controls (also called procedural controls) consist of approved written policies, procedures, standards and guidelines. Administrative controls form the framework for running the business and managing people. They inform people on how the business is to be run and how day to day operations are to be conducted. Laws and regulations created by government bodies are also a type of administrative control because they inform the business. Some industry sectors have policies, procedures, standards and guidelines that must be followed - the Payment Card Industry (PCI) Data Security Standard required by Visa and Master Card is such an example. Other examples of administrative controls include the corporate security policy, password policy, hiring policies, and disciplinary policies.
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Administrative controls form the basis for the selection and implementation of logical and physical controls. Logical and physical controls are manifestations of administrative controls. Administrative controls are of paramount importance. Logical Logical controls (also called technical controls) use software and data to monitor and control access to information and computing systems. For example: passwords, network and host based firewalls, network intrusion detection systems, access control lists, and data encryption are logical controls. An important logical control that is frequently overlooked is the principle of least privilege. The principle of least privilege requires that an individual, program or system process is not granted any more access privileges than are necessary to perform the task. A blatant example of the failure to adhere to the principle of least privilege is logging into Windows as user Administrator to read Email and surf the Web. Violations of this principle can also occur when an individual collects additional access privileges over time. This happens when employees job duties change, or they are promoted to a new position, or they transfer to another department. The access privileges required by their new duties are frequently added onto their already existing access privileges which may no longer be necessary or appropriate. Physical Physical controls monitor and control the environment of the work place and computing facilities. They also monitor and control access to and from such facilities. For example: doors, locks, heating and air conditioning, smoke and fire alarms, fire suppression systems, cameras, barricades, fencing, security guards, cable locks, etc. Separating the network and work place into functional areas are also physical controls. An important physical control that is frequently overlooked is the separation of duties. Separation of duties ensures that an individual can not complete a critical task by himself. For example: an employee who submits a request for reimbursement should not also be able to authorize payment or print the check. An applications programmer should not also be the server administrator or the database administrator - these roles and responsibilities must be separated from one another. 4.15.8 Security Classification For Information An important aspect of information security and risk management is recognizing the value of information and defining appropriate procedures and protection requirements for the information. Not all information is equal and so not all information requires the same degree of protection. This requires information to be assigned a security classification. The first step in information classification is to identify a member of senior management as the owner of the particular information to be classified. Next, develop a classification
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policy. The policy should describe the different classification labels, define the criteria for information to be assigned a particular label, and list the required security controls for each classification. Some factors that influence which classification information should be assigned include how much value that information has to the organization, how old the information is and whether or not the information has become obsolete. Laws and other regulatory requirements are also important considerations when classifying information. Common information security classification labels used by the business sector are: public, sensitive, private, confidential. Common information security classification labels used by government are: Unclassified, Sensitive But Unclassified, Restricted, Confidential, Secret, Top Secret and their non-English equivalents. All employees in the organization, as well as business partners, must be trained on the classification schema and understand the required security controls and handling procedures for each classification. The classification a particular information asset has been assigned should be reviewed periodically to ensure the classification is still appropriate for the information and to ensure the security controls required by the classification are in place. 4.15.9 Access Control Identification is an assertion of who someone is or what something is. If a person makes the statement Hello, my name is John Doe. they are making a claim of who they are. However, their claim may or may not be true. Before John Doe can be granted access to protected information it will be necessary to verify that the person claiming to be John Doe really is John Doe. Authentication is the act of verifying a claim of identity. When John Doe goes into a bank to make a withdrawal, he tells the bank teller he is John Doe (a claim of identity). The bank teller asks to see a photo ID, so he hands the teller his drivers license. The bank teller checks the license to make sure it has John Doe printed on it and compares the photograph on the license against the person claiming to be John Doe. If the photo and name match the person, then the teller has authenticated that John Doe is who he claimed to be. There are three different types of information that can be used for authentication: something you know, something you have, or something you are. Examples of something you know include such things as a PIN, a password, or your mothers maiden name. Examples of something you have include a drivers license or a magnetic swipe card. Something you are refers to biometrics. Examples of biometrics include palm prints, finger prints, voice prints and retina (eye) scans. Strong authentication requires providing information from two of the three different types of authentication information. For example, something you know plus something you have. This is called two factor authentication.
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On computer systems in use today, the Username is the most common form of identification and the Password is the most common form of authentication. Usernames and passwords have served their purpose but in our modern world they are no longer adequate. Usernames and passwords are slowly being replaced with more sophisticated authentication mechanisms After a person, program or computer has successfully been identified and authenticated then it must be determined what informational resources they are permitted to access and what actions they will be allowed to perform (run, view, create, delete, or change). This is called authorization. Authorization to access information and other computing services begins with administrative policies and procedures. The polices prescribe what information and computing services can be accessed, by whom, and under what conditions. The access control mechanisms are then configured to enforce these policies. Different computing systems are equipped with different kinds of access control mechanisms, some may offer a choice of different access control mechanisms. The access control mechanism a system offers will be based upon one of three approaches to access control or it may be derived from a combination of the three approaches. The non-discretionary approach consolidates all access control under a centralized administration. The access to information and other resources is usually based on the individuals function (role) in the organization or the tasks the individual must perform. The discretionary approach gives the creator or owner of the information resource the ability to control access to those resources. In the Mandatory access control approach, access is granted or denied bases upon the security classification assigned to the information resource. Examples of common access control mechanisms in use today include Role-based access control available in many advanced Database Management Systems, simple file permissions provided in the UNIX and Windows operating systems, Group Policy Objects provided in Windows network systems, Kerberos, RADIUS, TACACS, and the simple access lists used in many firewalls and routers. To be effective, policies and other security controls must be enforceable and upheld. Effective policies ensure that people are held accountable for their actions. All failed and successful authentication attempts must be logged, and all access to information must leave some type of audit trail.[citation needed] 4.15.10 Cryptography Information security uses cryptography to transform usable information into a form that renders it unusable by anyone other than an authorized user; this process is called encryption. Information that has been encrypted (rendered unusable) can be transformed
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back into its original usable form by an authorized user, who possesses the cryptographic key, through the process of decryption. Cryptography is used in information security to protect information from unauthorized or accidental discloser while the information is in transit (either electronically or physically) and while information is in storage. Cryptography provides information security with other useful applications as well including improved authentication methods, message digests, digital signatures, nonrepudiation, and encrypted network communications. Older less secure application such as telnet and ftp are slowly being replaced with more secure applications such as ssh that use encrypted network communications. Wireless communications can be encrypted using the WPA or WEP protocols. Software applications such as GNUPG or PGP can be used to encrypt data files and Email. Cryptography can introduce security problems when it is not implemented correctly. Cryptographic solutions need to be implemented using industry accepted solutions that have undergone rigorous peer review by independent experts in cryptography. The length and strength of the encryption key is also an important consideration. A key that is weak or too short will produce weak encryption. The keys used for encryption and decryption must be protected with the same degree of rigor as any other confidential information. They must be protected from unauthorized disclosure and destruction and they must be available when needed. PKI solutions address many of the problems that surround key management. 4.15.11 Defense in Depth
Information security must protect information throughout the life span of the information, from the initial creation of the information on through to the final disposal of the information. The information must be protected while in motion and while at rest. During its life time, information may pass through many different information processing systems and through many different parts of information processing systems. There are many different ways the information and information systems can be threatened. To fully protect the information during its lifetime, each component of the information processing system must have its own protection mechanisms. The building up, layering on and overlapping of security measures is called defense in depth. The strength of any system is no greater than its weakest link.
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Using a defence in depth strategy, should one defensive measure fail there are other defensive measures in place that continue to provide protection. Recall the earlier discussion about administrative controls, logical controls, and physical controls. The three types of controls can be used to form the bases upon which to build a defence-in depth-strategy. With this approach, defence in depth can be conceptualised as three distinct layers or planes laid one on top of the other. Additional insight into defence in depth can be gained by thinking of it as forming the layers of an onion, with data at the core of the onion, people as the outer layer of the onion, and network security, host-based security and applications security forming the inner layers of the onion. Both perspectives are equally valid and each provides valuable insight into the implementation of a good defence-in-depth strategy. 4.15.12 Process The terms reasonable and prudent person, due care and due diligence have been used in the fields of Finance, Securities, and Law for many years. In recent years these terms have found their way into the fields of computing and information security. U.S.A. Federal Sentencing Guidelines now make it possible to hold corporate officers liable for failing to exercise due care and due diligence in the management of their information systems. In the business world, stockholders, customers, business partners and governments have the expectation that corporate officers will run the business in accordance with accepted business practices and in compliance with laws and other regulatory requirements. This is often described as the reasonable and prudent person rule. A prudent person takes due care to ensure that everything necessary is done to operate the business by sound business principles and in a legal ethical manner. A prudent person is also diligent (mindful, attentive, and ongoing) in their due care of the business. In the field of Information Security, Harris offers the following definitions of due care and due diligence. Due care are steps that are taken to show that a company has taken responsibility for the activities that take place within the corporation and has taken the necessary steps to help protect the company, its resources, and employees. And, [Due diligence are the] continual activities that make sure the protection mechanisms are continually maintained and operational. Attention should be made to two important points in these definitions. First, in due care, steps are taken to show - this means that the steps can be verified, measured, or even produce tangible artifacts. Second, in due diligence, there are continual activities -
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this means that people are actually doing things to monitor and maintain the protection mechanisms, and these activities are ongoing. SECURITY GOVERNANCE The Software Engineering Institute at Carnegie Mellon University, in a publication titled Governing for Enterprise Security (GES), defines characteristics of effective security governance. These include

