The State of eCommerce

David Strom

david@strom.com

(516) 944-3407

TISC Boston 11/12/1999

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Consider the shopper

• Can’t find your store

• Can’t find the right product

• Can’t determine prices and shipping ahead of time

• Can’t pay easily

• Can’t get decent service and support

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Consider the developer

• Poor quality of tools to build storefronts

• Need to integrate several products for any solution

• Have to deal with credit card snooping perceptions

• And still have to satisfy customers!

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It is a wonder anyone can buy anything on the web!

• BMW with page not found error

• Gap missing any search function

• Netmar payment screen confusing

• Singapore jewelry directory outdated

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Rent, buy, or build your store

• Rent: outsource to a CSP

• Buy suite of software

• Build it yourself

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The cold hard reality of suites

• Suites are nothing more than collection of products

• Lack integration among various elements

• Difficult to setup, customize, and use

• Require you to live “inside” their structure

• Limited payment options

• Sounds like early MS Office

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Trends

• Suites will get better, but no one will really care

• Rental options will continue to get cheaper and more functional

• Web/database integration still difficult problem that suites are ignoring

• Backoffice integration still difficult problem but getting better

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Technology status report

• SSL vs. SET

• eWallets

• eCommerce hosting providers

• Payment providers

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SSL vs. SETSSL

• Server authentication– Merchant certificate as

legitimate business

• Possible for client authentication– Not tied to payment method

• Privacy– Encrypted message to merchant

includes account number

• Integrity– Message authenticity check

SET• Server authentication

– Merchant certificate tied to accept payment brands

• Customer authentication– Digital certificate tied to

certain payment method

• Privacy– Encrypted message does not

pass account number to merchant

• Integrity– Hash/message envelope

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SET issues• Implementation of SET has some big drawbacks:

– Lack of interoperability among systems

– Management of public key infrastructure

– Distribution of digital certificates requires action on the part of the consumer

– Will banks want to become cert authorities?

• And who will pay for all this?• Meanwhile, eCommerce goes on

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The future of SET

• Non-repudiation of transactions through digital certificates for both merchant and customer

• SET may be the industry standard for payments, but yet to be implemented

• It will be far more difficult for a customer to claim no knowledge of a transaction

• Demonstrations continue

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Some problems with eWallets• Not transferable to other wallets

• Tied to a single PC

• Not available for use at many web storefronts

• Just solve a small part of the overall payment process

• And they just don’t work!

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Trends

• eWallets will eventually go away

• SET becomes a server-side issue

• SSL still dominates eCommerce transactions for many years

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Interoperability is the key

• Wallets will become widely used when the following events occur:– Mass distribution of wallets to consumers is

easily made– Will be accepted by all merchants, regardless of

wallet brand or payment brand– Don’t require PKI knowledge or computing

expertise

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Turnkey eCommerce hosting providers

• GeoShop/Yahoo

• ViaWeb/Yahoo

• iCat

• Shopsite/Open Market

• iTool

• Shopzone

• Encanto

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What they have in common

• Relatively easy to setup simple storefronts

• Relatively difficult to setup anything else!

• Payments, order processing still mostly a manual effort

• Limited catalog and page controls

• But good to learn about eCommerce!

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Case study: Encanto

• Started out selling hardware appliance

• Now sells eCommerce hosting services and gives away the box

• Will they make it on monthly fees?

• Best explanation of payment process around but took it off their web site!

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The state of payment systems

• Today the vast majority of web payments are with SSL forms and credit cards

• Many new directions for payments, but still far from general acceptance

• Banks at odds with software developers

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Remember the old payment providers?

• Digicash

• Cybercash (first generation)

• First Virtual

• Mondex

• GlobeID

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Why didn’t they work?

