Don’t Complicate E-Commerce; Embrace It

dceeDespite all the sweet talk about Net commerce, when candy store owner Kevin Benz launched his Web site a year ago he knew getting sales wouldn’t be a cakewalk. So the 40-year-old entrepreneur signed up with CyberCash–an Internet company that accepts credit card transactions. Within one day of posting Sweet Thoughts’s home page, orders for dab rigs came pouring in. As a result, projected revenues for the Bellevue, Washington, Web-based company are $65,000.

Like Benz, many business owners realize that the best way to beef up online orders is to accept credit cards. And now companies such as CyberCash allow you to accept plastic and let you deal in digital dollars as well. Unfortunately, says David Buchen, director of the Web incubator project at the University of Wisconsin-Whitewater, “the public isn’t yet feeling that it’s secure enough. There’s been too much negative publicity about hackers breaking into what everybody thought were secure sites.” Fortunately, the public’s wariness hasn’t caused sales at Sweet Thoughts to hiccup. And because CyberCash’s encryption system is safe, Benz is planning to accept digital dollars.

But even with tight security, people are skeptical. Although they’re just like paper legal tender, digital dollars remain a distant second as the chosen currency of Net commerce.  According to, a regional small business opportunities search site, only a fraction of the roughly 10,000 Web retailers now doing business online accept payment methods other than credit cards.

Still, if you sell items under $10 on your site, such as games, T-shirts, graphics, and CDs, you may want to look into digital dollars. That’s because it’s not cost-effective for you to handle such low-ticket purchases with plastic. In fact, Jupiter predicts that 16 percent of all online transactions will include digital dollars by the year 2000. To help you decide what kind of payment to deal in, we looked at three electronic commerce leaders.

Cash and Carry In Cyberspace

According to Jupiter, some half a million consumers use Cybercash’s services, making it the most popular electronic commerce provider. To join, customers establish an account with a Cybercash parmer bank, and load its free Wallet software onto their systems. Then, when they want to make a purchase, they get electronic cash from theft banks’ Web sites in increments of $20, up to $80 at a time. Or if customers wish, they can charge CyberCash to their credit cards. Then, once a customer has made a purchase and up-loaded the cash to his account, he can hack purchases and reconcile account balances onscreen. To keep the Reston, Virginia, company at the financial forefront, Cybercash recently introduced CyberCoin, which consumers can use to make small purchases from 25 cents to $10.

For business owners, the company’s CashRegister software is also free. So where does CyberCash make its money? Merchants are charged a per-transaction fee of 1 to 5 percent for CyberCash users. For purchases made with Cybercoins, you’re charged 8 cents for each 25-cent transaction, sliding up to 31 cents for each $10 transaction. The company claims its system is compatible with 90 percent of merchant banks as well as most order-processing systems.

Another company offering electronic commerce is San Diego’s First Virtual. Its VirtualPIN, basically an alphanumeric alias for a user’s e-mail address and credit card number, boasts more than 200,000 registered customers and some 3,000 merchants. Established businesses pay an application fee of $350, an annual fee of $350, and per-transaction fees of 2 percent, plus 29′ cents. New or small businesses can register at for $10, but there’s a 91-day period for the release of the entire amount of each transaction. This is meant to give First Virtual adequate protection against fly-by-night merchants.

To ensure secure transactions, customers register for free First Virtual membership online but submit sensitive information only over the phone. This way, when a customer is ready to buy one of your products, she simply e-mails you the order along with her PIN. You then forward the information to First Virtual, which confirms the purchase with your client via e-mail.

Since offering VirtualPIN on his Barrington Coffee Roasting Co. site just a few months ago, Gregg Charbonneau’s orders have been percolating: VirtualPIN purchases amount to 25 percent of the Great Barrington, Massachusetts, company’s sales.

Another form of cyberspace commerce is ecash, an electronic checking account into which your customers can deposit money. Backed by Mark Twain Banks for DigiCash B.V., only about 200 merchants had signed on by the beginning of 1997. One reason for its unpopularity among online entrepreneurs is its pricing structure: An ecash account costs $100 for a onetime setup fee and, beginning next year, $5 a month for the processing fee. Then, when you want to transfer money from your ecash account to your real business bank account, Twain Banks tacks on another 2 percent.

For customers, the ecash transaction process is just as cumbersome. For a onetime fee of $11, consumers establish an account at Twain Banks, then request transfers from it to the bank’s ecash Mint. The Mint coins and modems the money to the customer’s PC. When a customer wants to make an online purchase, he confirms the amount, purpose, and payee via PC, and the ecash software transfers the amount to the merchant’s account. An onscreen log lets customers monitor their balances and perform other functions.

According to Jupiter, this digital-cash system has been “riddled with problems” for business owners. And as an ecash consumer, James Ware, executive director of the Fisher Center for Information Technology & Management at the University of California at Berkeley, isn’t impressed. “You spend money in advance–just so you can have it stored in your computer, without any expectation of immediate use. And you give up any interest on the money.”

Working Out the Kinks

For electronic commerce to take off, ease of use for both consumers and business owners must be a priority. With any of these systems, “customers have to upload one of their free ‘wallets,’so it’s already complicated,” complains Gary Kohlenberg, owner of a Brookfield, Wisconsin, company that sells classified ads online. Likewise, retailers find linking some of these digital dollar services m existing order-processing systems difficult. Then there are security concerns. Recent surveys reveal that the public persists in its wariness of disclosing private information via the Web–even though companies tout the impenetrability of their systems.

Despite the drawbacks, electronic commerce options continue to grow. CyberCash recently introduced an electronic check service. Visa, MasterCard, and other companies are finalizing the Secure Electronic Transactions (SET) standard that will serve as the global, encrypted-payment infrastructure for the Web. And then there are smart cards– credit cards embedded with chips that function as electronic purses. Experts expect the introduction of smart card-ready PCs by December. Last, there’s PC banking–in which you could conceivably handle electronic transactions directly with your bank online.

“We’ll eventually have an Internet payment world that resembles the offline retail market,” predicts Scott Smith, director of Jupiter’s digital commerce group. “Consumers will use a variety of options.”

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