CyberCoin & Internet Wallet. Micropayment scheme
Ray Van Eng (10/08/96)
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You may have also noticed that most of the goods on sale on the Internet carry a price tag of at least US$10 or more. A major reason for this is because the credit card processing cost still remains too high for merchants to make any money on purchases of lower price items. For example, how could a web publisher be able to charge $0.25 for reading an article online or $1 for a real-time stock quote? Or may be a cyber Donald Trump would like to entice you to try your luck with a hand of Black-Jack at $2 a bet, how could that be done? What if you got a credit of only $3 left after a few hands and want to cash out, how do you get paid? All these small transactions online would require a payment scheme that carries a low overhead and be able to accomplish instantaneously. Friends, we are talking about micro-payment in cyberspace here. CyberCash may have a solution that could make these almost nickels and dimes dealings possible on the Internet. CyberCash is introducing the CyberCoin service that enables online transactions ranging from $0.25 to $10. The consumer would first download a free software known as the Internet Wallet (IW) from the CyberCash web site (www.cybercash.com) and be able to transfer money (at no cost) from either their bank accounts or from their credit cards to the IW. Up to $80 can be put into the IW in $20 denominations. Whenever the consumer makes an impulse purchase for goods, services or entertainment at a participating CyberCoin merchant web site, he/she just pull out the IW and click on the coin icon as an indication of payment. The transaction would be completed in a few seconds. The merchant would eventually be asking the bank for re-reimbursement, and at that time a transaction fee would be levied by the bank to the merchant. CyberCash would get a percentage of the transaction fee. Merchants will likely pay the bank about 8 cents for a 25 cents sale and up to about 31 cents for a $10 transaction. Besides the capacity to hold CyberCoins, the wallet can also be used to carry encrypted credit card information as other payment options over the Internet. To make money management even more complete for the consumer, the IW will keep an audit trail of spending at various merchants. Unlike other systems such as smart cards that actually host monetary values, the CyberCoins will not be lost if the consumer's computer crashes and information becomes non-retrievable. The consumer simply would not be charged by the bank because no purchases can be made after the computer has lost all its data. To lend an added measure of security for the consumer, money in the CyberCash system are FDIC- insured. All these may seem to make the CyberCoin a superior system to the smart card alternatives. Bear in mind that CyberCoins can only be used for transactions between the consumer and the merchant on the Internet. Smart card systems such as the Visa Cash card or the Mondex card currently being tested around the world offer much more flexibility. Smart cards can be used not only in the cyberworld through specially designed point-of-sale (POS) terminals, they can also be used in the real world at street level shops where money could be spent anonymously and privacy can almost be totally ensured. Incidentally, CyberCash is working with the London, UK based Mondex International to incorporate smart card technologies into future products. Netscape has agreed to incorporate the CyberCoin system into future versions of Netscape server (Live-Payment) and client (Navigator) software. CyberCash says that they will have an "electronic check" system that by-passes the traditional banking links by the end of 1996. Although Microsoft has not made any announcement about collaborating with CyberCash, the Redmond software giant has indicated in the past that wallet like technologies will be an integral part of their electronic commerce software for server (Merchant System) and client (Internet Explorer) operation. A number of U.S. banks and financial institutions including First Union, First USA Paymentech, First Data Corporation, and Michigan National Bank have agreed to offer the CyberCoin service to merchants and/or to consumers before the end of 1996. "CyberCoin fulfills a growing need for consumers to purchase lower-priced and 'impulse' items on the Internet -- especially digital goods and services that can be instantaneously downloaded to your computer, such as software, articles, research, games and music," asserted Bill Melton, CEO of CyberCash. "Internet merchants must offer consumers the ability to make spontaneous, small denomination payments on the Internet to take electronic commerce to the next level." |
© Copyright Ray Van Eng 1996 - 1999. All rights reserved.
