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Unit 1 of 4 · M.Sc IT Sem 3

Unit 1: E-commerce fundamentals and payments

E-Commerce & Digital Marketing notes · PTU syllabus (PGCA1921)

3 min read11 topics10 exam questions
On this page
  1. Unit summary
  2. E-commerce: meaning and models
  3. Technical components of e-commerce
  4. E-commerce framework
  5. E-commerce applications
  6. ISP and WWW architecture
  7. Types of electronic payment systems
  8. Value exchange systems
  9. Electronic funds transfer (EFT)
  10. Digital token-based payment systems
  11. Smart cards and credit cards
  12. Risks and design of electronic payment systems
  13. Key terms
  14. Quick revision
  15. Important questions

Unit summary

E-commerce depends on technology for storefronts, networks and money. This unit covers the technical components of e-commerce, the e-commerce framework and applications, ISP and WWW architecture, types of electronic payment systems, value exchange systems, EFT, digital token-based payments, smart and credit cards, and the risks and design of payment systems.

After this unit you can

  • Describe the technical components and framework of e-commerce
  • Explain ISP and WWW architecture
  • Compare electronic payment systems and digital tokens
  • Identify payment system risks and design requirements

PTU syllabus topics

  • Technical components of e-commerce
  • e-commerce framework and applications
  • ISP and WWW architecture
  • electronic payment system types
  • value exchange systems
  • EFT
  • digital token-based payment
  • smart and credit cards
  • payment system risks and design
ClassificationElectronic payment systems
E-payments

  • Cards

    Credit, debit, smart cards

  • EFT

    Bank-to-bank transfers: NEFT, RTGS

  • Digital tokens

    E-cash, e-cheques

  • Mobile

    UPI, wallets

  • Risks

    Fraud, privacy, chargebacks

1

Topic 1

E-commerce: meaning and models

E-commerce is buying and selling goods and services, and transmitting funds or data, over an electronic network, primarily the internet.

ComparisonTraditional commerce vs e-commerce
Traditional commerce
E-commerce

Place

Physical store or market

Website or app

Time

Limited business hours

24 × 7

Reach

Local

National and global

Customer interaction

Face to face

Digital — chat, email, reviews

Cost of set-up

High (rent, staff)

Lower

Payment

Cash, cheque, card at counter

UPI, cards, net banking, wallets, COD

Inspection of goods

Possible before purchase

Only after delivery

E-commerce models

ClassificationE-commerce models
E-commerce

  • B2B

    Business to business — IndiaMART, Udaan

  • B2C

    Business to consumer — Amazon, Flipkart, Nykaa

  • C2C

    Consumer to consumer — OLX, Quikr

  • C2B

    Consumer to business — freelancers on Upwork

  • B2G / G2C

    Government e-Marketplace (GeM), online tax filing

  • Others

    M-commerce (mobile), social commerce (Instagram, Meesho), ONDC network

  • Role of the internet: global, low-cost network (TCP/IP) enabling websites, email, cloud services and mobile apps — the infrastructure for e-commerce; the web made information and transactions universally accessible.
2

Topic 2

Technical components of e-commerce

ClassificationTechnical components
E-commerce system

  • Network infrastructure

    Internet, ISPs, data centres, cloud hosting

  • Web and application servers

    Storefront, catalogue, cart, checkout

  • Databases

    Products, customers, orders, inventory

  • Payment and security

    Gateways, TLS certificates, fraud detection

  • Middleware and integration

    APIs linking ERP, logistics and CRM

  • Client devices

    Browsers and mobile apps

3

Topic 3

E-commerce framework

HierarchyE-commerce framework (Kalakota and Whinston)
  1. E-commerce applications

    Supply chain management, video on demand, remote banking, procurement, online marketing, home shopping

  2. Business services infrastructure

    Security, authentication, electronic payment, directories

  3. Message and information distribution

    EDI, email, HTTP

  4. Multimedia content and publishing

    HTML, Java, the web

  5. Network infrastructure

    Telecom, cable, wireless, internet

  • Supporting pillars: public policy (privacy, taxation, IT law) and technical standards (documents, security, network protocols).
4

