Setting the right scenario for e-commerce
Last week, KPMG international organised a very well-attended conference on one of the fastest-growing means of doing business: on the Internet or e-commerce. David Kelleher takes a look at the various presentations, speeches and conclusions reached during the two-day conference.
Electronic commerce - using technology such as the Internet to do business - is here to stay. The Internet has allowed individuals and companies to do what they would never have managed using traditional business methods. It has opened up new horizons, created multiple job opportunities and many many millionaires.
Like everything else in life, e- commerce has also brought about its fair share of problems, in particular legislation, privacy and security. E-commerce is also the bone of contention between the European Union and the United States, two trading partners who have distinctly opposite views on how this new tool should be regulated.
But what is e-commerce exactly?
According to John Machin, the UK head of Information Risk Management at KPMG in London, e-commerce is "commerce occurring over networks which use non-proprietary protocols that are established through an open standard setting process such as the Internet".
He, however, makes a distinction between e-commerce and e-business. "E-business is a dynamic set of digital technologies, applications and business processes that link enterprises, consumers and communities," Mr Machin said.
The success of e-business, he said, depended on the integration of these digital business process - to reduce costs and improve response. Having an Internet presence was also of utmost importance because customers expect it.
According to the Gartner Group, "failure to plan for e-business changes will reduce competitiveness between 15 per cent and 30 per cent by 2001. For five per cent of the enterprises, the loss of competitiveness will lead to business failure by year-end 2001".
"In other words, adopt or become extinct," Mr Machin warned.
A look at the figures provide ample proof that e-commerce is the way to do business. In 1998, business-to-business on-line generated US$43bn. According to Forrester Research, this figure will increase to US$1.3 trillion by 2003.
Then again, e-commerce is not only restricted to dealings between companies but has seen the direct involvement of the consumers. In 1998 consumers spent US$8bn online and this figure is expected to grow to roughly US$130bn in the next three years.
In his presentation, Prof. Juanito Camilleri, CEO of Mobisle Communications Ltd, said "consumer e-commerce though currently envisaged to constitute only about 1/10th of the emerging e-commerce market may be grossly underestimated".
One has to examine carefully what has prevented consumers from using the Internet to do business or to purchase on line products. Prof. Camilleri listed four factors:
the varieties of products and services;
information about products/ services;
ability to test, return and gain refund if expectations are not met;
prompt delivery and immediate access.
One may also added to these factors the issue of security. Despite the introduction of secure servers, many are still wary of giving their credit card details over the Internet.
Given that these issues are thrashed out, the bane of any businessman is starting to rear its ugly head - Regulation - at least in the European Union. The main question being asked is whether e-commerce should be liberalised or regulated.
The EU is strongly in favour of regulation, not only in the EU but on a global scale.
Patrick Vittet-Philippe, an expert-advisor of the DG Enterprise within the European Commission, said a proactive attitude towards regulation was needed on a global scale.
The legal framework was a "clear, predictable and extremely industry-friendly framework for e-commerce in Europe" and the EU was ahead of the US in that respect.
The EU legal framework ensured the free circulation of e-commerce, and the mutual recognition of legislation, he said.
He said the EU legislation addressed five main obstacles to the development of e-commerce: issues of establishment, commercial communication, electronic contracting, liability and dispute settlement. On the other hand, Colin Helmer, science and commerce attaché for the American Mission to the European Union, agreed there had to be laws and order but certainly not government regulation.
"We are very much aware that there has to be law and order in the global electronic marketplace," Mr Helmer said, adding, "we do not see government regulation as being the first and foremost element in establishing that law and order."
The US approach to regulation worked faster and more efficiently than government action, he said, and European authorities would spend their time reviewing volumes of harmless activities.
A government's ability to "police" the web was limited, he remarked, but if industry regulated itself, a much larger share of the Web was covered than by the government alone.
Mr Helmer admitted that abuse on the Web was increasing. However, protection to consumers on-line could be given and consumers could be educated to know their rights and how to attain them, he added.
Michael Frendo, the managing partner of Gatt Frendo Tufigno Advocates, defined e-commerce as any form of business transaction in which the parties interact electronically instead of through physical contact.
Dr Frendo said e-commerce had implications for many aspects of Malta's economic and social life because it could change the way commercial transactions, the business of government, the delivery of services and other interactions were conducted.
Such changes would have an impact on national and international law at a fast rate, he remarked, adding that the law had to move quickly to "regulate, ensure fairness, set parameters, as well as combine justice and legal certainty."
Technology provided a medium which could be well-used or abused, he said. The law needed to counteract the vulnerability of law to protect the honest business operator and ordinary consumers. Contractual and financial issues, dealing with ownership, privacy and security as well as jurisdiction were all related to the legal aspect, Dr Frendo said.
The conclusion is quite simple and requires an all-round effort to find the right conditions to generate further e-commerce, while at the same time ensuring a level playing field for all.
To E or not to E? The benefits are there for the taking... but if you do be careful... "Our doubts are traitors and make us lose the good we might win, by fearing to attempt". (Measure for Measure, Act 1, Scene IV).
Advice that should be heeded.
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