An Enterprise-wide Issue. Leaders are Accountable. Viewed as a Business Requirement. Risk-based. Roles, Responsibilities, and Segregation of Duties Defined. Addressed and Enforced in Policy. Adequate Resources Committed. Staff Aware and Trained. A Development Life Cycle Requirement. Planned, Managed, Measurable, and Measured. Reviewed and Audited. CLIENT APPLICATION
The client-server software architecture model distinguishes client systems from server systems, which communicate over a computer network. A client-server application is a distributed system comprising both client and server software. A client software process may initiate a communication session, while the server waits for requests from any client. Client/server describes the relationship between two computer programs in which one program, the client, makes a service request from another program, the server. Standard networked functions such as email exchange, web access and database access, are based on the client/server model. For example, a web browser is a client program at the user computer that may access information at any web server in the world. To check your bank account from your computer, a web browser client program in your computer forwards your request to a web server program at the bank. That program may in turn forward the request to its own database client program that sends a request to a database server at another bank computer to retrieve your account balance. The balance is returned to the bank database client, which in turn serves it back to the web browser client in your personal computer, which displays the information for you. The client/server model has become one of the central ideas of network computing. Most business applications being written today use the client/server model. So do the Internets main application protocols, such as HTTP, SMTP, Telnet, DNS, etc. In marketing,
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the term has been used to distinguish distributed computing by smaller dispersed computers from the monolithic centralized computing of mainframe computers. But this distinction has largely disappeared as mainframes and their applications have also turned to the client/ server model and become part of network computing. Each instance of the client software can send data requests to one or more connected servers. In turn, the servers can accept these requests, process them, and return the requested information to the client. Although this concept can be applied for a variety of reasons to many different kinds of applications, the architecture remains fundamentally the same. The most basic type of client-server architecture employs only two types of hosts: clients and servers. This type of architecture is sometimes referred to as two-tier. It allows devices to share files and resources. The two tier architecture means that the client acts as one tier and application in combination with server acts as another tier. These days, clients are most often web browsers, although that has not always been the case. Servers typically include web servers, database servers and mail servers. Online gaming is usually client-server too. In the specific case of MMORPG, the servers are typically operated by the company selling the game; for other games one of the players will act as the host by setting his game in server mode. The interaction between client and server is often described using sequence diagrams. Sequence diagrams are standardized in the Unified Modeling Language. When both the client- and server-software are running on the same computer, this is called a single seat setup. CHARACTERISITCS Characteristics of a client Initiates requests Waits for replies Receives replies Usually connects to a small number of servers at one time Typically interacts directly with end-users using a graphical user interface Characteristics of a server Never initiates requests or activities Waits for and replies to requests from connected clients A server can remotely install/uninstall applications and transfer data to the intended clients
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Comparison to Peer-to-Peer architecture Another type of network architecture is known as peer-to-peer, because each host or instance of the program can simultaneously act as both a client and a server, and because each has equivalent responsibilities and status. Peer-to-peer architectures are often abbreviated using the acronym P2P. Both client-server and P2P architectures are in wide usage today. Comparison to Client-Queue-Client architecture While classic Client-Server architecture requires one of the communication endpoints to act as a server, which is much harder to implement, Client-Queue-Client allows all endpoints to be simple clients, while the server consists of some external software, which also acts as passive queue (one software instance passes its query to another instance to queue, e.g. database, and then this other instance pulls it from database, makes a response, passes it to database etc.). This architecture allows greatly simplified software implementation. Peer-to-Peer architecture was originally based on Client-Queue-Client concept. Advantages
In most cases, a client-server architecture enables the roles and responsibilities of a computing system to be distributed among several independent computers that are known to each other only through a network. This creates an additional advantage to this architecture: greater ease of maintenance. For example, it is possible to replace, repair, upgrade, or even relocate a server while its clients remain both unaware and unaffected by that change. This independence from change is also referred to as encapsulation. All the data is stored on the servers, which generally have far greater security controls than most clients. Servers can better control access and resources, to guarantee that only those clients with the appropriate permissions may access and change data. Since data storage is centralized, updates to that data are far easier to administer than what would be possible under a P2P paradigm. Under a P2P architecture, data updates may need to be distributed and applied to each peer in the network, which is both time-consuming and error-prone, as there can be thousands or even millions of peers. Many mature client-server technologies are already available which were designed to ensure security, friendliness of the user interface, and ease of use. It functions with multiple different clients of different capabilities.
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Disadvantages
Traffic congestion on the network has been an issue since the inception of the client-server paradigm. As the number of simultaneous client requests to a given server increases, the server can become severely overloaded. Contrast that to a P2P network, where its bandwidth actually increases as more nodes are added, since the P2P networks overall bandwidth can be roughly computed as the sum of the bandwidths of every node in that network. The client-server paradigm lacks the robustness of a good P2P network. Under client-server, should a critical server fail, clients requests cannot be fulfilled. In P2P networks, resources are usually distributed among many nodes. Even if one or more nodes depart and abandon a downloading file, for example, the remaining nodes should still have the data needed to complete the download.
NOTES
Specific types of clients include web browsers, email clients, and online chat clients. Specific types of servers include web servers, ftp servers, application servers, database servers, mail servers, file servers, print servers, and terminal servers. Most web services are also types of servers.
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UNIT V
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ONLINE COMMERCE ENVIRONMENTS