Topic 4

E-commerce applications

SectorApplications
ManufacturingE-procurement, supplier portals, EDI, B2B marketplaces, online dealer orders
WholesaleB2B platforms (Udaan, IndiaMART), online catalogues, credit and logistics services for retailers
RetailOnline stores, marketplaces, omnichannel, quick commerce, ONDC
ServicesOnline banking and insurance, travel booking, ed-tech, telemedicine, food delivery
5

Topic 5

ISP and WWW architecture

ProcessInternet access through an ISP
  1. 1

    User device

  2. 2

    Home router or mobile network

  3. 3

    ISP access network (fibre, DSL, cable, 4G or 5G)

  4. 4

    ISP backbone and internet exchange points

  5. 5

    Tier-1 and tier-2 carriers

  6. 6

    Destination data centre

ComparisonWWW architecture
Role
Examples

Client (browser or app)

Sends HTTP requests and renders HTML, CSS and JavaScript

Chrome, Safari

Web server

Serves static files and passes dynamic requests on

Nginx, Apache

Application server

Runs business logic

Node.js, Java, PHP

Database server

Stores data

MySQL, PostgreSQL

Supporting services

DNS resolves names; CDN caches content near users

Cloudflare, Akamai

  • Tiered architecture: presentation (client), application (logic) and data tiers, which can scale independently.
6

Topic 6

Types of electronic payment systems

ClassificationElectronic payment systems
E-payments

  • Cards

    Credit, debit, prepaid cards; RuPay

  • Net banking

    Direct transfer from bank account

  • UPI

    Instant, mobile-based (NPCI); BHIM, Google Pay, PhonePe

  • Mobile wallets

    Paytm, Amazon Pay

  • Fund transfer systems

    NEFT, RTGS, IMPS

  • Others

    Payment gateways (Razorpay), BNPL, e-RUPI vouchers, Central Bank Digital Currency (e₹)

ProcessHow an online card payment works
  1. 1

    Customer enters card details at checkout

  2. 2

    Payment gateway encrypts and sends to acquiring bank

  3. 3

    Card network (Visa, RuPay) routes to issuing bank

  4. 4

    Issuing bank authorises (OTP / 2-factor)

  5. 5

    Approval returns to merchant

  6. 6

    Settlement to merchant's account

  • Requirements of a good e-payment system: security, convenience, low cost, speed, acceptability, privacy, interoperability.
7

Topic 7

Value exchange systems

  • A value exchange system transfers value between buyer and seller and involves parties (payer, payee, banks, payment processors, clearing houses), instruments (cash, cards, tokens, cheques, accounts) and rules for authorisation, clearing and settlement.
ComparisonValue exchange models
Description
Examples

Account-based

Value moves between accounts held at institutions

NEFT, RTGS, UPI, card payments

Token-based

Value carried in a digital token that can be passed on

E-cash, prepaid wallets, CBDC tokens

Credit-based

Payer pays later

Credit cards, buy-now-pay-later

8

Topic 8

Electronic funds transfer (EFT)

ComparisonIndian EFT systems
How it works
Use

NEFT

Batches settled every half hour, available 24 × 7

Routine transfers of any amount

RTGS

Real-time individual settlement, 24 × 7; minimum ₹2 lakh

Large-value transfers

IMPS

Instant transfer 24 × 7 by account or mobile number

Small and urgent payments

UPI

Instant transfers using a virtual payment address or QR code over IMPS rails

Retail, peer-to-peer and merchant payments

ECS and NACH

Bulk debits and credits

Salaries, EMIs, dividends, subsidies

9

Topic 9

Digital token-based payment systems

ComparisonMagnetic strip vs smart (chip) card
Magnetic strip card
Smart (EMV chip) card

Data storage

Static data on a stripe

Microprocessor with secure memory

Security

Easily skimmed and cloned

Dynamic cryptogram per transaction; PIN

Uses

Older debit/credit cards

EMV cards, contactless (NFC), SIM, ID cards

India

Phased out by RBI (2018–19)

