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electronic tools and techniques provide many benefits to both customers and merchants. EDI standards, for example, enable fast, accurate information exchange between different automated systems in routine, relatively simple business transactions.

Unfortunately, despite the widespread use of numerous methods of electronic support, electronic commerce is still not the most common method of carrying out business transactions. This is so for several reasons. For one thing, most business transactions still require the physical exchange of paper documents and instruments, with the inherent costs and delays this represents. For another, current electronic commerce approaches are not sufficiently well integrated, secure, open, or easy to use:

Partial solutions. Current electronic commerce implementations automate only a portion of the entire transaction process. For example, although ordering and distribution of an information-based product (such as an electronic magazine or a software program) can be nearly simultaneous, the supporting accounting and inventory information, payment, and actual funds transfer tend to lag, often by days. This time lag, and the resulting decoupling of the accounting and payment information from the ordering and delivery of goods and services, increases the transaction's credit risks. It also increases the likelihood of discrepancies between the various information sources, requiring expensive and time-consuming reconciliation. Finally, today electronic commerce implementations are costly to develop and operate. Their high cost of entry does not make them feasible for many of the more spontaneous, high-volume, low-value electronic transactions (e.g., the sale and distribution of electronic information-based products, such as magazine articles and photograps) envisioned for the future. A fully integrated electronic commerce solution would let users maximize their control over their cash flows; for instance, it would allow the majority of their funds to work for them in bank savings accounts and/or investments, and it would minimize cash shortfalls. It would also eliminate the gaps between ordering, distribution, and payment, enabling development of real-time links to recordkeeping and accounting systems with minimal transaction costs.

Rigid requirements. Electronic commerce applications usually require highly structured protocols, previously established arrangements, and unique proprietary bilateral information exchanges. These protocols, arrangements, and exchanges for the most part involve dedicated lines and/or value-added networks (VANs) and batch processing. For example, EDI requires rigid agreements between the two or more transacting parties about the structure and meaning of data. These agreements are often time-consuming to negotiate, inflexible, and difficult to maintain, especially in a rapidly changing business environment. The resulting costs and necessary lead times frequently create barriers to investment in and widespread use of electronic commerce applications by small and medium-size companies and inhibit the expansion of electronic commerce beyond large companies and their major trading partners.

Limited accessibility. The consumer cannot usually communicate or transact with vendors in a simple, direct, free-form environment in today's electronic commerce applications. For example, to access most electronic shopping services, a consumer must subscribe to an online service (e.g., Prodigy or cable TV shopping channels) that then provides proprietary hardware and/or software with which to communicate with the vendors that have also registered with that service.

Limited interoperability. Most current implementations depend on proprietary solutions, which do not easily interoperate, if at all. Internet e-mail and the World Wide Web are notable exceptions. A truly interoperable electronic commerce infrastructure would allow parties to conduct their transactions in private, without paying any fees to intermediaries unless they provide some real added value, such as credit services. This infrastructure would make it easier for any and all interested persons to become service providers as well as consumers.

Insufficient security. The lack of personal contact and the anonymity associated with doing commerce over a telecommunications network make it difficult to authenticate parties and detect intruders; this in turn makes the system vulnerable to fraud and increases the need for security services. Additionally, the speed with which electronic commerce can be conducted leaves parties with less to react, check, and respond appropriately, again creating the potential for system fraud and abuse. Lack of sufficient security inhibits the introduction of direct, secure, real-time electronic payment and settlement systems that can support secure exchanges without prearrangements or third parties.

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