eCash Technologies Inc. expects to launch an online cash currency this summer that allows consumers and retailers to make and receive payments on the Internet without debit, credit or smart cards.
Issued by financial institutions and supported by bank account deposits, eCash will target the estimated 70 percent of the Internet population in the United States who have yet to buy online. These people primarily fear for the security of their credit information.
“Our goal is to make eCash currency the global standard for electronic cash payments, through both the Internet and eCash-enabled wireless devices,” said Dave Watson, vice president of business development at the Bothell, WA-based eCash Technologies.
Consumers open eCash accounts at banks just like a savings or checking account. While shopping online, the customer pays for a purchase by clicking on the eCash icon at an online retailer's checkout. The appropriate balance is then transferred from the consumer's eCash account to the retailer.
“Banks that issue eCash will market it to their customers as a value-added offering that complements their existing programs and services,” Watson said. “Merchants that accept eCash will market it to their customers as a convenient way to pay for goods and services online.”
In addition, eCash is designed to help loyalty programs, person-to-person transfers, international payments, electronic bill presentation and gift certificates.
One benefit to online retailers is decreased fraud, as there is little room to counterfeit, steal or lose eCash. Another is access to the untapped market that feels insecure buying online.
But perhaps most important, using eCash will lower transaction fees for the online retailer, Watson noted. Credit card-issuing banks charge retailers between 2.5 percent and 5 percent, plus a flat fee, to process transactions. eCash will charge 2 percent to 2.5 percent, without a flat fee.
eCash will take a cut of the retailer's transaction fee in addition to licensing fees from banks that buy eCash technology.
Banks that issue eCash stand to gain as well, according to the company, by getting a larger percentage of fees by eliminating a number of middlemen through which the credit information flows. Next, banks get the benefit of the float — using the cash in the consumer's account until it's actually transferred.
Then, of course, there's exposure to a whole new consumer base that will shop online with eCash.
The company has run a pilot program for the past two years that included St. Louis-based Mark Twain Bank, Germany's Deutsche Bank24 and six other global banks.
In that time, more than 30,000 user accounts were opened at the banks and $32 million worth of eCash transactions were completed in the United States, Australia, Germany, Switzerland, Austria, Japan and Canada.
After the pilot phase, only Deutsche Bank and Yahoo Germany currently issue and accept eCash.
Negotiations are being held with the other participants and major U.S. banks and retailers to recognize eCash. This includes leading bricks-and-mortar banks such as Citibank and Chase Manhattan and online institutions including TeleBank and Security First.
Watson said the U.S. e-commerce market, while advanced, is still being pushed by the dot-com side rather than the consumer. eCash is an attempt to tilt the balance, satisfying the retail, consumer and bank constituencies.