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A number of events took place during the past century that progressively
made our planet seem smaller: - 12/17/1903 - Wilbur and Orville Wright successfully flew their 'Flyer
I' at Kitty Hawk, NC
- 5/20 - 21/1927 - Charles Lindbergh piloted his 'Spirit of St. Louis'
across the Atlantic
- June, 1931 - Wylie Post flew his Lockheed Vega around the world in
8 days, 15 hours, 51 minutes
- 5/5/1961 - Astronaut Allen Shepard made a fifteen minute sub-orbital
flight into space
- December, 1967 - The Concorde, the world's first supersonic commercial
aircraft made its maiden flight. AirFrance and British Airways later
began transcontinental service with flights between Paris and London
to New York in less than four hours.
- 1972 - Email and the Internet made their first public appearances
at the Internet Computer Communication Conference.
As historical as these milestones were, development and burgeoning usage
of the Internet must be considered as the most important. Credit executives world-wide are struggling with the growing challenges
of doing E-business or E-Commerce - more frequently referred to as B2B,
B2B2C or B2C. These challenges include, but are not limited to: instant
credit approval; legal aspects; digital signatures on digital documents;
security of information; information exchange and learning new technology. Call it what you will, E-Commerce is changing the way business has previously
been conducted - both domestically and globally. It is also forcing companies
to re-evaluate their organizational structures and corporate cultures.
How big an economic force E-Commerce becomes is the subject of much speculation
by analysts. 'Forester Research maintains that e-business is about to reach
a threshold from which it will accelerate into "hyper-growth." Inter-company
trade of goods over the Internet Forrester forecasts, will double every
year over the next five years, surging from $43 billion last year to $1.3
trillion in 2003. Undeniably, B2B integration is rapidly becoming a business
requirement. To quote the June 26, 1999 issue of The Economist, "It
will become progressively harder for firms that cannot or do not want to
trade online to survive."1 The pre E-Commerce way of doing business was often slow and time consuming.
The sales process, depending on the type of product or service involved,
could span days, weeks or months. The process often involved a physical
visit (or several) by a sales person. Product was often delivered for evaluation.
Once a buyer had made a decision and submitted a purchase order to the
seller, the order was entered into the seller's business system, then,
the seller's credit staff would begin their time consuming credit investigation,
analysis and approval process. The order cycle could take several hours
or days, depending on several factors: dollar amount of the order, availability
of credit and/or financial information on the buyer, to name two. Once
credit had approved the order, it was submitted to manufacturing or to
a warehouse for fulfillment. Following order fulfillment and shipping,
an invoice was generated and mailed to the buyer. On the net or discounted
due date of the invoice, the buyer made payment. Upon receipt of the payment
by the seller, the payment was applied to the buyer's account to clear
the invoice. Under ideal circumstances, the entire process could consume
30 - 45 days. E-commerce has not only changed the business process we all are so familiar
and comfortable with, it has changed buyer expectations. Through an Internet
web page, also known as a web store front, buyers from anywhere in the
world can browse the on-line catalogs of companies world-wide, view products
(often in 3-D images with audio); download and test software or utilize
temporary subscriptions to data bases; place an order, chose a payment
method and complete a credit application; receive shipping advice and order
status; make payment and manage transaction records all through their desktop
computers. The E-commerce order cycle can be completed in a matter of minutes.
