Digital Transformation Chapter 4

Digital Transformation
Technologies
BDT1014
Ts. Ahmad Kamal Bin Hasan Basri

Lecture 7
Enabling Business-to-Consumer Electronic

Commerce,
FinTech,
Alternative Lending
(chapter 4 + notes on FinTech& Alternative

Lending)
Please Take Your Attendance for W7.
Scan the QR Code
Learning Objectives
4.1 Describe different approaches to competing in cyberspace
as well as different forms of electronic government and fintech
4.2 Describe business-to-consumer electronic commerce
strategies
4.3 Understand the keys to successful electronic commerce
websites and explain the different forms of Internet marketing
4.4 Describe mobile commerce, voice commerce, consumer-to-
consumer electronic commerce, and consumer-to-business
electronic commerce
4.5 Describe how to conduct financial transactions and navigate
the legal issues of electronic commerce
Copyright © 2015, 2012, 2009 Pearson Education, Inc. All Rights Reserved
Learning Objective 4.1
• Describe different approaches to competing in
cyberspace as well as different forms of electronic
government and fintech
E-Commerce and E-Government
• Types of Electronic Commerce
• E-Government
• Managing Financial Transaction on the Web
Types of Electronic Commerce (1 of 2)
• Electronic commerce (EC) refers to the exchange of goods, services, and
money1 among firms, between firms and their customers, and between
customers, supported by communication technologies and, in particular,
the internet.
• The Census Bureau of the Department of Commerce reported that, in the
first quarter of 2020, online retail sales were up by nearly 15 percent
compared to the first quarter of 2019,
EC accounted for 11.8

percent of total retail
sales, resulting in sales of
more than US$160.3
billion in one quarter
alone
• Electronic commerce (EC) is not limited to transactions between
businesses and consumers (B2C)
– Also used business partners and others to conduct business (B2B),
which is the largest form of EC in terms of revenue
▪ U.S manufacturers report e-commerce shipments totaling more
than US$4 trillion in 2018 and wholesalers reporting e-commerce
sales of US$2.6 trillion.
– Business between consumers (C2C) is big online, such as eBay
▪ note that a business, eBay, provides a platform to enable
transactions between consumers)
▪ A related EC model is consumer-to-business (C2B) EC, where
consumers offer products, labor, and services to companies, a
complete reversal of the traditional B2C model.
Type of EC Description Example
Business-to-consumer (B2C) Transaction between A person buys a book from

businesses and their customers Amazon
Business-to-business (B2B) Transactions among businesses A manufacturer conducts
business over the web with its
suppliers
Consumer-to-business (C2B) Transactions between A person offers his of her
customers and businesses photograph at shutterstock.com
Consumer-to-consumer (C2C) Transactions between people A person purchases some
not necessarily working together memorabilia from another
person via eBay
• Social commerce represents organizations trying to leverage social
networks to build lasting relationships
• Mobile commerce (MC)
– any electronic transaction or information interaction conducted using a
wireless, mobile device and mobile networks that leads to the transfer
of real or perceived value in exchange for information, services, or
goods
– has become a natural way of shopping online for many.
– Forrester Research estimates that, in the major European economies,
m-commerce will double between 2018 and 2023, reaching €330
billion.
– Forrester also expects the share of m-commerce in U.S. B2C e-
commerce (retail and travel) to reach 45 percent in 2024.
E-Government
• Government-to-Citizens (G2C)
o allows for interactions between
federal, state, and local governments
and their constituents.
o The U.S. Internal Revenue Service’s
internet tax filing, or e-filing, is one of
the more recognizable G2C services,
• Government-to-Business (G2B)
o is like G2C, but this form of EC
involves businesses’ relationships
with all levels of government. E-government initiatives include
interaction with citizens,
o his includes e-procurement. corporations, and other
governments
• Government-to-Government (G2G)
o used for electronic interactions that take place between countries or
between different levels of government within a country.
Managing Financial Transactions on the Web
• Disintermediation has enabled many firms to provide many financial
services directly to the end consumer
– the internet has enabled customers to easily compare prices for
financial services.
– these changes have affected not only traditional banks but also
brokerage firms, insurance companies, and other players in the
financial market.
• E-banking and online brokerage

