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E-commerce taking wings in India

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CIOL Bureau
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Narayan PanditThough e-commerce has immense potential, there are many factors that hinder its growth, says Pankaj Narayan Pandit, head - Airlines Vertical, Sonata Software Limited. Excerpts from an interview to Sudhakaran of CyberMedia News:

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E-commerce is the in-thing in the new-age economic system, but do you think India is geared up to tap the potential of it?

E-commerce offers unprecedented opportunities for the travel sector in both developing and developed countries. However, it is still in its nascent stage in India. Low Internet and PC penetration, lack of broadband network, security concerns on the use of credit card, low ‘bookers to lookers ratio’ are some of the factors inhibiting the growth of e-commerce in India.

Being the head the Airlines vertical at Sonata Software, how do you look at the possibility of e-commerce in the airline industry?

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The dawn of the Internet era has significantly changed the way travelers and airlines around the world interact with each other. GDS channel was earlier the only medium of transferring data. This has now been supplemented by a wider range of IP-based applications termed as e-commerce. The Internet has created a new economic ecosystem, the e-commerce marketplace, and it has become the virtual main street of the world.

Providing a quick and convenient way of exchanging goods and services both regionally and globally, e-commerce has boomed. The travel industry has benefited hugely through the growth surge in e-commerce. According to IDC, online sales of airline tickets, car rentals, and hotel reservations make the travel industry one of the strongest e-commerce markets in existence today.

Airlines were the earliest practitioners of large-scale computerization and e-commerce. In the late nineties, travel websites such as Expedia and Travelocity emerged as the most popular website brands in the Internet travel marketplace. Today the adoption of e-commerce technologies by low-cost airlines to facilitate direct sales has accelerated their market penetration. These airlines are already selling majority of their seats through online channels. On the other hand the network airlines (or mainline airlines) are able to sell less than 15 per cent of their tickets using online channels.

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There are many reasons why mainline airlines are not able to tap the full potential of e-commerce, like, complexity of their business model and complexity of fares and also the dependence on traditional travel agents.

As per airline IT trends survey, airlines have sold 49.9 per cent of tickets through GDS channels, 26 per cent through all web channels in 2009. However, this break up is expected to change to 37 per cent and 41 per cent respectively by 2013. To make this happen, airlines have turned to e-commerce, or e-distribution channels, thereby reducing their dependency on GDS/travel agents.

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As we all know, credit card security concerns is one of the major issues that inhibits e-commerce nowadays. What is the relevance of Payment Card Industry Data Security Standard (PCI DSS) compliance in this regard?

Security has always been a major concern for e-commerce websites globally. The introduction of the PCI DSS (Payment Card Industry Data Security Standards) has revolutionized security within the e-commerce industry with respect to the way in which credit card data is handled and stored. E-commerce activity is more safe and secure today than it had been without PCI DSS.

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PCI compliance is a complex and ever-evolving subject affecting millions of businesses – acquiring banks, Independent Sales Organizations (ISOs), processors, hosts, shopping carts, e-commerce and retail merchants and other merchant services providers. PCI DSS is a global standard that was created by the five major credit card companies: American Express, Discover Financial Services, JCB International, MasterCard Worldwide, and Visa, Inc.

The PCI DSS standard seeks to prevent credit card fraud by necessitating the implementation of certain controls and processes by all entities involved in the processing of credit cards. The ecosystem extends from credit card issuers, to consumers of products and services, the enterprises selling these services, and the service providers that help in transactions and fulfillment. Since the establishment of the security standard, cardholders have benefited from increased protection of both their personal information and their assets.

What is the importance PCI DSS compliance for online sales of airline tickets?

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The air travel industry has been one of the major beneficiaries of the e-commerce boom, which has triggered exponential rise in credit card purchases through the last decade. For airlines, online sales of tickets offer a whole new and cost-effective sales channel by reaching out to consumers directly. At the same time, it has also given rise to the possibility of credit card data fraud, which can lead to complex litigation and penalties, all of which cost the industry in the US a whopping 1.5 billion dollars annually! Payment card organizations have addressed the risk by introducing PCI DSS for ensuring the protection of credit card numbers and other sensitive cardholder data.

Today, airlines are looking for ways to achieve compliance with PCI DSS standards by the deadline, September 2010. The consequences of non-compliance are huge, loss of reputation, heavy penalties, loss of payment card processing privilege, operational restrictions imposed by payment card companies and organizations. This explains why PCI DSS Compliance is the #1 priority for airline CIOs and e-commerce executives worldwide.

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As PCI Compliance services partner, what is the role of Sonata? What are your products/solutions in this vertical and what is the competitive edge that Sonata has in this regard?

Airlines across the globe are making efforts to achieve PCI DSS compliance, mostly through internal initiatives or specialized providers. However, their efforts have been impeded by a number of factors, such as:

A large number of systems using credit card data in the airline industry make the discovery process time-consuming and complex.

Applications using credit card data are the key revenue generating applications for an airline, making modifications difficult.

PCI standards are complex. To comply with all these controls is an expensive and time consuming proposition for the airline IT staff.

Missing the deadline for PCI DSS Compliance – September 2010 is a big risk for airlines.

Although e-commerce brings tremendous benefits for the airline industry, security risks need to be carefully considered and controlled. Sonata's extensive experience in the airline enterprises domain helps our consultants to rapidly validate the Airline IT landscape and carry out the PCI implementation.

We provide end-to-end turnkey compliance services – right from assessment / validation to implementation and scanning services. Sonata has also developed proven solution accelerators – SonnetPCI and SonnetSecure – to fast-track the implementation of PCI DSS and meet the critical deadlines for its compliance. Sonata’s modular approach to PCI DSS implementation provides airlines with the flexibility to engage at any stage of the compliance cycle.

Could you please brief about Sonata’s website evaluation services?

With the recent rise in e-commerce websites, airlines are attempting to stimulate customers to shift from traditional distribution channels to online channels. Therefore, website quality is now considered a critical factor in attracting customers' attention and build loyalty. Sonata’s website evaluation service involves bench marking the airline website vis-à-vis the websites of other competitors and industry leaders. The objective of the research is to do the gap analysis between the needs of the travelers and offerings of the website.

And finally, what is the future of e-commerce in India?

Internet is transforming businesses and changing the way products and services are marketed and delivered in the digital age. In the last few years there has been a rise in the number of companies embracing e-commerce technologies in India. As customers and merchants are getting more sophisticated, and they are getting more comfortable with the online commerce world, they are beginning to demand those rich functionalities specific to their vertical and industry. However, the country’s citizens needed easier access to the net, navigation and ease-of-use, factors that are critical for the quick adoption of e-commerce.

The phenomenal growth of www.irctc.co.in, the official website of Indian Railways, underscores the potential of e-commerce in India, in spite of the constraints such as lack of Internet bandwidth and so on. Experts believe that overall, e-commerce will increase exponentially in coming years.

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