5.1 SERVER ENVIRONMENT A Server is a computer that provides services used by other computers. For example a web server serves up web pages. Services can be supplied centrally by the use of a server; in other cases all the machines on a network have the same status with no dedicated server, and services are supplied peer-to-peer. 5.1.1 In hardware A server is a computer that has been set aside to run a specific server application. For example, when the software Apache HTTP Server is used as the web server for a companys website, the computer running Apache is also called the web server. Server applications can be divided among server computers over an extreme range, depending upon the workload. Server is also used as a designation for computer models intended for use in running server applications under heavy workloads, also called operating units often unattended and for an extended period of time. While any workstation computer is capable of acting as a server, a server computer usually has special features intended to make it more suitable. These features can include a faster CPU, faster and more plentiful RAM, and larger hard drives. More obvious distinctions include redundancy in power supplies, network connections, and storage devices as well as the modular design of so-called Blade servers often used in server farms. A server appliance refers to network-connected computer appliances or appliance hardware that provide specific, dedicated applications to a network. Use of the term appliance indicates the marriage of software and hardware in a single system that is not heavily customizable such as Google Search Appliance. Such appliances are expected to work out-of-the-box with little customization and sometimes remain the sole property of the company that produced them. The simplest appliances include switches, routers, gateways, and print servers.
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5.1.2 In software Server used as an adjective, as in server operating system, refers to the products ability to handle multiple requests, and is said to be server-grade. A server operating system is intended or better enabled to run server applications. The differences between the server and workstation versions of a product can vary from the removal of an arbitrary software limits due to licensing, as in the case of Windows 2000, or the addition of bundled applications as in Mac OS X Server. 5.1.3 Server Hardware Hardware requirements for servers vary, depending on the server application. Absolute CPU speed is not usually as critical to a server as it is to a desktop machine. Servers duties to provide service to many users over a network lead to different requirements like fast network connections and high I/O throughput. Since servers are usually accessed over a network they may run in headless mode without a monitor or input device. Processes which are not needed for the servers function are not used. Many servers do not have a graphical user interface (GUI) as it is unnecessary and consumes resources that could be allocated elsewhere. Similarly, audio and USB interfaces may be omitted. Servers often run for long periods without interruption and availability must often be very high, making hardware reliability and durability extremely important. Although servers can be built from commodity computer parts, mission-critical servers use specialized hardware with low failure rates in order to maximize uptime. For example, servers may incorporate faster, higher-capacity hard drives, larger computer fans or water cooling to help remove heat, and uninterruptible power supplies that ensure the servers continue to function in the event of a power failure. These components offer higher performance and reliability at a correspondingly higher price. Hardware redundancyinstalling more than one instance of modules such as power supplies and hard disks arranged so that if one fails another is automatically availableis widely used. ECC memory devices which detect and correct errors are used; non-ECC memory can cause data corruption. Servers are often rack-mounted and situated in server rooms for convenience and to restrict physical access for security. Many servers take a long time for the hardware to start up and load the operating system. Servers often do extensive preboot memory testing and verification and startup of remote management services. The hard drive controllers then start up banks of drives sequentially, rather than all at once, so as not to overload the power supply with startup surges, and afterwards they initiate RAID system prechecks for correct operation of redundancy. It is not uncommon for a machine to take several minutes to start up, but it may not need restarting for months or years.
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5.1.4 Server Operting Systems Some popular operating systems for servers such as FreeBSD, Solaris, and Linux are derived from or are similar to UNIX. UNIX was originally a minicomputer operating system, and as servers gradually replaced traditional minicomputers, UNIX was a logical and efficient choice of operating system for the servers. UNIX-based operating systems, many of which are free in both senses, are popular. Server-oriented operating systems tend to have certain features in common that make them more suitable for the server environment, such as GUI not available or optional, ability to reconfigure and update both hardware and software to some extent without restart, advanced backup facilities to permit regular and frequent online backups of critical data, transparent data transfer between different volumes or devices, flexible and advanced networking capabilities, automation capabilities such as daemons in UNIX and services in Windows, and tight system security, with advanced user, resource, data, and memory protection.
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Server-oriented operating systems can in many cases interact with hardware sensors to detect conditions such as overheating, processor and disk failure, and consequently alert an operator and/or take remedial measures itself. Because servers must supply a restricted range of services to perhaps many users while a desktop computer must carry out a wide range of functions required by its user, the requirements of an operating system for a server are different from those of a desktop machine. While it is possible for an operating system to make a machine both provide services and respond quickly to the requirements of a user, it is usual to use different operating systems on servers and desktop machines. Some operating systems are supplied in both server and desktop versions with similar user interface. The desktop versions of the Windows and Mac OS X operating systems are deployed on a minority of servers, as are some proprietary mainframe operating systems, such as z/ OS. The dominant operating systems among servers are UNIX-based and open source kernel distributions. The rise of the microprocessor-based server was facilitated by the development of Unix to run on the x86 microprocessor architecture. The Microsoft Windows family of operating systems also runs on x86 hardware, and since Windows NT have been available in versions suitable for server use.
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While the role of server and desktop operating systems remains distinct, improvements in the reliability of both hardware and operating systems have blurred the distinction between the two classes. Today, many desktop and server operating systems share similar code bases, differing mostly in configuration. The shift towards web applications and middleware platforms has also lessened the demand for specialist application servers. 5.1.5 Server on the Net Almost the entire structure of the Internet is based upon a client-server model. Highlevel root name servers, DNS servers, and routers direct the traffic on the internet. There are millions of servers connected to the Internet, running continuously throughout the world. Among the many services provided by Internet servers are: the World Wide Web, the Domain Name System, e-mail, FTP file transfer, instant messaging, voice communication, streaming audio and video, and online gaming.
Virtually every action taken by an ordinary Internet user requires one or more interactions with one or more servers. There are also technologies that operate on an inter-server level. Other services do not use dedicated servers; for example peer-to-peer file sharing, some implementations of telephony (e.g., Skype), and supplying television programs to several users (e.g., Kontiki). 5.2 COMMERCIAL ENVIRONMENT The commercial environment team is made up of four main elements: health & safety, food, entertainment premises, and the consultation team. They ensure that commercial premises in Westminster are well run: Food Promote and regulate food safety in food premises within the City To control and investigate outbreaks of food poisoning. To advise the general public, new and existing business on good practice in relation to food safety.
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Health & Safety Ensure commercial premises provide safe working conditions Conduct risk assessments to identify all potential risks to health Provide educational activities to highlight Health & Safety issues
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Consultation Team The Consultation team provides the Environmental Health input into the planning and licensing application process. This involves liaising with applicants over the detail of applications, presenting evidence to licensing committees and acting as expert witnesses at court. The team also lead on the implementation of the Councils contaminated land strategy. Environmental Sciences Monitor air and water quality and contaminated land Provide expert acoustic advice to the Planning and Licensing services Develop noise mapping to display noise hotspots across Westminster.
5.3 PAYMENT METHODS We will look at an example for explaining about the payment methods. PayPal is an e-commerce business allowing payments and money transfers to be made through the Internet. PayPal serves as an electronic alternative to traditional paper methods such as checks and money orders. A PayPal account can be funded with an electronic debit from a bank account or by a credit card. The recipient of a PayPal transfer can either request a check from PayPal, establish their own PayPal deposit account or request a transfer to their bank account. PayPal is an example of a payment intermediary service that facilitates worldwide ecommerce. PayPal performs payment processing for online vendors, auction sites, and other commercial users, for which it charges a fee. It sometimes also charges a transaction fee for receiving money (a percentage of the amount sent plus an additional fixed amount). The fees charged depend on the currency used, the payment option used, the country of the sender, the country of the recipient, the amount sent and the recipients account type.[1] On October 3, 2002, PayPal became a wholly owned subsidiary of eBay.[2] Its corporate headquarters are in San Jose, California, United States at eBays North First Street satellite office campus. The company also has significant operations in Omaha, Nebraska; Scottsdale, Arizona; and Austin, Texas in the U.S.; India; Dublin, Ireland; and Berlin, Germany, and now also in Tel-Aviv, Israel after PayPal acquired an Israeli startup called FraudSciences for $169 million.[3] As of July 2007, across Europe, PayPal also operates as a Luxembourgbased bank.
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Currently, PayPal operates in 190 markets, and it manages over 175 million accounts (70 million active accounts). PayPal allows customers to send, receive, and hold funds in 19 currencies worldwide[12]. These currencies are the Australian dollar, Canadian dollar, Chinese renminbi yuan (only available for some Chinese accounts, see below), euro, pound sterling, Japanese yen, Czech koruna, Danish krone, Hong Kong dollar, Hungarian forint, Israeli new sheqel, Mexican peso, New Zealand dollar, Norwegian krone, Polish zloty, Singapore dollar, Swedish krona, Swiss franc and U.S. dollar. PayPal operates locally in 13 countries. Residents in 190 markets can use PayPal in their local markets to send money online. These new markets include Peru, Indonesia, the Philippines, Croatia, Fiji, Vietnam and Jordan. A complete list can be viewed at PayPals website. PayPal revenues for Q4 2008 were $623 million, up 11 percent year over year. 45 percent of revenues in Q4 were from international markets. PayPals Total Payment Volume (TPV), the total value of transactions in Q4 2008 was nearly $16 billion, up 14 percent year over year and for the first time PayPals TPV off eBay exceeded volume on eBay. PayPals Total Payment Volume in 2008 represented nearly 9 percent of global e-commerce and 15 percent of US e-commerce In China PayPal offers two kinds of accounts: PayPal.com accounts, for sending and receiving money to/from other PayPal.com accounts. All non-Chinese accounts are PayPal.com accounts, so these accounts may be used to send money internationally. PayPal.cn accounts, for sending and receiving money to and from other PayPal.cn accounts.
