Ecommerce: Terminology [Archives:2003/681/Education]

October 30 2003

Najeeb Yahya
NCC Education – Yemen

Commerce Service Providers (CSP)
CSPs are business or web sites that provide ecommerce solutions.

Digital or Electronic Cash or E-cash or Ecash or Digital Money
These terms are also used interchangeably, and they refer to any of the various methods that allow a person to purchase goods or services by transmitting a number from one computer to another. The numbers are issued by a bank and represent sums of real money. Digital cash is anonymous and reusable. Unlike credit card transactions, the merchant does not know the identity of the shopper.

Electronic Checks or Cheques
Customers pay for merchandise by writing an electronic check that is transmitted electronically by email, fax or phone. The “cheque” is a message that contains all of the information that is found on an ordinary cheque, but it is signed digitally, or indorsed. The digital signature is encoded by encrypting with the customer’s secret key. Upon receipt, the merchant or “payee” may further indorse by encoding with a private key. When the cheque is processed, the resulting message is encoded with the bank’s secret key, thus providing proof of payment. Various companies are selling Electronic Check software and services.

Electronic Wallet
Electronic Wallets store your credit card numbers on your hard drive in an encrypted form. You then make purchases at Web sites that support that particular type of electronic wallet. By clicking on a Pay Button, customers initiate a credit card payment via a secure transaction enabled by the electronic wallet company’s server.

Electronic Commerce or Ecom or Emmerce or EC
These terms are used interchangeably, and they all mean the same thing — the paperless exchange of routine business information using Electronic Data Interchange (EDI) , email, electronic bulletin boards, fax transmissions and Electronic Funds Transfer. It refers to Internet shopping, online stock and bond transactions, the downloading and selling of “soft merchandise” (software, documents, graphics, music, etc.), and business to business transactions.

An extranet is an extension of a corporate intranet. It connects the internal network of one company with the intranets of its customers and suppliers. This makes it possible to create e-commerce applications that link all aspects of a business relationship, from ordering to payment.

Disintermediation is the process of bypassing retail channels or mail order houses and selling directly to the customer.

Hard Goods vs Soft Goods
Hard Goods are items that exist in the real world, as opposed to soft goods, which exist virtually or electronically. For instance, an Internet merchant selling a book that is shipped to the customer in a print version is selling hard goods; a merchant offering a book for download in electronic format is selling soft goods.

High Risk Processors
High risk processors (or brokers) are financial institutions or companies that that issue merchant status accounts to high risk businesses. They offset their risks by charging higher transaction fees and higher rates than traditional banks do. However, the initial outlay of cash that you will be required to put up is usually much less than the large deposits required by traditional banking institutions. Some brokers may offer other added features such as shopping cart software, web site templates, forms or secure lines for ordering.

Immerce is the new term being used for commerce that is transacted totally over the Internet.

Merchant Account
A Merchant Account is a relationship between a business (i.e. a merchant) and a merchant bank which allows the retailer or merchant to accept credit card payments from customers. Depending on the country involved, banks or financial institutions could have stiff requirements and regulations regarding the issuing of a merchant account. Many small or home based businesses report that they have great (sometimes insurmountable) difficulties acquiring Merchant Status. If Merchant Status is obtained, the merchant then rents or buys special software that is used to process the transaction. In some cases, depending on the bank and depending on the type of business that you are operating, you will also need to purchase or rent a piece of hardware known as a processing terminal.
An Internet Merchant Account is a special account that permits the acceptance of credit cards online. Transactions are processed online, in real time. While the customer waits, the system checks the credit card to be sure that it has not been reported stolen, has not expired, and is listed to the same address that the customer has given. If the card is approved, the customer and the merchant are both automatically notified that the sale has transpired. This type of account is a stricter banking relationship than one involving face-to-face transactions. Web transactions do not gather signatures from purchasers and therefore there is a higher risk of fraud.
Merchant Brokers specialize in obtaining credit card accounts for online businesses. Brokers charge a setup fee and lease or sell the software and hardware as needed. Expect to pay a discount rate, which is the percentage you pay for each transaction processed, as well as various other charges that differ among services. If obtaining a merchant account through a traditional bank is proving to be a problem, merchant brokers are a good alternative.

Microtransactions or Micropayments
Microtransactions are transactions of tiny amounts — a few cents or a few dollars, typically made in order to download or access graphics, games, and information.

Telephone Billing Systems
A very new approach, telephone transactions allow the customer to purchase an item or service, and the amount will be billed to his or her telephone bill. To date, this is being used for soft items such as downloads, time measured services (i.e. time spent at a Web site) or for making charitable donations online.