Payment Options and Online Services - Digital Cash

DIGITAL CASH

Another downfall of the credit card payment method is that it excludes anyone without a credit card. To allow individuals without credit cards to make purchases online, many firms began devising online cash payment systems. A prime example of a digital cash payment method provider is InternetCash, which was founded in March of 2000. InternetCash users purchase a cash card at a retail outlet, such as a convenience store. Using a credit card reader, the retailer who sells the cash card sends notice to Internet-Cash that the card has been purchased. The next time the InternetCash cardholder goes online, he or she logs onto the InternetCash Web site, activates the account, and selects a password. From that point forward, the shopper can use the money in the InternetCash account to purchase goods and services from any merchant that accepts InternetCash. To be equipped to accept InternetCash payments, merchants simply install software that operates in the same fashion that credit card payment processing applications work. For shoppers, one major benefit of using InternetCash to pay for online purchases is the anonymity it offers. According to PC World writer Karen Bannan, "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. May e-cash vendors charge merchants lower fees than credit card companies do and have a simpler sign-up process."

Some digital cash firms have even gone so far as to attempt to create a new form of online currency. For example, Beenz.com, founded in March of 1998, was based on a system that allowed users to accrue points by doing things like completing surveys, registering at Web sites, and spending a certain amount of money at a particular online store. Users who had accumulated enough "beenz" could redeem them for merchandise. Using a similar tactic, Robert Levitan, co-founder of leading women's Internet hub iVillage.com, created Flooz.com in September of 1999. According to an August 2001 article in American Banker, the firm sold "a digital currency that was meant primarily for online gift certificates. A consumer could charge, say, $50 worth of flooz on a credit card, e-mail it to a friend, and let the friend use the flooz (which could not be turned back into cash) to buy things online from merchants that accepted it." The article points out that while both firms "must have had visions that consumers would be as eager to collect their products as housewives of yore were to amass S&H Green Stamps, they systems they set up did not mesh well with the existing payment systems." As a result, by mid-2001, Flooz.com and Beenz.com had halted operations.