It is impossible to send money between PayPal.cn accounts and PayPal.com accounts, so PayPal.cn accounts are effectively unable to make international payments. For PayPal.cn, the only supported currency is the renminbi. Although PayPals corporate headquarters are located in San Jose, PayPals operations center is located near Omaha, Nebraska, where the company employs more than 2,000 people as of 2007.[14] PayPals international headquarters is located in Dublin, Ireland. The company also recently opened a technology center in Scottsdale, Arizona. Its Asia Pacific operation center is locate in Shanghai China. The PayPal Buyer Protection Policy states that customers may file a buyer complaint within 45 days if they did not receive an item or if the item they purchased was significantly not as described. If the buyer used a credit card, they might get a refund via chargeback from their credit card company.
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According to PayPal, it protects sellers in a limited fashion via the Seller Protection Policy.[20] In general the Seller Protection Policy is intended to protect the seller from certain kinds of chargebacks or complaints if seller meets certain conditions including proof of delivery to the buyer. PayPal states the Seller Protection Policy is designed to protect sellers against claims by buyers of unauthorized payments and against claims of non-receipt of any merchandise. Note that this contrasts with the consumer protection they claim to offer. This policy should be read carefully before assuming protection. In particular the Seller Protection Policy includes a list of Exclusions which itself includes Intangible goods, Claims for receipt of goods not as described and Total reversals over the annual limit. There are also other restrictions in terms of the sale itself, the payment method and the destination country the item is shipped to (simply having a tracking mechanism is not sufficient to guarantee the Seller Protection Policy is in effect).[21] A class-action lawsuit was filed against PayPal, days after the companys successful initial public offering. 5.3.1 Security key In early 2007, PayPal introduced an optional security key as an additional precaution against fraud. A user account tied to a security key has a modified login process: the account holder enters their login ID and password, as normal, but is then prompted to press the button on the security key and enter the six-digit number generated by it. This two-factor authentication is intended to prevent an account from being compromised by a malicious third party without access to the physical security key. If a user loses their key, they can alternatively authenticate by providing the credit card or bank account number listed on their account. The key currently costs US$5.00 for all users with no ongoing fees.[23] The option of using a security key with ones account is currently available only to users registered in Australia, Germany, Canada, the United Kingdom and the United States.[24] 5.4 BUSINESS PROCESS ORIENTATION (BPO) The concept of BPO is used invariably with Server markets. The concept of business process orientation (BPO) is based upon the work of Deming (Walton, 1996), Porter (1985), Davenport and Short (1990), Hammer (1993, 1996 and 1999), Grover et al (1995), and Coombs and Hull (1996). This body of work suggests that firms could enhance their overall performance by adopting a process view of the organization. Although many firms have adopted the BPO concept, little to no empirical data existed substantiating its effectiveness in facilitating improved business performance. McCormack (2000) conducted an empirical study to explore the relationship between BPO and enhanced business performance. The research results showed that BPO is critical in reducing conflict and encouraging greater connectedness within an organization, while improving business performance. Moreover, companies with strong measures of BPO showed better overall business performance. The research also showed that high BPO levels within organizations
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led to a more positive corporate climate, illustrated through better organizational connectedness and less internal conflict. For a central concept, one that has become something of a Holy Grail for 1990s managers, BPO has remained remarkably hard to pin down. Its champions argue that it is a new approach to management that replaces the rigid hierarchies of the past (I report to my boss) with structures that are much flatter, more cooperative, more process-oriented (I report to my customer.). Many of us have had experience with both types of organization and we know intuitively what BPO feels like. Yet, if youre like me, you want a more solid foundation on which to make decisions and recommendations. Most of the literature on business process orientation has been in the popular press and lacks a research or empirical focus. Although empirical evidence is lacking, several models have emerged during the last few years that have been presented as the high performance, process oriented organization needed in today and tomorrows world. Deming, Porter, Davenport, Short, Hammer, Byrne, Imai, Drucker, Rummler-Brache and Melan have all defined what they view as the new model of the organization. According to each models proponent, the building of this model requires a new approach and a new way of thinking about the organization which will result in dramatic business performance improvements. This new way of thinking or viewing your organization has been generally described as business process orientation. Process centering or building an organization with a business process orientation has led to many reported successes. Texas Instruments, Progressive Insurance and American Standard have all been reported, albeit anecdotally, as receiving improved business performance from building a process orientation within an organization (Hammer 1996). Process orientation, and its relationship to improved cross-functional interaction, was introduced almost fifteen years ago by Michael Porter. He introduced the concept of interoperability across the value chain as a major issue within firms (Porter 1985). W. Edwards Deming also contributed with the Deming Flow Diagram depicting the connections across the firm from the customer to the supplier as a process that could be measured and improved like any other process (Walton 1986). Thomas Davenport and James Short (1990) described a process orientation within an organization as a key component in the New Industrial Engineering: Information Technology and Business Process Redesign. Michael Hammer also presented the business process orientation concept as an essential ingredient of a successful reengineering effort. Hammer coined this term to describe the development of a customer focused, strategic business process based organization enabled by rethinking the assumptions in a process oriented way and utilizing information technology as a key enabler (Hammer, 1993). Hammer offers reengineering as a strategy to overcome the problematic cross-functional activities that are presenting
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major performance issues to firms and cites many examples of successes and failures in his series of books and articles. Hallmark and Wal-Mart are often put forward as success stories and IBM and GM as the failures. Culture is a major theme in the examples cited. A business process culture is a culture that is cross-functional, customer oriented along with process and system thinking. This can be expanded by Davenports definition of process orientation as consisting of elements of structure, focus, measurement, ownership and customers (Davenport 1993). Davenport also stressed commitment to process improvement that directly benefits the customer and business process information oriented systems as a major component of this culture Finally, Hammer (Hammer 1993, 1995, 1996, 1999) described process thinking as cross-functional and outcome oriented. He also used four categories to describe the components of an organization. These are: 1. Business Processes 2. Jobs and Structures 3. Management and Measurement Systems 4. Values and Beliefs Definition To establish a more solid foundation, I would like to propose a definition and an approach to measuring BPO. The BPO concept has sufficient practitioners and researchers and has been implemented in enough companies that we now have the information we need to develop a testable statistical model. The trick, of course, is getting at that broad range of experience and boiling it down in scientifically acceptable ways to a point where practitioners can use it easily in the field. Our approach to building this foundation began with an extensive literature review, interviews with experts both in the U.S. and Europe and testing with experienced practitioners and experts to determine the key definition and variables within BPO. Using various statistical techniques (domain sampling, coefficient alpha testing, and factor analysis), we both determined the validity of various BPO variables and condensed those variables into a simpler composite list (survey instrument) that offered easy use in measuring BPO within an organization (McCormack 1999). Or research found that the practitioners and experts said a Business Process Oriented Organization comes down to this: An organization that emphasizes process as opposed to hierarchies, a process oriented way of thinking, outcomes and customers.
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We also found that BPO also breaks into three elements: Process Management and Measurement measures that include aspects of the process like output quality, cycle time, process cost and variability compared to the traditional accounting measures. Process Jobs product development process owner rather than research manager. Process View thorough documentation from top to bottom and beginning to end of a process.
5.5 MICROSOFT INTERNET SECURITY AND ACCELARATOR SERVER Microsoft Internet Security and Acceleration Server (ISA Server) is described by Microsoft as an integrated edge security gateway. Originating as Microsoft Proxy Server, ISA is a Firewalling & Security product based on Microsoft Windows primarily designed to securely publish webservers and other server systems, provide Stateful, ApplicationLayer Firewalling, act as a VPN endpoint, and provide Internet Access for client systems in a Business Networking environment. ISA 2000 and 2004 have also been included in the Premium Edition of Microsoft Small Business Server, as well as being sold as Appliance devices by a number of Third Party vendors. Microsoft Proxy Server The ISA Server product line originated with Microsoft Proxy Server. Microsoft Proxy Server v1.0 was first launched in January 1997, and was designed to run on the Windows NT 4.0 platform. Proxy Server v1.0 was a basic product designed to provide Internet Access for clients in a LAN Environment via TCP/IP. Although well-integrated into the NT4 platform, Proxy Server v1.0 only had basic functionality, and came in only one edition. Extended support for Proxy Server v1.0 ended on March 31, 2002. Proxy Server v2.0 was launched in December 1997,and included better NT Account Integration, improved Packet Filtering support, and support for a wider range of Network Protocols. Proxy Server v2.0 exited the extended support phase and hit End of Life on the 31st December 2004. ISA 2000 On the 18th of March 2001, Microsoft launched ISA 2000. ISA 2000 introduced the Standard and Enterprise editions which ISA continues to ship under, with Enterprisegrade functionality such as High-Availability Clustering not included in the Standard Edition. ISA 2000 required Windows 2000 (any edition), and will also run on Windows Server
