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KARISHMA SIROHI 1
Introduction to E-Commerce:
E- Commerce refers to electronic transactions such as buying; selling, information flow and
funds transfer over the internet. E-commerce broadly encompasses all business activities taking
place over the internet. It consists of electronic retailing, electronic data interchange and
electronic fund transfer. The main goal of e-commerce is:
Lower product cycle time
Faster customer response
Improved service quality
Electronic commerce is an emerging concept describes the process of buying and selling or
exchanging of products, services and information via computer network including the internet.
E-Commerce is a modern business methodology that addresses the needs of organization
merchant and consumers to cut cost while improving the quality of goods and services and
increasing the speed of service delivery. E-commerce is associated with buying and selling of
information products and services over computer communication network. E- Commerce is
refers to the paperless exchange of business information using electronic data interchange,
electronic mail etc.
It can be defined as a technology mediated exchange of digital information between various
individuals and organization as well as the electronically based intra or inter organizational
activities that facilitates such exchange over network channels.
Electronic Funds Transfer
Electronic Data Interchange
Electronic Mail FAX
Sales, Customer support
corporate digital library,
Electronic Document interchange
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Features of E- Commerce:
1. Payment: enabling credit card, smart card, e-money and other payments along with
electronic funds transfer.
2. Service Availability: It automates the conduct of business among enterprises, customers,
suppliers and employers anytime, anywhere.
3. Advertising and marketing: publicizing and advertising product and services.
4. Sales: generating orders for the product.
5. Fulfillment: processing the order and delivering product.
6. Support: providing pre and post sale assistant to generate more sales.
7. Inventory Mgt: maintaining and reporting inventory status.
8. Secure communication: fast efficient, reliable communication with customers and
9. E commerce allows you to gather information from customers while delivering a
marketing and sales pith through a website.
10. E commerce can be a fully integrated solution or a technical front end to a business that
otherwise isn’t wired.
Main activities of E commerce
Buying and selling of goods
Shipping of product
Producing financial statement.
Goals of E Commerce:
Reduced product cycle time
Attract more customer
Faster customer response
Improve service quality
Benefits of E- commerce:
1. Benefits to organization:
E- commerce decreases the cost of creating, processing, distributing, storing and
retrieving paper based information.
E commerce reduces the time
Improved customer service
New found business partners.
2. Benefits to consumer:
Customer can do transaction 24 hr a day
It provides customers with more choices
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It allows quick delivery
It provides customers with less expensive products and service.
Customers can interact with other customer in electronic communication.
3. Benefits to society:
It reduces the time for travelling for shopping.
It allows some merchant to be sold at low price
It enables people in rural areas to enjoy products and services
It facilitates delivery of public services, such as health care etc.
Functions of E- Commerce:
1. Transaction Capabilities:
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Forces fueling E- commerce:
Categories of E commerce:
Business to Business
Business to Consumer
Consumer to Consumer
Consumer to Business
Business to Government
Government to Business
Government to Citizen
Business to business web sites sell the product to the intermediate buyer who takes the
products to the final consumer. In this type of web sites a wholesaler places an order through
the companies web sites and then sells the supplies to the final consumer as shown in the
Business to consumer is a website where all transaction take place between a business
organization and the final consumer. In this type of websites customer login to the
organization’s website and place an order to buy the goods after receiving the order the
organization would complete the order and sends the goods to the customer and the customer
would receive the ordered goods.
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In this category consumers sell directly to consumer. If an individual have something to sell,
then he get it listed at an auction site, and others can bid for it.
For example: at an auction site, customer located in India and in Washington can register. A
customer form India places an advertisement on the website. A customer from Washington,
while surfing, looks at the advertisement and decides to purchase the product. Thus, the deal
is finalized through the web site without an actual meeting.
In such sites, the consumer places an estimate of the amount of money he is willing to spend
for a particular service. Businesses that can offer this service within the customer’s specified
limit get back to him with the offer. Such sites depend on proper estimate by consumer.
Customer in India Customer in
Places an advertisement
sell Wants to buy
Places Money for a
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It is a website used by the govt. to exchange information and trade with various organization
across the world.
A G2B website is an attempt by the govt. to reached to business. Such sites provides access
to various application forms.
A G2C website is an attempt by the govt. to reach out to people in general. The govt.
regularly conducts auctions and sales of vehicles, machinery and other material. These
auctions are high valued and are visited by customers. These websites also provides access to
Disadvantages of E commerce:
Training and Maintenance
Hardware and Software problem
Online Purchasing security
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Infrastructure of E- Commerce:
Here are seven important infrastructure decisions that ecommerce businesses face.
1. Marketing: Of all the infrastructure elements, marketing may be the most important. To
succeed, your website must be found. Once visitors are on your site, you need to keep them there
and compel them to buy from you. That’s the job of your marketing team. Whether it’s website
design, social media, search marketing, merchandising, email, or other forms of advertising, it’s
all about marketing. To effectively manage marketing activities in-house is very challenging.
Most small ecommerce businesses outsource some element of marketing.
