Small Case Presentation - 5

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Digital Cash Pros:

This type of currency is good for gifts.

It also limits fraud. Even if the currency is stolen, it can be used only for a fixed amount of purchases.

Case StudyCase StudyDigital Cash Cons:

Chicken-and-egg problem: Retailers don't want to install new software unless they see a lot of customers using it. Customers don't want to download software unless they see a lot of retailers accepting it. This conundrum is what killed DigiCash Inc., a pioneer in this area, which entered bankruptcy proceedings in 1998.

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Virtual Points Pros: help lock in customers to their

products. Customers get "free money" if they are willing to part with some personal information and view ads.

 Cons: Same problem as digital cash. Signing up

retailers to accept the currency can be a killer obstacle.

Takes a long time to accumulate sufficient points for meaningful purchase.

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Person-to-Person Payment Pros:

Most person-to-person systems charge no fees to users, because they make their money on the interest earned on the accounts.

Some charge fees to small businesses that want to accept payments.

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Person-to-Person Payment Cons:

An unscrupulous person can collect payments but then fail to deliver the goods.

Most person-to-person systems don't promise to pay back jilted buyers.

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Person-to-Person Payment Cons:

However, PayPal recently said it will take responsibility for transactions in which the seller agrees to disclose his or her bank-account number.

Billpoint guarantees transactions when the buyer uses an electronic check, which essentially is a transfer of money from an electronic bank account.

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Virutal Escrow Pros:

For large purchases, escrow services are a good way for buyers and sellers to protect themselves against fraud.

Don't require a long-term commitment. Both parties need only sign up for a one-time usage of the service.

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Virutal Escrow. Cons:

Most escrow services charge a fee per transaction, but prices have been coming down in the past year.

The fees are as follows (all in US$): At Escrow.com, credit-card transactions under $5,000 cost 3.85% of the total dollar amount of the sale, excluding shipping costs. At Tradesafe.com, credit-card transactions cost 50 cents plus 3.5% of the dollar amount of the sale, including shipping costs.

Case StudyCase StudyVirtual Credit Card Pros:

Buyers can stay anonymous online. Retailers will know your name and address but not your credit-card number.

It avoids the obstacle that has tripped up so many other electronic payment systems -- the need to persuade retailers to install special software.

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Virtual Credit Card Cons:

These services are very new and untested.

One possible obstacle is the finite number of credit-card numbers that can be generated and the difficulty of recycling disposable numbers.

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Conclusions: 1. Avoid chicken-egg problem.2. Automation.3. User friendly.4. Protect privacy.5. Security.6. Multi-platform, devise independent.