MGTC50  Building Internet  Commerce Ventures A 3rd year undergraduate course in the Division of Management, University of Toronto at Scarborough

This page last updated 2001 Nov 17 Saturday

Payment acceptance and processing
www.witiger.com/ecommerce/paymentmatrix.htm
SET and SSL
Digital Certificates
Setting up a Shipping Account
Forms related to shipping and receiving
calculating shipping costs online
the large courier and shipping companies
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Section A

Section B

Section C

Section D

Section E

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Chpt 7  Electronic  Payment  Systems

Before we begin to discuss the different types of payment systems, let's take a perspective from the introduction to Chapters 7 that Schneider and Perry wrote and look at one of the big reasons why companies want to effect EPS. The answer to that reason is the same fundamental answer to why all companies are trying variants of e-commerce - the answer is "to cut costs". A substantial amount of the costs medium and large sized companies incur is the costs associated with billing. These costs include the printing and paper costs of making the invoice/bill and envelopes, as well as the postage costs for mailing the bills. Utility companies, for example, can spend $1 to $1.50 on each customer each month sending out tens our thousands of bills. When you are able to implement an electronic payment system for these types of situations it can save a large company $X00,000's of dollars each billing cycle - in addition, you also have the environmental consideration of saving trees, literally.

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Chapter 7 Electronic  Payment  Systems

Schneider and Perry write in the beginning of chapter 7 a caution that still holds true 2 years after the book was released in Dec 1999; "Implementation of electronic payment systems is in its infancy and still evolving. The technical, economic, cultural and legal components of electronic payment systems are not fully understood.. As a result there are a number of competing proposals for implementations of electronic payment systems"   . As a result of the fact that EPS "are not fully understood" and "there are a number of competing proposals", we propose that participants in this course endevour to learn about the fundemental building blocks of payment systems so that when you become aware for competing formats that seem to be moving towards market dominance in 2001/2002, you will be able to understand enough about the critical components that you can judge which one(s) to have your company adopt. For example; in the Schneider and Perry book they discuss four technologies electronic cash software wallets smart cards credit/debit cards It is not apparent which one will win out at this stage and as we approach Christmas 2001 it seems that after the Christmas period some of these new technologies, (and the particular EPS brands that are being launched) will prove to be winners or losers over this annual buying period frenzy. By November 2001 we should be able to find articles and reports that some of these technologies did better than others and this may prove helpful in winnowing out which new payment systems may end up being dominant. WTGR . "When customers arrive at a store's electronic checkout counter, merchants want to offer them payment options that are safe, covenient and widely accepted. The key is to figure out which choices work best for your company and for your customers" Schneider and Perry page 212- 1st Edition

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Payment Systems for traditionally disenfranchised people                               Payment Systems for traditionally disenfranchised people

. Why do we need to know about payment systems for teens? In some consumer product areas and consumer service categories they are the leaders of new product trends and uses; BUT, if these vendors are trying to parallel their success with online circumstances, they will be thwarted if teens cannot actually pay for the product. The interesting thing about the article below is the suggestion that developments of payment circumstances for teens will be different in Europe than in North America. WTGR ..    "If traditional players ignore teenagers they face losing future, profitable customers and they will face an uphill struggle against new, 'cooler' brands."  Patore comments ""There is a need in the market for a teen payment product that allows secure payments online," said Julie Cunningham, financial services analyst at Datamonitor. "Teens are keen to have their independence and to shop online. Both traditional players and new entrants have a  part to play in this market. New entrants can attract teens through  the 'cool factor', while traditional players should use their established role in society as a way to convince parents and to gain their support." Patore wrote "Datamonitor predicts that online teen payments will grow considerably in the next five years -- due in part to general growth in the number of Internet users. However, growth is likely to be very different in the United States compared to Europe. U.S. teenagers generally have much more money at their disposal than their European counterparts.  The dominance of the credit card in the United States will allow products connected to parents' credit cards to flourish. In Europe,   more independent solutions will emerge, with products developed by  independent companies such as Smartcreds and Splash Plastic, but also from banks."