– Paying bills online using electronic bill pay
– People can turn to multiple on-line brokerage sites to get the
latest information about stock prices
Managing Financial Transactions on the Web
• Fintech
– FinTech = Contraction of Financial + Technology
– Financial Technologies or “Fintech” is used to describe a variety of innovative
business models and emerging technologies that have the potential to transform
the financial services industry.
– Refers to technologies that support activities in the financial sector.
– Ranges from crowdfunding platforms to online-only banks
• Innovative business models:
– Automation in products or services delivered through the use of the internet.
– Unbundling of different financial services traditionally offered by service providers like
banks and investment managers.
• Examples:
– Equity crowdfunding platforms- intermediate share placements
– Peer-to-peer lending platforms -intermediate or sell loans
– Robo-advisers providing automated investment advice
– Brokerage and investing services through social trading platforms
• See video on Fintech: https://www.youtube.com/watch?v=-EoNrg_DR3s

FinTech : What for?
FinTech : Why not?
FinTech : How Often?
FinTech : Why do things differently?
FinTech : How to do things
differently?
FinTech focuses on emerging technologies
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FinTech Drivers
• Generational shift
▫ Millennials & Gen Zs more open to newer mediums and
technologies
• Technology growth
▫ Mobile
▫ Internet
▫ Computing power
• Broader accessibility and decreasing cost of products and services
• Increasing disintermediation and reintermediation
8 core areas of innovation driving
opportunities in FinTech
8 core areas of innovation driving
opportunities in FinTech
• Describe business-to-consumer electronic commerce
strategies
Business-to-Consumer E-Commerce
Strategies
• Brick and Mortar – consists of retailers operating solely in

physical retail stores
• Click and Mortar – consists of retailers who use both physical
retail stores and online stores
• Click Only – consists of retailers who use online sales only
Business-to-Consumer E-Commerce Strategies
• Brick and Mortar – consists of retailers operating solely in physical retail
stores
– This approach of retailers operating solely using traditional physical
stores is referred to as brick-and-mortar business strategy.
– Companies following this strategy solely operate physical locations
such as retail stores and do not offer their products or services online.
– Physical locations only
– Traditional stores
• Cons: Limited geographical reach
• Click and Mortar – consists of retailers who use both physical retail stores
and online stores
– Click-and-mortars continue to operate their physical locations and have
added an e-commerce component to their business activities.
– They choose to utilise the internet to extend their traditional offline
retail channels.
– Bricks-and-clicks business strategy
– Hybrid strategy
Cons: Added complexity

combining two different
environments
• Click Only – consists of retailers who use online sales only
– Companies follow the Click-only business strategy conduct business
electronically in cyberspace.
– These firms (sometimes called virtual companies) have no physical
store locations, allowing them to focus purely on e-commerce.
– An example of a click-only company is the online retailer Amazon,
which does not have a physical storefront in the classic sense
– Business conducted in cyberspace—no physical location
– Virtual companies
Cons:
• Customers
uncomfortable with
online transactions
• No face-to-face
interaction with
customers
• Understand the keys to successful electronic commerce
websites and explain the different forms of Internet
marketing
Electronic Commerce Websites and
Internet Marketing
• Key capabilities of Web to Meet Online Consumers’
Needs
• Internet Marketing
Key Capabilities of the Web
1. Information Dissemination
• Firms across the world have access to

customers
• Economical medium for marketing products and
services
• Increased geographical reach
2. Integration
• Integration of information via Web sites