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2003. In accordance with Microsofts Support Lifecycle Policy, ISA 2000 was the first ISA product to use the 10 year support lifecycle with 5 years of Mainstream support and five years of Extended support. ISA 2000 reaches End of Life on the 12th of April 2011. ISA 2004 ISA Server 2004 was released on the 8th September 2004. ISA 2004 introduced multi-networking support, integrated virtual private networking configuration, extensible user and authentication models, Application-Layer Firewall support, support for the H.323 protocol, Active Directory Integration, SecureNAT, Secure Server Publishing, and improved reporting and management features. The rules based configuration was also considerably simplified over ISA 2000 version. ISA Server 2004 Enterprise Edition included array support, integrated Network Load Balancing (NLB), and Cache Array Routing Protocol (CARP). One of the core capabilities of ISA Server 2004 was its ability to securely publish Web servers. For example, some organizations use ISA Server 2004 to publish their Exchange services (e.g., OWA, RPC over HTTP, ActiveSync, OMA). Using the Forms-based Authentication (FBA) authentication type, ISA Server can be used to pre-authenticate web clients so that traffic from unauthenticated clients to published clients is not allowed. Microsoft Internet Security and Acceleration Server 2004 is available in two editions, Standard and Enterprise. Enterprise Edition contains features enabling policies to be configured on an array level, rather than on individual ISA Servers, and load-balancing across multiple ISA Servers. Each edition of ISA Server is licensed per processor (the version included in Windows Small Business Server 2000/3 Premium includes licensing for 2 processors), and requires Windows Server 2003 Standard (32 bit) or Enterprise (32 bit) Edition server on which to run. Appliance hardware containing Windows 2003 Appliance Edition and ISA Server Standard Edition is available from a variety of Microsoft Partners. ISA 2006 ISA Server 2006 was released on 17 October 2006. It was an updated version of ISA 2004, and retained most features. One criticism of all Microsoft ISA server versions to date, is the lack of native support for a fail-over or secondary WAN connection.[citation needed] This would enable two (or more) separate network interfaces, to be configured to two separate ISP, allowing leverage of multiple cheap ADSL connections and failover. ISAAppliance Edition Microsoft also offer what they call ISA 2006 appliance edition, software designed to be pre-installed onto a OEM server, and sold by the hardware manufacturer as a stand alone firewall type device.
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5.6 DIGITAL CURRENCY Digital gold currency (or DGC) is a form of electronic money based on ounces of gold. It is a kind of representative money, like a US paper gold certificate at the time (prior to 1933) that these were exchangeable for gold on demand. The typical unit of account for such currency is the gold gram or the troy ounce, although other units such as the gold dinar are sometimes used. DGCs are backed by gold through unallocated or allocated gold storage. Digital gold currencies are issued by a number of companies, each of which provides a system that enables users to pay each other in units that hold the same value as gold bullion. These competing providers issue independent currency, which normally carries the same name as their company. In terms of the most popular providers, e-gold has the greatest number of users and GoldMoney holds the greatest quantity of bullion (as of January 2007). As of April 2008, DGC providers held in excess of 9.6 metric tonnes of gold as disclosed reserves, which is worth approximately $280 million, which is a 47% increase since January 2007. FEATURES Universal currency Proponents claim that DGC offers a truly global and borderless world currency system which is independent of exchange rate variations and political manipulation. Gold, silver, platinum and palladium each have recognized international currency codes under ISO 4217. In addition to digital gold currency, GoldMoney, e-Bullion and eLibertyDollar also provide digital currency backed by silver. Asset protection Unlike fractional-reserve banking, DGCs (such as e-gold and GoldMoney) hold 100% of clients funds in reserves with a store of value. Proponents of DGC systems contend that deposits are protected against inflation, devaluation and other possible economic risks inherent in fiat currencies. These risks include the monetary policy of countries or territories, which are perceived by proponents to be harmful to the value of paper currency. Bullion investing Main articles: Gold as an investment and Silver as an investment For example, GoldMoney is accessible and approved for U.S. self-directed Individual Retirement Accounts through The Entrust Group.
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All of the other digital gold currency systems can be used to buy, hold, and sell precious metals, but do not promote themselves as an investment, as this implies an anticipated return. Exchanging national currency Some providers, like e-gold, Pecunix, Liberty Reserve do not sell DGC directly to clients. For those DGCs, e-currency must be bought and sold via a digital currency exchanger such as GoldNow or London Gold Exchange. Currency exchangers accept payment in national currencies by a variety of methods, including Bank Wire, Direct Deposit, Check, Money Order. Some exchangers also sell and fund pre-paid debit cards to make it easier for their clientele to convert DGC into an easily spendable form of national currency. According to the DGC issuers that do not directly sell DGC to clients, this keeps their system free of any exchange risk, which is instead taken by the independent exchange providers. DGCs are known as private currency as they are not issued by governments. Non-reversible transactions Unlike the credit card industry, DGC issuers generally do not bundle services such as repudiation. Thus having transactions involuntarily reversed, even in case of a legitimate error, unauthorized spend, or failure of a vendor to supply goods is not possible. In this respect, a DGC spend is more akin to a cash transaction while PayPal transfers, for example, could be considered more similar to credit card transactions. The advantage of this arrangement is that the operating costs of the digital currency system are greatly reduced by not having to resolve payment disputes. Additionally, it allows DGC transactions to clear instantly making the funds immediately available to the recipient. By contrast credit cards, checks, ACH and other reversible payment methods generally have a clearing time of 72 hours or more. The lack of payment repudiation in DGCs leaves an opportunity for third-parties to provide payment escrow services to buyers and sellers in untrusted environments, such as internet auction websites. 5.7 RISK IN DIGITAL CURRENCY Exchange risk Digital gold currency is a form of representative money as it directly represents gold metal on deposit or in custody, and denominated in units of mass (grams or troy ounces). Just as the exchange rates of national currencies fluctuate against each other, the exchange rates of DGCs fluctuate against national currencies, which is reflected by the price of gold
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in a particular currency. This creates exchange risk for any account holder, in the same way one would experience exchange risk by holding a bank account in a foreign currency. Some DGC holders make use of the digital currency for daily monetary transactions, even though most of their normal income and expenses are denominated in the national currency of their home country. Fluctuations in the value of gold against their national currency can create some confusion and difficulty for new users as they see the value of their DGC account fluctuate in terms of their native currency. In contrast to exchange risk, caused by golds fluctuation against national currency, the purchasing power of gold (and therefore DGCs) is measured by its fluctuation against other commodities, goods and services. Since gold has historically been the refuge of choice in times of inflation or economic hardship, the purchasing power of gold becomes stronger during times of negative sentiment in the markets. Due to this speculative interference, there are times when purchasing power has also declined. In 2007-2008, gold volatility has closely tracked the recent run-up in oil prices. Management risk DGCs, like all financial institutions and public securities, have a layer of risk in the form of the management of the issuing institution. Controls aimed to limit management risk are called governance. GoldMoney is the only DGC that is a government registered money service business . Imitating e-golds success, several companies claiming to be Digital Gold Currencies sprang up and failed between 1999 and 2004, including OS-Gold, Standard Reserve and INTGold. All three of these companies failed because the principals diverted deposits for other purposes instead of holding them in the form of gold. In each of the above cases, account holders lost several million dollars worth of gold when the institution failed. However, the warning signs were evident from the beginning. All three of the failed companies were created and operated by people in the high-yield investment program business, and the people who lost their funds were almost entirely HYIP players. None of the failed pseudo-DGCs had established a governance system to protect the reserves from being pillaged by management. In contrast to those notable failures, e-gold and GoldMoney have both established governance systems that provide a high level of transparency. E-gold publishes a real-time examiner on their website that shows the total amount of e-currency in circulation, as well as a list of the gold bars held in trust to back the value in the accounts. E-golds governance system is self-certified, meaning that there is no third-party verification of their published figures. GoldMoney goes a significant step further by publishing quarterly third102 ANNA UNIVERSITY CHENNAI
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party audits of their system along with a list of the serial numbers of the bullion bars held in trust. There are no specific financial regulations governing DGC providers, so they operate under self-regulation. DGC providers are not banks and therefore not subject to bank regulations that pertain to fractional reserve lending. However, DGCs do provide a method for transferring money from one person to another, and may therefore fall under regulations pertaining to currency transactions in some jurisdictions. The Global Digital Currency Association (GDCA), which was founded in 2002, is a non-profit association of online currency operators, exchangers, merchants and users. The GDCA is an example of the DGC industrys attempt at self-regulation. On their website they claim their goal is to further the interests of the industry as a whole and help with fighting fraud and other illegal activities, arbitrate disputes and act as escrow agent when and where required. Of the current DGC providers, Pecunix, Liberty Reserve and eight others have become members of the association. It costs one gram of gold to file a complaint if you are not a member, and the list of filable complaints is not exhaustive. Their domain name is registered anonymously through domains by proxy, see whois. Political risk Following April 27, 2007, the United States Department of Justice forced e-gold to liquidate some 10 to 20 million dollars worth of e-gold (a small part of which was all the assets of 1mdc which were held in e-gold), and is attempting to bring a case against egold. e-gold has committed to counter what its founders have declared to be groundless allegations. 1mdc is now defunct, however Pecunix, GoldMoney, e-Bullion and other DGCs appear to have been unaffected, and perhaps have gained market share as a result. (However, e-Bullions principals are also the principals and operators of The Bullion Exchange which was one of the exchange providers whose accounts were frozen by the governments lawsuit.) The indictment and gold seizure by the Justice Department led to a run on e-gold, as many account holders liquidated, the largest being the court-ordered liquidation of Omnipays entire gold balance. The fact that e-gold was able to satisfy the court order to liquidate the gold and fill all the liquidation orders of account holders is very strong evidence that their governance system works. It should be noted that any regular bank faced with a court order to pay out half the value of its reserves would be unable to do so because banks hold less than 2% of their deposits in reserve and lend the remainder out as long-term loans (fractional-reserve banking). E-golds self-certified governance has thus far proved to be a successful method of protecting account holders from management risk. As of Spring 2008, e-gold is still in business and doing several million dollars worth of gold transactions per day.
