[117682] in Cypherpunks
Digital Cash Is Back
daemon@ATHENA.MIT.EDU (Anonymous)
Wed Sep 8 22:17:34 1999
Date: Thu, 9 Sep 1999 03:35:40 +0200 (CEST)
Message-Id: <199909090135.DAA25947@mail.replay.com>
From: Anonymous <nobody@replay.com>
To: cypherpunks@toad.com
Reply-To: Anonymous <nobody@replay.com>
<http://www.thestandard.com/articles/article_print/0,1454,6192,00.html>
Digital Cash Is Back
Bet you thought you'd heard the last of micropayments. Guess again.
By Megan Barnett
So far, every attempt to create a new currency for the Internet Economy has failed
miserably. The digital-cash business has been plagued by a terrible
chicken-and-egg problem: Consumers won't buy into new payment systems that
aren't in common use, and without mass consumer participation, merchants will
be indifferent at best.
Nonetheless, the concept of digital cash refuses to die Ð and there are a number
of new players ready to tackle the issue yet again.
Certainly, they can't do any worse than the early entrants in the field. In 1994, for
instance, CyberCash (CYCH) built a business around the idea of giving consumers
access to "CyberCoins" to pay for small-ticket items. But after a five-year struggle
to make the system work, the company finally dropped the project in May.
Digicash, another micropayment software provider, last year filed for Chapter 11
bankruptcy protection. These and a handful of other cumbersome solutions that
enabled merchants to handle small transactions without the burden of credit-card
processing fees failed to gain traction with either consumers or retailers.
The new generation of digital-cash companies Ð including eCharge, Qpass, Ipin
and OneClick Charge Ð contend their new payment systems will be easy for
consumers to use and painless for merchants to implement. The result, the
companies claim, will be a revolution in the way content is paid for over the Net.
Publishers of digital content Ð including games, music, text and videos Ð thus far
have not found a viable solution for handling very small transactions. And that's a
problem. As the Net has matured, many content companies are beginning to
realize that advertising revenue alone can't sustain a business. Only a few
companies have had success with subscription-based business models online.
And as higher transmission speeds and improved streaming technology increase
the multimedia content available, the need for an alternative to credit cards
increases.
A logical alternative: digital cash for small transactions. Over the last year, for
instance, the music industry has embraced the Net as a distribution platform,
sparking the creation of new startups focused on music downloads. Songs are
sold for as little as 99 cents apiece Ð which makes the market a prime candidate
for digital cash. Not only are customers often reluctant to enter their credit-card
information for such a small purchase, but merchants and issuing banks can't
make money on such tiny transactions after processing fees are paid.
Qpass [which counts The Standard's Web site among its partners] thinks it has
the problem licked. Its approach: lump purchases into a single monthly
credit-card charge. Other payment systems are gaining instant access to large
customer bases through partnerships with ISPs or other institutions with billing
relationships. Purchases are simply added to monthly ISP bills or phone bills, or
deducted from bank accounts.
Some of the new payment systems sit between consumers and credit-card
companies; others will directly take on the card companies, establishing billing
deals with utilities or banks.
"We've found that consumers want a brand they can trust," says Jim Degracia,
senior VP of e-commerce for Visa USA. "We don't have any trust hurdles on the
consumer side and we don't have an acceptance issue on the merchant side."
Visa is working on two payment solutions for small Web transactions: a prepaid
account service and an aggregated transaction service.
They will be tough competition. Even if content providers buy into these new
systems, there is no guarantee consumers will follow. While the Net has changed
the way people spend money, it still hasn't found a place for pocket change.
New Ways to Pay Online
A guide to the new generation of online payments systems
COMPANY
WHAT IT DOES
MERCHANT/CONTENT PARTNERS
CyberGold
Earn & Spend incentive
program; click on ads,
earn money and spend
in network
Animation Factory, Axis 3D,
GoodNoise, Nolo Press, ZDNet,
CDWorld
eCharge
Pay in advance with
online bank account, or
charge to phone, cable
or utility bills
Unannounced; service is expected
to launch in Q4
Ipin
Charges digital content
to ISP bill
eMusic, AT&T Music, Virgin Radio,
BBC
Millicent
Digital wallets with
Millicent "scrip" inside.
Asahi.com, Oxford University
Press, Military Miniatures
Magazine
One Click
Charge
Prepaid account with
credit card for digital
content purchases
Zack's Investment Research,
Institutional Investor, MaMaMedia
Qpass
Payments are
aggregated monthly and
charged to a credit card
Wall Street Journal Interactive,
Morningstar, PR Newswire,
TheStandard.com
Trivnet
Charges digital content
to ISP bill
Tucows, Jerusalem Post
Mentioned in this article
COMPANIES
CyberCash (CYCH) Reston, VA
AT&T Englewood, CO
Morningstar Chicago, IL