• Real-time access to personalized information
• No time lag between company decisions and
customers’ ability to access these
Example: Integration
• Touch n Go e-wallet
customers can
access their wallet
at any time
– Real-time link
between company
database and
customer
3. Mass Customization
• Meeting particular
customers’ needs on a
large scale
• Timbuk2.com
– Custom Messenger
Bag Builder
• Customers create a
virtual bag
• Preference-tracking
helps Timbuk2 in
marketing efforts
4. Interactive Communication
• Immediate feedback
between company and
customers
– E-mail notifications
– Customer service online
chat
• Best Buy
– E.g Geek Squad
5. Collaboration
• Different departments
of a company can
collaborate through the
web.
– Ability to stay current
on projects
– Ability to stay current
with the changing
market conditions
6.Transaction Support
• Dell—automated
transaction support
– Cost savings per sale
– Disintermediation
• Reintermediation
– Reintroduction of
middlemen
– E.g., Orbitz.com, Agoda
Internet Marketing
• A fundamental mistake
companies make when
building an online
business is assuming that
if you build it, they will
come
• Businesses must attract
visitors to their site and
away from thousands of
other sites
• By 2023, companies will
spend US$150 billion on
internet marketing
Search Marketing
• By 2023 US will spend
US$86 billion on search
marketing
• Companies use search
engine optimization (SEO)
to boost their rankings in
search engines
• Google’s AdWords ensures
high-quality leads by using
key words (Paid Search)
Search Engine Optimization
• The results presented by search engines such as Google or Bing are
typically separated into organic results (i.e., based on the page’s
content) and sponsored results.
• The organic results of a user’s search are presented based on
complex, proprietary formulas, and the ranking (position of the link to
a particular page) in the search results is largely outside the control of
the web page’s owner
• Companies use search engine
optimization (SEO) in an attempt
to boost their ranking in the
organic search engine results.
• Site owner has no control over
the position of the ad
• Optimization based on:
– Web site updates
– Use of key terms
– Unethical “tricks” such as
hidden text not allowed
Search Engine Marketing (SEM or Paid Search)
• Sponsored search
– Pay to ensure a spot on top
of search results page
– E.g., AdWords
• Bid for being listed in
sponsored search
results
• Placement depends on
relevance
– Pay-per-click
– Can get costly
Difference between SEO/SEM (paid search)
• The main difference is that Search Engine Optimization (SEO) is focused on optimising
a website in order to get traffic from organic search results.
• Companies use search engine optimization (SEO) in an attempt to boost their ranking
in the organic search engine results.
– Major search engines give tips on how to optimize a page’s ranking, including
providing unique and valuable content, keeping the content updated, and
including key words for which a user might query
• On the other hand, the goal of Search Engine Marketing (SEM)/paid search is to get
traffic and visibility from both organic and paid search.
– A way to ensure that a company’s page appears on the first page users see when
searching for a specific term is using search advertising (or sponsored search). For
example, using Google’s “AdWords,” a company can bid for being listed in the
sponsored search results for the term “4K TV”.
– Google is paid on a pay-per-click basis. This can quickly become very expensive for
advertisers, especially when the sponsored link is associated with a popular search
term, and the advertiser must bid against many competitors
• Describe mobile commerce and attracting and Retaining
Online Customers
Mobile E-Commerce
Services can be offered tailored to a person’s
needs based on their current location
Service Example
Location Determining the basic geographic position of the cell phone
Mapping Capturing specific locations to be viewed on the phone
Navigation The ability to give route directions from one point to another
Tracking The ability to see another person’s location
Consumers use mobile apps to

make purchases while on the go
M-Commerce Applications
Key Drivers of M-Commerce
• General interest in adoption of the Internet

and e-commerce
• Real-time transfer of data over 4G and 5G
cellular networks
– “Always-on” connectivity
• Growth in mobile telephony
• Global m-commerce is expected to reach
$4.058T in 2020
Attracting and Retaining Online Customers
• Basic rule of commerce

– Offer valuable products/services at fair prices
• Additional e-commerce rules
1. The Web site should offer something unique.
2. The Web site must be aesthetically pleasing.
3. The Web site must be easy to use and fast.
4. The Web site must motivate people to visit, stay, and
return.
5. You must advertise your presence on the Web.
6. You should learn from your Web site.
Web Site Rules: Rule 1
• Offer something unique

