E-commerce and E-business: Models, Payments, Outsourcing and Recovery

A shop used to need a street, a door and opening hours. An online business needs a website or an app, a way to be paid and a way to deliver. It can serve customers in another state or another country at three in the morning.

That change, together with the use of internet technology to run the inside of a business as well as the selling side, is the subject of this topic.

The Institute of Chartered Accountants of Nigeria (ICAN) syllabus asks you to explain e-commerce and e-business, the business case for them, the policies and infrastructure they need, the choices in deploying them, their benefits and challenges, outsourcing, disaster recovery, the models of e-commerce and the payment systems. Examiners favour scenario questions, so practise applying each idea to a business.

E-commerce and e-business

E-commerce is the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, mainly the internet. It covers online retailing, digital marketplaces, mobile commerce and electronic payments, and it lets transactions happen without the parties being in the same place. E-business is the broader term.

It includes e-commerce but also covers internal processes, such as inventory management, production planning, customer relationship management and enterprise resource planning, run with internet technologies.

Growth in the internet, mobile technology, cloud computing and digital payments has pushed firms from brick-and-mortar models towards digital-first and hybrid ones. In Nigeria, online marketplaces and payment companies have changed how goods, services and payments are accessed.

The business case for e-commerce

A business case is the formal justification for investing in e-commerce. It sets out the reasons, objectives, costs, expected benefits and fit with the firm’s strategy, and it should state the value proposition, revenue model, customer groups, competitive advantages and expected results. The firm must also weigh the investment cost, risk, scalability and technology fit before going ahead.

IT policies that come first

Information technology (IT) policies set the rules for secure, lawful and efficient use of technology, and they are the groundwork for e-commerce.

• Data protection and privacy: how customer and staff data is collected, stored, used and shared, with consent and an opt-out. Nigerian firms must meet the Nigeria Data Protection Act and its regulations.
• Cybersecurity framework: passwords, device security, monitoring, incident response, firewalls, encryption and staff training.
• Acceptable use policy: how staff and customers may use the firm’s IT resources.
• Vendor and outsourcing policy: how outside providers such as payment processors, couriers and cloud hosts are chosen and monitored, with confidentiality terms and service level agreements.
• Business continuity and disaster recovery: how systems are restored after an attack, failure or disaster.

Choosing how to deploy

A cost comparison. Assume a seller makes ₦1,000,000 of sales a month. On a marketplace that charges a 10% commission, the cost is ₦100,000. On its own cloud store with a ₦50,000 subscription and 2% payment fees, the cost is 50,000 + 20,000 = ₦70,000. The own store is cheaper and keeps customer data, but the marketplace brings a ready audience, so the right answer depends on sales volume and the need for traffic.

Benefits and challenges

IT infrastructure and the internet

E-commerce needs scalable, secure, compliant infrastructure: servers and hosting, databases and storage, networks with firewalls and fast connections, application platforms such as content management systems and mobile app tools, security tools such as SSL certificates, antivirus, intrusion detection and VPNs, payment gateways, and backup and recovery systems. The standard for card payment data is PCI DSS.

The internet is the backbone. It gives global connectivity, round-the-clock access, several channels at once (email, social media, chat and the website), access to the cloud and customer self-service, so that shoppers browse, compare, pay and track orders without human help. Social media adds product discovery, social selling through shops and catalogues, customer engagement and reviews, influencer marketing and retargeting of site visitors with tailored ads.

The six e-commerce models

Payment systems

A poor payment experience leads to abandoned carts and lost trust, and network errors, delays and chargebacks remain problems.

The digital middleman

Digitisation has turned brokers, dealers and agents into technology platforms that connect buyers and sellers, process payments and sometimes provide delivery and trust services. They add value through efficiency and lower transaction cost, as with global marketplaces and local classified-ad platforms.

Outsourcing and disaster recovery

By location, outsourcing is onshore (the same country), nearshore (a neighbouring country) or offshore (a distant country, usually for cost). Typical functions passed on are delivery, customer service, IT infrastructure, payment processing and marketing.

Disaster recovery keeps a firm running after a cyber attack, natural disaster or system failure. A plan has regular, automated backups stored off site or in the cloud, redundancy, a recovery time objective (how fast systems must be back) and a recovery point objective (how much data, measured in time, may be lost).

Recovery options are a hot site (a fully equipped mirror, ready at once), a warm site (partly equipped, ready in hours or days), a cold site (basic space needing major set-up) and disaster recovery as a service (virtual copies of the firm’s systems in the cloud).

