Explain Online Shopping and online banking.

Explain Online Shopping and online banking.

Online shopping is the process whereby consumers directly buy goods or services from a seller in real-time, without an intermediary service, over the Internet. It is a form of electronic commerce. An online shop, e shop, e-store, internet shop, web shop, web store, online store, or virtual store evokes the physical analogy of buying products or services at a bricks-and-mortar retailer or in a shopping mall. The process is called Business-to-Consumer (B2C) online shopping. When a business buys from another business it is called Business-to-Business (B2B) online shopping.

In recent years, online shopping has become popular; however, it still caters to the middle and upper class. In order to shop online, one must be able to have access to a computer, a bank account and a debit card. Shopping has evolved with the growth of technology. According to research found in the Journal of Electronic Commerce, if one focuses on the demographic characteristics of the in-home shopper, in general, the higher the level of education, income, and occupation of the head of the household, the more favorable the perception of non-store shopping., Enrique.(2005) The Impact of Internet User Shopping Patterns and Demographics on Consumer Mobile Buying Behavior. Journal of Electronic Commerce Research, An influential factor in consumer attitude towards non-store shopping is exposure to technology, since it has been demonstrated that increased exposure to technology increases the probability of developing favorable attitudes towards new shopping channels.

Online shopping widened the target audience to men and women of the middle class. At first, the main users of online shopping were young men with a high level of income and a university education. This profile is changing. For example, in USA in the early years of Internet there were very few women users, but by 2001 women were 52.8% of the online population.

Payments: Online shoppers commonly use credit card to make payments, however some systems enable users to create accounts and pay by alternative means, such as:

§  Billing to mobile phones and landlines

§  Cash on delivery (C.O.D., offered by very few online stores)

§  Check

§  Debit card

§  Direct debit in some countries

§  Electronic money of various types

§  Gift cards

§  Postal money order

§  Wire transfer/delivery on payment

Some sites will not accept international credit cards, some require both the purchaser's billing address and shipping address to be in the same country in which site does its business, and still other sites allow customers from anywhere to send gifts anywhere. The financial part of a transaction might be processed in real time (for example, letting the consumer know their credit card was declined before they log off), or might be done later as part of the fulfillment process.

Online Banking

Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit unionor building society

Features of Online Banking

Online banking solutions have many features and capabilities in common, but traditionally also have some that are application specific.

The common features fall broadly into several categories

§  Transactional (e.g., performing a financial transaction such as an account to account transfer, paying a bill, wire transfer, apply for a loan, new account, etc.)

§  Payments to third parties, including bill payments and telegraphic/wire transfers

§  Funds transfers between a customer's own transactional account and savings accounts

§  Investment purchase or sale

§  Loan applications and transactions, such as repayments of enrollments

§  Non-transactional (e.g., online statements, cheque links, co browsing, chat)

§  Viewing recent transactions

§  Downloading bank statements, for example in PDF format

§  Viewing images of paid cheques

§  Financial Institution Administration

§  Management of multiple users having varying levels of authority

§  Transaction approval process

Features commonly unique to Internet banking include

§  Personal financial management support, such as importing data into personal accounting software. Some online banking platforms support account aggregation to allow the customers to monitor all of their accounts in one place whether they are with their main bank or with other institutions.

Security: Protection through single password authentication, as is the case in most secure Internet shopping sites, is not considered secure enough for personal online banking applications in some countries. Basically there exist two different security methods for online banking.

§  The PIN/TAN system where the PIN represents a password, used for the login and TANs representing one-time passwords to authenticate transactions. TANs can be distributed in different ways, the most popular one is to send a list of TANs to the online banking user by postal letter. The most secure way of using TANs is to generate them by need using a security token. These token generated TANs depend on the time and a unique secret, stored in the security token (this is called two-factor authentication or 2FA). Usually online banking with PIN/TAN is done via a web browser using SSL secured connections, so that there is no additional encryption needed.

Another way to provide TANs to an online banking user, is to send the TAN of the current bank transaction to the user's (GSM) mobile phone via SMS. The SMS text usually quotes the transaction amount and details, the TAN is only valid for a short period of time. Especially in Germany and Austria, many banks have adapted this "SMS TAN" service as it is considered as very secure.

§  Signature based online banking where all transactions are signed and encrypted digitally. The Keys for the signature generation and encryption can be stored on smartcards or any memory medium, depending on the concrete implementation.

Attacks

Most of the attacks on online banking used today are based on deceiving the user to steal login data and valid TANs. Two well known examples for those attacks are phishing and pharming. Cross-site scripting and key logger/Trojan horses can also be used to steal login information.

A method to attack signature based online banking methods is to manipulate the used software in a way, that correct transactions are shown on the screen and faked transactions are signed in the background.

A recent FDIC Technology Incident Report, compiled from suspicious activity reports banks file quarterly, lists 536 cases of computer intrusion, with an average loss per incident of $30,000. That adds up to a nearly $16-million loss in the second quarter of 2007. Computer intrusions increased by 150 percent between the first quarter of 2007 and the second. In 80 percent of the cases, the source of the intrusion is unknown but it occurred during online banking, the report states.

The most recent kind of attack is the so-called Man in the Browser attack, where a Trojan horse permits a remote attacker to modify the destination account number and also the amount.

Countermeasures

There exist several countermeasures which try to avoid attacks. Digital certificates are used against phishing and pharming, the use of class-3 card readers is a measure to avoid manipulation of transactions by the software in signature based online banking variants. To protect their systems against Trojan horses, users should use virus scanners and be careful with downloaded software or e-mail attachments.

In 2001 the FFIEC issued guidance for multifactor authentication (MFA) and then required to be in place by the end of 2006