[2582] in cryptography@c2.net mail archive
Credit cards crushing virtual cash
daemon@ATHENA.MIT.EDU (Robert Hettinga)
Sun Apr 26 23:14:37 1998
Date: Sun, 26 Apr 1998 07:12:59 -0400
To: cypherpunks@cyberpass.net, cryptography@c2.net
From: Robert Hettinga <rah@shipwright.com>
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Date: Fri, 24 Apr 1998 20:28:18 -0700 (PDT)
From: William Knowles <erehwon@dis.org>
To: Digital Commerce Society of Boston <dcsb@ai.mit.edu>
Subject: Credit cards crushing virtual cash
Organization: Home for retired social engineers & unrepented cryptophreaks
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Reply-To: William Knowles <erehwon@dis.org>
[ZDNNet News] (4.24.98) The struggles of First Virtual Holdings Inc.,
an e-commerce technology company, to make its payroll have left many
wondering: What ever happened to virtual cash?
But First Virtual's problems don't necessarily reflect on the
potential of innovative methods for making payments over the Internet,
according to industry observers.
"It says more about (First Virtual's) business model than it does
about virtual cash," said analyst Cliff Condon of Forrester Research
Inc. As for forms of electronic payment other than credit cards,
there's room for plenty of choices, Condon believes. "Some people just
don't like credit; they prefer to buy as they go. There's room for
that."
If you're wondering what the fuss is all about, turn the clock back to
1994, when First Virtual premiered its Internet Payment System, one of
the first attempts to facilitate secure online transactions.
A new currency Internet Payment System, along with tools from
CyberCash, Digital Equipment Corp.... and DigiCash, broke new ground by
proposing a new kind of currency -- virtual currency.
Instead of drawing directly on a bank account, the user could, for
example, transfer money to an electronic "wallet" (in CyberCash's
system) and dole out anything from a few cents to a few dollars with a
minimum of fuss.
Virtual cash was supposed to revolutionize the way consumers bought
content online: Instead of free content supported by advertising,
companies could sell magazine articles, for example, for a few cents a
page.
First Virtual rode the wave of techno-optimism to a successful initial
public offering of common stock in December of 1996, generating $18
million at $9 per share.
But that stock has been trading at under a dollar recently, and First
Virtual pulled the plug on Internet Payment System earlier this year.
'Bleak' picture for micropayments "People are using credit cards for
smaller and smaller purchases on the Web," explained Chris Gwynn, an
analyst with The Yankee Group. "This big reluctance to use a credit
card for small purchases is not real."
The big picture for micropayments? "It looks pretty bleak," Gwynn
said.
While consumer e-commerce continues to grow by leaps and bounds,
shoppers have taken to buying books, CDs, clothes, vacations and even
cars and houses over the Net without seeming to miss the theoretically
greater security and privacy provided by virtual cash.
In response, e-cash's original proponents have modified their
approach, seeking to make their products more appealing to those
accustomed to the credit or debit-card model.
CyberCash, for example, has turned its cyber wallet into a Java applet
that will run on merchants' Web sites, much as credit card transaction
processing systems run on cyberstores today.
First Virtual's Virtual PIN payment system, observers say, was just
too hard to use, requiring the user to verify each payment by e-mail.
A burden for consumers? "It put way too much burden on the consumer,"
said Forrester's Condon. "Any time you ask the consumer to do
something, it's going to slow down the whole process." Wednesday,
First Virtual announced it had signed a non-binding letter of intent
to sell off a controlling stake in the company to a group of
investors, including Softbank Holdings Inc., to generate enough funds
to keep its doors open beyond the end of April. (Softbank is the
parent company of ZDNet publisher Ziff-Davis Inc.)
In the meantime, First Virtual has left the virtual cash market
altogether, instead hoping to find a market with a new e-mail-based
transaction system -- a kind of super-spam.
"Four of our five founders came out of messaging," said First Virtual
President Keith Kendrick. "By moving into the messaging industry,
we're in a better position to explore our core competencies."
Observers see some potential in the "interactive messaging platform,"
which will allow users to buy a product online without ever leaving
their e-mail in-box.
"That might be kind of cool," said Gwynn.. "(Merchants) are trying to
find any way they can to generate revenue ... and an e-mail system
might be very attractive."
==
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Clearly there will be better job and financial opportunites.
Other high stakes will be missed by people if they don't
master and connect information. -- Everette Dennis
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-----------------
Robert Hettinga (rah@shipwright.com), Philodox
e$, 44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
The e$ Home Page: http://www.shipwright.com/
