How Disintermediation Helps Decrease the Transaction Risk of Purchasing Items by Consumers - Essay Example

To what extent has disintermediation helped decrease the transaction risk of purchasing items by consumers? Table of Contents Introduction 3 Discussion 3 Retail industry 4 Airline industry 5 Bitcoin 8 Conclusion 9 References 11 Introduction Global business environment is becoming highly competitive as several leading organisations across the globe are trying to implement unique strategies in business operation process in order to gain potential competitive advantages over their respective competitors. Disintermediation can be considered as an effective and unique strategy that helped several organisations to reduce their overall business operation cost. Disintermediation occurs due to high inflation rate. Disintermediation generally helps to eliminate the involvement of old-fashioned middleman in the purchasing activities. Previously the facilitators and gatekeepers were known as knowledge brokers or intermediaries. Disintermediation has changed the role of historical knowledge brokers and the traditional knowledge. Companies can deal with the customers directly through online process instead of involving traditional intermediaries. This leads to the reduction of operation cost while serving customers. It can help companies to sell products directly to the customers in an economical way. The transaction risk of purchasing items can be decreased by the introduction of disintermediation. This essay highlights the application of disintermediation and its importance in reducing transaction risks. Discussion E-commerce can be considered as an essential mode of purchasing and selling of goods and services. In this modern era of globalisation and technological advancement, each and every multinational organisation is trying to purchase business resources and sell finished products to end-customers online in order to reduce business operation cost. Disintermediation can be defined as the elimination process of monetary intermediaries. In the 20th century, several organisations used to depend upon the activities of brokers and intermediaries in order to sell their products and services. Organisations had to pay a certain amount of commission to these brokers against the percentage of goods sold. It actually increased the business operation cost of the organisations. Slowly and gradually the management of several leading organisations introduced e-commerce business concept in order to communicate directly with their customers. It eliminated the necessity of brokers. Therefore, the organisations succeeded to reduce additional business operation cost. The involvement of several traditional intermediaries can create transaction risks as these brokers can do some wrong activities with the personal information of customers. Therefore, disintermediation can help organisations to reduce the possibility of transaction risk. Retail industry Tesco is one of the largest retailers in the world. The organisation adopted e-commerce business model in the year 2000. The core activity and vision of the organization is to deliver high quality product and services at economic price. The effect of disintermediation helped Tesco to provide low price products to customers with zero transaction risks. This eventually helped in reduction of operational cost. Tesco applied several encryption methods in its website in order to secure transaction (Tamer, 2009, p.77). This process has been implemented to assure customers completely safe and secure online transactions. Account details of consumers are stored in system during online transaction process, which provides an opportunity for hackers to access the crucial information of customers. Advance information technology has been implemented by Tesco to track cyber thefts and debit/credit card hacking (Baker, 2012, p.645). The application of disintermediation has nullified the middleman and reduced the operating cost (Dave, 2008, p.293). Tesco has installed BMT micro security software to remove the storage of any database after online transaction. This is the reason why codes are used to trace the people who are using online transaction (Gray, 2000, p.120). This process helps to reduce the risk of transaction by consumers. Card Verification Value or Card Security Code has implemented by Tesco as another security feature for debit/credit card holders (Barnes and Hunt, 2013, p.299). This process of disintermediation helped to increase online shopping activities without intermediaries. The advancement of online transaction is vital for organization to maintain competitive edge (Glaser, 2013, p.69). Therefore, it can be stated that disintermediation process has helped Tesco Plc to reduce the business operation cost by removing third part expense and it has ensured secured online transaction. Airline industry In many developed countries, middlemen are extremely prevalent in several organisations. The promotion and distribution cost has reduced due to disintermediation (Smrekar and Tiran, 2013, p.44). The lower cost would influence buyers to directly trade with online booking system of airline organisations. Buyers can refuse to trade with the travel agent or middleman. The risk of online transaction has been effectively reduced by the application of disintermediation. Private gain can be maximized by the improvement in information technology. The rise of internet provided opportunities to airlines to sell tickets directly to the customers. This benefited airlines to save commission that were funded to the middleman. British Airways is one of the premier flag carrier airlines in the world. British Airways is the largest airline in terms of fleet size. The website of British Airways provides services for customers to buy tickets via internet. People do not have to go to travel agents to book their tickets. Instead of that people can book tickets online efficiently. Several discounted airline tickets are introduced by British Airways for its loyal customers. This enabled airline industry to develop a potential customer base. The introduction of information communication technology has created a havoc impact on the entire business world. The early adopters of information communication technology are airline organisations. In order to deduct the booking fees of travel agent, British Airways has developed dedicated website to book air tickets (Steinfield, 2003, p.344). It has been surveyed that almost 1.5 million people visit British Airways website on monthly basis. There has been an increase of 11% of the average online booking in British Airways website (Waldman, 2013, p.73). The future perspective of British Airways is to manage the entire supply chain electronically. This can help every airline organisation to increase the accuracy of transaction. Sometimes people are hesitant to buy air tickets online due to safety concerns. The use of effective advancement in information communication technology leads to the deduction of cost and improve safety of transaction. Depending upon the demand of customers, British Airways online booking website ensures passengers to buy tickets of different prices. (Finke, 2003, p.10). If there is