Academic journal article ABA Banking Journal

New Wave of E-Money Options Hits the Web

Academic journal article ABA Banking Journal

New Wave of E-Money Options Hits the Web

Article excerpt

E-commerce and newfangled computer gear are coaxing old-fashioned cash into futuristic form. Take the case of e-mail money. Representing encrypted value that is first paid for in the real world (by credit card or cash), and later presented for online purchases, it is arguably more of an electronic instruction to pay than true "electronic money." But it is nevertheless a significant development.

Until recently, the ability to make secure nonrepudiatable non-credit card payments efficiently has been missing from the e-commerce mix. Early 'Net users downloaded their music, or picked up Furbies, books, flowers, and clothing by giving a merchant credit card information (or by mailing a personal check), or they didn't transact.

But inventive providers are offering an expanded palette of options. New York City-based Internet-Cash Corp., is a newer e-mail money provider, as are the slightly more established, Conshohocken, Pa., eMoneyMail, (Bank One's venture), ecash technologies, Inc., Bothell, Wash. (which sells its technology to banks), PayPal, a free service from Palo Alto-based, and Billpoint, San Jose, Calif. (an eBay company which is partnering with Wells Fargo bank to offer payment services for the auction site).

Providers vary in approach, and in the "sweet spot" they target (e.g., auctions, person-to-person payments, or business-to-consumer transactions), yet all offer a payment that to some degree mimics cash. In doing so "e-cash" takes on some of paper money's key attributes, including durability, anonymity, and divisibility. Unlike earlier payment technologies of this ilk--notably the Digicash and Cybercash services of the mid '90s--"e-mail money," generically speaking, is more elegant. It requires no software downloads or especially elaborate activation schemes.

The newer services vary in their features, differing in everything from how they encrypt and activate value, to the type and extent of information they collect to process the payment, to how or whether fees are charged. "It's definitely a new and evolving payment form that can cause confusion due to its similarity [in some cases] to debit and credit forms," notes Ken Kerr, senior analyst at Gartner Group. "E-cash ventures are typically secured with an ACH deposit, though some vendors accept credit card deposits too," he explains. "The vendor/host doesn't pay any interest on the deposit and really, they make their money on float," Kerr adds. (They do pay a credit card processing transaction fee, however.)

Matt Gillin, president and CEO of offers his "take" on the form: "To be successful, this payment type will have to be 'device agnostic,' working with wireless technologies as well as it does with e-mail. It will need to leverage the existing payment infrastructure, either ACH or credit; and the digital cash will need to be easily converted from the virtual to physical worlds. I don't think people will want a lot of restrictions about where and how the 'money' can be used," Gillin adds. "Remember this is supposed to function like cash."

Gillin's company includes former employees of American Express, MBNA America, and Andersen Consulting among its staff. Though originally conceived as a consultant in Internet payments, saw an opportunity to create a new form based on patterns of commerce on the Net--and seized it.

Called the "personal account," this payment system uses a patented technology that, in essence, issues a virtual 16-digit MasterCard debit card as soon as funds are deposited (by the account holder or by someone sending funds on their behalf). Unlike the services of some competitors,'s "money" isn't limited to online transactions, but can be taken out of an ATM as cash. It's also "personal," in that the features of the account will vary somewhat, depending on the account holder's patterns of use.

Though comparatively new (product introduced about 15 months ago) the form is getting traction fast, says Gillin, and some indirect indicators point to a sizable growth potential. …

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