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Payment Acceptance and Processing Chpt 14               Payment Acceptance and Processing Chpt 14               Payment Acceptance and Processing Chpt 14

Creating Stores on the Web Chpt 14, "Payment Acceptance and Processing" "An an online store owner, the majority of your customers' orders will be paid for with credit cards..."   . In 1998-2001 it is true that most payments are by credit cards - but since 1999, there have been many companies striving hard to develep alternate payment systems - unfortunately ion 1990 and 2000, not many of these systems were able to gather strong support - some died, and some are struggling; leaving credit cards to remain the major way people buy online products. WTGR . The textbook says that when you are looking for a merchant account provider, you can "... refer to the yellow pages". This is not very sophisticated advice !.   . In 2001, obtaining a merchant account to be a vendor that can receive payment through VISA, Mastercard and AMEX, is increasingly difficult - the reason is due to so many fraudelent uses of credit card processing by some of the adult web sites - which has caused the credit card industry to be more "invesitgative" when deciding to open a new account to a vendor. Some ISPs understand this situation and offer B2C e-commerce hosting solutions that include the processing of credit card - that is to say the ISP has a relationship with a financial institution so that when you open the hosting account, you also get a merchant account allowing you to accept the major credit cards. WTGR . Some medium and large sized ISP's and hosting service companies provide info and FAQs on their web site, have a look at The importance of credit card process services is represented by the fact that Yahoo has a complete category in their search engive for this topic. Have a look at a few of the entries in.

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Payment Acceptance and Processing Chpt 14

Creating Stores on the Web Chpt 14, "Payment Acceptance and Processing" page 324 - 331 describes several of the new types of payment options being used.   . In 1999 and 2000, Prof. Richardson, in attempting to describe all the most current online payment systems, created a matrix - this matrix was last updated int. WTGR . matrix  describing  the different Electronic Payment Systems  www.witiger.com/ecommerce/paymentmatrix.htm witiger's payment matrix last updated Sept 2000 an additional reference  - mb digital's matrix of Electronic Payment Systems (mb's was made in 1996 and hasn't been updated much) .    This site was made by Scott Richards, an MBA graduate student at  the Fisher College of Business at The Ohio State University. It is helpful - but when you are looking at it, keep in mind it was first created in 1996 - and does NOT appear to have been updated. The site was found by Marian Lee of MGTC50 in Nov 2001

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SET and SSL Chpt 14

"Most merchants, companies, and software providers are still using SSL technology and not bothering with SET, which is harder to install and use. Still, the credit card providers are hoping that SET-based transactions will grow because they are more secure and thus reduce costs" page 336   . So before we look at SET, which is briefly described on page 336, we will use someinfo off the Netscape site to look at the predecessor, SSL WTGR "Netscape's Secure Sockets Layer, SSL, provides a secure channel between web clients and web servers ... this is an important point because unlike the standard Internet protocols, such as TCP/IP, SSL must be selectively employed by the web client (the person surfing)... SSL is a layered approach to providing a secure channel" page 103, Gnosh   If you want more information about Netscape's role in developing SSL, you can go direct to the Netscape SSL site - which also has a great glossary of security terms.

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Payment Acceptance and Processing Chpt 14

Creating Stores on the Web Chpt 14, "SET" Secure Electronic Transmission" page 336   SET - Secure Electronic Transaction,              in SET protocol there are 4 entities  cardholder  merchant  Certificate Authority  payment gateway - "the role of the payment gateway is to connect the Internet and proprietary networks of banks" "SET protocol was developed jointly by Mastercard and Visa with the goal of providing a secure payment environment for the transmission of credit card data" Greenstein, page 295   . Because SET was sponsored by Mastercard and Visa back in 1997, it has gathered a lot of momentum as a payment protocol, which is good for Mastercard and Visa  since they want people to continue using credit cards for the businesses online, instead of using new payment methods which would cut the credit card companies out of the loop. SET vs. SSL                      Secure Electronic Transaction vs. Secure Sockets Layer   According to Greenstein and Feinman (p. 297) "The initial version of SET protocol is considered  to be a stronger security mechanism than other transmission protocols, such as SSL, because of SET's stronger authentification features". Greenstein and Feinman point out that SSL is good at providing confidentiality during the transmission of the data, but alone it does not authenticate either the sender or the receiver of  the message.

