Review: No credit? Digital cash made easy

From...

by Karen J. Bannan

(IDG) -- Sure, some people feel Visa is everywhere they want to be, and others won't leave home without their American Express card, but more than one-third of the U.S. population don't own credit cards. That lack of plastic has kept those millions of people out of the online shopping frenzy.

Enter ECharge, Cybermoola, InternetCash, and other companies, each of them aiming to provide you with an alternative to credit cards to use for your online shopping. The concept has been around since 1994, but only now are these services making serious inroads, popping up on major e-commerce sites such as Barnesandnoble.com and Buy.com.

Merchants benefit as well. They not only increase their potential buying audience, but they also gain the ability to offer inexpensive items ($10 and under) that are not profitable when handled via credit card transactions. Many e-cash vendors charge merchants lower fees than credit card companies do and have a simpler sign-up process.

Cash in many colors

Alternative payment options vary depending on how users fund their purchases. Today, a stored-value model is most common: You fund an online account with traditional currency--either cash or credit card. Services like Cybermoola and InternetCash fall into this group. Services such as ECharge Phone adhere to a different model--here, you accumulate a balance, then pay a single bill each month.

Limited acceptance plagues all alternative payment methods. And finding out which stores take your option can be a chore. Most store sites list the forms of payment they accept, but such listings can be deceptive. To use an alternative payment service, you may have to enter a merchant site from the e-cash vendor's "mall" or Web portal, and some merchants don't list certain e-cash options on their information page, even though they do accept these at the virtual checkout. To be safe, check your e-cash vendor's site for a list of online shops that accept that payment method.

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PIN money

Cybermoola sounds completely Web-based, but this stored-value option requires an offline component. You buy Cybermoola credits at your local supermarket or via snail mail in $20 to $100 chunks, just as you would with a prepaid phone card. You then log on to the company's Web site and enter those credits into your account. As long as your account has funds, to shop, just enter a PIN number at the checkout stage on Cybermoola's site.

If you lose your Cybermoola receipt before uploading the credit into your account, you can't get a refund. Cybermoola also takes some effort to buy: Today only four chains--Big Bear, P&C, Quality Market and ShopRite--sell it; the company is negotiating with others.

InternetCash, another prepaid option, works much like Cybermoola but is available nationwide through Western Union, bill-payment merchant In Person Payments, and prepaid service provider Pay Smart America. You can also buy it at the company's Web site, using a credit card or Western Union PayCash (another e-cash service). To spend your riches, go directly to any of more than 200 stores online.

InternetCash plans to test a better option in the first quarter of 2001. The program will let participants use their own bank-supplied debit card and PIN number at over 80,000 Net stores. Buyers never have to convert cash or credit into e-cash. A Gartner Group report predicts that online purchases via debit cards will account for up to 30 percent of all online shopping by 2003.

Achex is already in place and works like a debit account. You give Achex your banking information and create a user name and password. At sites that accept Achex (three at press time, many more on the way), you choose Checks as a payment option, then enter your user name and password. Your purchase is deducted from your checking account.

ECharge Phone service is a different beast. The account is linked to your phone bill, and your online charges appear just the way long-distance calls do. That setup makes ECharge Phone easy to use and to abuse: Users can get in over their head without set credit limits. ECharge also offers a new Net Account option that lets you link to your credit card or prepay; this option is currently accepted at six sites.

Some e-cash vendors opt for a hybrid. Trivnet, a technology infrastructure provider, lets ISPs, mobile operators, and other third parties provide customers with Trivnet's WiSP currency. Users prepay or get charges on their monthly bills.

What's in it for me?

Aside from helping reduce your dependency on credit cards--and the interest charges these entail--most e-cash methods restore your anonymity. Sure, Net merchants still know your name and address, but they can't tie you to the leather jacket or plane tickets you bought last week--and that cuts down on targeted ads and profiling.

E-cash also increases security. Many people feel safer not giving out credit card information online, says ECharge chair Ron Erickson. E-cash account numbers sent to and from stores aren't tied to social security numbers or addresses. If hackers intercept this data, they get only the account number and bill amount. Unlike with credit cards, most e-cash options require you to supply a password to complete a transaction. Stolen possession of an account number by itself is unlikely to permit fraudulent charges.

Discover has responded to security concerns with its Discover Deskshop 2 service. When you shop, Discover generates a random number for you to use in place of your credit card number at a given site. You never give the online vendor your real card number, and you don't have to worry about acceptance--if the site takes the Discover card, you can use this service.

"Consumers are looking for a payment option that combines a recognizable brand with ease of use," says Jupiter Research analyst James Van Dyke. "In the end, a bank or existing payment option that offers a wide variety of payment options under one roof is probably the model that's going to succeed."

Shoppers want a payment option that gives them a recognizable brand and is easy to use.

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Discover to offer single-use credit cards
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Net study has positive results
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Credit-card numbers exposed in extortion attempt
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PCWorld.com editors' guide to shopping sites
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We're shopping more online, liking it too
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Making the customer king
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Does shopping online cheat your library?
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InternetCash
Cybermoola
ECharge

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