More and more economies are realizing the potential of the opportunity presented by online commerce, and governments are gearing themselves to harness it. India is not lagging much behind, although its sheer geographical size and the population post huge constraints. It has emerged as a country with one of the highest growths in Internet usage.

The Boston Consulting group predicts that the growth of business-to-business online purchasing in the US will rise from $1.2 trillion in 2000 to $4.8 trillion by 2004, accounting for nearly forty percent of the offline ordering. The Gartner group predicts Rs 300 crore of business-to-business online purchasing in India, by 2004. Online commerce not only provides a more efficient and effective means of conducting business for corporates, irrespective of their size, but also opens up new markets. True online commerce is not possible without a proper online payment mechanism in place, as a true online purchase is possible only when the buyer can pay online and the seller can receive those payments online.

Globally, banks have realized this and are quickly deploying technologies to serve their clients better. Some initiatives worth mentioning are that of NETS-Singapore, which is a consortium of five different banks using shared infrastructure for inter-bank switching and settlement through a Third Party Service Provider (TSP), viz. Cash Card International. US initiatives worth mentioning are First Data Corporation and Checkfree who provide third party transaction services.

However, this is an area where our country has still to catch up, with only a bunch of private banks providing or building up these facilities for their clients. Given the Indian scenario of nationalized banks who are still struggling to establish basic connectivity between their branches to provide "anywhere, anytime banking", the very thought of commerce banking looks like a far fetched idea.

In India, Global Tele-Systems Ltd. is providing third party processing and switching services to the banks to enable them to conduct commerce banking. Global Tele-Systems is establishing connectivity between various banks to provide inter-bank fund transfer over the Internet for the bank’s clients.

For any such financial transactions to happen in an open network (i.e. Internet), it is imperative to have a proper security mechanism in place. The issues are different for the business-to-business (B2B) and business-to-consumer (B2C) segments.

Typically, the payments in the B2C segment for online retail business are carried out using credit/debit cards. The high charge backs that are pinching the online merchants as well as the issuing bank mar the growth in B2C sales. Charge back happens when a cardholder denies the sale. In absence of cyberlaws and any proper mechanism to protect the online merchant and issuing bank, virtual wallets become a very viable and safe method of protecting the merchants as well as the customers. Virtual wallets typically work in an SSL/SET environment to provide non-repudiation, confidentiality and integrity to online B2C purchase. They also provide the customer better convenience by providing auto form fill functionality.

The payments in the B2B segment are usually done through directly debiting the bank account of the buyer. Here, typically, the web server of the corporate is protected by firewalls (a software that protects the web server from hacking). The data travelling between the payer and the banks through a payment gateway is protected by encrypting and sending it over the Internet using SSL (Secured Socket Layer – a standard accepted by VISA & MasterCard for encrypting data).

For providing non-repudiation for the payments done electronically, various methods can be deployed. Some popular ones are:

Checksum can be integrated with the service to protect the integrity of the data that is exchanged. The moment anybody tries to alter the data or hack into it, the checksum detects it and denies the transaction.

Providing smart cards with a digital signature for the initiation of a transaction. The smart cards can act as a safe medium for storing the access information and the digital certificate of the initiator. Every transaction done by the initiator will then be signed using the digital signature stored on the smart card. Thus, the initiator cannot deny the purchase later and the seller as well as the banks involved in the transaction can be safeguarded.

A safer way of providing non repudiation is by using biometrics for the initiator, but this technology is still in its infancy and very expensive.

We have a long way to go before we can achieve significant progress in the arena of e-commerce, but, despite all the odds and constraints, the phenomenon is picking up in the country. With the proper support of the banking industry, the day is not far when India can also boast of a robust Internet economy.

Santosh D Khanolkar, general manager-consulting, e-commerce services, Global Tele-systems

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