2. Facilities: A key competitive advantage that ecommerce businesses have over brick-and-
mortar stores is the investment in their physical offices and warehouses. In many cases, you can
host your business out of a home office and your basement or garage. If you drop ship or
outsource fulfillment, you may be able to do that for a long period of time. Even when you grow
to have many employees, you can set up your offices in class B or C space, as you have no need
for a fancy store in the right location. A word of advice is to keep your options flexible. Try to
find an office park that has a wide variety of spaces in different sizes. You may be able to start in
a smaller space and move up to a larger one without penalty, as your needs change.
3. Customer Service: There are many choices today for delivering high-quality customer
service. You can manage those activities in-house or outsource to a third party. Basic customer
service for sales and post-sales activities can be handled using email, and by providing an 800
number for more extensive phone support. A customer-management system will make those
activities easier, but for smaller companies it is not a requirement. Live chat will impact your
operations as someone needs to be available during specified hours of operation. Be sure to
gauge the impact of that on your organization, if you decide to handle those activities in house.
4. Information Technology: Choosing the right ecommerce platform is one of the most
important decisions you will make in your business. Do you want to build and host your own
system, outsource the development and then manage the system going forward, or use a hosted,
software-as-a-service platform that is more turnkey and externally managed? If you build and
host your own system, you may need more cash upfront and skilled administrators and
developers on your staff. By using a SaaS platform, you will not need to host or manage the
system in-house, but you may still need web developers on staff. Choosing to outsource the
development and hosting will reduce your staffing costs, but you will incur higher costs for any
future enhancements or changes to your websites. There are pros and cons to any approach. Just
be sure to think through the impacts on both your staffing and your cash flow and bottom line
before you move forward.
5. Fulfillment: Another key decision is whether you will manage your own inventory or
outsource those activities to a fulfillment house or through drop shipping arrangements with your
suppliers. Managing your own inventory will provide you with a high level of control, but you
will tie up your cash in inventory, warehouse space, and your own fulfillment staff. In some
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industries — like the jewelry supply industry that my previous business was in — managing
your own inventory was the most logical choice. We had no alternative for drop shipping, and
most items were purchased in bulk and were very small. We did not trust preparation and
fulfillment to an outside service. Select the best fulfillment option to meet your needs. Be sure to
understand the costs involved and analyze the other options before moving forward.
6. Finance and Administration: As with other business operations, you will need to decide
if you want to manage your finance and administration activities in-house, outsource, or a hybrid
of the two. If your ecommerce platform is tightly integrated to your accounting system, you may
have very little need for an in-house bookkeeper. If you use separate systems for your website,
order management and accounting, you may need more help for data entry and making sure that
the information is properly managed Many ecommerce companies use outside services for
vendor payments, payroll, and other basic accounting activities. They decide to focus on the
sales, marketing, and customer service. This allows them to maintain a focus on growing their
businesses, instead of paying an internal accountant — or doing that work yourself as the
business owner. On the administration side, you need a leadership team and provide direction to
them. Good communication is important, whether you have 3 or 100 employees. Whether you
choose to be more authoritative or democratic in your management style is up to you. But choose
a style and stay consistent. Be sure that everyone understands their roles, as well as the overall
business strategies. You may need to adjust your approach as your business evolves.
7. Human Resources: Many small-business owners avoid the human resources function.
Recruiting, setting up compensation, maintaining compliance and other HR activities are
specialized and time consuming. You may choose to bring the resources in-house to manage
those activities, but also evaluate outsourcing them. There are many individuals and agencies
well equipped to take on your HR activities.
Scope of E – Commerce:
1. Linking with D & R
2. Interface with customer
3. Enterprise Management
4. Linking with supplier
5. Global e commerce infrastructure
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1. Linking with D &R:
Product information and distribution
2. Interface with customer:
Trading in E market
Customer service and sales management
Customer information gathering
3. Enterprise management:
Logistics and supply chain support
4. Linking with supplier:
Product information collection
Supplier process management
Accounts payable management
Purchase process management
5. Global e-commerce infrastructure:
Generic Framework for E-Commerce:
Supply chain management
Video on demand
Procurement and purchasing
Online marketing and advertisement
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WWW and E- Commerce:
E commerce can be defined as a modern business methodology that addresses the desire of firms,
consumer, and management to cut cost while improving the quality of goods and increasing the
speed of services. The need for e commerce stems from the demand within the business and
government to make better use of computer technology to improve business processes and
information exchange both within an enterprise and across organization.
In short, e-commerce appears to be an integrated force that represents the digital convergence of
21st century business application and computing technologies.
E-commerce Application Services:
E Mail Fax
Sales, customer support
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The application services layer of e commerce will be comprised of existing and future
application build on a innate architecture. Three distinct classes of e-commerce application can
be distinguished as:
Customer to business transactions
Business to business transaction
Intra organizational transaction
1. Application Services C2B
2. Brokerage and data management Order processing
3. Interface layer Software agents,
Directory support function
4. Secure messaging EDI
Secure hypertext transfer protocol
5. Middle ware services Compound documents
6. Network Infrastructure Wireless cellular
WWW as the Architecture
The E-Commerce framework outline on the www architecture to provide a human analogy, think
on the network infrastructure as the skeleton and web is like a flesh, veins, and skin that shape
the human body.