– Offer hard-to-find goods
• Global audience
• Reasonable prices
• Web site must be aesthetically pleasing

– Use of color schemes, backgrounds, high quality
images
– Clear, concise, and consistent layout
• Increases chances of return
• Can separate a Web site from the competition
• Web site must be easy to use and fast

– Easy navigation
– Fast download speed
• Average user will wait only a couple of seconds for a Web
site to download
– Present brief summary information with hyperlinks
• Allows users to “drill down”
• Web site must motivate people to visit, stay,

and return
– Create a community
• BMW Car Club of America (BMWCCA)
– Users share tips on maintenance, repair, and other items, and
follow electronic links to other BMW resources.
– Buy from each other
• Advertise your presence on the Web

– Pull marketing
• A passive method of attracting to a specific site
• Include the Web site address on all promotional
materials
• Advertise your Web site on other sites
Web Site Rules: Rule 5 (cont’d)
• Advertise your presence on the Web (cont’d)

– Pay-per-click
• Only pay for advertising when user clicks on it
• Click-through rate
• Conversion rate
– Affiliate marketing—Website owners post ads on their site
• Money earned fro referrals or ensuing sales
– Problem: click fraud—artificially clicking on ads to create
revenue
– Network click fraud
– Competitive click fraud
• Learn from your Web site

– Who are your customers?
– What are they doing?
• Web analytics
– Analyze behavior of visitors
• Path the visitors take
• Length of the visit
• Number of pages viewed
• Page from which they exit
• Describe how to conduct financial transactions and
navigate the legal issues of electronic commerce
Securing Payments and Navigating
Legal Issues in EC
• Legal Issues in EC
• Securing Payments in the Digital World
Ways to Protect Yourself When
Shopping Online
Tip Example
Ensure that the website uses SSL Always look for the padlock icon in your browser’s status bar
encryption before transmitting sensitive information
Check the site’s privacy policy Make sure that the company you’re about to do business with
does not share any information you would prefer not be
shared
Read and understand the refund and Make sure that you can return unwanted/defective products
shipping policies for a refund
Keep your personal information Make sure that you don’t give out sensitive information, such
private as your Social Security number, unless you know what the
other entity is going to do with it
Give payment information only to Make sure that you don’t provide your payment information to
businesses you know and trust fly-by-night operations
Keep records of your online Make sure that you don’t miss important notifications about
transactions and check your email your purchases
Review your monthly credit card and Make sure to check for any erroneous or unauthorized
bank statements transactions
Possible Indicators of Fraud
• Email addresses
• Shipping and billing
addresses
• Transactions patterns
Legal Issues in EC
• Taxation
– Sales taxes
– Internet Tax Freedom Act: Internet sales are treated like
mail-order sales
• Digital Rights Management
– Preventing unauthorized duplication
– Restrict which devices can play media
– Limit number of times media can be played
Securing Payments in the Digital
World
• Must be sure that online transactions are secure
• Issues related to different forms of online payments are:
1. Payment Services—involves the use of independent
payment services such as PayPal, Google Wallet
2. Cryptocurrencies—involves the use of a non-banking
currency such as Bitcoin
3. Managing Risk—businesses are financially liable for
fraudulent transactions, thus look for these and sometimes
reject risky transactions
The leading companies in the revolution of Fintech payment
Bitcoin
https://blockgeeks.com/
Bitcoin
• Transfer of value (in the hope that digital • Is not widely adopted. The idea is bitcoin will be
currency will have value in the future). the new currency . Shift from USD, MYR to
crypto system. Dell, Expedia, Microsoft,
• Decentralised – non traditional way of banking.
Lamborghini are some companies who have
• Bitcoin relies on blockchain technology. accepted bitcoin.
(recording transactions and verifying bitcoin
• Bitcoin can transfer online as fast as an online
transfer, from Person A to Person B where
transaction through a bank.
everything is accounted for).
• To convert current currency to digital currency,
• Altcoins – other coins beside bitcoin (Eg
we need to use mobile app( e.g coinbase,
theorium, omise, ..etc..) // research the
blockchain wallet,plus500online trading, etc..)
difference and purpose..
See video https://www.youtube.com/watch?v=5LMS0PIzGh8

