Early access to strong encryption came from activists who created ways for civil rights activists to secure their communications from repressive governments. The technology, known as Pretty Good Privacy, was not easy to use. When Netscape released a form of public-key encryption, Secure Sockets Layer, in its browser in 1995, the process was easy and hidden away. The open internet could be secured, allowing credit card numbers, as well as other sensitive information, to be transferred with ease.
E-commerce helped keep us hidden from governments through encryption, but it also pushed us to be visible to businesses as we shopped. The web cookie, pioneered by Lou Montulli of Netscape, created a unique identifier every time a browser connected to a website. The cookie allowed us to have online shopping carts, but it also set the stage for us to be tracked across the internet. E-commerce legitimated encryption in a way that even governments could not resist, but also fostered consumer tracking in a way that we couldn’t either.
The business infrastructure of the early 1990s made e-commerce possible in ways beyond the encryption. The early 1990s also marked the moment when credit card securitization really took off. In 1990, 1 percent of American credit card debt was securitized. By 1997, 51 percent was. Electronic payments, made possible through credit cards, were easier than ever.
If credit cards enabled checkout, then supply chain management made delivery possible. During the 1970s, Walmart had achieved its market breakthrough by computerized inventory and logistical management, and then in the 1980s other corporations, trying to keep up, began to manage their supply chains. With e-commerce still in its earliest phases, business thinkers were already hard at work considering how to use data to optimize their now global supply chains.
The 1994 Marrakesh Agreement, which established the 123-nation World Trade Organization in 1995, made those flows smoother than ever before. This increased economic interconnectedness, lack of any major wars, and the relative political stability of the mid-90s, quite anomalous in human history, made up the right geopolitical mix to enable the technical innovations behind e-commerce to come together. E-commerce seemed to go hand in hand with the triumph of Western democracy and logistical capitalism.
Today, of course, we know that there is no such determinism to either the internet or e-commerce. There is, however, a similar underlying problem to the one faced in 1994: a lack of trust. Consumer privacy and transactional security remain challenges for e-commerce globally, and it is not clear that all of it will end well. Here in the United States, we continue to struggle with how to balance privacy and commerce to preserve both civil liberties and free trade. The old struggles of capitalism and society continue in a new guise.
If we are a bit less blinded to the shortcomings of e-commerce than we were in 1994, we also remain guardedly optimistic, at least if our rising online spending reflects our beliefs. If the early days of e-commerce depended on trust, then the future of e-commerce depends less on the next technology than on how we choose to design and deploy that technology in a trustworthy fashion, just as we did in 1994.
Louis Hyman is a professor of history and the director of the Institute for Workplace Studies at Cornell, where Kwelina Thompson is a graduate student. They are co-authors of “the History of E-commerce,” a research study by Cornell and PayPal, from which this essay is adapted.
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