Transaction Issues - Accommodating Customers

Some of the major transaction issues that e-commerce firms needed to address at the start of the 21st century were revealed and prioritized in a report released by PricewaterhouseCoopers in 2000. Titled Barriers to Online Purchasing 2000, the report found that, of all the major barriers to online shopping, 79 percent of survey respondents listed credit card security as their greatest concern, while 77 percent most feared disclosure of their personal details, 48 percent reported that their lack of trust in online merchants most prevented them from shopping online, 40 percent were bewildered by Web storefronts, 21 percent were befuddled by the convoluted order processes, and 20 percent were simply fed up with the time it took to complete a transaction.

Clearly, security was among the preeminent transaction concerns, for obvious reasons. On the consumer side, the novel electronic shopping environment provides unique opportunities for convenience, comparison shopping, and speed, but through the 1990s and early 2000s, many consumers were wary of trusting companies—and even the Internet itself—with their personal and financial information out of fear that it could potentially fall into the wrong hands. In many cases, these fears were justified; electronic credit card theft was not unheard of in the early years of widespread e-commerce. Thus businesses had a clear incentive to fortify their transaction systems to ward off hackers and other cybercriminals. If customers weren't at ease making online purchases, then companies wouldn't be able to reap the full advantages inherent in e-commerce. Moreover, if firms earned a reputation for lax security measures, they could simply lose their customers to competitors. At the macro level, analysts placed great hope in the promise of e-commerce, and recognized that security concerns were holding back the potential national and international benefits that online business holds.

It was for these reasons that U.S. legislators finally relaxed restrictions on the proliferation of strong encryption schemes in the late 1990s. For years, governments were concerned about the widespread use of powerful encryption technologies, as it could render criminal investigations harder to conduct. At the close of the 20th century, however, the United States opted to allow wider international proliferation of encryption schemes as a way of fostering the development of e-commerce. Encryption was among the key methods of securing electronic transactions, scrambling and coding sensitive information in a manner that only authorized persons could decode and read. However, encryption schemes continually grow stronger in response to more sophisticated hacking technologies and methods, representing a sort of arms race between hackers and security designers.

There was a more immediate and pragmatic reason for companies to be on guard against potential criminals and untrustworthy customers. Credit card companies, highly aware themselves of the risks involved in e-commerce, charge online merchants much higher percentages than their brick-and-mortar counterparts for services such as credit authorization, verification, and payment. Moreover, charge-backs, or those occurrences where a credit card number comes up empty, are the sole responsibility of the online company, and constituted a conspicuously high expense for e-businesses in the 1990s and early 2000s.