Page 103 - Introduction to Electronic Commerce and Social Commerce

82 3 Retailing in Electronic Commerce: Products and Services

Customers accessing a bank system online must go In addition, some believe that virtual banks carry a liquidity
through encryption provided by SSL (Secure Socket Layer) risk (the risk of not having sufficient funds to pay obligations
and digital certificate verification (see Chapters 10 and 11). as they become due) and could be more susceptible to panic
The verification process assures users each time they sign on withdrawals. Regulators are grappling with the safeguards
that they are indeed connected to their specific bank. The cus- that need to be imposed on e-banking.
tomer inquiry message then goes through an external firewall.
Once the logon screen is reached, a user ID and a password
are required. This information flows through a direct Web Online Billing and Bill Paying
server and then goes through an internal firewall to the bank’s
application server. This process is illustrated in Figure 3.3. The popularity of e-payments is growing rapidly. The num-
Information is shared among a bank’s business partners ber of checks the U.S. Federal Reserve System processes has
only for legitimate business purposes. been decreasing while the volume of commercial Automated
Banks do not capture information provided by customers Clearing House (ACH) transactions has been increasing.
when conducting hypothetical scenarios using planning tools Many people prefer online payments of monthly bills such as
(to ensure privacy). Many banks use cookies to learn about mortgage payments, car loans, telephone, utilities, rent,
their customers; however, customers can control both the credit cards, cable, TV, and so on. The recipients of such pay-
collection and in some cases the use of such information. In ments are equally eager to receive money online because
addition, most banks provide suggestions on how users can online payments are received much more regularly and
increase security (e.g., by using a browser that supports 128- timely and have lower processing costs.
bit encryption). Another method for paying bills via the Internet is elec-
With the increased use of mobile devices, the threat of tronic billing or electronic bill payment and presentment
security risks has increased. Banks are creating innovative (EBPP). With this method, the consumer makes payments at
solutions. For example, in January 2009, Bank of America each biller’s website, either with a credit card or by giving
introduced “SafePass,” a feature that can generate a six-digit, the biller enough information to complete an electronic with-
one-time passcode that is necessary to complete an online drawal directly from the consumer’s bank account. The biller
transaction. The passcode is delivered via text message to sends the invoice to the customer via e-mail or a hosting ser-
your mobile device. (See bankofamerica.com/privacy/ vice site. The customer then authorizes and initiates a pay-
online-mobile-banking-privacy/safepass.go.) A similar ment via an automatic authorization, e-check, and so forth.
device is offered by other financial institutions.
Taxes
Questions
1. Why is security so important for a bank? One important area in personal finance is advice about and
2. Why is there a need for two firewalls? computation of taxes. Dozens of sites are available to help
3. Who is protected by the bank’s security system—the cus- people with their federal tax preparations. Many sites will
tomer, the bank, or both? Elaborate. help people legally reduce their taxes. The following list
4. What might be the limitations of such a security system? offers some sites worth checking:

• irs.gov: The official website of the Internal Revenue
Example Service.
Some banks have multistage security systems. For example, • taxsites.com: A massive directory of tax-related informa-
Central Pacific Bank (centralpacificbank.com) asks you to tion, research, and services.
log in (with your ID) and then answer security questions to • fairmark.com: A tax guide for investors.
which you previously provided the answers. You then see an • taxaudit.com: IRS tax audit help and audit assistance.
image on the screen that you preselected. If you do not rec-
ognize the image and a pre-established phrase, you know you Mobile Banking
have not accessed the real bank. If all answers are provided
satisfactorily, you provide a password to enter your account. Mobile banking is a system that enables people to conduct
financial transactions from a smartphone or other wireless
mobile device. Many of the recent developments are in the
Risks area of mobile banking (presented in Chapters 6 and 11).
Topics such as payments from smartphones and handling
Online banks, as well as click-and-mortar banks, might carry micropayments have revolutionized the financial systems
some risks and problems, especially in international bank- (Chapter 11). The need for an improved banking and finan-
ing. The first is the risk of hackers accessing their accounts. cial system is clear.