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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

Cash -- or E-Money?

Paper and coins are for the Stone Age

By Robin Ajello


IF THE HYPE MERCHANTS are to be believed, money as we know it will soon be as much of a relic as the gold standard. Instead of bills and coins, we will spend electronic currency -- call it e-money -- that we zap to merchants from our PCs or carry with us on smart cards.

And about time too, the digerati exclaim. Cash is annoying stuff. It is easy to steal. It costs banks and businesses billions to cart around -- a paltry $1 million weighs about 50 kilos -- and governments must routinely replace worn-out bills. Coins produce holes in our pockets. And how often do we have the right change? Face it, cash is for the Stone Age.

Not that electronic currency is new. Large transactions have been hurtling around the globe at the speed of light for years. What is new is that banks, businesses and software firms want to bring cyberpayments to the masses. The impetus for the coming revolution, of course, is the Internet, which big business hopes to turn into a borderless shopping mall.

As is so often true with technology, reality lags behind the hype. Despite the talk of 40 million Internet users, most traffic is in e-mail not commerce. And most users are male nerds between 20 and 40. "These are not people dialing up to buy consumer products," says Bob Carlson, chief of technical services at Hongkong Bank. "The predictions of commerce on the Internet definitely are over-hyped."

Key hurdles must be cleared before cybermall becomes a (virtual) reality. Then, says Carlson, "it will take off like a rocket."

• Security needs to be improved. One reason Internet shopping has not caught on is that people are loath to send credit card numbers into the ether. For digidollars to work, people must believe criminals can't access accounts. No security code will ever foil a determined hacker with a supercomputer and a lot of time on his hands, but soon encryption should be adequate to placate most people. Credit card companies are working with CyberCash and Netscape Communications to develop and implement the new Secure Electronic Transaction protocol for online credit card commerce. SET is expected to become the standard for secure online transactions.

• For Internet commerce to fulfill its potential, phone lines to the home will have to be able to carry more data faster. Hitting Websites now tries the patience of the most devoted surfer; ordinary shoppers won't take the time. As users proliferate, the servers that form the Internet's backbone will also come under more strain.

• Access to the Word Wide Web also must be simplified. There has been much talk lately about $500 Internet box that will allow technophobes to get online. But before consumers will start shopping, the device will have to be cheaper. Carlson jokes that it should be so simple it has one button, marked "shopping." Interactive TVs are another possibility.

There is good reason to believe that much of the above can be sorted out within the next few years. Powerful interests -- Microsoft, credit card concerns, banks -- are betting billions that zapping around e-cash will be as commonplace as sticking a card in an ATM. Those controlling the new money medium stand to make big bucks charging people to shop online.

Not surprisingly, banks fear losing customers one day to upstart e-money dispensers and are themselves getting in on the act. Many offer routine on-line services. From a PC you can transfer money, buy shares, apply for loans, check balances. Last month, Hongkong Bank started a pilot smart-card program at two Hong Kong malls. The cards suck up to $400 from an ATM. Or cardholders can buy a $200 device that hooks to a phone line and transfers money to the card from an account. Ultimately, smart cards will plug into a PC -- and the ATM, if not the bank branch, could one day become obsolete.

Online, various firms are trying to popularize e-money. The best-known is U.S. firm CyberCash. Its system provides a glimpse of what the digital economy might look like. Regular money from customers' bank accounts is converted into CyberCoins, e-cash for the small (under $10) transactions expected to fuel Internet commerce. "CyberCoin fulfills a growing need for consumers to purchase lower-priced and impulse items on the Internet," says CyberCash CEO Bill Melton. These might include games, articles and music.

CyberCoins are stored in a password-protected "wallet" that holds up to $80 a month. The merchant does not know the buyer's name unless he or she reveals it -- just like with old-fashioned money. The consumer pays nothing to use the system.

It sounds great --but there is one caveat. A handful of merchants have signed up in the U.S. In Asia, things are moving even slower. Kuala Lumpur-based Asia Connect has been working with a Malaysian and Thai bank to launch online banking sevices that would support CyberCash. Nothing has materialized. Electronic money is coming, but for now most of us will continue to pay the old way.

-- With additional reporting by Alejandro Reyes


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