Payment systems for e-commerce: Page 3

Posted December 10, 1999

David Strom

David Strom

(Page 3 of 4)

Making payments, Internet style

The first wave of Web payments began around 1995/1996 with companies that minted their own cyber-money and tried to convince consumers to use it in place of credit cards or real cash for Internet purchases. These companies, such as DigiCash Inc. (which was recently acquired by eCash Technologies Inc.), First Virtual Holdings Inc., and others, failed because people had credit cards, were comfortable using them, and didn't trust the Internet bongo bucks developed by these and other companies. It didn't help matters that these products were difficult to implement, requiring custom programming around poorly documented interfaces, among other technical challenges. As a historical side note, the biggest initial markets were the porn merchants, looking to guarantee their buyers' anonymity.

But we still need an easy way to make payments, and in the past few years a number of electronic wallets have been created. These eWallets store frequently used information such as credit card numbers, shipping addresses, and so forth in a piece of software that resides on users' hard disks and is invoked when they go to a checkout screen on a Web storefront. eWallets are troublesome, however: The software is very hard to set up, very particular about the store and screen layouts, and often doesn't work as intended. For example, in the years I have been using various eWallets, I have yet to conclude a single, successful purchase. Often the wallets don't fill out the fields as intended or don't recognize the particular page as a checkout screen and just refuse to provide any information whatsoever. Many eWallets are on their second or third version, and hope springs eternal for companies such as IBM with its Consumer Wallet, The Brodia Group, Citigroup with its CitiWallet, and EntryPoint Inc. to get them right. A new company called Yodlee.com is taking the wallet concept a step further and using its service to store other information, such as frequent flyer accounts, e-mail IDs and passwords, and other frequently misplaced information.

However, look for lots of smoke and little heat in this department for years to come. A good example of the trouble with eWallets is Microsoft Corp.'s foray into this genre. Microsoft included an eWallet in every copy of Windows 98. Unfortunately, it wasn't enabled by default. Instead it was buried several screens deep in the Internet Options control panels. Then earlier in the fall of 1999 the company came out with its Passport technology. Completely Web-based, there is no software to install on any desktop. However, Passport users are required to sign up for Microsoft's HotMail e-mail service, and can't initially enter payment information until they are about to make their first purchase at a Passport-enabled merchant site. All of this is far too confusing for the average Internet shopper.

Web payment transactions can happen in any one of a number of ways. These include manual entry by a human via a point of sale (POS) terminal in a physical storefront; manual or electronic entry via a PC acting like a POS terminal; electronic entry from shopping cart software on a Web site; or via an electronic Internet gateway into the banking network.

The POS technologies, both manual and automated systems, were the first attempts to connect the computer and banking worlds without having to alter either one significantly. Basically, these vendors, including two companies purchased by CyberCash Inc. (Tellan Software Inc. and ICVerify), sell software that runs on a Macintosh or Windows PC and mimics the standard physical POS terminal found in just about every retail bricks-and-mortar establishment. They communicate via a dial-up modem or via the Internet to send credit card information to the banking network, much the same way the physical POS terminal does. If you want to start receiving payments quickly, take a closer look at these technologies and begin with at least manual processing. These methods will work for up to several dozen daily transactions.

The next step up is to install shopping cart software. This is software that handles the checkout screens on your storefront, and has a link to the payment processing network. Mercantec Inc.'s SoftCart is one of the more popular options and comes with modules to work with various CyberCash technologies as well as other systems. This is adequate for smaller catalogs (less than 200 items), but requires more technical storefronts. The most complex and capable solution is to run your own copy of the CyberCash Cash Register software on your Web site. However, this requires more programming expertise.

As you can see, CyberCash has cornered the market on payment processing, offering a variety of technologies. Begun in 1994 with Cybercoin, its own cyber-money, the company has constantly reinvented itself on almost a yearly basis. Earlier this year CyberCash released its InstaBuy one-click network, which has several hundred merchants signed up, but has been a limited success to date. This could be because of the critical mass issues mentioned above, or because most Internet shoppers are used to paying with credit cards and haven't bothered to investigate these other, more sophisticated methods.

Given this shifting landscape, what should a Web storefront operator do when it comes to accepting payments? If you sell digital content, then look into joining one or more of the one-click networks. And if you have shopping cart software already working on your storefront, first test out particular payment gateway technologies supported by that software.

Next time we'll talk more about what to do in terms of outsourcing parts of your Web content, including looking at the new breed of Web storefront outsourcing service providers.IJ

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About the author:

David Strom was the founding editor-in-chief of Network Computing magazine and has written over a thousand articles for dozens of computer trade publications. He publishes Web Informant, a weekly guide to new Web technologies, trends, and services and is a frequent speaker at industry events including Next Generation Networks and Networld+Interop. He can be reached at david@strom.com.

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