The quick tour: a summary of approaches

RELease 1.0, Jan 24, 1995

Electronic-commerce efforts range from simple to complex, low transaction value to high, transaction services to complete commercial environments. A few target interesting niches; many aim to suit almost everyone. Here is a summary of the initiatives we know (for pointers to these companies' online presences, see Resources, page 27). Interestingly, several of them are designed to manage payment for the kind of intellectual property that we stated last month might be offered free as an inducement for other service-or performance-related payments. Many high-value items will, of course, still be metered (see Release 1.0, 12-94).

Welcome to net/digi/e/cyber/cash/bill/check/bank/site

NetBank has offered e-mail-based pocket change for the Internet since May, 1994. Founded over a year ago by Bob Houston, president of Maryland-based Software Agents, NetBank offers people and companies a low-cost way to buy and sell low-priced items. NetBank collects fees only when money enters and exits the system. As long as people keep NetBank's NetCash circulating, it's like cash. If Zoe pays Phil in NetCash, Phil can use it to pay Alice, without incurring a fee.

To get real money out of the system, open a merchant account and deposit NetCash coupons in it; merchants may specify how often or at what threshold value they wish to be paid. NetBank charges a two percent fee when it converts NetCash to US dollars, subject to minimum charges of $1 for check cashing (people buying NetCash) and $4 for merchant payments. NetBank does not yet support foreign currencies, but plans to.

A NetCash coupon looks like a line of text in an e-mail message. For example, the line "NetCash US$ 10.00 E123456H789012W" represents ten US dollars of NetCash. When NetCash changes hands, the recipient sends an accept" transaction to NetBank's server, which returns the coupon with a new ID number. The old one is then void, which prevents its being spent again. An e-mail merchant catalog is available to anyone who requests it. To pay for items with NetCash, buyers must send exact change to the seller (the NetBank server makes change). The NetBank system is simple enough that a merchant can create a virtual vending machine with a few pages of Perl script.

NetCash holders are responsible for securing the IDs. Whoever submits a particular ID first gets its value. NetBank does support PGP encryption to secure transactions. There is no maximum denomination for NetCash, but NetBank does specify that items for sale not exceed $100. NetCash initially had only denominations that match US currency, but that proved cumbersome. Since October, 1994, the system supports arbitrary amounts. NetBank is also working with MIME to improve the e-mail interface.

First Virtual Holdings has already launched a system that makes clever use of information physics. When an information merchant fulfills an order, it doesn't deplete its inventory, so First Virtual has them deliver the information immediately. Buyers get instant gratification; later, they must confirm their purchases and may decline to pay. First Virtual monitors purchase patterns and closes abusers' accounts. The system is easy to enroll in, easy to use, doesn't require encryption and attaches to the credit-card system, through the First USA bank. First Virtual's system is explicitly not intended for the sale of hard goods. It offers small merchants a way to make money, even if they don't qualify for a Visa merchant account (more details, page 23).

CyberCash, a friend of the banking system, has two efforts underway: an authorized merchant service and a peer-to-peer service (the latter is portable electronic cash you can pass to a friend). The first system uses special client and server software developed by CyberCash to put a "pay" button on the screen of an online service or Web browser. A prospective buyer needs to download that software and establish an account prior to the initial purchase with CyberCash.

When a buyer presses the button, it calls up a purchase form, into which the buyer enters her CyberCash account information. The merchant passes that information, encrypted along with purchase details, to CyberCash, which presents the information to the buyer right away for approval with a digital signature. When the transaction is complete, CyberCash sends it to a bank as if it were a traditional credit transaction. It charges the consumer a transaction fee roughly equal to the cost of a postage stamp. CyberCash expects to have a pilot version of the merchant system running by April and eventually plans to support debit cards. Its first partner is Wells Fargo Bank, but CyberCash plans to offer its services to many banks.

The peer-to-peer system uses blind signature technology licensed from DigiCash to allow any CyberCash account holder to pass cash" to another account holder unilaterally and without intervention from a server. The digital cash is first certified as authentic by a bank. Bill Melton, founder of VeriFone, and Dan Lynch of Interop fame co-founded CyberCash in 1994. The Merchant system seeks to do for the Internet what VeriFone did for credit-card transactions over point-of-sale terminal devices.