NEW YORK (CNNfn) - For most Americans, the flapping of paper money and the jingling of coins are far more comforting than the hums and zips of electronic cash. So perhaps it's no surprise that e-cash -- an Internet-only currency -- has yet to catch on in this country.
"People have plenty of payment choices today in the U.S.," said David Weisman, a technology analyst at Forrester Research Inc. in Cambridge, Mass. "We have a very good telecommunications structure that allows for credit and debit cards to work in most situations."
Besides, do people who can write checks, ring up credit card balances and toss cash need another way to do business? Three companies offering special forms and uses for their own version of e-cash say yes.
Hard to break a cash habit
The move to a truly cashless society is probably generations away in the United States. Bankers and industry experts say several things need to fall into place before e-cash takes off.
Consumers need a financial incentive to use the service -- such as those provided by loyalty or rewards programs and discounts, and they need to become as comfortable with virtual cash as they are with the crisp fold of bills and the warmth of plastic credit cards.
Meanwhile, people in Europe, Asia and Latin America have embraced this newest form of money exchange. They have developed a stronger sense of trust in the e-cash system. Nevertheless, e-cash makes up a small part of the whole.
Worldwide, consumers, businesses, governments and educational institutions are expected to use electronic cash for 9 billion payment transactions by the year 2000, when more than 25 billion credit card transactions are expected to occur, according to a study by Killen & Associates, a research firm based in Palo Alto, Calif.
E-cash made its debut in 1995 when DigiCash Inc. in Palo Alto, Calif., enlisted 25,000 online shoppers to begin testing the company's new software. DigiCash made headway selling the software to overseas banks, but it garnered little attention here and the company filed for bankruptcy last year.
Most American consumers didn't want to download software essentially to create money on their computers, experts say. For many, there was a general distrust of exchanging electronic cash over the Internet.
And the kids will lead them
But there still is hope. E-cash may come into vogue as younger, savvier Internet users increasingly join the ranks of those buying online. The number of teens online will jump from today's 4.5 million to 11 million in 2002, according to Jupiter Communications, a New York consulting firm.
Already, they are having an effect. Kids and their often-fickle tastes are the cornerstones of ICanBuy.com, a San Francisco company that launched in April and boasts more than 20 online retailers offering toys, clothes, books, records and other goods for kids and teens. The portal makes money by taking a percentage of each transaction.
"Kids represent a powerful group of consumers who have been, for the most part, powerless when it comes to Internet commerce," said R. Paul Herman, ICanBuy's chief executive officer, noting those ages 4 to 18 spend about $130 billion annually on goods and services. "Our idea was to give them a place where they can learn to manage their money, but allow parents to keep control on what's being spent where."
Perhaps it's no coincidence that IcanBuy offers electronic cash transactions.
Here's how ICanBuy.com works:
- Parents set up an electronic allowance by using a credit card to deposit money in a child's electronic account.
- Parents choose the places the child may shop and set spending limits.
- Teens and kids get to shop, conduct financial transactions -- such as online banking and charitable donations -- and learn money management.
- Children's identities are protected, preventing vendors from targeting them in the future.
Parents can review their children's account activity at any time and revise its parameters.
Flooz.com is taking another tack. The New York-based company is accepting credit card payment for gift certificates issued in an electronic currency called Flooz. The term Flooz is slang for cash in Persia.
Here's how a Flooz transaction works:
- On the Web site, users buy any amount of Flooz using a credit card -- one Flooz equals one dollar.
- A certificate and an electronic greeting card are e-mailed to the recipient, who can spend the Flooz at an affiliated online merchant, perhaps Books.com, Caesar's Palate or Nirvana Chocolates.
- Flooz can be spent right away or stored in an account.
Flooz.com will even remind customers of Secretary's Day and other easy-to-forget events.
They're full of 'beenz'
And where there is Flooz, can beenz be far behind?
The Beenz Co., a New York- and London-based upstart, recently added an electronic incentive program to the mix. It issues electronic credits, known as beenz, as rewards for those who deal with companies on the beenzworld list.
- Electronic credits are earned by shopping at or visiting certain sites.
- The earned beenz are saved in an account managed by the company until they are used to purchase goods or services from online merchants in beenzworld.
- So far, the company has partnered with 25 retailers, ranging from online flower shops to music stores and Internet service providers.
"Our goal is to make online shopping as commonplace as taking a trip to the mall to shop," said Nina Helms, Beenz's director of marketing. She says the company has made electronic transaction easy and free.
Still, it's "going to be a hard sell for some people."
- by Bank Rate Monitor for CNNfn