Acceptance in Malaysia
Acceptance in Malaysia
Bitcoin prices 2018-2019
38
Predicting
Bitcoin prices 38
Characteristics of bitcoin
1. It’s decentralized
• Base for the Bitcoin protocol is a peer-to-peer
system which means that there is no need for
a third party.
• Therefore, in theory, bitcoin network is not controlled by

central authority (fully decentralized monetary system).
• Bitcoins are created by a community of people where

anyone can join.
• In theory, there is no authority (financial institution)

which deals with monetary policy to devalue or revalue
Bitcoin currency.
69
2. It’s anonymous and transparent
• Bitcoins are stored in wallet with digital credentials for your bitcoin holdings and
allows you to access them.
• Wallet uses public-key cryptography that can be thought of as an account number or

name and the private key, ownership credentials.
• Bitcoin is transferred to the next owner when the next owner gives a public key and
previous owner uses his private key to publish a record into system announcing that the
ownership has changed to the new public key.
• Bitcoin protocol stores details of every single transaction that occurred in the network
in huge version of general ledger (Block chain).
70
3. No transaction fees and irreversible process
• Bitcoin doesn’t charge fees for either national or international transfers.
• Bitcoin is not the first private money, not the first digital currency, and not first
currency based on cryptography, but it has been the first to rely on peer to peer network
decentralization to avoid double spending.
• Bitcoin protects against double spending by verifying each transaction added to the
block chain to ensure that the inputs for the transaction had not previously already been
spent.
72
How are Bitcoins created - Mining process
• Miners use special software to solve math problems (Bitcoin algorithm), and upon
completing the task they receive certain amount of coins.
• They are created each time a user discovers new block (finds hash value).
• Software is creating new units until it reaches amount of 21

million unites (bitcoin market cap).
• The rate of block creation is approximately consistent

over time (6 per hour) with 50 % reduction every four years.
• Halving (in theory) continues until 2110-2140 when

21 million BTC have been issued.
73
Total bitcoin unit supply over time
Number of units in (Projection)
circulation
Period
data source: bitcoin.it 74
Blockchain
Blockchain Technology
ü A ‘blockchain’ is the cryptographic technology

that underlies bitcoin. It is effectively a public
ledger of all transactions that have ever been
executed with that bitcoin.
ü Blockchain technology introduced in the back-
office in order to settle transactions and keep
track of money flows in real-time has the
potential to be the efficiency innovation in
payments.
Video on Blockchain: https://www.youtube.com/watch?v=8o9QxMxhTp8
76
How Blockchain works?
39
https://www.cbinsights.com/research/ what-is-blockchain-technology/
If a miner manages to solve the puzzle, the new block is
appended to the blockchain. The transactions are placed in
this block and considered confirmed.
Proof of Work (PoW)
Proof-of-Work, or PoW, is the original consensus algorithm in a Blockchain

network.
In Blockchain, this algorithm is used to confirm transactions and produce new

blocks to the chain.
Etherium
• Open software platform to build blockchain applications that enable

developers to build and deploy a decentralised applications.
• Has its own currency called ‘Ether’.
• Etherium – running code (Solidity) for decentralised computation on the

