Consumers will soon be able to cast their credit cards aside when it comes to shopping on the Web thanks to the development of alternative e-payment methods, according to a recent study by Ovum, a research and consulting company. Unfortunately for mobile workers and companies that would like to use e-payments for business-to-business applications, full adoption of the new technology is probably four or five years away because most businesses are not prepared to give up the traditional methods of settling accounts.
Ovum's study, "Second Generation E-payments: E-business Beyond the Credit Card," foresees a future in which new payment methods displace the familiar plastic from e-commerce. These new payment methods include metered payments, e-cash, e-checks, optimized card payments and alternative currencies. According to the study, the new technology will bring increased flexibility, affordability and security for both buyers and sellers.
The mobile field force will eventually enjoy such innovations as storing electronic signatures on their mobile telephones, phones with multiple SIMM cards (one of which contains a pointer to an Internet URL) and myriad security options, according to Ovum.
Paola Bassanese, an Ovum analyst specializing in e-business and security, says that for companies that send their employees out of their offices armed with various laptops, personal data assistants (PDAs) and two-way pagers, the secure identities of the users are the overriding concern because the devices may have access to the corporate intranet.
"With an e-payment method like metered payments, mobile workers will be able to make purchases through their devices, and the item will be billed to a pre-existing account such as their cellular telephone bill," Bassanese explains. "In one sense, this method is more secure than a credit card because no one can steal your credit card, but it requires a digital certificate, a PIN number or password to ensure the person making the purchase is authorized." She added that biometrics--the use of fingerprints, retinal scans or voice recognition--offer an even higher level of confidence.
Despite security concerns, Bassanese says, electronic payments that are optimized for the Internet or the mobile Internet are automatically more secure than credit cards or debit cards because security is embedded in the technology.
If e-payments are so flexible, affordable and secure, what is holding up their use? Bassanese says that businesses are currently looking for ways to increase efficiency in the supply and procurement chains, but true optimization of invoice settlement is still in the future.
"This is a business decision that companies have to make," she says. "Just like the shifting of purchase orders online is still not fully completed, companies must let go of using paper checks for payments. It is this mind-set that inhibits large-scale adoption of e-payments. Nothing will happen in a flash. The adoption rate will be different on a case-by-case basis, with some adoption by 2002 or 2003."
B2C First Adopters
On the business-to-consumer side, there is already adoption of e-wallets, metered payments, e-vouchers and other pre-paid alternative currencies, according to Ovum. Some examples include American Express' Private Payment. Each time the service is used, a new credit card number is generated. It is disposable and is only good for one transaction, so no one else can use it, says Ovum's Christina Kasica, senior consultant with Ovum and one of the authors of the study.
"E-cash has been around for 10 years, it just has not caught on in the United states," Kasica explains. "One reason is because it must be set up in advance. The user must go to a bank, identify himself, put money into an account, then constantly replenish that account in order to use it. It is very bank-centric. But, there is no transaction fee because it is pre-paid. E-cash is good for micropayments. Also, like cash, it is anonymous and leaves no trail."
Kasica adds that some people have already discovered the value of using alternative currencies like RocketCash and PayPal. She believes that the advantages of the new payment methods are clear.
"As digital goods and e-commerce increase, we will see more second-generation payment methods," she says. "They are cheaper and more fraud-proof for the merchants. You can see that they are already catching on with the youth market and on the rise elsewhere, too. The speed, price and anonymity factors will make them popular with consumers. Banks are the only ones who are unhappy, because their credit card transaction fees are threatened."