e-com analysis by Nick Huber With so much marketing spin and hyperbole surrounding electronic commerce - or e-com for short - it's difficult to measure the current state of the industry: its products, technology, and the size of the market. IBM - which set up its own e-commerce think tank last December - estimate that by 2015 e-commerce will account for over half of all retailing. Other estimates are just as radical - predicting a future market value well up in the trillions of dollars. But one thing is clear. E-commerce, whether online banking, shopping or cyber cash - will stand or fall on the strength of its payment systems. The criteria for success can be broken down into three areas: ease of use, security and interoperability. Without this basic trinity, e-commerce will never gain the mass market its tipped for. Ice.com, an Internet software and services provider, is one of the UK companies hoping to cash in on such a market. In December the London-based company launched an Internet payment sysytem, claiming it to be the only software on the market able to handle small and large payments - micro and micro. Called VPS, the encrypted payment system, which doesn?t require any hardware or software, can handle sterling or dollars. Based on a third party sysytem Ice.com acts as an agent, ensuring the authenticity and confidentiality for all transactions. The business - Merchant - pays a two part charge: a one-off payment of #400 to be hooked up to a standard system, plus an additional fee per transaction. Account details are given just once, by fax or on-line. And after paying a small float, ten pounds for example, the sysytem works as with a normal credit card. Money is deducted from the merchants' account when they make an online purchase and the accounts balance can be viewed regularly using a standard password protection system, as in telephone banking. ?It will be as safe and easy to use as a traditional credit card,? said Candida Slater, ice.com?s chief executive, who pointed to Microsoft backing for the project. One early client is the online information provider and Slater believes micro charges offer the most lucrative returns: ?Micro payments offer us the biggest gap in the market. Lots of companies who produce information for free are waiting for an effective way to charge users. We believe that the quality of information on-line will go up with VPS." This faith in micro payment is well founded, according to Ken Fraser, principal consultant at Dataquest: ?Micropayments have proved more problematic than any other. People will give a lot of information for free on the internet but they?re keen to find an efficient way to charge users for accessing small amounts of information. There?s a massive free lunch on the net at the moment." But Fraser argues that smart cards - credit crads with an embedded microchip instead of a magnetic stripe - is where the serious money will be made in the short term. Trials for electronic purses are already well underway in the UK. According to consumer magazine Which, there are 14,000 Mondex e-cash cards in Swindon and 70,000 Visa cash cards being tested in Leeds. The Visa cash card uses 1,500 purpose built e-cash machines, where electronic money can be drawn out of the account. The two other types of card are an add-on function to a normal credit/debit card and a disposable card simmilar to a phone card, with a set face value. But with so many products fading away after a luke-warm consumer reaction, when, if ever, will smart cards go mainstream? The answer will arrive later this year, according to an upbeat Visa spokesman: ?Our cards in Leeds started last October as part of a year long trial,? he said. ?We?re now entering talks with all the banks involved and the next step will be a national rollout. Leeds has been a useful test bed for this new technology.? With around 20 e-cash schemes circulating in Europe he predicted that reloadable cards will replace disposable cards as the industry standard and that eventually cards from all participating banks will be accepted on the same terminal. But the road to e-commerce ubiquity is not obstacle-free. US payment software and servers often have to be tailored to suit the network architecture of European companies and Secure Electronic Transaction (SET) is not yet an industry-wide secure syten for online transactions. ?What might be good for US corporations might not work in the European markets,? said Bob Barker, e-commerce manager for Oracle in the UK. ?Not all UK banks in the UK accept SET, some use secure FSL. When you have someone as powerful as Barclaycard who don?t use SET. It means we?re faced with the prospect of two payment system.? BarclayCard, however, was quick to emphasise that it is keeping an open mind about payment systems while they are in their trial period. Perhaps a more serious turn-off for the user is the requirement that he or she applies for a digital certificate, what Fraser terms an ?electronic passport? to prove they are the actual holder of a card during an online transaction. Fraser believes that e-commerce has an image problem: ?It all comes down to marketing, marketing and marketing. People are still worried about safety when they give out creadit card details even though you could argue that companies have overdone encryption. With thousands of people all demanding SET transactions web servers will be brought to their knees.? But despite these grey areas over payment, most of the big guns in IT - Microsoft, IBM and Oracle - are staking their claim in the market. It seems safe to say that teething problems apart, the e-commerce market is set for massive growth.
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