The open structure of the Internet has created a dynamic new marketplace enabling businesses to reach an ever-increasing number of customers in more efficient ways. The existing global agreement not to tax or impose customs duty on Internet transactions has transformed the business process and led an increasing number of companies to decide to embark on web-based initiatives to streamline the customer experience and improve cost efficiency. According to a recent survey of 251 CEO’s in twenty-six different countries, 72% of their respective businesses are already engaged in creating or maintaining e-business strategies; and nearly 75% believe that e-business will have "an extremely or moderately significant impact on future product offerings". It is estimated that within the next four to five years, global B2B and B2C e-commerce transactions "will account for about 5 per cent of all inter-company transactions and retail sales respectively".

The question is, will Australia keep pace with these projections?

While there is no doubt that Australia is embracing e-commerce, as the passage of The Electronic Transactions Act 1999 will attest; the country is hampered by the fact that broadband Internet access is limited and costly, and the relatively small population limits the total potential number of Australian e-consumers. Consumer confidence in the Internet has been slow to mature in Australia and the current legislation "has faced some criticism for failing to cover consumer protection issues adequately by including provisions that promote business-to-business activity such as compatible electronic signatures." Furthermore a survey conducted by Ernst & Young in January 2000 concluded that Australia’s biggest worry about the Internet is credit-card security and more than 40% of Australians listed security concerns as a barrier to Internet shopping. Unless Australian businesses take steps to attract shoppers from the outside world, "only the largest and most efficient Australian e-tailers are likely to survive over the next few years".

In the B2B marketspace, there are a number of basic issues for a new entrant, repositioning existing entity to consider aside from determining what customers to target, what information to provide, what products to offer for sale, who will design the site. The customer relationship must be managed from the moment the "buy button" is hit, through the fulfillment of the order, to the ultimate delivery of the product or service. In addition, the various financial steps leading from the acquisition of the credit card information, to the encryption and safe transmission of the data through a payment gateway and processor to an acquiring bank resulting in the settlement of that transaction to a merchant account must also be developed.

While the success of any web-based initiative is dependent upon all of these issues; it is the establishment of an Internet merchant account that actually enables a company to accept credit cards as a method of payment for goods and services sold through a website. Without it, a business might be able to attract and retain interested customers, and even accept an order, but they would not be able to efficiently process compensation from the major credit card organizations such as VISA, MasterCard or American Express.

However, despite the fact that the global demand for Internet merchant accounts is increasing on a daily basis, many financial institutions in Australia do not yet offer them. While there is one large Australian bank that has a payment gateway for processing Internet credit card transactions through a "shopping cart", this solution is only available to merchants who have had a non-web merchant solution with them for more than a year or who have lending or deposits with them in excess of $250,000. Therefore, despite the country’s relative wealth, mid-size businesses and new ventures may experience difficultly in becoming Australian e-tailers unless they look offshore for an international Internet transaction settlement solution.

At the moment it is possible to establish a merchant accounts in a number of offshore jurisdictions including: Barbados, Cayman, Panama, and Bermuda. Surfing the web will produce a number of companies promising to establish merchant accounts without background investigations, credit checks or banking references. But there is a catch – the companies offering these "hassle-free" offshore accounts tend to have higher discount rates, require large upfront security deposits or hold all proceeds for a period of one month to ensure availability of funds to cover Chargebacks. At the present time, Bermuda is the only offshore centre offering Internet merchant accounts that has established "know your customer" due diligence policies and banking transparency regulations in place. The island derives its income base from customs duties, employment taxes, land taxes and various levies. It does not tax income or profits, nor does it have any form of value-added tax or sales tax.

Bank of Bermuda, the world’s largest offshore financial institution, offers full Internet transaction settlement services for VISA, MasterCard and American Express including retrievals, Chargebacks and dispute resolution. Through its established gateway partners, the Bank is able to offer settlement for US dollars, Canadian dollars, Sterling, Euro, Hong Kong dollars, Singapore dollars, and New Zealand dollars.

The advantages of establishing a merchant account at Bank of Bermuda include:

• Ability to accept VISA, MasterCard and American Express credit card payments over the internet
• Internationally competitive discount rate
• No exchange rate or transfer restrictions
• Real time processing
• Multiple certified gateway solutions
• Safe state of the art secure servers
• Credit card numbers are not stored in any system – this information is encrypted and stored off-site by financial processing institution
• A variety of options exist to administer, invest and / or transfer funds as required

According to both the regulations of the credit card associations, and Bank of Bermuda, merchants wishing to settle credit card transactions in Bermuda must have established a "presence" on the Island. At the moment, companies may choose between forming a traditional corporation, and establishing a virtual presence known as an "eSuiteä ".

Acquiring an eSuiteä is typically a more cost-effective process than establishing a presence in many other jurisdictions, and is ideal for both B2B and B2C applications including: e-merchants, on-line catalogues, ISP’s, software and other technical support, telecommunications and vertical exchanges. This segregated account structure is made possible through a Bermudian private act of Parliament, known as the EBS Ltd. Act, which is sponsored exclusively to oeBusiness.com Ltd.

Under the provisions of the Act, the assets and liabilities of each virtual entity are insulated or "firewalled" from the assets and liabilities of all other segregated accounts and from the company issuing the virtual entity itself. Consequently, the assets of one virtual entity cannot be applied against the liabilities of another. However, in some instances it is possible for the Proprietor of a virtual entity to enter into contracts with third parties including other virtual entity Proprietors.

As with all companies seeking to establish a presence in Bermuda, each eSuite^TM applicant must then undergo a vetting process designed to, amongst other things, ensure the exclusion of any illegal activities and/or association with illegal activities, proscribed activities or bankruptcy proceedings. For the typical client, the eSuite application process commences with a preliminary e-mail questionnaire in which basic company information is obtained including: company name, address, country of registration, ownership, nature of business, annual volume of sales, estimated value of transactions, and website address. The information provided is held in the strictest confidence and is used to determine the VISA and MasterCard bank discount rates for qualified applicants.

Upon receipt of a client application, the client’s business profile is reviewed and an immediate response is sent providing preliminary fee quotations based on the information provided and recommendations as to any additional service options that are required such as: virtual or physical hosting, facilities management, multiple payment gateway solutions, website design and development, e-commerce risk management and insurance solutions, operations management, as well as corporate administration.

Companies which successfully pass the due diligence process receive a "Suite Proprietor" contract and a Bank of Bermuda merchant account contract for review and execution. The Bank of Bermuda and oeBusiness.com work closely together in developing and customizing solutions and services which best meet individual client Enablement needs. Applications for these virtual entities are available on-line at: http://www.oebusiness.com