network.
• Ethereum is a platform that's built specifically for creating smart contracts
• https://www.youtube.com/watch?v=owFY_z5fF-Y&feature=youtu.be .
Smart Contract
• Handling something with perfect accuracy in every possible way in which a contract
should be executed.
• Facilitate three functions:
1. Store rules
2. Verify rules
3. Self-execute rules
• Other Characteristics: Letter strict & Immutable (cannot be changed even by the owner)
• https://www.youtube.com/watch?v=qgMGqOYtIkY
Alternative Lending
• To understand crowdfunding
• To understand other small business lending options
available outside of traditional bank lending.
• To know about P2P technology and payment options.
Crowdfunding
WHAT YOU NEED TO KNOW BEFORE INVESTING IN
CROWDFUNDED SECURITIES
What is Crowdfunding?
Crowdfunding is an online money-raising

strategy that began as a way for the public
to donate small amounts of money, often
through social networking websites, to
help artists, musicians, filmmakers and
other creative people finance
their projects.
The concept has recently been promoted
as a way of assisting small businesses and
start-ups looking for investment capital to
help get their business ventures off the
ground.
What is a Funding Portal?
A funding portal is a website, also called a “platform,” that advertises the
investment opportunities and facilitates the payment from the investor to the
issuer.
Some portals advertise a variety of investment opportunities on one website,

allowing the investor to select one or more projects in which to invest.
How Crowdfunding Works ( An Example)
Mary has a small business selling goat cheese made from her special pygmy
goats.
To keep her business afloat or to help it grow, Mary can turn to the Internet to
seek online donations from the public who contribute small amounts of money
and expect nothing in return.
Mary usually sends a sample of her cheese as a thank you for the
donation; large donors might even get a cheese named in their honor.
How Crowdfunding Works
https://www.youtube.com/watch?v=bERs-GlCyjo
Why Investors Should be Cautious About Crowdfunding
• Because state regulators are not allowed to review crowdfunding issuers or their
offerings, full and complete disclosure may not be available to investors.
• Investors may have limited legal ability to take action against the issuer should the
investment not perform as represented.
• Due to limited regulatory oversight over these offerings, investors may be left on their
own to pursue costly private lawsuits when things go wrong.
• Crowdfunding investments are mostly illiquid and investors must be prepared to hold
their investments indefinitely.
• It also may be difficult or impossible to resell these securities due to the lack of a
secondary market.
• Funding portals must be registered with the Securities and Exchange Commission
(SEC), belong to a self-regulating organization (SRO), and comply with other rules the
SEC may issue.
• Crowdfunding portals claiming an accreditation or “seal of approval” from a
standards program or board may not be legitimate. Need to check with SEC
Bottom Line for Investors
It pays to be skeptical of investment opportunities you learn about

through the Internet.
When you see an offering on the Internet — whether it is on a
funding portal, in an online newsletter, on a message board or in a
chat room — you should be cautious until you have done your
homework and proven that it isn’t a scam.
Marketplace Lending(MPL)
• Marketplace Lending (MPL) refers to lending by Fintech platforms
rather than traditional lenders, e.g. banks. The loans are directly
funded, fully or partially, by one or more parties who invest through
the platform.
• Typical model for marketplace lending:
◦ borrowers apply for a loan on a marketplace platform;
◦ accepted loan applications are then originated by a partner bank
◦ the MPL performs the underwriting of the loans, using criteria agreed with
the partner bank
◦ platforms purchase the loan from the partner bank;
◦ the platform issues a note to lenders, instead of a contract.
• Marketplace or “peer-to-peer” lending platforms make a profit from
arrangement fees rather than the spread between lending and
deposit rates
• Marketplace lending has grown due to faster processing, low interest 94
rates, low default rates, improved lending process and scarcity of
consumer credit
The history of payment automation
Credit card bank mainframe computers PayPal was founded

1950s 1980s 1998
ATM Electronic stock trading Digitalization in

1960s 1970s financial institutions
2000s
(https://www.forbes.com/sites/falgunidesai/2015/12/13/the-evolution-of-fintech/#3ad227377175)
Payment process by traditional financial institutions
1. Transaction request from sending bank.
2. Secure message from sending bank to recipient bank.
3. Flow of funds through a clearing house or correspondent bank.
(Graph from WEF’s “The Future of Financial