Worked example: advising a firm

1. Business case. Market expansion at lower cost than opening shops, and a new revenue stream.
2. Model. B2C, selling directly to shoppers. B2B can be added for retailers.
3. Deployment. A cloud-based store, because it is cost-effective and handles hosting and security, perhaps with a marketplace listing for early traffic.
4. Payments. Card and bank transfer through a payment gateway, plus mobile money and USSD for customers who rarely use cards.
5. Policies and risks. Write a short data protection and security policy, use strong passwords and backups, and use a reliable courier for delivery.
6. Challenges to plan for. Delivery in places with poor roads, trust from new customers, and payment failures.

E-commerce and e-business in more detail

E-commerce versus e-business: a clear example

A shop that sells clothes through its website is doing e-commerce. If it also uses internet-based systems to manage stock, link suppliers, pay staff, track customer relationships and plan production, it is doing e-business. The first concerns the transaction with the customer. The second concerns the whole business.

Choosing a deployment: a decision guide

Challenges for e-commerce in Nigeria and how to manage them

Disaster recovery: the two objectives with numbers

The recovery time objective is how long a system can be down. If an online shop loses ₦200,000 of sales a day and can tolerate at most four hours of downtime, it needs a recovery option that restores service within four hours, such as a hot site. The recovery point objective is how much data can be lost, measured in time.

If orders must not be lost beyond fifteen minutes, backups or replication must run at least every fifteen minutes. A cold site is cheap but slow, and a hot site is fast but expensive, so the choice depends on the cost of downtime.

Outsourcing: reasons and risks

A firm outsources to cut cost, access skills, focus on its core business and scale quickly. The risks are loss of control, dependence on the supplier, poor quality, confidentiality breaches and hidden costs. These are managed by a clear contract with service levels, confidentiality terms, regular reviews and an exit plan.

Exam focus: e-commerce infrastructure, models and payment systems

IT infrastructure for e-commerce

It is the hardware, software, networks and data centres that support online business. It must be scalable, secure and compliant (for example with Nigeria’s data protection rules and PCI DSS for card data).

• Servers and hosting platforms. On-premises or cloud, for example AWS, Google Cloud or local data centres such as MainOne.
• Databases and storage. Customer records, transactions and catalogues, with backup redundancy.
• Network infrastructure. Routers, switches, firewalls and reliable broadband or fibre.
• Application platforms. Web frameworks, content management systems and mobile app platforms.
• Cybersecurity tools. SSL certificates, antivirus, intrusion detection systems and VPNs.
• Payment gateways. Paystack, Flutterwave and Remita for safe real-time payments.
• Backup and recovery systems. Redundant storage and replication for continuity.

Why the internet is central to e-commerce

Global connectivity (a Lagos seller can reach buyers abroad); 24/7 accessibility; multichannel integration of e-mail, social media, chat and websites; cloud access; and customer self-service to browse, compare, pay and track orders.

Roles of social media in e-commerce

Product discovery; social selling through Facebook Shops or WhatsApp Business catalogues; customer engagement and reviews; influencer marketing; and retargeting campaigns that re-engage site visitors using tools such as Facebook Pixel.

Six e-commerce models

Payment systems

• Card payments through gateways such as Paystack, Interswitch and Flutterwave.
• Bank transfers with real-time confirmation.
• Mobile money and USSD, popular where bank access is low, for example Paga, OPay and MTN MoMo.
• Wallet systems, where users preload funds, for example JumiaPay or Kuda.

A poor payment experience causes cart abandonment and weakens trust. Network errors, delays and chargebacks remain challenges.

Common mistakes in the exam

• Using ‘e-commerce’ and ‘e-business’ as if they were the same.
• Listing benefits without the challenges when the question asks for both.
• Naming a model without an example.
• Forgetting that outsourcing can be onshore, nearshore or offshore.
• Mixing the recovery time objective with the recovery point objective.
• Recommending a deployment choice without reasons tied to the firm’s size and budget.

Quick revision

• E-commerce is transactional and part of e-business, which is transformational.
• Business case: reach, efficiency, convenience, competition, new revenue.
• Five IT policies. Five deployment choices.
• Six models: B2B, B2C, C2C, C2B, B2A, C2A.
• Payments: cards, transfers, mobile money and USSD, wallets, cryptocurrency.
• Outsourcing: BPO, ITO, KPO, cloud. Onshore, nearshore, offshore.
• Disaster recovery: backups, redundancy, RTO, RPO, hot, warm and cold sites.

Practice questions

These are original questions written in the style of the ICAN exam. Try each one before you open the answer.

Section A style: multiple choice

Section B style: written questions

A further written question

Model answers

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