Brave New Money
George Matyjewicz -- Gifts & Decorative Accessories, 10/1/2000
The latest study from ActivMedia Research states that e-commerce activity is expected to reach $132 billion worldwide by the end of 2000. Yet it could be much higher were it not hampered by security issues and an antiquated payment system, which prevents true global e-commerce.
A survey commissioned by the Information Technology Association of America and Educational Data Systems, reported that more than three out of five American consumers say that security concerns make them less likely to do business online.
Elwyn Jenkins, an authority on online currency, states, "The Internet was to have been the place where all people from across the world could meet and, regardless of borders, commerce could be conducted. We are far from this, in reality. E-commerce is largely limited to the U.S.A., Great Britain, and Europe."
"E-commerce is being hampered by security issues and an inefficient and outdated payment system," said Jenkins. "Card-based payment was a concept that was designed for face-to-face commerce, where a consumer's credit card was used to imprint on a receipt to represent the presence of the consumer in a store. However, e-commerce does not work like this. The customer is never present at a store. The merchant does not handle the card. Online authorization mechanisms are not in reality 'real time' in most cases."
Apparently, most banks believe Jenkins' findings, because they charge higher fees for merchant accounts for Web retailers, if they offer them at all. (Web retailers pay 2.5 percent plus 30 cents per transaction vs. 1.5 percent plus 30 cents per transaction for brick-and-mortar retailers.) The banks may have good cause: The use of stolen cards represents 1.2 percent of Internet sales in the U.S.
WWW.Money
The World Wide Web demands worldwide money. Five years ago, a new method of payment emerged: private digital currency (PDC). The first two attempts at PDC iterations failed; PDC is now in its third incarnation. However, we should remember that the debit card also failed during its first two attempts.
The term PDC encompasses several different brands of electronic money, which can be obtained at various Web sites. Essentially, PDC allows consumers to pay for goods or services without the merchant having to set up an account for credit card payments. Some forms of PDC, such as PayPal, are simply online bank accounts, which allow consumers to e-mail money to other consumers. On the other hand, e-gold, which has been carving out a niche of its own, is a digital currency that is "gold itself, circulated electronically." As such, e-gold is an ideal currency for worldwide e-commerce trade.
The first PDC was Digicash. It allowed customers to download "cash" to their own computers. However, Digicash proved cumbersome to use. It was also untraceable, so, while it might have worked on a consumer-to-consumer basis, it wasn't practical for use in a business environment.
Other types of PDCs, like beenz and flooz, are used as marketing tools. They can be spent at merchant sites regardless of where in the world they are located. With beenz, a visitor "works" by visiting sites, earning "beenz" that can be used at any merchant that accepts them. Those merchants currently include spiegel.com, eddiebauer.com, dellcomputer.com, and others. Flooz is the online gift currency you send via e-mail. Your recipients spend "flooz," just like money, at the store of their choice. Merchants that accept flooz include ashford.com, art.com, barnesandnoble.com, TowerRecords.com, and ToysRUs.com. You can spend beenz and flooz only online.
Need for Rules
PDCs will work in the business world if the parties involved can determine the rules of exchange. For example, the retailer could specify that the merchandise will be inspected by the consumer before the retailer is paid. Once the consumer has examined the merchandise and found it acceptable, he or she would then notify the PDC operator, and the PDC operator would see that the merchant was paid. If the merchandise was deemed unacceptable, the money would not be refunded to the customer until the merchandise was returned. This is the same protection that is afforded to companies when they use letters of credit for foreign purchases. While credit cards assure the merchant that the consumer can pay, they really protect the consumer, which can become a problem when one is selling "electronic intellectual property" (software or documents written and downloaded to a consumer's machine) or selling to someone in another country.
E-Gold
Two companies have emerged that together could create the next global monetary system. Gold and Silver Reserve (G & SR), based in Melbourne, Florida, has created a currency called e-gold to enhance e-commerce transactions. E-gold is backed by gold bullion stored in the Bank of Nova Scotia in Toronto, Ontario. E-gold's value is determined by the weight of the metal, not by the value of the U.S. dollar or any other national currency. Weight units have a precise, internationally recognized definition. This means that a Canadian retailer can pay a German supplier or a Japanese consumer can pay an Australian retailer the correct weight of e-gold as easily as if the price had been quoted in his or her own national currency. All prices are quoted in currency, and the conversion is done seamlessly in the G & SR's back office.
Gold Grams
Another company, Atlanta-based Standard Reserve, a partnership between G & SR and others, unveiled a new currency called gold grams. Gold grams are specifically designed to enable global e-commerce. Gold grams will hold their assets as e-gold. Holders of gold grams will be able to purchase goods and services globally. When making purchases from merchants that do not take gold grams, holders can use a Standard Reserve debit card to draw upon their holdings of gold grams, just as one might use a Visa or MasterCard debit card. The Standard Reserve debit card can be used in ATMs, brick-and-mortar stores, and any other location where Visa and MasterCard are accepted. The debit cards are now in pilot testing and are scheduled for rollout in the first quarter of 2001.
Simply put, gold grams (and e-gold online) is a new monetary system based on the gold standard. While gold is no longer the standard for the U.S. dollar, it is the standard for Standard Reserve and e-gold. Safety, security, efficiency, and speed-worldwide money for the World Wide Web!
Web Resources
www.paypal.com
www.e-gold.com
www.beenz.com
www.flooz.com
www.digicash.com
www.standardreserve.com
George Matyjewicz of GAP Enterprises Ltd., a management and marketing "solutioning" firm, can be e-mailed at georgem@gapent.com. E-Tailer's Digest is a moderated Internet retail discussion forum, located at www.gapent.com/etailer/.