Service” report)
Major trends in payment innovation
Mobile Streamlined Integrated New Generation

Payments Payments Billing Security
• Smart phone • Mobile • Geotagging- • Biometrics-
platform for ordering and location-based location-based
payment payment payment identification
process applications • Machine to
machine
payment
Payment Gateway
◦ A payment gateway is a platform through which you can accept payments.
◦ Instead of going through all the financial and legal hassles required to process
money yourself, you can simply sign up for a third-party payment gateway that
will handle it all for you.
◦ The payment gateway handles your customers’ credit card numbers, expiration
dates, and other personal information securely so that you don’t have to.
◦ It also makes the entire transaction less anonymous and more transparent.
Some of the most well-known payment gateways are Stripe, PayPal Pro, and
Authorize.net.
◦ There are two basic kinds of payment gateways that you can use on your
website:
◦ A payment form that is directly in your store. This means that the customer never leaves your
website. Most major eCommerce sites like Amazon or Shopify work this way.
◦ A payment form that is on the payment gateway’s website. For the customer to pay, they
need to click a link, which goes to the payment gateway’s website. PayPal is a prime example
of this.
Payment Gateway
◦ When a customer purchases something from your online store, the gateway
opens a secure link to the payment processor, the transaction is approved,
the website receives a “success” message and the transaction is completed.
◦ Finally, you (the merchant) receive the money in your account, either
immediately or within a few days, depending on the gateway. The entire
process happens in less than a few seconds!.
https://www.youtube.com/watch?v=GUurzvS3DlY
Peer-to-Peer (P2P) Concepts
◦ Payments not involving a bank directly.
◦ Payments “directly” between payor and payee
◦ Classic examples: cash , transfers between digital wallets, etc..
The impact of payment revolution on traditional financial institutions
• Increasing network of alternative financial service providers.

• Price competition will be more fierce.
• Traditional financial institutions will be challenged and motivated to
launch alternative payment solutions.
• Traditional financial institutions will have to play new role as interaction
between alternative payments and traditional ways increases.
The leading companies in the revolution of Fintech payment
https://www.youtube.com/watch?v=yrFkhfteYPc
https://www.youtube.com/watch?v=ZKrsdJPFwkg
End of Chapter Content
Managing in the Digital World: Taobao
and the World of E-commerce
• Taobao is the largest digital marketplace in China
– By 2020 more registered users (500 million) than the
population of the United States
– Online marketplace for multiple companies
– Online consumer-to-consumer sales, much like eBay
– Notorious for piracy and counterfeit goods
• JD.com new-fast growing competitor
– Invests heavily in the own logistics solutions
• Sales in China pose huge logistics headaches
– Greatest barrier is trust
– People fear being defrauded
Coming Attractions: The AI Hedge
Fund
• In the past hedge fund and money managers have relied
on mathematical and statistical models
• Now AI is used to emulate human intelligence in making
trading decisions
• Machine learning algorithms bring together data from
many sources to improve these models
• Critics doubt the AI approach will be any better than the
existing players in the future
• If AI succeeds, and everyone has the same programs
how will one be competitive over another?
Ethical Dilemma: The Ethics of
Reputation Management
• Online reviews can be critical to a customer’s buying
decision
• Biased and fake reviews can affect a business’s
profitability, or even survival
• Owners are tempted to post fake positive reviews
• Competitors are tempted to post fake negative reviews
• Reputation management can help offset negative biased
reviews, but poses ethical dilemmas
Security Matters: Too Small to Be
Hacked?
• Cybercriminals steal data that can be converted into cash
(credit card numbers, personal info)
• They now have begun to take a user’s data hostage by
encrypting it
– Demands ransom payment to unlock data
– If paid, will the data be released?
• Experts recommend paying a 3rd party to maintain system
security
• Technology alone cannot protect a business if the system
user is the weak link
When Things Go Wrong: Buying Likes
• Many businesses entice users to “like” their business
page on Facebook, Twitter, or other social media sites for
some reward
• Campaigns and contests can be deeply biased by
automated “like” and votes, giving unfair advantage to
users who game the system
• Social media platforms try to suppress this type of
devious behavior, but it can be a cat-and-mouse game
Green I T: Green Online Shopping
• Fossil fuel requirements
– Retail shopping – use cars to drive to many stores in different
locations
– Online shopping – most of the fuel use is by delivery vehicles
• Incredible amounts of cardboard boxes are needed to prevent

