Transcript Technology Transfer - National Chi Nan University

Electronic Commerce
Financial Intermediaries and
Electronic Payments
Topics
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Electronic Fund Transfer
Digital cash
Virtual bank
Certification authority (CA)
Web capitalist
Types of financial intermediaries
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just one example of intermediaries for digital
products,
a middleman who facilitates transactions
between potential traders.
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match buyers with sellers: broker;
buy goods from sellers and sell them to buyers:
retailer;
buy goods and sell them after modifications
transformer;
sell transaction-related information only:
information brokerage
Broker
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The more buyers and sellers there are, the more
marketable a commodity becomes since there
will be a higher probability of finding a match in
a larger pool of traders.
Exchange markets of commodity trading markets
or stock exchanges
Commercial banks and a large group of financial
institutions dealing with payment clearing
services (between creditors and debtors)
Retailer
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the intermediary who concerned with
the ultimate buyers of the goods since
his profits originate from the spread
between the bid (of the buyers) and ask
(of the sellers) prices in the market.
Dealers: purchase goods and resell
them
Transformer
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(value-added retailer)
Beyond brokering and distribution
Example: a mutual fund manager who
sells a share of its fund of combined
products from different producers; a
bank receives deposits from savers and
makes loans to borrowers.
Transactional Efficiencies
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Broken down into three distinctive
market interaction processes of
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search, negotiation, and settlement
An online market not only provides a
meeting place for sellers and buyers but
also performs other economic roles
such as price setting, payment and
delivery.
Internet Initial public offerings
(IPOs)
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The motive for companies to offer IPOs is to raise capital for
their business projects.
The first Internet IPOs, Spring Street Brewing Company
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A microbrewery in New York, offered the first Internet IPO, raising $1.6
million from 3,500 shareholders without using Wall Street underwriters.
Its offerings were open to all potential buyers without the need to rely
on brokers or to pay commissions.
Both the firm and individual investors can trade capital assets at a lower
cost.
Internet investment and brokerage firm to promote Internet
IPOs and subsequent public trading of stocks in secondary
markets.
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Wit Capital Corporation
Internet Capital Exchange (http://www.inetcapital.com) and
Web IPO - Capital Formation Group (http://www.webipo.com).
Internet Digital Exchange
Markets
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Individual investors can buy and sell without
involving a broker through private online trading
houses
Internet-based linkage to proprietary online
brokerage services
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Datek Securities Corp., which provides access to
NASDAQ's computerized Small Order Execution
System or NYSE's SuperDOT system
Internet brokerages
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e.Schwab of Charles Schwab (http://
www.schwab.com)
E*Trade online brokerage of E*Trade Group
Transformational functions
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Maturity transformation
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Volume transformation
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accept short-term deposits and make loans on a long-term basis
can thus accommodate lenders and borrowers with different
maturity preferences.
match the different needs of lenders and borrowers in terms of
volume.
Electronic commerce effects
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home-banking by software producers such as Intuit
(http://www.intuit.com) will have a significant effect in diverting
the customer base of traditional banks in a way of more creative
and flexible in developing and providing new financial services
Sony Bank Inc.
Paypal.com
Ezpay.com
Information brokerage
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Agents with functions of collecting, evaluating and
monitoring may or may not be tied to actual trading of
digital financial instruments.
Example, stockbrokers, on top of their brokerage
functions, often make buy and sell recommendations to
their customers based on their own information and
analysis.
Publishers of financial newspapers and newsletters,
financial cable networks, and online specialized business
information services
Financial intermediation sector alone accounts for over
20.5% of the GDP in US steadily from 2002 to 2005.
Information brokerage
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Information Uncertainty and Risk
Information trading
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Merrill Lynch & Co.
Securities Exchange Commission's Electronic Data Gathering,
Analysis, and Retrieval, EDGAR (http://www.sec.gov/edgarhp.htm)
Certification and Assurance
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Identifying Certificates: e.g., a leading provider of digital IDs as
VeriSign, Inc.
Authorizing Certificates: verify attributes of a person other than the
identity. (password, age, city, address, email, etc.)
Transactional Certificates: digital signature attached to transaction
Time-Stamping Services: unforgeable time stamp (Cryptographic
hash value)
Payment patterns
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80% of all retail purchases are paid for
by cash in the U.S. And 96% of all
business-to-business transactions are
completed using paper checks.
Types of Electronic Payment
Systems
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Anonymous Internet Mercantile Protocols by
AT&T Bell Labs (http://www.bell-labscom)
Conditional Access for Europe (CAFE) for the
European community
Secure Electronic Transaction (SET) promoted
by MasterCard (http://www.mastercard.com)
and Visa (http://www.visa.com)
Some open standards are being offered
including CyberCash, Digicash, Mondex, NetBill
and NetCheque
Conventional Payment Process
Notational Funds Transfer
Payment Clearing Services
First Virtual
Holdings, Inc.
(http://www.
fv.com).
A buyer need only send the seller his identification
number assigned by the intermediary.
How the First Virtual (FV)
Payment System Works
Payment Based on Electronic
Currency
An electronic bank
converts outside
money (e.g. U.S.
currency) into inside
money (e.g. tokens or
e-cash) which is
circulated within online
markets.
Cybercash payment clearing
system
e.g. Mark Twain Bank, http://www.marktwain.com).
E-cash model of Mark Twain
Bank
Money as a Medium of
Exchange
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Meet the criteria of acceptability, availability, and
convenience as a medium of exchange.
Anything imperishable informational media
issued by a trustable party
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Anonymity in Transaction (for many strangers)
Micro-payments in the Internet (for any purchasing)
Transferability of Value (for extended orders)
Desirable Properties of Digital
Currency
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Monetary Value
Convenience
Security
Authentication
Non-refutability
Accessibility and Reliability
Anonymity
Technical Specifications of
Digital Currencies
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DigiCash (http://www.digicash.com), is the
forerunner of Internet payment systems based
on online transactions.
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Ecash uses public key encryption technologies to
maintain the integrity of digital coins.
Mondex is a smart card system which transfers
stored balances based on off-line transactions.
The Millicent system, self-described as a payahead, coupon system, uses vendor-specific
digital scrips, which are akin to merchant-issued
coupons.
Monetary effects of digital
currency
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Money Stock = (Money Multiplier) × (Monetary Base),
where Money Multiplier = (1+ CD)/(CD + RD)
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CD is the currency-deposit ratio, and RD is the reservedeposit ratio.
E-cash systems essentially create new currencies, but
their effect on the money supply depends on
whether they are backed by the national currency.
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Withdraws $100 from her conventional bank for Ecash
account, (lower down the deposit ratio and therefore
increase money supply)
If Ecash is backed by dollars or any outside money, it could
reflow into deposit constrained by a reserve ratio. The
same amount of cash balance is held with no effect on the
money multiplier.
Regulatory Issues on digital
currency
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Possible reduction in government revenue
due to private monies.
Consumer protection and law enforcement
issues such as money laundering that
demand government attention.
Reexamine existing laws which regulate
who can issue private monies and accept
money as deposits