Online Currencies Go For Broke
N E W Y O R K, Aug. 28 -- It seemed like a brilliant idea at the time. With no foolproof secure way for consumers to pay for purchases online, why not create a brand new Internet currency?
It would be safer and more secure than a credit card number and merchants would receive their payment instantly — without having to worry if the buyer on the other end is a crook. And for consumers, they would be able to use it on virtually any e-tailer they stumbled onto on the World Wide Web.
That idea seems a little less brilliant now with the closure in the past week of two widely known Internet currency companies: Flooz.com, a two-year-old firm that made its name with Whoopi Goldberg as its spokeswoman, and the lesser-known Beenz.com.
Green Stamps Go Digital
The two dot-com failures epitomize the difficulty merchants have had in finding a surefire way to pay for online purchases.
"People had nutty projections about e-commerce growth and knew that cash was never designed for the Internet," said James Van Dyke, a research director with Jupiter Media Metrix. "People thought it made sense to jump in and design an alternative payment method just for the Internet, but the bottom line was that it never proved to be a very good alternative."
No Coins in the Floppy Drive, Please
Long before Amazon.com became a household name, companies had been grappling with how to handle purchases from customers online. Since no one has ever been able to figure out how to send hard currency into the ether, most merchants had gravitated to the same type of system that mail-order and telephone-order merchants had long used: payment via credit card number.
But that had its obvious pitfalls. For one, no one could figure out how to verify identity. Since you can't check someone's signature over the Internet, companies accepting credit cards as payment for their wares could only hope that the person inputting the credit card number was who they claimed to be.
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