By 2000, the number of electronic cash payment transactions will reach 9 billion and continue to soar, according to a new study by financial researcher Killen & Associates.
In 1995 there were 1 billion e-cash transactions, and by 2005, that number will surge to 30 billion, officials say. "The thing that will drive e-cash on the Internet is micropayments," says Jules Street, vice-president of the Palo Alto, California-based company.
Micropayments are the small amounts consumers pay for services or information which add up to big money and which, if processed in traditional ways, are labour-intensive and expensive for companies, according to Street. For instance, a consumer might elect to receive reports and stock quotes each day on certain investments, Street says. The charge for the information is slight, but keeping track of the consumer's choice and charging for the service is costly, he says. People use the Internet to buy not just big-ticket items but information and services, and e-cash helps make that practical, according to Street.
"It's a less expensive alternative to most of the payment services that are available," Street says.
The exact form e-cash will take remains to evolve, but could include desktop card readers, akin to those used by stores to check the validity of customers' credit cards. Consumers would buy a card which they would run through the reader, subtracting value from the card to buy assorted services, according to Street. Alternatively, consumers could buy value from companies with whom they already do business, storing the value with the company, which would subtract from the value based on the customer's activity, he says.
Security will remain an issue for some consumers, but Street is confident that e-cash will triumph. "It took a while for people to accept that cheques are money," Street says. "It's just a matter of time before we have a diminution of this security issue."