Block diagram depicting E-Commerce Architecture:
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The architecture is made up of three primary entities: client server, web server, and third party
services. The client browser usually interacts with the WWW server, which acts as an
intermediary in the interaction with third party services. The client browser resides on the user’s
PC or workstation and provides an interface to the various types of content. For instance, if the
user retrieves a graphics file from a web server, the browser automatically starts up the graphics
file are available-JPEG, GIF, TIFF, BMP, among others. The browser has to be smart enough to
understand what file it is downloading and what browser extension it needs to activate to display
the file. Browsers are also capable of manipulating local files. Web server functions can be
categorized into information retrieval, data and transaction management, and security. The third
party service could be other web servers that make up the digital library, information processing
tools, and electronic payment systems.
E-Commerce and Internet
Internet as a Network Infrastructure:
The internet is the most well known component of information superhighway network
infrastructure. Today, the internet is an information distribution system spelling several
continents. In very general infrastructure targets not only one electronic commerce applications
such as video on demand or home shopping but a wide range of computer based services such as
e-mails, EDI, information publishing, information retrieval and video conferencing.
Network making up Internet:
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This diagram captures the distinction between Academic and Business Internet. Academic
Internet consists of various government network, regional networks, campus network, and some
international networks. These include NSFNET the premier group of research IP networks in the
United States; EBONE the European group of IP networks; and more recently, private IP
network run by for profit organizations.
The business internet consists of on line services, value added networks, and other e mail only
services. The academic and business networks can talk to each other through language
translators, called gateways, stationed at the network border. In the past, because only mail
gateways were widely implemented and deployed, the most interoperable application or the least
common denominator for the entire internet was electronic mail.
6 stages of Internet Growth:
The incredible growth of the internet can be divided into 6 stages:
1. Experimental networking (ARPANET, 1965)
2. Discipline specific research (CSNET, MILNET, 1981-85)
3. General research networking ( early NSFNET – 1985-1991)
4. Privatization and commercialization ( present NSFNET)
5. Restricted public data networks for research and education ( NREN)
6. National information infrastructure ( I-Way)
The first stage, experimental networking, covers the early years under the aegis of the DOD
ARPA and the province of a relatively small technical community. That group developed not
only the technology but the cooperative mechanism that made it possible to scale and allow
further innovation to occur.
The second stage, discipline specific research (1980-1985), grew out of the more general
ARPANET and began to build international online communities. CSNET, for instance, linked
computer science researchers from all over the world.
The third stage, general research networking (1985-1991) and called the NSFNET program,
unfolded following the explosive growth in the mid 1980’s. the NSFNET program was
established chiefly to allow exchange of information and access to remote resources within the
research and education community. Since the backbone network was launched, its traffic has
doubled each year and its transmission capacity has increased more than thirtyfold to 45 million
bits per second.
The fourth stage, privatization and commercialization( 1991-present), involves removing
government subsidies to regional networks and dismantling the barriers imposed by restricted
acceptable usage policies. The network extends far beyond the research community and today
supports not only the expanding backbone services, but also commercial transactions and
extensive connections for commercial organizations. The fourth stage recognizes the changing
nature of the networking marketplace.
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E-Commerce and Internet:
e-commerce is the buying and selling of products, information and services over the internet. E
business on the other hand represents the transformation of organization business and functional
process through the application of technologies, philosophies and computing paradigms of new
E commerce includes:
Merchandise planning and tracking
Order entry and tracking
Pricing and promotion
Financial accounting and reporting
Customer relationship management
Supply chain management
Further, the internet apart from enabling e-commerce is also contributing to the rapid
internationalization of services sector. It makes this to happen to unbundle consumption of
information intensive service activities like-
Electronic payment system:
EPS are becoming central to online business process innovation as companies look for ways to
serve customers faster and at lower cost.
The most important function of e-commerce over the I way. As e-commerce involves the
exchange of some form of money for goods and services, payment system are integral part of
electronic commerce system. Because of the online transactions in electronic commerce, there is
a rising concern for the security of these systems.
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EPS is also known as EFT, which is defines as any transfer of funds initiated through an
electronic terminal, telephone instrument, computer or even magnetic tape to order, instruct or
authorized a financial institution to debit or credit of an account. Work on EFT can be
categorized on three broad categories:
Digital Token Based Payment System:
New forms of financial instruments called electronic tokens in the handled in the form of
electronic cash or checks. E-tokens are designed as electronic analogue of various forms of
payment backed by a bank or financial institution, basically they are equivalent to cash that is
assured by a bank. Electronic tokens are of three types:
1. E-cash or real time: electronic commerce transactions are settled with the exchange of
electronic currency. Such as e-cash.
2. Prepaid or debit card: in this case, consumers need to pay in advance for the privilege of
3. Postpaid or Credit card: this is another option available, where the server authenticates
the consumer and verifies with the bank that funds are adequate before purchase.
Electronic Cash: it is a new concept in online payment systems because it combines
computerized convenience with security and privacy that improve on paper cash. It can
be based on e-payment protocol that supports a series of payment transactions using
electronic tokens or coins issued by third party.
There are three types of users in this payment system:
the payer e.g. consumer
Banking and Financial
•Large scaleor wholesalepayment
•Small scaleor retail payment
•Token Based Payment system
•--smart card and debit cards
•Credit Card Payment System
•----encrypted credit card
•---third party authorization
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a payee e.g. merchant
a financial network where both the payer and payee have accounts.
There are three types of transactions in this payment system as given below:
Withdrawal: the payer transfers some money from his bank account to his or her
Payment: the payee transfers the money from the card to the payee.
