What exactly is e-Commerce and what is in it for Bermuda? The well-known, short and simple answer is that e-commerce is buying something over the Internet. But, we all know there is more involved as evidenced by the many e-commerce conferences held around the world, (including the one being held presently at the Hamilton Princess Hotel).

On one website (the internettradeshowlist.com) I found 10 conferences in September alone. There are e-commerce conferences being held in Boston, Atlanta and Bermuda, just to name a few. What do they talk about at these conferences? To understand e-commerce, one needs to think about the process of buying something on the web from the start to finish.

First, there is the website set-up phase. A business must create a web storefront with a secure transaction-processing system. They must connect this web storefront to back-end systems that track inventory and accounts. Next, the business must open an "Internet merchant account'' at a bank (referred to as an "acquiring bank'') to enable them to accept credit card purchases via the web.

Even if a business already has a regular merchant account that they use to accept credit cards, they most likely will need another merchant account to accept Internet credit card purchases.

Second, there is advertising. Businesses must get customers to buy their products online. They must have easy-to-use web stores that are easy to find among the millions of sites on the Internet.

After a customer decides to buy something and types in his credit card information, the authentication phase occurs. This third phase makes sure that the card number is valid. Businesses collect the credit card information and process it immediately ("real-time authorisation'').

The web storefront's transaction system forwards credit card information to the Credit Card Association (e.g. Visa or MasterCard) via a Payment Processing Network.

The association either authorises or declines the transaction, depending on the state of the customer's credit limit. If it is authorised, the funds are reserved to cover the transaction.

The association sends the decision whether to authorise the transaction back to the business. This authentication phase happens in seconds.

Finally, the business must ship the goods and arrange for funds to be moved from the buyer's account to its own account. After the goods ship, the merchant issues a Capture Request, which is a request to be paid, and the funds are transferred to the business's bank account.

At e-commerce conferences, people discuss the best ways to do every aspect of e-commerce, from acquiring banks (the bank that provides the Internet Merchant account) to the web software used to keep track of everything.

There are many companies that can help a business make money online at each e-commerce phase.

Businesses doing e-commerce need the right financial services from banks.

Processing credit card transactions through an offshore bank has its advantages. When the Visa or MasterCard systems sees that the transaction is based in Bermuda, it permits settlement on the Island so the retailer can take advantage of the benefits of confidentiality, security and tax-neutral status.

There is even insurance for e-commerce websites. There is the question of where the computer that hosts your website will be located. One computer can host many websites, and not take up very much space.

Bermuda actually has enough space for hosting facilities because they do not take up acres and acres of land, and indeed there are first-rate hosting facilities already here. Bermuda has established financial institutions that have partnered with new Bermudian commerce solutions providers to provide secure online financial transactions.

E-commerce makes it easier for companies to do business offshore because it does not matter to the customer where the computer hosting the web storefront is located or where the credit card transaction occurs. More off-shore business means that governments can collect more revenue through the traditional offshore fees.

E-commerce also has created a new industry, commerce solution providers.

Commerce solution providers design secure Internet payment systems for businesses looking for online transaction settlement solutions.

Like the financial and insurance industries, high-tech commerce solutions is another high-end service industry that does not require natural resources, just business sense and technical know-how.

E-commerce conferences, like eCC Bermuda this week, provide an opportunity for professionals in a variety of fields to come together to hear industry experts and local leaders talk about strategic e-commerce issues and see why Bermuda has a lot to offer offshore businesses.

*** Michelle Swartz's column appears on the first and third Wednesday of every month in The Royal Gazette's Personal Technology section. She can be reached at michelle y christers.net