Money on the Internet

The age of electronic commerce is about to commence. World wide computer networks like the Internet, are no longer the domain soleley of computer techies and academics. Due to developments like the World Wide Web, more people than ever are able to participate in this new world, which has been aptly christened: 'Cyberspace'.

In defining Cyberspace, an important decision has to be made in the area of electronic commerce. As all communication becomes increasingly automated choices have to be made regarding what kind of electronic world we want to build for ourselves. Several possible scenarios come to mind. One is a world in which it becomes very easy for someone to keep track of everyones' spending habits (and thus behaviour), since all data is already handled by automated systems. Another scenario may be equivalent, or even an improvement, on our world today; a world where personal data is kept private and safeguarded by the individual.

Here we examine the options and the risks of these differing scenarios by discussing several methods of payment currently available on the Internet other networks.

Payments external to the net

The first payments for services on the Internet were conventional ones. Subscribers transferred monthly fees for a service from their bank-account into the accounts of the selling party. These payments are expensive and take a long time to process, especially when the payment is made from one country to another. Perhaps this is sufficient for long lasting relationships, or frequent users of a certain database. But the one-time user who wants small amounts of data from many sources or a fast answer to a question is not well served by this payment mechanism.

Payments using credit card details

In order to avoid bank-transactions, credit card payments on the Internet became the next possibility. If you want to use a commercial service, you simply send your credit card details to the service provider involved and the credit card organization will handle this payment like any other. However, there are some risks to be considered. First of all, your credit card details are transmitted over the Internet. The customer doesnt know exactly how these details will reach the receiver. His or her message can pass through via multiple systems on its way to its final destination and maybe someone, somewhere along the way, is scanning these messages for credit card details; details which could be used for criminal purposes, making this system unsecure.

Payments using encrypted credit card details

It would make sense to encrypt your credit card details before sending them out, but even then there are certain factors to consider. One would be the cost of a credit card transaction itself. Such cost would prohibit low value payments by adding costs to the transaction amounting to more than the payment itself.

Payments using third parties

One solution is the introduction of a third party: a company that collects and approves payments from one client to another. After a certain period of time, one credit card transaction for the total accumulated amount is completed.

There are, however, other factors to consider when using third party (or credit card) payments. For one, there is always a possibility that a payment is refused because the spending limit has been reached. For another, all payment details of a person are gathered in one centralized system: where they buy, when they buy and sometimes what they buy is stored. The collection of this data tells much about the person involved and this can conflict with the individual's right to privacy.

Payments using ecash

Fortunately, in real life people always have the right to choose. If desired they can pay with cash, anonymously. If we want to introduce this right on the Internet we need digital cash: ecash.

Ecash is the digital equivalent of cash. You can withdraw digital coins from your Internet bank account and store them on your hard disk. Whenever you want to make a payment, you use these coins. The payment is fast and anonymous, and the payer can always prove that he made a certain payment. In some environments (like offices) there may be a need for additional security to prevent other users from accessing your ecash. Smart cards can be used to store your ecash allowing you to carry your ecash with you.