Deposit: the payee transfers the money received to his bank account.
There are two types of implementations of this system as given below:
Online Payment: the merchant calls the bank and verifies the validity of the
consumer’s token or electronic coin before accepting the payment and delivering
Offline payment: the merchant submits the consumer’s payment for verification
and deposit sometimes after the payment transaction is completed.
There are three participants involved in this system as given below:
Client wallet software: e-cash software should be installed on the client
computer from where the consumer can use e-coins to make purchases from the
merchants. The client can store the coins in the client wallet, withdraw coins
from that and request new coins from the bank.
Merchant software: there has to another merchant software installed on the
merchant machine to accept and process payments and sell items. This software
will interact with the bank to perform validation and authentication. Also the
software can make refunds, if required.
Banks: both the client and merchant should have e-cash account in the bank. The
bank can issue new coins to the client, validate the coins when presented.
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Electronic checks: e-checks are another form of electronic token. They are designed to
accommodate the many individuals and entities that might prefer to pay on credit or
through some mechanism other than cash. In e-check buyer must register with a third
party account server before they are able to write electronic checks. The account server
also acts as a billing service. The registration procedure can vary depending on the
particular account server and may require a credit card or a bank account to back the
checks. Once registered, a buyer can then contact sellers of goods and services. To
complete a transaction, the buyer sends a check to the seller for a certain amount of
money. These checks may be sent using e mail when deposited. The check authorizes the
transfer of account balances from the account against which the check was drawn to the
account to which the check was deposited.
Smart cards and EPS: in the meantime, thousands of would be sellers of electronic
commerce services have to pay one another and are actively looking for payment
substitutes. One such substitutes is the smart card.
Smart cards have been in existence since the early 1980’s and hold promise for secure
transactions using existing infrastructure.
Smart cards are credit and debit cards and other card products enhanced with
microprocessors capable of holding more information than the traditional magnetic stripe.
Relationship based products are expected to offer consumers far greater options,
including the following:
Access to multiple accounts, such as debit, credit, investments or stored value for
e-cash, on one card or an electronic device.
A variety of functions, such as cash access, bill payment, balance inquiry, or
funds transfer for selected accounts.
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Multiple access options at multiple locations using multiple device types, such as
an automated teller machine, a screen phone, a personal computer, a personal
Credit card and EPS: to avoid the complexity associated with digital cash and
electronic checks, consumers and vendors are also looking at credit card payments
on the internet as one possible time tested alternative. There is nothing new in the
basic process. If consumers want to purchase a product or service, they simply send
their credit card details to the service provider involved and the credit card
organization will handle this payment like any other.
We can break credit card payment on online networks into three basic categories:
Payments using plain credit card detail: the easiest method of payment is
the exchange of unencrypted credit cards over a public network such as
telephone lines or the internet. The low level of security inherent in the
design of the internet makes this method problematic. Authentication is also
a significant problem, and the vendor is usually responsible to ensure that the
person using the credit card is its owner. Without encryption there in so way
to do this.
Payments using encrypted credit card details: it would make sense to
encrypt your credit card details before sending them out, but even then there
are certain factors to consider. One would be the cost of a credit card
transaction itself. Such cost would prohibit low value payments by adding
costs to the transactions.
Payments using third party verification: one solution to security and
verification problems is the introduction of a third party: a company that
collects and approves payments from one client to another. After a certain
period of time, one credit card transaction for the total accumulated amount
Encryption and credit cards: encryption is simply when credit card information is
entered into a browser or other electronic commerce device and sent securely over
the network form buyer to seller as an encrypted message. To make a credit card
transaction truly secure and nonrefutable, the following sequence of steps must occur
before actual goods, services, or funds below:
1. A customer presents his or her card information securely to the merchant.
2. The merchant validates the customer’s identity as the owner of the credit card
3. The merchant relays the credit card charge information and signature to its
bank or online credit card processors.
4. The bank or processing party relays the information to the customer’s bank
for authorization approval.
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5. The customer’s bank returns the credit card data, charge authentication, and
authorization to the merchant.
Third party processor and credit cards: in third party processing, consumers
register with a third party on the internet to verify electronic micro transactions.
Verification mechanism can be designed with many of the attributes of electronic
tokens, including anonymity. They differ from electronic token systems in that (1)
they depend on existing financial instruments and (2) they require the online
involvement of at least one additional party and, in some cases, multiple parties to
ensure extra security. OTPPs have created a six step process that they believe will be
a fast and efficient way to buy information online:
1. The consumer acquires an OTPP account number by filling out a registration
form. This will give the OTPP a customer information profile that is backed
by a traditional financial instrument such as a credit card.
2. To purchase an article, software, or other information online, the consumer
requests the items from the merchant by quoting her OTP account number.
The purchase can take place in one of two ways: the consumer can
automatically authorize the merchant via browser setting to access her OTPP
account and bill her, or she can type in the account information.
3. The merchant contacts the OTPP payment server with the customer’s account
4. The OTPP payment server verifies the customer’s account number for the
vendor and checks for sufficient funds.