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SSL and SET according to the credit card companies The screen capture to the right comes from the VISA web site. Why note Visa? - because Visa has more cards worldwide than the total number of American Express, MasterCard, and Discover cards combined.
SSL and SET according to the credit card companies The screen capture to the right comes from the Mastercard web site.

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Digital Certificates Chpt 14

Digital Certificates           page 337 Netscape's web site has a great explanation of digital certificates, and further explains how individual people can obtain them for security in communication.  http://home.netscape.com/security/basics/getperscert.html "A digital certificate is a software tool that you  can install in your browser. Once installed, your  digital certificate identifies you to web sites  equipped to automatically check it. A digital certificate  Eliminates multiple passwords and user certificates for you to remember  Enhances your security - your certificate can't be guessed, forgotten, intercepted, or forged.  Lets you send and receive secure email using most popular email programs, including Netscape Messenger.  When you have a digital certificate, web sites set up to accept digital certificates can authenticate your identity and log you in  automatically in one step, without leading you  through the registration process again. Once a web site recognizes you through your certificate, it can customize web pages and merchandise according to your interests."

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Shipping Chpt 17

Chpt 17, page 377 Creating Stores on the Web Setting up a Shipping Account "Online means mail order, and mail order means shipping. And, being an online store, you will have customers all over the world --  some in very remote places. A significant number of them will be  used to the immediate gratification of the Web, and that means being able to get them your goods as soon as possible. The speed  with which you can deliver their orders can be critical to your business' success. Shipping is one of the few things that links you physically with your customers. While pricing, promotion, communication, and order  processing can be done virtually, the shipped package is what your customers will hold in their hands.   . Therefore - one of the problems in online e-commerce is that the customer makes the decision to buy in a relatively short period of time from a convenient circumstance (shopping at home or in the office) - yet they do not receive the goods til some time in the future - in most cases , much longer than a person who would have driven out to the brick and mortar store to go shopping. WTGR .  The same level of speed, quality, and attention to detail you put into the Web-based portion of your  store also needs to be applied to the shipping side. You should understand that no single shipping option can cover you completely and provide maximum efficiency. The challenge is to  stitch together the various services, software, Web sites, and your  own store into a unified model that allows customers the best coverage, speed, and pricing options. Then you have to display this "shipping stew" on your site in a manner that is easy for your  customers to understand. A Web site with too many options or too few instructions is confusing to customers. When someone looks lost in a real store,  the owner will notice and be able to physically respond. On the Web you won't. Customers will turn away without your even noticing as they find that you don't offer a particular option for delivery. All you  will notice is lower sales.  All of these are reasons why something as mundane and physical as how you organize your shipping plan is incredibly important to your store. So get to know your solutions inside and out, use the Web as much as you can, and make sure your plan is clearly displayed to  users. If you maintain that and utilize the software the shipping companies offer, your customers will get nicely packaged, on-time products, and you'll get repeat business. Many of the posts on  newsgroups and much of the positive e-mail Tronix has received  from its customers concerns its attention to the details of shipping." Some of the text words above come from  http://www.storebuilder.com/chapter17.html

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Shipping Chpt 17

Chpt 17, Setting up a Shipping Account Linking Shipping with Your Web Site  used when companies have a significant quantity of physical goods being sent to customers and / or coming in from suppliers commonly used with companies retailing clothing, books and CDs

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Shipping Chpt 17

Chpt 17, Setting up a Shipping Account Linking Shipping with Your Web Site  Forms related to shipping and receiving click on the screen capture to the left to see an example of shipping related forms used on a working web site FEDEX has a spot on their site where you can get commonly used forms in PDF format check also  www.fedex.com/ca_english/ services /documentationguidelines/

