E-Commerce Business Models, Digital Payments & Security Protocols

Explanation

Digital commerce encompasses electronic transactions across telecommunication networks. Securing financial transactions requires end-to-end cryptographic integrity. Payment gateways prevent merchants from storing sensitive credit card numbers (Primary Account Numbers) by implementing tokenization, where sensitive cardholder data is swapped for an irreversible cryptogram. E-commerce sites must adhere to strict PCI-DSS standards, enforcing HTTPS/TLS encryption and multi-factor authentication for checkout sessions.

Key points

• Revenue Models: Advertising, Subscription, Transaction Fee, Sales, and Affiliate referral models.
• Digital Payment Systems: Credit/Debit cards, Digital Wallets (eSewa, Khalti), QR-code payments (Fonepay), and Automated Clearing House (NCHL).
• Security Architecture: TLS/SSL encryption, PCI-DSS compliance (Payment Card Industry Data Security Standard), and 3D-Secure 2-Factor Authentication (OTP).
• Payment Gateway Integration: Secure API redirection/tokenization between merchant website, payment gateway, and acquiring bank.

Example

Code examples

/*
Online Payment Gateway Redirection Workflow:
1. Customer initiates checkout on Merchant Site
2. Merchant creates signed payment request with payload:
   { amount: 1500, order_id: "ORD-9912", hash: "SHA256(amount+merchant_key)" }
3. Customer redirected to Payment Gateway (e.g. eSewa / Fonepay)
4. Customer authenticates with PIN/OTP on Gateway domain
5. Gateway redirects back to Merchant Callback URL with signed Transaction Token
6. Merchant server calls Gateway Server-to-Server Verification API
7. Order status updated to PAID
*/

Exam questions

• [8 Marks] Explain the major business models of e-Commerce (B2C, B2B, C2C, P2P) with real-world examples. What are the primary revenue generation models?
• [8 Marks] Explain the step-by-step payment processing workflow when a customer pays using an online digital wallet. What is PCI-DSS compliance?