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5. The OTPP payment server sends an electronic message to the buyer. This
message could be an automatic WWW form that is sent by the OTPP server
or could be a simple e mail. The buyer responds to the form or e mail in one
of three ways: yes, I agree to pay; no I will not pay; or fraud, I never asked
6. If the OTPP payment server gets a YES from the customer, the merchant is
informed and the customer is allowed to download the material immediately.
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E Commerce and Banking:
The role of e-commerce in banking is multifaceted impacted by changes in technology. Rapid
deregulation of the emergence of new banking institution and basic economic restructuring.
Many banks feel that in order to be a profitable they need to reduce operating expenses and
maintain strict cost control. This philosophy is evident in many mergers and acquisition
occurring in the banking industry. So, the challenge behind bank restructuring lies in adequately
operationalizing the motion of cost control.
Changing dynamics in Banking Industry:
There are 5 distinct factors contribute to the new competitive environment:
1. Changing consumer needs driven by online commerce.
2. Optimization of branch networks in order to reduce cost.
3. Changing demographic trends and potential new consumer market.
4. Cross industry competition caused by de-regulation.
5. New online financial products.
1. Changing Consumer Needs
Consumer requirements have changed substantially in the last decade customers want to
access account related information download account data for use with personal software
products, transfer funds between accounts, and pay bills electronically. Of course, along
with these services, banks must be able to supply/guarantee the privacy and
confidentiality that customers demand which is not a trivial matter to implement on the
part of the banks.
Many consumer requirements are based on simple premise customers and financial
institutions both seek closer and more multifaceted relationships with one another.
Customers want to be able to bank at their convenience, including over the weekend or
late at night. Bankers want more stable and long term relationships with their customers.
Electronic banking provides a method of communication that will enable the bank
customer to be reached served, and sold products and services in their homes and offices
whenever it is convenient for them twenty four hours a day, seven days a week.
2. Cost Reduction
The central goal of most mergers is to reduce operating costs. During the decade 1984-
1994, the number of banks in the United States fell by 27 percent. In general brick and
mortar branches cost at heavy. Online technology can deliver services far more
economically than these existing methods as the infrastructure costs such as PC’s are
shared with the consumer.
As banks merge to reduce their operating costs, they are obviously growing in size.
however, even their increased size is dwarfed by many of their new competitors. If banks
are going to compete with these larger competitors, they are going to have to address
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their traditional banking overhead structures, as well as their existing retail strategies.
Providing online financial services can address both these needs.
3. Demographic Trends
Consumers are increasingly careful about their personal finances. Social demographic
and economic changes have altered the way value their time and money. People spend
more time working than ever before, and therefore place a higher premium on their
leisure time. Thus, they are a very receptive audience for time saving products and
services. In addition, the reduced level of job security and the need to plan for the future
has heightened concern over personal debt, retirement planning, tax planning , and saving
The companies that take advantage of this opportunity by targeting the appropriate
customers with appropriate products and services will have a lasting competitive
advantage. As it prov8ides convenience and the ability to customize products and
services on a mass level electronic delivery of these products and services will be one of
the key means of achieving this advantage.
4. Regulatory Reform
Banks occupy a unique strategic position as they act as intermediaries in redistributing
capital from areas of excess to areas of scarcity. This role has made financial services a
closely watched and regulated industry as government is intersted in the control and
stability of this redistribution. Recent years have brought about far reaching regulatory
changes that have removed many of the competitive protections banks enjoyed for a long
time. The ability to provide complete financial services is necessary if commercial banks
are to survive increasing competitive from mutula funds, brokerage firms, and insurance
5. Technology based financial Services Products
The growing importance of computer technology is another factor complicating
predictions about the future structure of baking. Some observers believe that additional
development of electronic cash, such as smart cards, could stimulate further baking
consolidation. They point to the fact that the start-up costs associated with electronic
payments technology cab be high in part because electronic cash requires large
investments in computer software and other resources to establish a network of secure
The development of electronic banking might actually increase competition in banking
markets and lower bank operating costs. Electronic banking offers an inexpensive
alternative to branching to expand a bank's customer base and many banks are using
electronic banking to increase service to their customers. Many banks have started web
sites on the internet, and many plan to offer banking services over the internet. Some
banks are laready offering certain banking services over the telephone. Smart cards and
other forms of electronic cash could be the key to consumer acceptance of home banking,
eventually allowing banks to reduce the number of their physical branches.
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Home banking industry:
Financial institutions work interested in turning the home banking concept into reality as early as
1970. Many banks invested million of dollars in R&D in Oct. 1981. The American banker had a
set of articles promoting the virtue of home banking. In 1980’s cable television was considered
as possible medium of home banking and telephones was considered in 1970’s.
Success of home banking:
There are several factors that lead to believe that home banking has a good chance of success
1. Consumers up the learning curve.
2. Increasing consumer awareness.
3. The alternative is too expensive.
4. Huge competition.
There are several factors that lead us to believe that home banking has a good chance at success
Consumers Up the Learning Curve Consumers are becoming increasingly cornputer-
literate and are able to interact more fluently with their online financial service
providers. C)ver the years, consumers have demonstrated a high level of acceptance of
basic electronic services. The banking industry expects that PCs will eventually replace
ATMs and POS terminals as the crucial method of consumer-bank interfacing. However,
the use of technology is not just restricted to ordinary consurner-bank interface (or retail
banking). Evidence indicates that banks and software companies are begin- ning to find
a receptive audience among PC users wanting to simplify bill paying, cheekbook
balancing, and tax-related tasks.