The entire process is easily completed without the buyer leaving his or
her office, or even from their homes - see E-Commerce Revenue Chain [see
figure 1]. Orders can also be completed during non-business hours. E-Commerce seems to be ideal for speeding commodity orders world wide
and providing important information for fair pricing without regard to
time zones. However, the "anything goes" attitude that seems
to prevail in the U.S. does not exist in many of the countries who are our most important
trading partners. Two factors that many companies site as reasons for jumping on the e-business
bandwagon are the promise of increased productivity and the creation of
immediate supply and demand. The advantages that these companies hope to
include are: less paperwork, fewer errors in placing and filling orders,
no time-zone worries, less on-hand inventory, betters records of product
inventory and demand, and on-demand tracking of shipment status. 1 - www.webmethods.com The promise of increased productivity has become a source of frustration
for many international credit executives. The speed with which transactions
can be completed via the Internet has created buyer expectations which
may not always be met. The challenge of instant or very rapid credit approval
tests even the most experienced credit executive. Although technology is
now providing tools for gathering information, credit scoring, financial
statement evaluation and decision making, supply has not yet caught up
with demand. Consumer credit grantors have utilized such software or modeling
for decades. However, the number of vendors offering these tools for commercial
credit granting is limited. The available tools have been based on those
used for consumer credit and are being adapted for commercial use. eCredit.com
and C/LEC are two such providers of credit scoring for commercial credit
grantors. Commercial credit information on international companies is available
through a number of sources including Dun & Bradstreet, Graydon of
America and Veritas. Credit executives are able to access, view and download
credit information through their desktop systems. Unfortunately, the information
may not always be instantaneously available. Depending on the location
of a potential or existing international customer, a credit report may
not be available for 10 or more business days. In such cases, the credit
executive is challenged to approve a new customer's order as rapidly as
possible, while attempting to ensure future payment. International credit
executives are still challenged with keeping up with local political and
economic conditions of the country in which their company's do business.
Many international credit executives still believe that the best sources
for such information are those they have privately and personally cultivated
'in-country' through on-site visits and frequent contacts via telephone. While credit executives usually have some basic, if not extensive, knowledge
of the laws governing business within their own countries and/or states,
many may find themselves faced with uncertainty when selling to foreign
customers. Unlike the U.S. whose states recognize the provisions of the
Uniform Commercial Code (UCC), foreign countries have not attempted to
adopt such standardization regulations of business transactions. Early in 2000, the U.S. enacted the "Electronic Signatures in Global
and National Commerce Act." Section 101 of the Act, entitled' General
Rule of Validity' reads in part……"(a) General, - Notwithstanding
any statute, regulation, or other rule of law (other than this title and
title II), with respect to any transaction in or affecting interstate or
foreign commerce - (1) a signature, contract, or other record relating
to such transaction may not be denied legal effect, validity, or enforceability
solely because it is in electronic form; and (2) a contract relating to
such transaction may not be denied legal effect, validity, or enforceability
solely because an electronic signature of electronic record was used in
its formation……". While electronic signatures are being
readily recognized and accepted within the U. S., many foreign countries
have not been taken to this new method of contractual agreement with such
enthusiasm. Consumers have come to accept various terms and conditions
posted on the web pages they regularly utilize for shopping, travel, or
seeking general information. "Do you agree to the terms and conditions
stated above? If so, please click on 'Agreed' below." This is commonly
known as a "click agreement" and by "clicking" you
send a digital signature which indicates your approval. This is the same
basic type of digital signature that can be placed on a credit application
form [see Figure 2], contract, terms of sales, etc. between two commercial
firms. This information can then be archived for future reference. Another E-Commerce challenge for the credit executive is taxation. While
the U.S. has chosen not to place a federal tax on Internet trans-actions,
purchases are still subject to prevailing state tax laws in effect at the
time of the purchase. Exceptions to this may be the purchase of software
(canned, non-customized) that is downloaded in its entirety from a seller's
server via the Internet. Purchases by foreign customers would presumably
be subject to prevailing local tax and/or import laws as well. Credit executives
are encouraged to work closely with their company's in-house tax and export specialists so they can avoid these pitfalls. The simple creation of an electronic portal or web storefront raises
serious concerns for privacy and security of a company's business systems.
Anyone in the world with Internet access can enter this portal and delve
into company records unless provisions are made for security. This is a
potential obstacle to wide acceptance of e-commerce. The potential vulnerability of company's database should be seriously
addressed before the implementation of a web storefront. Giving potential
and/or existing customers access to your company's database, even with
security measures in place, places vital and confidential information at
risk. Many firms are concerned about the vulnerability of their database
to database mining software and the sharing or availability of customer
information. The Internet provides the TCP (Transmission Control Protocol) and
the IP (Internet Protocol) address that allows servers worldwide to identify
each other based on a standard addressing system. It provides communication
and application services to an international base of business, consumer,
education, research, government sites and other organizations. By utilizing
an IP address, each user can be granted various levels of access through
an electronic portal or web storefront. By setting up firewalls, access
to a company's database can be controlled through the authentication of
users. Firewalls force Internet traffic of a specific type (according to
access levels assigned) to go to a specific location or address. The placement
of routers in front of and behind firewalls further enhances the capabilities
of a company's system to protect itself via address translation. Further
security enhancement is gained through the use of encryption software and
digital certificates. Encryption should be used before the connection is
made so that passwords and Ids do not cross a network where they can be
recorded and reused. Digital certificates not only authenticate the transmission
of data, they also prevent the date from being transmitted more than once.