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Data security Digital Gold Systems are completely dependent on electronic storage and transmission of account ownership information. Therefore the security of a given digital currency account is dependent upon the security of the Issuer as well as the security of the Account Holders computer. While the Digital Gold Issuers employ data security experts to protect their systems, the average account holders computer is poorly protected against malware (trojans, worms, and viruses) that can be used to intercept information that could be used to access the users DGC account. Therefore the most common attacks on digital currency systems are directed against account holders computer through the use of malicious spam, phishing and other methods. Issuers have taken quite different approaches to this problem. E-gold basically places the entire responsibility on the shoulders of the user, and uses a user-name and password authentication system that is weak and highly vulnerable to interception by malware. (Though it is the most common authentication method used by online banks.) The not our problem approach to user security has negatively contributed to e-golds public image, as not a few e-gold accounts have been hacked and swept clean by attackers. E-Bullion offers account holders a Cryptocard security token that changes the passphrase with each logon, but charges the account holder USD $99.50 for the token. E-bullion does not require customers to use the Cryptocard, so account holders who choose not to get one may suffer from the same security issues as e-gold customers. GoldMoney allows the user to login with user-name and passphrase, but sends an email with a unique personal identification number (PIN) that the user must enter in the form to complete the transaction. This reduces the likelihood of a successful attack because the attacker must gain control of the users email account in addition to his login information, and must further prevent the user from receiving the email with the PIN, which would alert the user that someone is attempting to transfer gold out of his holding. Pecunix devised a unique rotating key system that provides many of the benefits of a security token without requiring the user to buy one. Pecunix also supports the use of PGP signatures to access an account, which is probably the strongest of all authentication methods. Electronic money Electronic money (also known as e-money, electronic cash, electronic currency, digital money, digital cash or digital currency) refers to money or scrip which is exchanged only electronically. Typically, this involves use of computer networks, the internet and digital stored value systems. Electronic Funds Transfer (EFT) and direct deposit are examples of
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electronic money. Also, it is a collective term for financial cryptography and technologies enabling it. While electronic money has been an interesting problem for cryptography (see for example the work of David Chaum and Markus Jakobsson), to date, use of digital cash has been relatively low-scale. One rare success has been Hong Kongs Octopus card system, which started as a transit payment system and has grown into a widely used electronic cash system. Singapore also has an electronic money implementation for its public transportation system (commuter trains, bus, etc), which is very similar to Hong Kongs Octopus card and based on the same type of card (FeliCa). There are also one implementation is in the Netherlands, known as Chipknip. Alternative Systems of E-cash Technically electronic or digital money is a representation, or a system of debits and credits, used to exchange value, within another system, or itself as a stand alone system, online or offline. Also sometimes the term electronic money is used to refer to the provider itself. A private currency may use gold to provide extra security, such as digital gold currency. Also, some private organizations, such as the US military use private currencies such as Eagle Cash. Many systems will sell their electronic currency directly to the end user, such as Paypal and WebMoney, but other systems, such as Liberty Reserve, sell only through third party digital currency exchangers. In the case of Octopus Card in Hong Kong, deposits work similarly to banks. After Octopus Card Limited receives money for deposit from users, the money is deposited into banks, which is similar to debit-card-issuing banks redepositing money at central banks. Some community currencies, like some LETS systems, work with electronic transactions. Cyclos Software allows creation of electronic community currencies. Ripple monetary system is a project to develop a distributed system of electronic money independent of local currency. Off-line anonymous electronic money In the use of off-line electronic money, the merchant does not need to interact with the bank before accepting a coin from the user. Instead he can collect multiple coins Spent by users and Deposit them later with the bank. In principle this could be done off-line, i.e. the merchant could go to the bank with his storage media to exchange e-cash for cash. Nevertheless the merchant is guaranteed that the users e-coin will either be accepted by the bank, or the bank will be able to identify and punish the cheating user. In this way a user is prevented from spending the same coin twice (double-spending). Off-line e-cash schemes
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also need to protect against cheating merchants, i.e. merchants that want to deposit a coin twice (and then blame the user). Using cryptography, anonymous ecash was introduced by David Chaum. He used blind signatures to achieve unlinkability between withdrawal and spend transactions.[1] In cryptography, e-cash usually refers to anonymous e-cash. Depending on the properties of the payment transactions, one distinguishes between on-line and off-line e-cash. The first off-line e-cash system was proposed by Chaum and Naor.[2] Like the first on-line scheme, it is based on RSA blind signatures. 5.8 SMART CARDS A smart card, chip card, or integrated circuit card (ICC), is in any pocket-sized card with embedded integrated circuits which can process data. This implies that it can receive input which is processed by way of the ICC applications and delivered as an output. There are two broad categories of ICCs. Memory cards contain only non-volatile memory storage components, and perhaps some specific security logic. Microprocessor cards contain volatile memory and microprocessor components. The card is made of plastic, generally PVC, but sometimes ABS. The card may embed a hologram to avoid counterfeiting. Using smartcards also is a form of strong security authentication for single sign-on within large companies and organizations. DIMENSIONS A smart card is also characterized as follows: Dimensions are normally credit card size. The ID-1 of ISO/IEC 7810 standard defines them as 85.60 53.98 mm. Another popular size is ID-000 which is 25 15 mm (commonly used in SIM cards). Both are 0.76 mm thick. Contains a security system with tamper-resistant properties (e.g. a secure cryptoprocessor, secure file system, human-readable features) and is capable of providing security services (e.g. confidentiality of information in the memory). Asset managed by way of a central administration system which interchanges information and configuration settings with the card through the security system. The latter includes card hotlisting, updates for application data. Card data is transferred to the central administration system through card reading devices, such as ticket readers, ATMs etc.
Benefits
Smart cards can be used for identification, authentication, and data storage. Smart cards provide a means of effecting business transactions in a flexible, secure, standard way with minimal human intervention.
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Smart card can provide strong authentication[2] for single sign-on or enterprise single sign-on to computers, laptops, data with encryption, enterprise resource planning platforms such as SAP, etc. DETAILS ABOUT SMART CARD The automated chip card was invented by German rocket scientist Helmut Grttrup and his colleague Jrgen Dethloff in 1968; the patent was finally approved in 1982. The first mass use of the cards was for payment in French pay phones, starting in 1983 (Tlcarte). Roland Moreno actually patented his first concept of the memory card in 1974. In 1977, Michel Ugon from Honeywell Bull invented the first microprocessor smart card. In 1978, Bull patented the SPOM (Self Programmable One-chip Microcomputer) that defines the necessary architecture to auto-program the chip. Three years later, the very first CP8 based on this patent was produced by Motorola. At that time, Bull had 1200 patents related to smart cards. In 2001, Bull sold its CP8 Division together with all its patents to Schlumberger. Subsequently, Schlumberger combined its smart card department and CP8 and created Axalto. In 2006, Axalto and Gemplus, at the time the worlds no.2 and no.1 smart card manufacturers, merged and became Gemalto. A smart card, combining credit card and debit card properties. The 3 by 5 mm security chip embedded in the card is shown enlarged in the inset. The contact pads on the card enables electronic access to the chip. The second use was with the integration of microchips into all French debit cards (Carte Bleue) completed in 1992. When paying in France with a Carte Bleue, one inserts the card into the merchants terminal, then types the PIN, before the transaction is accepted. Only very limited transactions (such as paying small autoroute tolls) are accepted without PIN. Smart-card-based electronic purse systems (in which value is stored on the card chip, not in an externally recorded account, so that machines accepting the card need no network connectivity) were tried throughout Europe from the mid-1990s, most notably in Germany (Geldkarte), Austria (Quick), Belgium (Proton), France (Moneo), the Netherlands (Chipknip and Chipper), Switzerland (Cash), Norway (Mondex), Sweden (Cash), Finland (Avant), UK (Mondex), Denmark (Danmnt) and Portugal (Porta-moedas Multibanco). The major boom in smart card use came in the 1990s, with the introduction of the smart-card-based SIM used in GSM mobile phone equipment in Europe. With the ubiquity of mobile phones in Europe, smart cards have become very common.
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The international payment brands MasterCard, Visa, and Europay agreed in 1993 to work together to develop the specifications for the use of smart cards in payment cards used as either a debit or a credit card. The first version of the EMV system was released in 1994. In 1998 a stable release of the specifications was available. EMVco, the company responsible for the long-term maintenance of the system, upgraded the specification in 2000 and most recently in 2004. The goal of EMVco is to assure the various financial institutions and retailers that the specifications retain backward compatibility with the 1998 version. With the exception of countries such as the United States of America there has been significant progress in the deployment of EMV-compliant point of sale equipment and the issuance of debit and or credit cards adhering the EMV specifications. Typically, a countrys national payment association, in coordination with MasterCard International, Visa International, American Express and JCB, develop detailed implementation plans assuring a coordinated effort by the various stakeholders involved. The backers of EMV claim it is a paradigm shift in the way one looks at payment systems. In countries where banks do not currently offer a single card capable of supporting multiple account types, there may be merit to this statement. Though some banks in these countries are considering issuing one card that will serve as both a debit card and as a credit card, the business justification for this is still quite elusive. Within EMV a concept called Application Selection defines how the consumer selects which means of payment to employ for that purchase at the point of sale. For the banks interested in introducing smart cards the only quantifiable benefit is the ability to forecast a significant reduction in fraud, in particular counterfeit, lost and stolen. The current level of fraud a country is experiencing, coupled with whether that countrys laws assign the risk of fraud to the consumer or the bank, determines if there is a business case for the financial institutions. Some critics claim that the savings are far less than the cost of implementing EMV, and thus many believe that the USA payments industry will opt to wait out the current EMV life cycle in order to implement new, contactless technology. Smart cards with contactless interfaces are becoming increasingly popular for payment and ticketing applications such as mass transit. Visa and MasterCard have agreed to an easy-to-implement version currently being deployed (2004-2006) in the USA. Across the globe, contactless fare collection systems are being implemented to drive efficiencies in public transit. The various standards emerging are local in focus and are not compatible, though the MIFARE Standard card from Philips has a considerable market share in the US and Europe. Smart cards are also being introduced in personal identification and entitlement schemes at regional, national, and international levels. Citizen cards, drivers licenses, and patient card schemes are becoming more prevalent; For example in Malaysia, the compulsory