Increasing Consumer Awareness Advertising about and media attention to online
banking have never been stronger. Mainstream magazines are in- creasing the amount of
coverage given to computer-related topics. As a result, consumers are increasingly aware
of alternatives to traditional branch bank- ing. As consumers become aware of
alternatives, they are going to demand more. Banks that fail to meet expectations face
the possibility of mass exodus.
Large Base of Installed PCs Finally, there is a critical mass of PC-using households
with modems. For a long time, home banking was a classic .chicken or egg" ptoblem;
KARISHMA SIROHI 24
without a large enough sample of potential users, there was no urgency for financial
institutions to provide sen-ices. Conversely, without a wide array of services, there was
little consumer in- terest. This problem is resolving itself. Today there are more than 30
million PCs in American homes, and, for the first time in history, consumers are now
spending more on PCs than TV sets. Modem penetration into house- holds is a key issue
for home banking, as online services require a modem. Clearly the technology exists to
make home banking a reality. "lether'it will happen via the Intemet, a proprietary service,
or both is yet to be deter- mined, but the home banking infrastructure is in place.
Home banking implementation approaches:
1. Proprietary bank dial up services.
2. Off the shelf home finance software.
3. Online services based banking
4. www based banking services.
Pushed by growing consumer demand and the fear of losing market share, banks are investing
heavily in. home banking technology. Collaborating with hardware, software,
telecommunications, and other companies, banks are introducing new ways for consumers to
access their account balances, transfer funds, pay bills, and buy goods and services without using
cash, mailing a cheek, or leaving home. The four major categories of home banking (ii-t
historical order) are:
Proprietary bank dial-up services. A home banking service, in cornbina on with a PC
and modem, lets the bank become an electronic gateway to customers' accounts, enabling
them to transfer funds or pay bills directly to creditors accounts.
Off-the-shelf home finance software. This category is a key player in cementing
relationships between current customers and helping banks gain new customers.
Examples include Intuit''s Quicken, Microsoft Money, and Bank of America's MECA
software. This software market is attracting interest from banks as it has steady revenue
streams by way of upgrades and the sale of related products and services.
Online services-based banking. This category allows banks to set up re- tail branches on
subscriber-based online services such as Prodigy, CompuServe, and America Online.
World Wide Web-based banking. This category of home banking allows Pt,Mbanks to
bypass subscriber-based online services and reach the customer's browser directly
through the World Wide Web. Ue advantages of this model are the flexibility at the back-
end to adapt to new online transaction processing models facilitated by electronic
commerce and the el~atiort of the constricting, intermediary (or ordine service).
In contrast to packaged software, which offers a limited. Set of services, the online and
WRWW approach offers further opportunities. As consumers buy more and more in
eyberspace using credit cards, debit cards, and newer financial instruments such as
KARISHMA SIROHI 25
electronic cash or electronic checks, they need software products to manage these
electronic transactions and reconcile them with other off-line transactions. In the future,
an increasing number of paper-based, manual financial tasks may be performed electroni-
cally on machines such as PCs, handheld digital computing devices, inter- active
televisions, and interactive telephones, and the banking software must have the
capabilities to facilitate these tasks.
E- Commerce and Retailing:
Retailing is expected to change with a rapid development of new online sales and distribution
channels that literally used from anywhere, anytime from work, school and a hostel, car or
These developments should base impact resulting as much as the catalogue retailing and T.V.
based home shopping at most every retailer is re evaluating every aspect of its operations from
customer service to adversely merchandising to store designing and logistics to order fulfillment.
However, retailer needs to consider the following issues and developing a business order.
2. Software interface issue
4. Payment issues
5. Market penetration issues.
Changing retail industry dynamics:
So, the important factors affected retail industry:
1. Over building and excess supply
2. Change in consumer demographics.
3. Change in consumer behavior
4. Technology improvement.
Online retailing success stories:
1. PEA POD’s experience
2. CVC international
3. Web based travel agencies.
Open Vs Closed Model:
An open system such as web offers two additional key benefits:
KARISHMA SIROHI 26
Control of user interface
With a open system the bank designs the user interface and therefore able to incorporate its own
look and feel.
The authority allows the bank to enhance its brand awareness and maintain direct access to its
customer. The open system also allows bank to offer an expended array of financial services and
to choose their business partners when offering additional services such as brokerage accounts
and mutual funds which leads to stronger customer relationship and increased revenue.
In this system using proprietary financial management software such as Quicen, the software
firm act as a intermediary between the bank and its customer. In managing the customer
relationship the software provider controls the interface design, thus diminishing and even
eliminating any reference to the bank itself. This software provider also control the selection of
financial providers and determine the choice of services and availability of those services.
Consumer merchandise model:
receipt of product
authorization of payment
placement of order
placement of terms
negotiation of terms
comparison shopping and product selection based on various attributes
Product/ service search and discovery of information
KARISHMA SIROHI 28
Intranet and corporate finance:
The competitive business environment is forcing firms to re-engineering financial management
process. General ledger system and spread sheets (traditional method) prove inadequate when
data is voluminous and worldwide, when corporate structure change because of mergers and
acquisition and when timely and reliable consolidation, budgets and forecasts are essential.