User authentication and application authentication aids in the safe movement
of mission critical data. The privacy issues associated with e-business affect companies and
individuals alike. Many companies and individuals have concerns about "Big
Brother" government monitoring E-Commerce transactions through encryption
programs. The U.S. and thirty-two other countries participate in the Wassenaar
Arrangement (1996), the first global multilateral arrange-ment on export
controls for conventional weapons, sensitive dual-use goods and technologies.
Included on the list of sensitive dual-use goods and technologies covered
by the Wassenaar Arrangement are high-end encryption programs. The U.S.
prohibits export of such programs. Cultural and governmental differences can create unanticipated hurdles
in establishing an international e-business. "China, for example,
has been linked to the Internet since 1993. Computer sales in China, currently
estimated at U.S. $1 billion, are increasing by roughly 60% a year, according
to Alan Brown of the Digital Freedom Network. However, Internet access
is controlled by the state-run Internet monopoly, which censors the content
of its online service…."2 Although the design of a company's web storefront is not usually among
the functions or responsibilities of a credit executive, if a company is
going to conduct business over the Internet and extend credit, the credit
executive should be involved. He or she can ensure that any credit related
documents posted on the web page are correct and request the required information. Entering the global world of E-Commerce may be an appropriate time
for a company to re-examine its credit and collection policies and procedures.
Disciplinary boundaries between the technical, economic, business and legal
aspects of E-Commerce are blurred and porous at best. Presently, global
standards for doing e-business do not exist. Therefore, it is suggested
that companies address all pertinent legal issues; i.e., electronically
submitted credit applications, purchase orders, sales contracts or "click
agreements" to terms and conditions of sale, pricing and database
security. Taxation and export issues (as previously mentioned) should also
be included such reviews. Additionally, a company should check out the
banking structure and customary methods of payment in the countries they
are targeting. For example, China's banks are not set up to support e-business
and credit cards are not yet popular there. 2 - www.pubs.acs.org/hotartcle/ci/00apr/inet The Internet has also spawned on-line industry credit groups. While
the exchange of credit information via the Internet or email may seem like
an idea that is long overdue, the practical application is not without
its pitfalls. The confidentiality of credit information, exchanged at a face-to-face
industry credit group meeting between creditors, can be controlled and
protected. Credit executives the world over know the value of confidential
exchange of credit information. They build trusting relationships with
their peers through periodic credit industry group meetings and the resultant
networking activities - they know with whom information is being exchanged. Many credit executives are familiar with the various U.S. antitrust acts,
including the Sherman Antitrust Act, the Clayton Act and the Robinson-Patman
Act. Each of these acts covers various elements of U.S. antitrust laws. "Of
particular importance in the antitrust arena is the 1984 court decision
in the Catalano v. Target Sales case, where the judge said that "if
you give better terms, then that's a better price," tying together
for the first time terms and price, which held then, that competitor's
cannot fix credit terms, because that is a violation of the Sherman Antitrust
Act. This has implications on whether a company should state terms when
exchanging credit information…….."3 However,
if similar laws exist in other countries, they are not widely known. While
the use of the Internet and email do offer fast, widespread dispersal of
credit information to industry group members - no matter how far-flung,
caution should be exercised. Exchanging credit information such as payment history via the Internet
or email is subject to security breaches through "hacking." Despite
a company's or credit group's best efforts to protect their business systems
with firewalls, user passwords and other authentication measures, confidential
credit information remains vulnerable and the resultant liability for the
misuse of such information could be monumental. 'As the business world and E-Commerce force change, the field of credit
management is on the brink of a whole new frontier. All credit professionals
need to face the issue of what skills will be needed to remain a player
in the new millennium and then decide what they have to do to acquire those
skills." 3- www.nacm.org/bcmag/bcarchives/1966/julaug 4- www.nacm.org/bcmag/bcarchives/2000/articles2000
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