Electronic money has long been high on the wish-list of those doing business (or wishing to do business) online. Proprietary systems such as Compuserve have had secure payment systems for many years, the issue is creating secure payment systems for the Internet. Until means of payment are secure, it seems unlikely that the Internet will reach its full potential as a means of electronic commerce. Current efforts for secure payment systems currently fall into two distinct camps: the first uses the existing credit card system; the second takes a more radical approach.
A credit card system
Until recently, it looked as if there would be a standards war in the market for secure payment based on the existing credit card system. Two rival groups, Microsoft and Visa on the one hand and a grouping including MasterCard, Netscape and IBM on the other were developing separate standards but have now agreed to cooperate on a vendor-independent solution which will be available without charge.
Digital money
The best example of the more radical approach is provided by the Digicash Corporation, which has developed a software-based form of digital money called 'e-cash'. Unlike the credit card system, e-cash is not linked in to any financial system. It is intended that e-cash can be created by banks and would consist of electronic messages in the form of "I promise to pay the bearer on demand", security being provided by encryption of the message, authentication being provided by the private/public key system. E-cash is presently being used by the Mark Twain Bank in St Louis, Mississippi.
Difficult issues
The fundamental legal issues involved in a credit card based system are similar to many other situations already encountered, but 'e-cash' is an entirely new concept. There will be some very difficult issues to resolve if e-cash becomes popular, such as who bears the responsibility for the integrity of the 'currency' and how the exchange rate with real currencies will operate. Who, for instance, bears the responsibility for authentication of e-cash funds and the risk of fraud? If banks can freely issue e-cash will there be rampant electronic inflation? The Mondex scheme developed by National Westminster Bank plc addresses these issues by linking e-cash to withdrawals and deposits using a real bank account, but it has not yet gained significant consumer acceptance in current trials.
This article is correct to the best of our knowledge and belief at the time of publication. It is however, written as a general guide, so it is recommended that specific professional advice is sought before any action is taken.
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