In this section, we provide the setting by elaborating on what financial information system are
intended to accomplish.
What exactly is financial system:
a financial system encompasses business process, procedure, control and data dedicated to
operations and maintenance of corporate financial objectives.
It incorporates the following tasks:
Report and analyses the financial data
Simply the budgeting and forecasting process.
Enabling better planning
Control the financial consolidation of actual results.
Answer at ad hoc requests efficiently.
Improve cost control and performance measurement.
Financial accounting activities:
1. Processing, maintaining, collecting, transmitting and reporting data about financial event.
2. Supporting financial plan and preparing budget
3. Supporting the preparation of financial statement.
Management accounting activities:
1. Reporting historical transaction to external parties.
2. Accumulating and reporting false information.
3. Safeguarding the asset of company.
4. Providing insight with respect to the value of future transaction.
Accounting software provided a way to enter transactions and manage those transaction in the
form of an accounting trial. Today there is a lot more that the business manager’s need from the
information lock inside the accounting databases. The information is there but it is very difficult
to obtain. Intranet can play a big role in solving this problem because this will allow the
KARISHMA SIROHI 29
integration necessary to provide accounting information that the manager needs in the specific
form they need, when they need it and where they need it.
1. Managing information about monthly progress towards annual goals of an organization.
2. Allowing managers to spend time in manipulating not gathering the data.
Create a central database of measurement information using the web.
use the web for end user interface.
Give user easy to use form for query information.
Use a data warehouse to store information
Generic modules in a financial information system/ understanding the different software
1. General ledger
2. Accounts payable
3. Accounts receivables
4. Asset management
6. Billing and invoicing
Intranet and transaction accounting:
Intranet offer companies new tools that harness the power of network computer. For the
transaction accounting purposes. This includes:
1. Efficient transaction entry
2. Common transaction processes
3. Consistent internal controls
4. Audit trials
Payment system/ management:
Today’s competitive world demands operational efficiency with strong management control tight
integration of purchasing, payables and receivables is necessary to eliminate paper work
redundant data entry. The goal is to use automatic price order creation, automatic text with
holding and automated voice and payment processing to improve operational efficiency. In this
process, the company is linked with supplier and distributor so, the payment can be send and
received through e-commerce. This allows customer order to be build after shipment with
invoice printed and inventory, sales and accounting information maintain automatically.
KARISHMA SIROHI 30
Treasury and cash management:
The global market place demands support for multiple currency, international tax method and
other global business practices. Companies must work with financial institution to boost their
ability to deal on global basis. The goal is to enable global companies to manage their money in
various foreign exchange accounts. This includes multinational, multi currency bank
reconciliation and cash management.
In general cash management is to access information related to their checking accounts in order
to make timely payment and reduce their exposure to check fraud. Therefore, cash management
requires rapid transfer of information between bank and its customer.
Human resource management system:
HR department are finding that the web is an effective vehicle to deliver more strategic programs
and services and to enable line managers and employees to directly access the information and
initiate self service transaction. The intranet and web also provide a common, enterprise wide
platform to deliver solutions to support a wide range of HR functions including recruiting and
application tracking, organization training and development skills planning and performance
evaluation compensation and benefit administration etc.
Training and development
Health and safety
Com X Bank X Bank Y Comp. Y
Transfer of funds
KARISHMA SIROHI 31
Health care benefit management
Size and structure of financial software market:
Companies are looking for system flexibility to meet changing business requirements such as
corporate re-engineering, new govt. reporting requirements, new product line and the ability to
link financial data throughout the enterprise. To meet the management needs of large
corporations, e commerce solutions are being used to develop and integrated enterprise suite that
enables the re-design of financial and accounting processes.
Corporate digital library:
Today most internal e-commerce system whether centralized or dispersed, concentrate on
business transaction data. This focus is essential and few companies of any size can keep pace
without automating routine transaction. These transactions affect the key strategic decision
strategic and operational decisions are the life blood of every organization. In fact, it is safe to
speculate that the next wave of internal commerce will be aimed at decision support. Dimensions
of internal e-commerce system:
Digital library layer: many corporations are finding that the most effective way to
manage their business information is through a corporate library that provides the
architecture to model, map, integrate, condense, and transform scattered information
housed in digital documents and legacy databases into meaningful business information.
Today, the term digital library is widely used as the generic term for diverse information
structures that provide organizations and workers access to the vast amount of internal
information encoded in multimedia formats. It creates a unified repository of consistent
business data for information processing. Digital libraries are of two types: electronic
document based digital libraries and structured data or database oriented warehouses.
Document digital library: the term document denotes all nondata records, including
books, reports, paper materials, electronic files, video and audio. A document digital
library is simply, a distributed network of interlinked information that is tailored for
electronic publishing. It encompasses new types of information resources; new approach
to acquisition; new methods of storage and preservation; new approaches to classification
and cataloging; new modes of interaction with information; and shifts in organizational
Data warehousing: it is designed as central information repositories for combining and
storing vast amounts of historical and reference data from a number of different sources.
These corporate data sources include mainframe databases, client-server relational
databases, spreadsheets, text reports, flat files, and proprietary systems. A data warehouse
is a physical separation of an organization’s operational data systems from its decision
KARISHMA SIROHI 32
legal cases and
DocumentImaging ( scanning
documents for storageandfaxing)
structuring documents (structuring
and encoding info. using document
distributionhypertext ( structuring
interlinked textual andmultimedia
info.for distributednetwork access)
active or compound documents
(structuring applications arounda
support system. It includes a repository of information that is built using data from the
far-flung and often departmentally isolated systems.
