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