Academic journal article Journal of Management Information and Decision Sciences

E-Commerce Security Standards and Loopholes

Academic journal article Journal of Management Information and Decision Sciences

E-Commerce Security Standards and Loopholes

Article excerpt


The Internet offers tremendous opportunity for merchants around the world to sell their products online. However, the anonymous and open nature of public communication networks has presented serious challenges for securing personal and bankcard information over the Internet. U.S. businesses are seeking opportunities worldwide by using the Internet to open up unreachable foreign markets. According to, nearly 134 million Americans are online today compared to 118 million last year. Cap Gemini USA estimates that roughly 55,000 new users are going online every day. With this much growth in online use the natural beneficiary is online commerce. Industry's role in this regard then is to provide confidence for the customers that the transactions online are secure.

Standards play a significant role in securing the transactions on the Internet. Standards provide interoperability, connectivity, consistency of applications, transparent data exchange, distributed open environments, improved information sharing, security, and lower costs to users and software providers. The banking industry estimates that it costs approximately $1.07 per transaction. Surprisingly, without costly branches and human interaction, the cost per transaction using online will be one cent. With such a profound cost differential the businesses are slowly going to gravitate towards electronic transactions, with sufficient incentives to attract customers for online usage. U.S. Internet Council estimates that the capacity of the Internet backbone to carry information is doubling every 100 days in order to meet this added volume. Compared to a growth rate of only 10% in voice communications, the data traffic is rising at the rate of 125%. This phenomenal growth can be directly attributed to the expected $1.3 trillion e-commerce sales by 2003.


Some of the newer and popular Internet standards include Secure Electronic Transactions (SET), Enhanced Data Encryption Standard (DES), Secure Sockets Layer (SSL), Secure HyperText Transfer Protocol (S-HTTP), and Secure Multipurpose Internet Mail Extensions (S/MIME).

Secure Electronic Transactions (SET)

Secure Electronic Transactions (SET) is a standardized, industry-wide protocol designed to safely transmit sensitive personal and financial information over public networks. Jointly developed by MasterCard and Visa International, SET uses RSA encryption and authentication technologies to enable secure payment transactions (RSA, 2000). SET uses RSA with 1024 bit keys. The RSA algorithm is the most scrutinized, tested, and trusted public key algorithm. The SET protocol contains state-of-the-art cryptographic technology that provides on-line transaction security that is equivalent or superior to the safeguards in present physical, mail and telephone card transactions.

To meet the security needs of bank card transactions over public networks, the Secure Electronic Transaction (SET) protocol uses cryptography and related technology to provide confidentiality of information about financial data, to ensure payment integrity, and to authenticate merchants, banks, and cardholders during SET transactions. The level of security incorporated into SET is based on RSA's Public-Key Cryptosystem, which has been proven over the last 10 years as the most commercially viable, widely used security technology available. The RSA Cryptosystem is used in over 100 million copies of messaging, groupware, email, and Internet-based applications. In this context it is worth noting the following.


With these many sources for online access around the world, the e-commerce industry has to guarantee security of transactions. Otherwise unscrupulous elements will try to take advantage and bring down the entire e-commerce industry. The stakes are enormous.

The SET protocol defines four main entities involved in a SET transaction: the Cardholder, the Merchant, the payment Gateway, and the Certificate Authority (Keen, 2000). …

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