The Enigma of Electronic Commerce: An Alternative Solution


Recently, there was an uproar in Bangladesh’s e-commerce sector with massive allegations of fraud. Customers paid online merchants for different products, but they did not receive the product.

In response, the relevant authorities have set up an escrow system where there is a third party (escrow), who retains authority over the release of the money until delivery of the product is established.

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Different media agencies have pointed out that in Bangladesh the escrow agency follows a process that is largely manual. Such a model cannot be sustainable or serve the millions of transactions that can occur in the field of e-commerce every day. In addition, the government of Bangladesh is currently implementing a policy requiring an e-commerce based entrepreneur to keep sufficient security deposit so that in the event of a default, affected customers can be compensated.

Sounds good, but such a policy would restrict thousands of small and medium entrepreneurs who don’t have enough deposit money. This will create a handful of giant e-commerce merchants with monopoly power, a situation no one wants. A computer solution can solve these problems. But before I explain, let me discuss the general process of an ecommerce transaction.

There are different models of e-commerce, but the most common is where the merchant owns the e-commerce site but does not have stock. Both sellers and buyers use this site for their business transactions.

The transaction begins when a customer places an order on this site. The e-commerce site transmits the order to the seller and the transaction information along with the credit card details to the payment gateway. The payment gateway sends the transaction details to the card association (Visa, Mastercard, etc.).

The card association passes this on to the card issuing bank. The bank checks the available balance and verifies other details before authorizing the transaction. This authorization returns to the payment gateway via the same channel but in the reverse order. The gateway then releases the payment.

The whole process is automatic and takes place in seconds. When the supplier or merchant receives payment, they initiate the product delivery process. In the end, the buyer receives the ordered item.

Anyone can notice that here the customer is the weak link who has already paid but has no control over the delivery of the product. But the process is still followed all over the world in e-commerce because of the mutual trust between merchants and customers. This trust was established after many years of collaboration. If trust is lacking, as in the case of Bangladesh, this process simply cannot work.

In order to protect the interests of customers, the Bangladesh authorities have introduced an escrow model into the standard operating procedure (SOP) of e-commerce transactions. The model has serious limitations. Therefore, I am offering an IT solution that can be implemented as a viable alternative.

A Product Delivery and Payment Tracking Application (PDPTA) can be designed, developed and implemented to coordinate the activities of the merchant, supplier, escrow agency and payment gateway and for tracking of the delivery process.

It is a database-based web application that captures all information about an item and logs all events from order to delivery. This application would be under the control of the payment gateway or escrow agency and preferably mounted on their server. Merchants, vendors, and delivery services (eg, courier services) would interact with the PDPTA website through an application programming interface (API).

In this model, once a buyer places an order on an e-commerce site, an item tracking number (a unique order number known only to the customer) is generated automatically.

The PDPTA website would record the Order ID along with all other information related to this transaction.

An automated notice would be generated and sent to the supplier for product delivery. The payment gateway would also receive a payment notice through the credit card transaction channel, but suspend payment until it receives a delivery confirmation notice from the PDPTA website.

Upon receipt of the order, the supplier prepares the item with appropriate packaging, attaches a barcode with the relevant information, and hands it over to the courier for delivery. The courier would scan the barcode, which would update the PDPTA database with information such as date of packaging, date of shipment and expected delivery date. This will happen at all subsequent delivery service stations en route.

The PDPTA website can also keep customers informed of all events by sending automated text messages in response to each event. In addition, if the customers wish, they can visit the e-commerce site at any time of the day and see the most recent information on the location of the product purchased.

The delivery person at the destination station would be equipped with a smart device. During the physical delivery event, the customer would enter the order ID into the smart device owned by the delivery person. If the PDPTA system confirms the validity of the Order ID, the courier will receive a confirmation message and deliver the items to the customer. This event will update the PDTPA database with the “delivery complete” information, and the payment gateway will be notified accordingly.

The payment gateway would then release the fund. The whole process is fast automated and error free. If the item is large such as a motorcycle or a refrigerator, the customer, upon receipt of the notification, will proceed to the delivery center to complete the “delivery complete” event.

This is a generic solution that can be tailored to meet the needs of different Bangladesh e-commerce scenarios. The solution I am proposing here is not rocket science. I think Bangladesh has many software development companies that are able to design and develop such application within few months.

Authorities could ask payment gateways or escrow agencies, as the case may be, to install and integrate product tracking software into their systems. Other stakeholders such as merchants, suppliers and delivery organizations would also be required to integrate their systems with the PDTPA website through APIs. Most importantly, the delivery staff should be equipped with smart devices (with APIs installed on them) to record the last event of the delivery process over the internet.

When properly implemented, this solution would either remove the manual process of the escrow system or completely eliminate the need for an escrow system. It will also end the need to organize a huge security deposit before starting an ecommerce business and help thousands of aspiring entrepreneurs who find it extremely difficult to secure initial capital for their businesses.

The author is a Senior Computer Specialist in the Australian Public Service and a Certified Professional from the Australian Computer Society.

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