September 25, 2000

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Online Payment Services Eschew Credit Cards

eCharge and Cavio tout offerings as safer for buyers and less expensive for merchants

By Cheryl Rosen

More on online payments:

Network Computing: Handling Electronic Bill Payments (9/18/00) TechWeb: Visa Gets Brainy With Smart Card (9/12/00) Computer Reseller News: Online Transactions, Security Top Government Priorities (9/4/00)

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redit cards are an imperfect payment option for Internet commerce--at least that's the view of executives from two online payment systems launched last week. Both eCharge Corp. USA and Cavio Corp. maintain that buyers will be better protected and merchants will save money with systems that electronically transfer payments.

ECharge last week disclosed that it's testing eCharge Net Account, which gives customers a revolving line of credit for online shopping and then deducts payments directly from their bank accounts. Consumers can pay the full balance each month or set a monthly payment. The service will launch later this year.

Signed up already is MP3.com, whose customer base of music downloaders is arguably less ingrained in the use of credit cards and more open to options. "ECharge is a system developed to essentially serve the Internet from the ground up, and its feature set and functionality support the customer acquisition programs we have in mind," says Steve Sheiner, MP3.com's executive VP of sales and marketing.

MP3.com's site will show an eCharge icon at checkout. Once an eCharge account is established, customers can click on the icon to handle their financial transaction. MP3.com gets immediate and guaranteed payment.

MP3.com and other merchants also save on fees because eCharge bypasses the credit-card settlement system entirely. Its fees are 0.5% to 1% lower than typical credit-card fees.

Credit cards, designed for a physical world in which the buyer presents a card and signs an authorization, have become the Internet payment system by default, says eCharge chairman Ron Erickson. Each time credit cards are used for an online purchase, the credit-card number is transmitted over the Internet, raising the risk of fraud. With eCharge's system, customer data is stored offline on secure servers and electronic payments are made over secure private links.

Cavio has taken the same premise to the world of international trade. Its new system targets small and midsize global commodity trading companies. To conduct an online transaction, traders use a thumbprint reader provided by participating banks to authenticate themselves. They then make their trades and initiate a bank transfer of payment. The customer's financial and purchasing data resides at the bank and is never sent over the Internet.

Cavio has signed Wells Fargo & Co. and Fidelity National Title Co. as participating banks.

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