Cash Flow Changes Course on InternetFor years pundits have predicted that the digital age would usher in the paperless office and the cashless society. But computers have led to more paper, not less. And though getting cash may be more convenient with computerized ATMs, the need for it is no less great.
But significant change is in the works, at least on the money front.
Today you can carry out transactions using your personal computer and the Internet without exchanging cash. You can buy, and you can sell, and you don’t even need a credit card.
Online auctions have been the catalyst behind the innovations, says Mark Morgan, a research analyst who specializes in e-finance for the San Francisco investment bank Putnam Lovell. The biggest mover here is a little-known, meteorically growing, and controversial company named PayPal.
Out of the heart of the Silicon Valley, PayPal has vaulted in little more than a year from nowhere into the world’s largest Internet-based payment network. More than five million people now use its PayPal service, according to a company spokesperson. This constitutes more than 10 percent of all Internet traffic in the financial services sector — more people than are served by big names such as Citibank, Wells Fargo and Bank of America combined.
For consumers and businesses, PayPal offers useful services, and for businesses, useful lessons as well.
Using PayPal <http://www.paypal.com>, you can quickly and conveniently pay for goods or services by having money transferred from your bank account, credit card account or PayPal money market account. The kicker here is that you can sell over the Internet without a credit card merchant account, which for individuals and even small businesses can be difficult or expensive to obtain.
PayPal used to promote itself as being “always free,” — in its logo no less — but it now charges if you buy or sell more than specified amounts. It can still be a good deal, compared with other options.
But PayPal’s abrupt change of terms of service created a storm of protest — Internet message forums were flooded with scathing complaints and calls for boycotts. In what undoubtedly is a side effect of this, the Better Business Bureau just gave PayPal an “unsatisfactory” rating.
PayPal will likely weather this deluge, in part because a key competitor, ExchangePath, just went belly-up. But it could have handled things better.
Sure, in today’s brutal dot-com shakeout, businesses need to make money rather than just coax venture capital and grow market share. But the transition from being a free service to one that charges should be planned and managed. PayPal’s lesson to other businesses is a fairly common-sense one: Don’t promise what you may not be able to deliver.
PayPal isn’t the only player in the “person-to-person payment” market. Ecount, based in Conshohocken, Pa., is carving out space for itself by marketing to banks and credit card companies rather than directly to individuals or small businesses, says Matt Gillin, the company’s CEO and president.
Individuals can still sign up <http://www.ecount.com>, and more than 800,000 have, often those wary of using credit cards over the Internet. You can use the service with any merchant who accepts MasterCard payments — unlike with PayPal, which requires the merchant to have a PayPal account.
You pay for online purchases out of your Ecount, which you fund through a major credit card. The company plans to offer bank account transfers in the future. You’re charged a small fee only when you add or withdraw money from your account or opt to receive a traditional plastic MasterCard debit card from the company. You withdraw funds with your credit card or MasterCard debit card or by having a check mailed to you.
Other services battling for position in the online payment space include eCharge <http://www.echarge.com>, MoneyZap <http://www.moneyzap.com> and c2it <http://www.c2it.com>.
Any electronic payment service that is worth its silicon makes security top priority, but you have to do your share, too. Don’t use the same password for your e-cash account as your e-mail account. Recently hackers got into the PayPal accounts of some Hotmail users by hacking their Hotmail passwords.
Also, beware of “spoof” sites with names such as PayPai that try to trick you into giving up your password. It’s best to log directly onto sites such as PayPal than to go to them via possibly bogus links in e-mail messages.
E-payment companies have grandiose plans, with dollar bills flashing before their eyes. The ultimate goal: One payment system that replaces not only cash, but credit cards and checking accounts as well. — Reid Goldsborough is a syndicated columnist and author of the book Straight Talk About the Information Superhighway. He can be reached at firstname.lastname@example.org or http://members.-
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