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national ID scheme MyKad includes 8 different applications and is rolled out for 18 million users. Contactless smart cards are being integrated into ICAO biometric passports to enhance security for international travel. SIGNAL DESCRIPTION VCC : Power supply input RST : Either used itself (reset signal supplied from the interface device) or in combination with an internal reset control circuit (optional use by the card). If internal reset is implemented, the voltage supply on Vcc is mandatory. CLK : Clocking or timing signal (optional use by the card). GND : Ground (reference voltage). VPP : Programming voltage input (deprecated / optional use by the card). I/O : Input or Output for serial data to the integrated circuit inside the card. NOTE - The use of the two remaining contacts will be defined in the appropriate application standards. ELECTRONIC DATA INTERCHANGE Electronic Data Interchange (EDI) refers to the structured transmission of data between organizations by electronic means. It is used to transfer electronic documents from one computer system to another (ie) from one trading partner to another trading partner. It is more than mere E-mail; for instance, organizations might replace bills of lading and even checks with appropriate EDI messages. It also refers specifically to a family of standards, including the X12 series. However, EDI also exhibits its pre-Internet roots, and the standards tend to focus on ASCII(American Standard Code for Information Interchange)-formatted single messages rather than the whole sequence of conditions and exchanges that make up an inter-organization business process. In 1992, a survey of Canadian businesses found at least 140 that had adopted some form of EDI, but that many (in the sample) [had] not benefited from implementing EDI, and that they [had] in fact been disadvantaged by it. The National Institute of Standards and Technology in a 1996 publication defines Electronic Data Interchange as the computer-to-computer interchange of strictly formatted messages that represent documents other than monetary instruments. EDI implies a sequence of messages between two parties, either of whom may serve as originator or recipient. The formatted data representing the documents may be transmitted from originator to recipient via telecommunications or physically transported on electronic storage media.. It goes on further to say that In EDI, the usual processing of received messages is by computer only.
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Human intervention in the processing of a received message is typically intended only for error conditions, for quality review, and for special situations. For example, the transmission of binary or textual data is not EDI as defined here unless the data are treated as one or more data elements of an EDI message and are not normally intended for human interpretation as part of online data processing. EDI can be formally defined as The transfer of structured data, by agreed message standards, from one computer system to another without human intervention. Most other definitions used are variations on this theme. Even in this era of technologies such as XML web services, the Internet and the World Wide Web, EDI is still the data format used by the vast majority of electronic commerce transactions in the world. EDI STANDARDS Generally speaking, EDI is considered to be a technical representation of a business conversation between two entities, either internal or external. Note, there is a perception that EDI constitutes the entire electronic data interchange paradigm, including the transmission, message flow, document format, and software used to interpret the documents. EDI is considered to describe the rigorously standardized format of electronic documents. The EDI standards were designed to be independent of communication and software technologies. EDI can be transmitted using any methodology agreed to by the sender and recipient. This includes a variety of technologies, including modem (asynchronous, and bisynchronous), FTP, Email, HTTP, AS1, AS2, etc. It is important to differentiate between the EDI documents and the methods for transmitting them. When they compared the bisynchronous protocol 2400 bit/s modems, CLEO devices, and value-added networks used to transmit EDI documents to transmitting via the Internet, some people equated the non-Internet technologies with EDI and predicted erroneously that EDI itself would be replaced along with the non-Internet technologies. These non-internet transmission methods are being replaced by Internet Protocols such as FTP, telnet, and E-mail, but the EDI documents themselves still remain. As more trading partners use the Internet for transmission, standards have emerged. In 2002, the IETF published RFC 3335, offering a standardized, secure method of transferring EDI data via e-mail. On July 12th, 2005, an IETF working group ratified RFC4130 for MIME-based HTTP EDIINT (aka. AS2) transfers, and is preparing similar documents for FTP transfers (aka. AS3). While some EDI transmission has moved to these newer protocols the providers of the value-added networks remain active. EDI documents generally contain the same information that would normally be found in a paper document used for the same organizational function. For example an EDI 940 ship-from-warehouse order is used by a manufacturer to tell a warehouse to ship product to a retailer. It typically has a ship to address, bill to address, a list of product numbers
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(usually a UPC code) and quantities. It may have other information if the parties agree to include it. However, EDI is not confined to just business data related to trade but encompasses all fields such as medicine (e.g., patient records and laboratory results), transport (e.g., container and modal information), engineering and construction, etc. In some cases, EDI will be used to create a new business information flow (that was not a paper flow before). This is the case in the Advanced Shipment Notification (856) which was designed to inform the receiver of a shipment, the goods to be received and how the goods are packaged. There are four major sets of EDI standards: The UN-recommended UN/EDIFACT is the only international standard and is predominant outside of North America. The US standard ANSI ASC X12 (X12) is predominant in North America. The TRADACOMS standard developed by the ANA (Article Numbering Association) is predominant in the UK retail industry. The ODETTE standard used within the European automotive industry
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All of these standards first appeared in the early to mid 1980s. The standards prescribe the formats, character sets, and data elements used in the exchange of business documents and forms. The complete X12 Document List includes all major business documents, including purchase orders (called ORDERS in UN/EDIFACT and an 850 in X12) and invoices (called INVOIC in UN/EDIFACT and an 810 in X12). The EDI standard says which pieces of information are mandatory for a particular document, which pieces are optional and give the rules for the structure of the document. The standards are like building codes. Just as two kitchens can be built to code but look completely different, two EDI documents can follow the same standard and contain different sets of information. For example a food company may indicate a products expiration date while a clothing manufacturer would choose to send color and size information. Standards are generally updated each year. Advantages of using EDI over paper systems EDI and other similar technologies save a company money by providing an alternative to, or replacing information flows that require a great deal of human interaction and materials such as paper documents, meetings, faxes, etc. Even when paper documents are maintained in parallel with EDI exchange, e.g. printed shipping manifests, electronic exchange and the use of data from that exchange reduces the handling costs of sorting, distributing, organizing, and searching paper documents. EDI and similar technologies allow a company to take advantage of the benefits of storing and manipulating data electronically without the cost of manual entry. Another advantage of EDI is reduced errors, such as shipping and billing
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errors, because EDI eliminates the need to rekey documents on the destination side. One very important advantage of EDI over paper documents is the speed in which the trading partner receives and incorporates the information into their system thus greatly reducing cycle times. For this reason, EDI can be an important component of just-in-time production systems. According to the 2008 Aberdeen report A Comparison of Suppler Enablement around the Word, only 34% of purchase orders are transmitted electronically in North America. In EMEA, 36% of orders are transmitted electronically and in APAC, 41% of orders are transmitted electronically. They also report that the average paper requisition to order costs a company $37.45 in North America, $42.90 in EMEA and $23.90 in APAC. With an EDI requisition to order costs are reduced to $23.83 in North America, $34.05 in EMEA and 14.78 in APAC. Examples of Disadvantages of EDI United States Health Care Systems The United States health care system consists of thousands of different companies and other entities. In 1996, the Health Insurance Portability and Accountability Act (HIPAA) was enacted. In short, it set down standard transaction sets for specific EDI transactions and mandated electronic support for every insurance company in the United States for these transactions. While the benefits of EDI are numerous and only increase with increased volume, the drawbacks, though not directly related to EDI itself, include managerial problems in the support, maintenance and implementation of EDI transactions.
1. Though an EDI standard exists for health care transactions, the standard allows for variation between implementation, which gives way to the existence of Companion Guides, detailing each companys variation[3]. 2. Each entity may have a different method of delivery, ranging from dial-up BBS systems[4]; mailing hard media such as a CD-ROM or tape backup; or FTP[5]. Some entities may elect not to support different methods of delivery depending on a trading partners expected volume. 3. Due to varying implementation on nearly all points of EDI including contact, registration, submission and testing of transactions between different entities in US health care, the existence of EDI clearinghouses has sprung up. An EDI clearinghouse is one entity agreeing to act as a middle-man between multiple entities and their end-clients, such as between medical providers
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and insurance companies they accept coverage from. They may act as a value-added network and attempt to conform their different supported entities to one submission standard. One such example is Emdeon. An EDI clearinghouse will not cover all health care entities, though they may cover a large portion, and they may not cover all HIPAA-mandated transactions for all of their supported entities. 4. Because of the above points, one single computer application cannot handle all health care entities. Though this may not be necessary, it can lead to an obvious management headache as a company attempts to register itself with vario
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1. us EDI partners. This all comes at a massive cost in time and management as a company may attempt to support a broad range of transactions with a broad range of entities. This example is an extension of the lack of strict standards across implementations, transactions and methods.
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DMC 1621 ELECTRONIC COMMERCE