Making a business case for a document library:
This section highlights the role that documents plays in today’s organization and explores how
businesses can better meet their customer’s need by improving document management support.
Corporate digital library as a core of documentation:----------
Document management describes a wide variety of disparate functions including document
authoring and scanning, repository archiving, document distribution and delivery, document
processing along the work flow, information search and retrieval, and document browsing or
viewing. In this diagram and information architecture that ties different departments around a
corporate document library of information that enables cross functional information sharing. This
is brought about by establishing information architectures that
enable the seamless movement of information across the enterprise
Types of digital documents:
1. Document imaging: document imaging emulates
microfiche and microfilm. An imaging system passes a
paper document through a scanner that renders it digital and
then stores the digital data as a bit mapped image of the
document. Keyword for each document that help in
KARISHMA SIROHI 33
indexing and retrieval are entered during scanning. The problem with the imaging
approach is that the output contains only images, not encoded text. Consequently,
searching the text of a document’s image is possible only using the keywords that
categorize that document.
The following imaging standards are prominently used:
TIFF (tag image file format)- format for interchange of bit-mapped images. It
was developed through an industry effort initiated by Aldus Corporation and has
achieved de facto standard status.
ITU-TSS (international telecommunication union- telecommunication
standardization sector)- group Corporate digital library as a core of
documentation .6 Facsimile. This standard is used for compression and exchange
of bit mapped files.
2. Structured documents: it apply database structuring capabilities to individual
documents and documents collections to allow tools to manipulate document content just
like fields within database tables. A large array of standards and products are available to
help create and manage structured documents, depending on the goal and task at hand. If
document interchange between platform and fidelity to document format is the main
concern, a compound document architecture may suffice.
Standard generalized markup language (SGML)
Office document architecture (ODA)
Compound document architecture (CDA)
Rich text format (RTF)
3. Hypertext documents: hypertext is a way of making document based information more
mobile. Mobility of information is necessary for the following reasons:
Information in enterprise is seldom located on one node or server but is
distributed throughout the organization.
Accessing and retrieving large monolithic documents is time consuming.
Reuse of document fragments for composing new documents is more effective
when information stored on individual systems and servers across an enterprise
can be accessed from remote locations.
4. Active documents: it represents what is known as document oriented computing. Active
documents provide and interactive interface where all documents, applications, and data
related to a particular task are assembled, arranged, and interlinked in such a manner that
the user can focus on the task at hand and be shielded from nontask related issues like
access, storage, data formats, location, computing or delivery mechanism.
KARISHMA SIROHI 34
E-Commerce scenario in Indian corporate:
• India has an internet user base of about 354 million as of June 2015. Despite being third
largest user base in world, the penetration of e-commerce is low compared to markets
like the United States, United Kingdom or France but is growing much faster, adding
around 6 million new entrants every month.
• In India, cash on delivery is the most preferred payment method, accumulating 75% of
the e-retail activities.
• As of Q1 2015, seven Indian e-commerce companies have managed to achieve billion-
dollar valuation. Namely, Flipkart, Snapdeal, InMobi, Quikr, Amazon India, OlaCabs,
• Large percentage of population subscribed to broadband Internet, burgeoning 3G internet
users, and a recent introduction of 4G across the country.
• Explosive growth of Smartphone users, soon to be world's second largest smart phone
• Rising standards of living as result of fast decline in poverty rate.
• Availability of much wider product range
Usage and advantages:
• Global Trade
• Virtual Businesses
• Lower search costs
• Increased power of downstream players
• No Standing in Queues or Being Placed on Hold Forever
• Easier to Compare Prices
• Lots of Choices
• Payment Collection: When get paid by net banking, one has to end up giving a
significant share of revenue (4% or more) even with a business of thin margin.
• Logistics: Businesses have to deliver the product, safe and secure, in the hands of the
right guy in right time frame.
KARISHMA SIROHI 35
• Cyber crime in E – Commerce
• Consumer attitudes are a composite of a consumer’s
• beliefs about
• feelings about
• behavioral intentions
• Beliefs: A consumer may hold both positive beliefs toward an object (e.g., coffee tastes
good) as well as negative beliefs (e.g., coffee is easily spilled and stains papers)
• Affect: Consumers also hold certain feelings toward brands or other objects. For
example, an extreme environmentalist may believe that cutting down trees is morally
wrong, but may have positive affect toward Christmas trees because he or she
unconsciously associates these trees with the experience that he or she had at Christmas
as a child.
• Behavioral Intention: The behavioral intention is what the consumer plans to do with
respect to the object (e.g., buy or not buy the brand). As with affect, this is sometimes a
logical consequence of beliefs (or affect), but may sometimes reflect other circumstances
-e.g., although a consumer does not really like a restaurant, he or she will go there
because it is a hangout for his or her friends
• OPPORTUNITY FOR RETAILERS
• OPPORTUNITY FOR WHOLE SALERS/DISTRIBUTER
• OPPORTUNITY FOR PRODUCERS
• OPPORTUNITY FOR PEOPLE