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Shipping Problems  calculating  the cost                   Shipping Problems  calculating  the cost

By Erika Morphy  CRMDaily.com  October 24, 2001  "Last year, a report from Forrester Research revealed that 85 percent of companies surveyed could not fill orders internationally because of the complexity of shipping across borders. The most common complaint was that users could not know the final cost of a shipment when placing an order  -- and oftentimes it would be several times higher than originally estimated. " ... Morphy writes "Jupiter Media Metrix statistics show that 63 percent of online shoppers back out of a purchase when they see how much they have to pay for shipping and handling. In fact, the high  cost of shipping -- and the almost surreptitious, last-minute manner in which it is sprung on the shopper -- is one of the  major customer complaints about online retailers." Morphy explains "... the problem is really that consumers, perhaps subconsciously, resent paying any  shipping charges. When business-to-consumer (B2C) e-commerce took off a few years ago, online retailers lured  shoppers to their Web sites with the promise of free shipping.  It made sense then -- they had to build market share, and  money was no object to many of those sites.  Even as recently as last summer, Amazon and Barnes & Noble engaged in a dogfight over the same customer base, using  free shipping as a lure. Usually, this tactic works. Toys R Us  offered free shipping on its Web site for last year's holiday  season and watched annual sales jump 300 percent,  according to news accounts.   Now, though, online retailers have crash-landed back to  earth. Shipping charges are here to stay, and fair-minded  consumers do see a need for them -- assuming they want  the online retailer to stay in business. Unfortunately, a lack  of standards for calculating online shipping costs and a lack  of transparency in the cost-calculation process leave a lot of  consumers feeling, well, gouged."

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Shipping What do you  do when you  are outside  the territory  they ship to

What do you do when you are outside the territory they ship to new companies like  www.borderfree.com have spring up to serve U.S. companies that have not considered shipping outside the continental states From their web site, Borderfree.com says www.borderfree.com/bf2/jsp/com_au_our_company.jsp "Based in Toronto, Canada, [P: 416.480.2558] Borderfree provides U.S. merchants the most effective way to immediately drive global e-commerce revenues by offering a comprehensive end-to-end solution for serving international customers.  Offering a suite of marketing, financial, logistics and delivery capabilities, Borderfree has removed the barriers that have prevented international e-shoppers from buying from U.S. sites ..Borderfree delivers a total purchase price  including foreign currency conversion, duties, taxes, and shipping and handling costs."   . The whole point of services like bordefree.com is to allow websites to extend their capabilities so they will not lose potential customers. - they want to encourage people to continue clicking through the purchase shopping cart process - instead of stopping when they get to the shipping info. WTGR .  who are customers of bordefree.com, companies like RitzCamera.com and BoatersWorld.com in class we will go online to RitzCamera.com and show the process

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Shipping the large courier and shipping companies UPS and FEDEX account for more than 80 % of online shipment deliveries	UPS -  www.ups.com FedEx -  www.fedex.com DHL -  www.dhl.com Canada Post  www.canadapost.ca
	The UPS page which covers FAQs and other required info
	The FEDEX FAQ page -they specify "Canadian" English !!
	The FEDEX page describing the products they offer to people shipping to Canada

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Shipping Chpt 17 Returns Refunds                     Shipping Chpt 17 Returns Refunds

