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Industry Standard

The quest for a global e-currency

September 28, 1999
Web posted at: 10:28 a.m. EDT (1428 GMT)

by Matthew Yeomans

(IDG) -- Just as the battle for control of global e-commerce heats up, so, too, does the quest for a global e-currency.

Last week, the major online currency players upped the ante. Visa trumpeted the inception of eVisa, a new division that encompasses its entire e-commerce operation and targets the global market. Not to be outdone, American Express launched a new online shopping charge card, Blue, complete with a fraud-protection smart chip and a hip, iMac-style ad campaign.

Both companies are jockeying for position in the exploding market. By 2003, there will be 183 million Web-based consumers racking up an estimated $1 trillion in e-commerce, according to the Global Internet Project, an industry advisory group. But as credit card companies like MasterCard, Amex, and Visa (which already handles 52 percent of all e-commerce transactions) smack their lips in anticipation of the global boom, the larger question remains: Can one form of currency emerge as the global standard for online commerce?

Today, credit card companies control the bulk of Internet transactions. That figures, given that e-commerce remains primarily a U.S. concern. Outside of the U.S., though, credit card purchases are anything but routine. Visa may be everywhere you want to be, but you don't see the locals bartering camels with it in the North African desert. In some parts of the world, the notion of credit rubs against local culture and customs, while other parts are just too poor to even contemplate such flights of fancy as consumer debt. Throughout Latin America and the Caribbean, for example, Visa counts only 68 million clients, out of a total population of some 500 million. Even in Europe, consumers continue to shy away from credit in favor of debit cards.
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Nonetheless, Visa realizes that its e-commerce efforts must be global. The company is currently strengthening its European debit market and is introducing Visa Horizon, a pre-authorized smart card for developing nations that allows consumers to make purchases without connecting to a telecommunications network.

In spite of these efforts, many micropayment upstarts still see a huge online opportunity. "Both Visa and MasterCard have failed to provide a framework for the Internet that works," says Ron Erickson, CEO of E-Charge, one of a number of new companies that hope to undercut the credit card giants by offering the option of charging purchases to your phone bill, ISP bill, or even utility bill. Erickson sees this system as perfect for countries that don't have a cultural history of credit card use China, for example. E-Charge has already signed partnership agreements with AT&T in the U.S., Cable and Wireless in the U.K. and Tele in Sweden. San Francisco startup iPin, which is partnering with international ISPs for its micropayment system, has a similar goal. "The vision is that we become a ubiquitous payment system for the global Web," says Geoff Watson, iPin's marketing director.

But does it stop there? The Web has already changed the way we conduct our lives and our business. And if consumers are willing to believe that most global commerce will be conducted in a virtual marketplace, then shouldn't they expect a single workable Internet currency to homogenize those transactions?

"We are just a small step away from an Internet currency," says Jack Weatherford, author of "The History of Money." "It's really upon us, we just haven't realized it." Only some 10 per cent of the world's money is currently represented in paper cash or coins, he says the rest is on bank ledgers that are exchanged at the press of a computer key. The more people do business over the Internet, he believes, the more they are going to want products that can be redeemed in the same way. "If you can earn and spend on the Internet," he says, "then there's no reason to exchange your Internet currency for money outside the system."

Given the extravagant flops of earlier virtual currencies such as DigiCash and CyberCash (CYCH) , many in the payment industry doubt that a single standalone Internet currency will ever flourish. "It's an interesting concept," says iPin's Watson, "but so far off from where we are today." An Internet currency not tied to a real-world currency like the dollar or the pound, he says, requires a "real mental quantum leap that people have to make."

But might that leap be that far off? After all, U.S. bank notes were only introduced 150 years ago. For the first 60 years they were redeemable in gold, then silver. Today, Americans happily fling around wads of bills that are secured by little more than what some would call a dubious promise "In God We Trust."

Currency, says Weatherford, is "exactly like religion. It's based entirely on faith." If enough people use one currency and believe that it will be honored, then there is no reason for it not to work. And if faith is all you need, there's no reason why some highly undesirable currencies like the unpredictable lira, and the farcical ruble can't one day be replaced by a common currency from MasterCard.

Maybe we'll be using Beenz. Not anytime soon, certainly but this young U.S.-U.K. company may offer a look at the Internet's future. Beenz promises a globally acceptable alternative to money that could influence online consumer behavior. The company sells "beenz" for one cent each to participating Web sites beenz appear on the site as Java applets. Those sites then give beenz away to consumers, rewarding them for visiting the site. Consumers can then barter beenz for merchandise or services on other Web sites. Eventually, Beenz will buy the currency back, for a half-cent per beenz.

For the consumer, beenz works as a common currency. For the Web sites, it works as a way to track the market habits of consumers. Last week, Beenz took a step towards greater consumer acceptability by signing a deal with Excite (ATHM) UK. For the moment, Beenz founder Charles Cohen sees his invention as a way to build an online consumer and business community. He remains coy on the prospects of launching the new global currency. "We didn't set ourselves up to do this," he says. "But we're seeing a way how it could work."

One hundred years from now, this site may be worth a good deal more than a hill of beans.

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CyberCash Indulges Impulse Buyers
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MasterCard and Visa Flex Marketing Muscle On Net
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DOJ targets Visa, MasterCard over smart cards
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CyberCash expects more red ink
Year 2000 World
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