eCharge Aims to Take the Card Out of E-Commerce Credit >BY Nick Patience

Computergram International, August 17, 1999

Next month eCharge Inc will launch an internet payment system that it believes will put all the current credit card-based systems in the shade, be they macro or micropayment based. It will effectively launch a credit system minus the card and by using fewer financial institutions keep costs down, thus making it attractive to merchant and users alike.

So-called "one-click" shopping tools are all the rage at the moment, enabling users to enter details once and then buy from any merchant that supports the system. eCharge still needs the support of merchants and the building the critical mass of both merchants and users will be crucial to its success. But, believes co-founder George Fleming, the fact that it can offer it cheaper will enable it to take off in a way that systems such as CyberCash's InstaBuy, iCanBuy and the Qpass micropayment system have so far failed to do. Fleming believes that eCharge can offer merchants transactions up to one full percentage point below current fees, which when applied to the volume of sales being recorded by the likes of Amazon.com Inc can make quite a difference.

eCharge uses digital certificate technology from Entrust Technologies Inc, but will support others after the launch. The backbone is being managed by Electronic Data Systems Corp and the company hasn't named its financial institutions yet. This 'closed loop' system with eCharge handling both the merchant and the consumer means that only one bank in each jurisdiction is really needed. But, says Fleming, the company will probably partner with more than one because of the varying level of risk involved.

Another advantage that eCharge claims it offers over credit cards is that users will be able to get approval online and start using the system straight away, rather than having to wait for a card in the mail. Users will be able to apply for either a credit or pre-payment account. The latter is useful to capture those with insufficient credit histories to get a credit account or for parents of college students who want to give them money to spend but control the amount. The company is planning to launch affinity programs and will offer its partners detailed data mining capabilities. According to Fleming, by using digital certificates that are issued automatically to users when they sign up, information such as user's names and addresses do not need to be supplied to the merchant, apart from when delivery details are required. That way, eCharge can offer better privacy protection for users while also being able to offer incentives if they do want some of their details disclosed.

This is the second phase of eCharge's development. The Seattle, Washington-based firm launched itself in April 1998 with a system to charge purchases, made over the net directly to their phone bills (04/29/98). That system, called eCharge My Phone, has been up and running for a couple of months in the US and for a month in the UK and Sweden. The company has partnered with AT&T Corp in the US, Cable & Wireless Plc in the UK and Telia AB in Sweden and Telus Corp in Canada. It is talking to 12 other telcos at the moment. There are currently about 85 merchants in that network and more news about eCharge My Phone is expected later this week.

eCharge has just closed its series A funding, which along with earlier money from angel investors, brings the total raised to $35m. It will start the series B round later this week and that will be the last before an expected initial public offering early next year. Principle investors include T-Venture, the investment arm of Deutsche Telekom AG, Hikari Tsushin of Japan and Shanghai Industrial Investment Corp. The prominence of non-US investors highlights the fact that the company feels this will have more appeal outside the US in countries with less credit card penetration. Chief executive Ron Erickson has just returned from China where he believes there is a huge opportunity for eCharge.

eCharge will launch the new system in September, with initial consumer roll-out in November. A SoHo product will be launched around the end of the year, and a business-to-business product in the first quarter of 2000.