Chpt 17, page 397 Creating Stores on the Web Refunds   . Obviously, you will do everything when you are producing physical products, to minimize defects and maximize quality - however, mistakes do happen, and - particularly when you have a new business and there are a million things to consider all at once.  So, no matter how you try - there will be some reasons why customers want a refund, or want to ship back products for repair, or missing parts. How you handle this - and how you develop contingency plans - can be a "business breaker". Keep in mind that many customers have concerns about aspects of refunding and parts, and repair - its one of the common reasons why people browse the site, but refuse to conclude the sale. WTGR .  Creating Stores on the Web    Chpt 17, page 398 "If you do happen to make a mistake on a customer's shipping address, forget to check off the appropriate method of shipping, or send them an incorrect item or quantity, show deep concern, apologize profusely, and offer the customer free shipping on the next order..."   This web site has 10 tips which are relevant to the practical aspects of getting your store operating - several of these tips have to do with returns and refunds and shippings; they are listed below #4 Plan for the flood.  If you're a B2C, start planning for the holiday season now. It's probably your last chance to lock in customers. Miss this one and you're history. Be prepared. How many hits can your site handle in an hour? Quadruple it.  What is your contingency plan if you exceed capacity? Have subcontractors ready and waiting to step in and get you going again.  #5 Deliver, deliver, deliver.  If you burn consumers just one time, they're probably clicking somewhere else now. Consumers must know you can be trusted to deliver the products they ordered on time and undamaged. Check out the capability of your fulfillment houses and shipping vendors. Go beyond the promises and look at their systems. Get firm commitments. Your return business success depends on it.  #6 Make return policies easy and efficient.  Consumers need to know they can return a product that doesn't fit, is the wrong color, or simply isn't what they wanted. If you can't offer that service to them, you don't deserve their business. State your return policy up front and honor it-without reservation. Do not make consumers go through hoops and hurdles to get their money back. Include return labels; accept returns at a brick-and-mortar store; give a credit refund over the phone. Do whatever you can to keep your customer coming back to your site over and over again.  #10 Create a service recovery system.  Problems are going to happen. Customers understand that errors occur,  but if they experience a dazzling solution in response to a complaint,  they're even more loyal than if they had never experienced the problem.  The key word here is system. Recovery cannot be a haphazard event. It needs to be a proactive, comprehensive approach to dealing with customer problems. Bottom line: Know what you're going to do in the event things  go wrong.

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Shipping The effects of  Sept 11th

Report: E-Tailers Not So Ship-Shape for  Holidays [2001] By Erika Morphy  CRMDaily.com - which is linked through the E-Commerce Times site  October 18, 2001   www.crmdaily.com/perl/story/14222.html#story-start Morphy writes "Forrester Research  was not overly enthusiastic about holiday shopping prospects for online retailers -- even before September 11th. Now, the consulting  company is warning of another problem that could affect consumer confidence unless retailers take proactive  measures: shipping. " Security Delays: Heightened security at ports, fortunately, is only delaying shipments by hours, not days -- so far. If U.S. Customs starts turning spot checks of containers into full searches,  however, holiday orders could be delayed until it is too late,  Forrester warned.  Aircraft used in shipping: Another possible cause of delays is the Civil Reserve Air Fleet  agreement, in which such carriers as FedEx, UPS and other passenger airlines would have to make their aircraft available for military transport. Thus far, this has not happened, but if  this agreement does go into effect, consumer shipments will  suffer.    . How do you deal with this? You have to be very pro-active in communicating to your customers. Emphasize ordering early use brick-and-mortar stores for order fulfillment develop contingency plans use regional distribution centers partner with brick-and-mortar stores if you don't have them WTGR .  "Forrester also predicted new shipping-related services will develop in the long run that will change holiday shopping patterns for retailers and consumers.  Buying cycles will change, the consulting firm forecast, as shoppers buy and ship for the holidays throughout the year  to get their gifts on time. "

Shipping The effects of  Sept 11th

By Erika Morphy  CRMDaily.com  September 17, 2001  "While there are no easy answers, the Ontario Trucking Association is now calling upon motor carriers, drivers and shippers to work together to ease the pressure at congested border crossings and keep essential deliveries moving as seamlessly as possible.  "The backlog of trucks at the major Ontario-U.S. border points is testing the limits of the North American distribution network, and no one is expecting things to change in the  foreseeable future," OTA president David Bradley said. For that reason, the OTA is stepping in to help Canadian federal and provincial authorities ensure that essential  shipments receive priority attention."

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Shipping

-an example of how some of the large consumer product companies have diversified into the shipping business

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