With the newspapers once again full of stories of on-line security alerts - this time at Barclays' ‘iBanking” service in the United Kingdom, where customers reported being able to view other people's account details on screen - company executives may be pausing to rethink their e-commerce strategies.
The challenge for firms is to balance innovation - being at the forefront, embracing the new technologies - with caution. There are still key security and data protection questions. No company wants to fall behind its competitors; yet executives are aware that locally, nationally or internationally, the necessary regulation is largely not in place to protect the consumer. Without consumer protection, market confidence will not follow.
Governments and regulators are working to meet the many challenges that e-commerce poses, recognising they should support both the consumer and the companies offering the new services. Questions include: How to keep pace with this level of constant change, and regulate effectively, without stifling growth? How best to keep ahead of the hackers? How to guarantee the security of electronic signatures? How to be sure that the other person you are dealing with is who or what they purport to be?
The International Underwriting Association of London (IUA) has discussed the needs of our industry with other associations, the UK government, Brussels and bodies such as the Organisation for Economic Co-operation & Development (OECD) and the World Trade Organisation (WTO). We have said that flexibility is required. In terms of regulations, this means minimum interference, otherwise the electronic revolution will not happen.
New taxes are not the way forward; neither are additional licensing agreements, which would discriminate this new way of doing business against the more traditional ways, and would distort competition internationally. We believe that business to business transactions should be treated differently from business to consumer, where rules about providing advice to customers of financial products need to be adapted to supply relevant information in an appropriate form on-line.It is vital that digital signatures be recognised in contracts, to avoid businesses having constantly to revert to a paper document.
Response to all these challenges has to be international. The Hong Kong commissioner for insurance, Benjamin Tang, recently gave a talk in the London Underwriting Centre, expressing concern about consumer protection. He could not, he said, stop anyone in Hong Kong from buying an insurance product online from anywhere in the world. But how is that consumer protected when something goes wrong? In (re)insurance, the International Association of Insurance Supervisors (IAIS) will provide a vital forum, helping supervisors work together on these issues across national boundaries.
In terms of security, authorities internationally have already been co-operating to try to prevent fraud and computer hacking. The “Love Bug” was a salutary reminder of just how quickly a virus can spread across the computer world.
With the high-profile use of the internet in Senator John McCain's fundraising campaign, and individual state agencies increasingly on-line, a new era of e-politics is also taking off. Governments must address the challenges by embracing the internet themselves, opening up access and transforming the way in which they serve the public. In this area, the United States is estimated to be about three years ahead of the UK and other European countries.
Huge changes may be expected in all the key areas of government. Paying taxes, delivering health care and education, defence procurement, using office space, public consultation, voting and organising elections - all will be transformed, probably in a short space of time. Governments must review every aspect of why they do what they do and then what and how they should do things in the future.
In the UK, a central government portal is being developed. Members of Parliament will each get their own website (many have already done this privately). Many local authorities are also beginning to grasp that the web is more than another information tool. The European Union institutions are making progress, with on-line access available in a number of departments.
Governments must also be aware that dramatic action may sometimes be necessary to help the economy respond directly to the rise of e-commerce. US readers will be aware of the power cuts that have resulted in some areas from inability to keep up with demand for power to drive e-business. In the UK, the Financial Times recently raised the prospect of London's electricity network being under pressure to build ten huge “internet hotels” in order to meet the future demand of web-based businesses.
The challenges arising from the new way of working are taking unexpected forms. There are doubtless many stumbling blocks ahead. But to embrace the future, governments must take a firm grasp on all their internal and external processes and reorganise them from top to bottom.