Mandatory EMV chip-and-PIN

  • E-cheque: electronic version of a cheque with digital signature (recognised under the NI Act amendment 2002 — "cheque in electronic form"); used for B2B payments.
  • E-cash (digital cash): electronic money stored in wallets or prepaid instruments — features: anonymity (in some systems), divisibility, transferability; India — prepaid payment instruments (PPIs) like Paytm wallet regulated by RBI; CBDC (e₹) retail and wholesale pilots.
  • Other e-payments: UPI, net banking, BNPL, payment gateways.
Key termsProperties of electronic cash
Monetary value
Backed by money or credit
Interoperability
Exchangeable for other forms of payment
Retrievability
Recoverable if the device is lost
Security
Cannot be copied or spent twice
Anonymity
Some systems hide the payer's identity
  • Today: prepaid wallets (Paytm, Amazon Pay), UPI Lite for small offline-style payments, and the RBI's e-rupee (central bank digital currency) piloted since 2022.
10

Topic 10

Smart cards and credit cards

ComparisonSmart cards and credit cards
Smart card
Credit card

Technology

Embedded chip that stores data and processes it securely (EMV)

Magnetic stripe or chip linked to a credit line

Payment

Debit, prepaid or credit; contactless via NFC

Pay later within a credit limit

Security

Chip and PIN, dynamic cryptograms; hard to clone

Card-not-present fraud online; protected by OTP, 3-D Secure and tokenisation

Other uses

Identity, transit (NCMC), access control

Rewards, EMIs

ProcessOnline card payment
  1. 1Customer enters card details or uses a saved token
  2. 2Payment gateway encrypts and forwards to the acquirer
  3. 3Card network routes to the issuing bank
  4. 4Issuer authenticates (OTP) and approves
  5. 5Merchant receives confirmation; settlement follows
11

Topic 11

Risks and design of electronic payment systems

Key termsPayment system risks
Fraud and identity theft
Phishing, stolen cards, account takeover
Data breaches
Theft of stored card data
Operational risk
System outages, errors
Settlement and credit risk
Party fails to pay
Privacy risk
Tracking of spending
Legal and regulatory risk
Non-compliance with RBI rules
Key termsDesign requirements
Security
Encryption, tokenisation, two-factor authentication
Reliability and scalability
Handle peak loads with high uptime
Ease of use
Few steps; mobile-friendly
Low cost
Low transaction charges
Interoperability
Works across banks and apps
Trust and dispute resolution
Refunds, chargebacks, grievance redressal
  • Regulation in India: the Payment and Settlement Systems Act, 2007; RBI rules on card tokenisation (card-on-file data cannot be stored by merchants) and additional factor authentication; PCI DSS for card data.

Key terms

E-commerce framework
Layered model of infrastructure, services and policies for e-commerce
ISP
Company providing internet access
EFT
Electronic transfer of money between accounts
Digital token
Electronic representation of value used for payment
Tokenisation
Replacing card numbers with unique tokens

Quick revision

  • Technical components; framework layers; applications.
  • ISP access; WWW client, servers, DNS, CDN; tiers.
  • Payment types; value exchange models.
  • NEFT, RTGS, IMPS, UPI, NACH; e-cash, e-cheques, wallets, e-rupee.
  • Smart vs credit cards; card payment flow; risks; design requirements; regulation.

Important exam questions

Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).

Short-answer questions

  1. Q1.Name four technical components of e-commerce.
  2. Q2.What is the role of an ISP?
  3. Q3.Distinguish NEFT and RTGS.
  4. Q4.What is e-cash?
  5. Q5.How does a smart card differ from a magnetic-stripe card?
  6. Q6.State three requirements of a good payment system.

Long-answer questions

  1. Q1.Explain the technical components and framework of e-commerce.
  2. Q2.Explain ISP and WWW architecture.
  3. Q3.Explain electronic payment systems, EFT and digital tokens.
  4. Q4.Explain the risks and design issues of electronic payment systems.

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