damage to the items in transit
• Primary drivers of energy consumption for online shopping are
the packaging (boxes) and fuel for delivery of packages
• Research suggests that online shopping might not be that
green after all, due to increase in particulate matter emissions
Digital Density: Digital Payments
• Advent of credit cards and electronic funds transfer have
paved the way for the cashless society
• Only half of all consumers are projected to use peer-to-
peer (P2P) payments by the end of 2022
• Most people carry their phones with them, thus digital
payments are leading to a cashless society
– Can discriminate against the 15% of the population who
are underbanked and carry cash
– Also lack of accessibility for older generations
– There are privacy questions
Industry Analysis: Retailing
• Retailing has embraced new technologies
– Barcode scanning for price, inventory management, self-
checkout
– RFID functions like a barcode but uses wireless
technologies, and can be integrated with other information
technologies
– New forms of electronic payment, whether by pin, phone
barcode, near-field communications (NFC) technologies,
or fingerprint, are gaining traction
– Retail stores are increasingly using Bluetooth-enabled
sales beacons to provide customers with real-time
promotional offers
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Digital Transformation

Ts. Ahmad Kamal Bin Hasan Basri

Enabling Business-to-Consumer Electronic

(chapter 4 + notes on FinTech& Alternative

EC accounted for 11.8

Business-to-consumer (B2C) Transaction between A person buys a book from

• E-banking and online brokerage

• See video on Fintech: https://www.youtube.com/watch?v=-EoNrg_DR3s

• Brick and Mortar – consists of retailers operating solely in

Cons: Added complexity

• Firms across the world have access to

• Integration of information via Web sites

Mapping Capturing specific locations to be viewed on the phone

Tracking The ability to see another person’s location

Consumers use mobile apps to

• General interest in adoption of the Internet

• Basic rule of commerce

• Offer something unique

• Web site must be aesthetically pleasing

• Web site must be easy to use and fast

• Web site must motivate people to visit, stay,

• Advertise your presence on the Web

• Advertise your presence on the Web (cont’d)

• Learn from your Web site

See video https://www.youtube.com/watch?v=5LMS0PIzGh8

• Therefore, in theory, bitcoin network is not controlled by

• Bitcoins are created by a community of people where

• In theory, there is no authority (financial institution)

• Wallet uses public-key cryptography that can be thought of as an account number or

• Software is creating new units until it reaches amount of 21

• The rate of block creation is approximately consistent

• Halving (in theory) continues until 2110-2140 when

ü A ‘blockchain’ is the cryptographic technology

Video on Blockchain: https://www.youtube.com/watch?v=8o9QxMxhTp8

Proof-of-Work, or PoW, is the original consensus algorithm in a Blockchain

In Blockchain, this algorithm is used to confirm transactions and produce new

• Open software platform to build blockchain applications that enable

• Has its own currency called ‘Ether’.

• Etherium – running code (Solidity) for decentralised computation on the

• Ethereum is a platform that's built specifically for creating smart contracts

• Facilitate three functions:

Crowdfunding is an online money-raising

Some portals advertise a variety of investment opportunities on one website,

It pays to be skeptical of investment opportunities you learn about

Credit card bank mainframe computers PayPal was founded

ATM Electronic stock trading Digitalization in

(Graph from WEF’s “The Future of Financial

Mobile Streamlined Integrated New Generation

• Increasing network of alternative financial service providers.

• Incredible amounts of cardboard boxes are needed to prevent

This work is protected by United States copyright laws and is

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