COMP 6125 An Introduction to Electronic

Commerce

Session 4: E-Commerce In Developing Countries

Introduction

• There is doubt regarding whether there is enough information on the Web that is relevant and valuable for the average SME in a developing country that would make investment in Internet access feasible

• Underlying this is the fact that most SMEs in developing countries cater to local markets and therefore rely heavily on local content and information

Introduction

• there is a need to substantially increase the amount and quality of local content (including local language content) on the Internet to make it useful especially to low-income entrepreneurs

Issues of Electronic Payment Systems

• Transaction security

• Absence or inadequacy of legal infrastructures governing the operation of e-payments

• Lack of developed online banking policies and procedures

• Undeveloped credit card industry

• Many developing countries are still cash-based economies

Current Methods Of Payment For Online Transactions

• Traditional– Bank transfers– Money orders– Cash-on-delivery

• Electronic Payment– E-cash, e-cheques, smart cards, encrypted

credit cards

Impact of B2B E-Commerce

• Transactions costs

• Disintermediation

• Transparency in pricing

• Economies of scale and network effects

E-banking

• Includes telephone banking, credit cards, ATMs, direct deposit, electronic bill payments

• Also includes products mostly in the developing stage, including stored-value cards such as smart cards/smart money, and Internet-based stored value products

E-banking

• In developing countries, still in early stage of development; most banking carried out using traditional methods

• However, there is increasing growth of online banking; promise of future growth in this area

Market Factors Affecting E-Banking Development

• Online a small number of banks offer Internet banking

• Security issues

• Preference for personal contact with banks

• Access to high quality products – Internet services too basic

Uses For Entrepreneurs of Developing Countries

• Facilitates the access of artisans and SMEs to world markets

• Facilitates promotion and development of tourism at global level

• Facilitates marketing of agricultural and tropical products in global market

Uses For Entrepreneurs of Developing Countries

• Provides avenues for firms in poorer countries to enter into B2B and B2G supply chains

• Assists service-providing enterprises by allowing them to operate more efficiently and directly provide specific services to customers globally

• Provides means for acquiring online technical support, requesting maintenance/repairs, ordering replacements parts, software tools and applications, lodging technical inquiries, etc

Uses For Entrepreneurs of Developing Countries

• Able to partake in discussion groups with persons around the world who are also in the same business/industry– Share information, experiences, solutions to specific

technical problems– Valuable to entrepreneurs who are geographically

isolated from peers in same business

• Services sector able to expand market with the increased ability to transact directly with international customers and advertise services

Current Uses Of Internet by SMEs

• Communication and research; least used for e-commerce

• E-mail for communication purposes (considered very important)

• Extent is limited by recognition of importance of face-to-face interaction with buyers and suppliers; level of confidence of using e-mail for communication with both suppliers and buyers increases only after initial face-to-face interaction

• In some case, static web sites only advertising company or products

Barriers To Use

• Unfavourable economic environment

• High cost of infrastructure and connectivity

• Security concerns

• Poor internal communications infrastructure

Barriers To Use

• Insufficient resources and funds

• Perceived lack of relevance or value added

• Lack of supporting banking facilities for online merchant accounts

Role Of Government

• Establishing laws and policies for e-commerce

• Be leading-edge user of e-commerce and its applications in operations to encourage mass use

State Of Current Laws and Policies

• Most developing countries do not have a developed framework in place

• Issues still unresolved; for example: contract laws not rewritten to include new definitions of writing and signing

Discussion

• What can be done by governments to promote the use of e-commerce for SMEs?

– Strengthening consumer protection– Network infrastructure and localization of content– E-Government– Awareness campaigns– Legal and jurisdictional framework– Pilot projects and initiatives for HRD and capacity

building– Establishing a Certification Authority– And more!

Links

• Reference– “E-Commerce and E-Business/E-Commerce in

Developing Countries”, Wikibooks, http://www.wikibooks.org

• Of Interest