Mondex and AT&T have teamed up to create a cost-effective electronic commerce system for small purchases, as a new survey reveals that online shopping currently centres on big ticket items. Several surveys highlighted at the Internet World show indicate that Web purchasing has boomed far earlier than expected, but needs to support small customers.
The Mondex-AT&T alliance (see story 12 March) is intended to remove the barrier to full scale electronic commerce caused by the cost of processing credit card transactions via the Internet. The surcharges involved make it uneconomical to process transactions of less than $10.
Keith Kendrick, AT&T?s senior vice president for smartcard payments, said this effectively rules out many items that could easily be purchased across the Web. "Transaction costs make low value Internet sales too expensive for merchants to accept using credit cards and other traditional payment methods," he said.
Using Mondex smartcard technology, the new ?micropayment? solution will entail users running cards through a special reader to make payments over the Internet. The information on the card and the payment from a bank account would be handled on a ?chip-to-chip? basis with neglible costs.
But the success of the system, which the two companies hope to have in full deployment in 1999, will depend on widespread acceptance of smartcard technology - which is currently more broadly accepted in Europe than the US - and on the installation of reader machines.
The AT&T-Mondex announcement was made at the Spring Internet World show in Los Angeles on Wednesday. The day before, Digital unveiled its Millicent micropayment scheme, which the company claims will make possible Internet payments of less than $5 (see separate story).
If successful, the two micropayment initiatives may change the nature of online shopping, which according to a new study by Nielsen Market Research, is currently most likely to involve the purchase of big ticket items, like computer hardware or cars.
The study, which polled 6,600 people over the age of 16 in the US and Canada, found that of the 50.6 million people who accessed the Internet in December last year, around 5.6 million made purchases using the Web.
Stacey Bressler, vice president for marketing at Commercenet, a non-profit electronic commerce industry body which commissioned the study, said: "Even in our wildest dreams, we didn?t think that they numbers would be as high as they are."
But a breakdown of the overall figures makes distinctions about how online shoppers go about their business. Around 75 per cent of those who accessed the Net used the Web as an online shopping catalogue to gather information about prospective purchases and most completed their purchase using traditional payment methods.
Other findings in the survey included a reduction in the number of Internet commerce users with high incomes - defined as over $80,000 a year - since the last such survey in autumn 1995, and an increase in the number of women online.
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