Making Credit Good Online
Sydney Morning Herald
Tuesday September 14, 1999
Despite attempts to launch cyber currencies, credit cards remain the universal currency of the Web. Even though consumers are still concerned about online security, sending credit card numbers over the Net is far safer than giving a salesperson a manual imprint of a card over the counter.
However, many online merchants are still keen to find alternatives to credit cards, which attract processing fees.
Researchers working on new payment mechanisms such as smartcards to be incorporated into online payment systems are aiming for a single means of payment that eventually can be used both online and off. Here are a few of the ways in which technology developers have tried to make life easier for online shoppers:
Micropayments
Most online information is free, which presents a marketing problem. When confronted with a request for payment, most Web surfers simply go off to seek the information elsewhere for no charge.
However, some information merchants believe consumers would be more inclined to pay for content if it was incredibly cheap and easy to pay for. And several companies have developed systems that let online information providers charge extremely small amounts to access information. For example, a customer might be willing to pay 20c a day to receive a constantly updated ticker showing the price of a particular stock or the latest news headlines.
While this amount is far too small for a normal credit card transaction, it is possible with micropayment technology by deducting small amounts of money from prepaid accounts. Under this concept, a consumer might prepay $20 to an online account, which would be used to fund many information downloads.
Electronic wallets
Wallet software from Microsoft, VeriFone and several other companies stores all the information and cash you need while shopping online. Real money can be added to the wallet a program that sits on a PC or a distant computer server through a bank or other financial institution, and is then deducted from the wallet as it is spent online. ``Cash" stored in the wallet can be re-issued if the computer crashes. Wallets can also include personal details such as a shipping address, relevant credit card numbers and other information needed for online transactions. Although wallet software is widely available, most consumers still prefer direct credit card transactions.
SET (Secure Electronic Transaction)
Fearing that electronic cash would threaten their share of cyber transactions, credit card companies MasterCard and Visa spent three years developing their own secure standard for e-commerce transactions, known as SET. The technology creates a three-way relationship between an online shopper, the shopper's bank and an online merchant, eliminating the need to transmit credit card details.
SET shoppers need to register with their bank for an authorisation code and a special code that confirms their identity. These are stored in an electronic wallet and given to the merchant online when buying goods. The merchant forwards this information and confirmation of its own identity to the bank for payment authorisation and processing.
Although some banks have begun SET pilot projects, the technology has proved complicated to implement and few companies have deployed it commercially. SET also faces irrelevance now that shoppers have become comfortable with using credit cards online.
More information about SET is available at www.setco.org.
ECML (Electronic Commerce Modelling Language)
One of the most annoying things about buying online is having to re-enter personal details such as shipping addresses and credit card details. Research indicates that complicated or tedious forms have made 27 per cent of consumers abandon an online purchase.
Hoping to eliminate this problem and improve completion rates for online purchases, the ECML consortium backed by America Online, Microsoft, IBM, Compaq, American Express, Visa and many other companies last week launched ECML as a way to standardise the flow of information between online shoppers and online merchants.
ECML defines a broad range of standard field types, so that any ECML-compliant merchant will be able to understand information sent in ECML format. This means that ECML-compliant wallet software could automatically fill out all relevant fields for an e-commerce purchase as long as the merchant supported ECML.
The working ECML draft is at www.ecml.org/ietfecml.txt.
© 1999 Sydney Morning Herald