Centre for Distance Education

Reviewer Dr .R.K annan r.R.K .R.Kannan

Editorial Board Dr .T .V .Geetha Dr.T .T.V .V.Geetha

Dr .H.P eer u Mohamed Dr.H.P .H.Peer eeru

Dr .C . Chella ppan Dr.C .C. Chellappan

Dr .A.K annan r.A.K

Copyrights Reserved (For Private Circulation only)

DMC1621 ELECTRONIC COMMERCE

UNIT II SECURITY TECHNOLOGIES

UNIT III ELECTRONIC PAYMENT METHODS

UNIT IV ELECTRONIC COMMERCE PROVIDERS

UNIT V ONLINE COMMERCE ENVIRONMENTS

5.3 5.4 5.5 5.6 5.7 5.8

93 95 95 98 100 101 106

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Table 1.1 Internet Economy Conceptual Frame

Adobe Microsoft IBM Oracle

e-Steel Travelocity eTrade Yahoo! ZDNet

Amazon Com Dell

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Figure 1.4: Business-to-business procurement environment

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Figure 1.11 RFQ process flow for local RFQ.

Figure 1.14 Typical B2B environment using protocol conversion.

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Figure 1.15 Punchout request flow with protocol conversion.

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Figure 2.3 Security Info page

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ELECTRONIC PAYMENT METHODS

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Fig 3.1 Sample Credit Card

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