any failure in the transaction process during booking of tickets, money should be refunded to the customers by the management. Customers always want safe and convenient online booking site. Booking tickets in British Airways is always safe, easy and convenient. Travellers buy tickets from British Airways booking website that is automatically connected to the secure sockets layer. The online booking website connects to the industry-standard protocol. Efforts have been made to maintain customer confidentiality during the process of online transaction. All the personal information that travel through the internet is encrypted to ensure safety for all credit and debit card details. All personal information is scrambled between the server of British Airways and customers’ computer. After a successful transaction, each and every personal data is removed by the database of the website. As a part of creating record of transaction, information is send to the secured severs of British Airways (Tshohl, 2001, p.74). Heathrow airport headquarter has secured servers. During the booking process, security message pops up on the screen. This message reveals that customers are entering to the secured area. The website is developed in such a way that once a customer comes out of personal details section to an open area, a security message pops up automatically in order to safeguard the personal details. After moving to the public area, private information will be deleted. The privacy of the transaction is utmost imperative for British Airways (Werthner and Bichler, 2001, p.56). The website of British Airways is connected with industry standard protocol and secured socket layer. Application of this particular system has helped to reduce the involvement of traditional brokers and increase the safety during online bookings. Organisations in airline industry are trying utmost best to drive disintermediation and increase sales through online booking systems. This is done by offering incentives to the customers. Sometimes travellers are uncertain of using online airline booking systems due to risks involved in online transactions (Wallace, 2004, p.28). The increase in information sharing and advancement of technology helped to reduce the sense of uncertainty among travellers. Buyers often tend to go for low priced tickets. The reduction of price can help to decrease the transaction risk. The official airline licensed booking counter has created a sense of safety among people. Travellers used to feel safe while booking tickets from the travel agents because of the ongoing trend of intermediation (Pender and Sharpley, 2004, p.78). However, the process of disintermediation has helped customers to ensure the process of online transaction and overcome interference of middlemen. Bitcoin Bitcoin is system software through which payments are detailed, recorded and verified in a public ledger. It is also regarded as the biggest crypto-currency in the world. Bitcoin was introduced in the year 2009 (Uwajeh, 2012, p.31). Software centred payment system was created as a reward for processing work of payment. During the process of payment work, users have the power to record and verify their payments. Bitcoin has attained an immense growth rate. Bitcoin is the offspring of disintermediation as it removes the gatekeepers. Public ledger is the pivotal part of Bitcoin system. All the financial transactions are recorded in Bitcoin without interference of any intermediaries (Martin, 2014, p.97). Bitcoin is a peer-to-peer consensus network that is not powered by any middleman. Bitcoin provides personal wallet to the users with the help of computer program or mobile app. Users can receive and send Bitcoin to other users without any help of middlemen (Mullan, 2014, p.9). The process of transaction is safe, fast and efficient. Bitcoin works similar to disintermediation where no central authority or middleman is required for transaction of money from one party to another party. The network of Bitcoin is controlled by public ledger. Each and every processed transaction is contained in the ledger. The validation of each transaction is verified by user. Users have the freedom to verify and notify their transactions. The transactions of Bitcoin are authenticated and fully protected by digital signature. The transactions are protected by verifying user’s sending and receiving addresses (Jackman, 2014, p.42). Each and every Bitcoin user has complete access and control over their transactions. People are more secure to use Bitcoin, which is due to the fact that it does not require any personal and sensitive information that eventually protects users from fraudulent. The users of Bitcoin can make payment and transaction without providing any personal information. Users can also safeguard their money with encryption codes and backup (Davidson, 2013, p.52). This provides freedom to the users to receive and send money to other Bitcoin users anywhere in the world. Digital signatures help in securing individual information of users during online transaction process. The use of Bitcoin helped many organisations to avoid fraudulent during transaction. Conclusion It is clear from the above discussion that disintermediation has helped effectively to reduce the risk of transactions. Disintermediation has several positive impacts on business in this modern era of globalisation and technological advancement. Economic disintermediation is the pivotal aspect for the revolution of e-commerce. The idea of removing middleman during the process of disintermediation is to reduce the costs and increase the speed of completion of any task. This process of direct interaction can benefit recipient and originator of the task. The process of disintermediation can be applied in different ways. The use of disintermediation has gained popularity in financial markets. This is mainly due to the trend of raising capital. The trend of selling and buying the securities are preferred by borrower. Bitcoin is a mobile application or computer program that enables users to send money to Bitcoin users around the world. The users of Bitcoin have full control over their transaction and it is fully protected. The process of disintermediation resulted in reduction of booking through several travel agencies. The security and safety of the customers is the pivotal aim of British Airways and other airline company. This proves that disintermediation has helped in development of a risk free business environment across the globe. References Baker, M., 2012. The marketing Book. London: Routledge. Barnes, S., and Hunt, B., 2013. E-Commerce and V-Business. London: Taylor & Francis. Dave, C., 2008. E-Business and E-Commerce management. New Jersey: Pearson. Davidson, J., 2013. The Digital Coin Revolution. London: JD-Biz Corporation. Finke, J., 2003. Tanzania. London: Rough Guides. Glaser, J., 2013. Careers in Online Retailing. London: The Rosen Publishing Group. Gray, A., 2000. Studies in Economics and Business: Marketing. New York: Heinemann. Jackman, J., 2014. Bitcoin for Beginners. London: Minoan Marketing. Martin, W., 2014. Black Market Crypto currencies. New York: Business and Economics. 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