• Too complex to implement

• Too much cumbersome infrastructure

• Not too many stores took their kind of money

• Too many other technical challenges

• Solved the wrong problem first (credit card snooping)

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Today’s sessions

• Choosing the right payment provider

• New alternatives to PKI for authentication

• Securing and integrating web and database servers

• Web switching and caching

• Preventing cyberfraud

• PKI application implications

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Our moderators

• Christy Hudgins-Bonafield

• Victor Danevich

• Greg Yerxa

• Greg Shipley

• Jon Udell

Session 1: Choosing the right eCommerce

payment provider

Christy Hudgins-Bonafield

Brian Boesch, Cybercash

David Strom, David Strom Inc.

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Why use any payment system?

• Automate existing business practice (POs, procurement, supply chain, etc.)

• Non-human transactions, businss-to-business

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Three choices

• Outsource everything (Evergreen, BofA, Amazon zShops)

• Use Cybercash online system

• Use PC POS (Tellan, PC Authorize)

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Issues

• Real time or batch authorization• Real time or batch capture/posting of

transactions• Fraud detection• Whether or not physical goods are involved• Scalability, reliability• Where and how customer account data is

stored

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Diversity issues

• Shopping carts used to keep track of sessions vs. committed order processing

• Rich reporting tools, backup, management, history/log

• Open interfaces to extract information and use across different legacy payment models

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Three different levels of security

• Transaction level

• Session level

• Membership and directory level

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What is the goal?

• To safeguard user identity and payment information

• Across all transactions, sessions, and wherever membership information is stored

• And to ensure that accurate transactions occur!

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Transaction level security

• Identity must be coupled with transactions

• Transactions must be persistent and grouped for optimal payment authorization and processing

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Session level security

• Identity must be constantly verified during eCommerce session and especially when transactions committed for payment authorization.

• Cookies, tokens, SSL

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Membership level security

• Persistent way to store identity and payment methods.

• Must be secure – or face legal consequences!

• Critical for business-to-business automation

• Must leverage existing business PO authorization systems

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All of these are tied to your shopping cart

• Usually, cart processes payments and sends to banking network

• Demonstration from Perfectotech.com• strom.com/pubwork/ecommerce/testcart.htm

Session 2: Authentication alternatives for

secure eCommerceDavid Strom

(516) 944-3407

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The old method: SSL/credit cards

• How to deal with returning customers?

• How to deal with breaks in shopping session?

• How to deal with peak loads?

• Are they really secure? (Perception vs. reality)

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Current authentication methods

• Cookies

• Database logins

• Certs and PKI infrastructure

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Do you really want to do this?

• Setup CA server

• Generate a secure root CA

• Train Reg Authorities to manage certs

• Develop customer cert policies

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New ways to authenticate shoppers

• 1Clickcharge.com

• qPass.com

• Cybercash’s InstaBuy.com

• ISP bill-backs (iPin, Trivnet)

• eCharge.com

• Personalized shopping portals (Shopnow, iGive, eBates)

• ECML

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Characteristics

• Mainly for digital content delivery

• Per day pass (WSJ)

• Charge 8- 12% per transaction

• Universal membership

• Aggregate lots of small transactions into one monthly bill

• Don’t leave site while completing purchase

• Build on “community” and “standards”

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ShopNow, eBates

• Each user registers and sets up own mini mall with links to stores

• Basic rebate program but large collection of stores

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iGive

• Percentage of sales goes towards charities

• Clickthroughs also are measured and accumulate $

• Members have earned $300k for charities so far

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iPin, Trivnet

• Digital content only

• Aggregates purchases and bills your ISP directly

• Only works if your ISP and merchant are signed up

• Does this sound familiar?

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Advantages

• Ease of use -- maybe

• No credit card transmission over the Internet

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Disadvantages

• Need to reach critical mass of users almost at launch

• Still rely on username/password combination which can be cumbersome

• Small companies without a lot of depth

• Standards still in play

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Why use these any of these services?

• Save money

• Build loyalty, return visits

• Make eCommerce easier? Not sure.

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Panel

• Brian Smiga, 1ClickCharge

• Jamie Fullerton, Inflo

• Ted Goldstein, Brodia/ECML.org