Downloading dollars - transactions on the Internet - includes related article on emerging digital payment methods - Communications - Column

Home Office Computing, August, 1995 by David Hallerman

AMID THE ESCALATING TALK ABOUT DOING BUSINESS ON the Internet with its estimated 30 million visitors, one central yet knotty problem is just starting to come unraveled: How do you get paid in a digital world?

Nethead entrepreneurs have already increased their reach by sending e-mail to clients and researching business opportunities via online databases. The potential for online storefronts is equally astounding. But who would send and receive payments through an Internet blighted with hacker brigands waiting to pirate your money?

Luckily for the budding online businessperson, there are several ways to beat the insecurities of the Net. Although no single transaction solution has yet dominated, standardized, or sanitized this frontier marketplace, if you want to sell information, services, or products online, there are several ways to get paid electronically that are safe and secure.

Accepting payment online increases your moneymaking opportunities, not only by letting you do business in other ways but also by leveling the playing field between you and the Fortune 500 set. On the Net you're just as accessible as they are. A strong online presence also projects the image of an up-to-date, forward-thinking company that's committed to serving its customers in every possible way.

Your choices for payment online are similar to your choices in the flesh--cash, credit card, or check. And as in the real world, the more ways you accept payment online, the more likely you are to make the sale.

Transaction Problems No matter which method of digital payment you choose to accept, there are a few problems associated with online transactions of any sort. The remote nature of these transactions brings up questions of authenticity: If you can't see the customer, how do you know he is who he says he is? Also, your customers may be wary of hackers who aim to steal such information as credit card numbers and then rack up fraudulent charges. These issues can be boiled down to five central questions both parties need to consider:

*Are you who you say you are?

*Can I prove you ordered from me?

*Can you prove you ordered from me?

*Can anyone else see our messages?

*Can we be sure the message I get is exactly what you sent (and vice versa)?

The most common solution to these problems is encryption, a technology that scrambles messages containing sensitive information so only the intended recipient can read them. This technology is also used to create digital signatures that verify online identities. First Virtual Holdings, however, uses a different method to enable secure online transactions, bypassing encryption entirely (see the box "Setting Up Shop With Electronic Cash" for details).

In the near future, most Web browsers will integrate encryption technology directly into their software (see "Just Browsing," July, page 98, for our roundup of Web browsers). That means if your storefront is on the World Wide Web, the same software that people use to visit your site will enable them to pay you securely.

Credit Where Credit Is Due Encrypted credit card transactions sent out over the Net are almost identical to credit card purchases performed over the phone (except that the encrypted online versions are probably more secure).

If your business can get merchant status to accept credit cards, then finding a provider that uses a secure Web server, such as Netscape's Commerce Server, should be your first priority. But bear in mind that credit card transactions typically make sense for larger purchases, and merchant accounts are not available for every business--especially smaller, home-based ones.

Cashing In Online Encryption technology also enables secure transfers using digital cash. Customers exchange real money at virtual banks for digital chits they can spend online. Anyone can then redeem them for cash or spend them again. As an electronic merchant, the main advantage of these digital cash schemes is that there is no membership or other prior conditions necessary for you to begin accepting money (other than having the freely available software on your PC). When someone pays you in digital cash, you can immediately turn around and spend it on other virtual delights, all without contacting the bank that created it. The only time you have to deal with them is if you want to convert your digital cash to the analog format (better known as greenbacks).

If you're selling inexpensive goods, such as an online newsletter, you'll probably also want to accept digital cash. As we went to press, NetBank's NetCash was the only fully active cash format, but DigiCash's ecash looks promising, although they hadn't yet announced a launch date.

Bringing Your Business Into the New Era No matter which way you allow customers to pay you, just being able to accept payment online marks you as an innovative business. What's more, most of the methods we looked at were quite reasonably priced. In this increasingly wired world, electronic payment is one of the most convenient ways to open new markets.