Cybercash Inc. is collaborating with a video game company to develop arcade-style games that consumers could play on the Internet and pay electronically for playing.
The announcement steps up the competition among software and technology companies to offer a secure on-line micropayment system. Banks have been watching the race closely as they try to anticipate the future of electronic commerce.
Through a partnership with Rocket Science Games of San Francisco, Cybercash intends to widen its array of payment options to include "electronic coins," which are essentially small direct transfers between consumers' and vendors' demand deposit bank accounts.
By the second half of 1996, officials at both companies said, Internet users will be able to select from among 20 video games and play them on- line for 25 cents a game. The money will move directly from the player's bank account to the vendor's account, they said.
Officials at Reston, Va.-based Cybercash said the electronic change purse will be a new feature of their "electronic wallet" product, a software program that consumers can use to shop on the Internet.
Currently, the Cybercash wallet can facilitate credit card payments for customers who use Visa, MasterCard, Discover, or American Express. But credit card payments are considered too cumbersome for small sums like the cost of a video game.
Jim Wickett, chief operating officer of Rocket Science Games, said his company had surveyed those working on processing Internet micropayments before choosing to work with Cybercash.
"We just felt Cybercash was the most real," he said. "Cybercash has the momentum and visibility in the industry to be the best partner."
Cybercash completed an initial public offering Feb. 15, selling 2.4 million shares at $17 each. Though the company has no revenues, its stock price rose 66% the day it was issued and has remained high, reflecting Wall Street's interest in the development of secure Internet payment methods.
Another company, Digicash Inc., already has brought a digital cash product to market. The Amsterdam-based company has paired up with Mark Twain Bancshares of St. Louis to offer bank customers an electronic cash equivalent called "Ecash" that can be used to buy a small sampling of products on the Internet.
Unlike the proposed Cybercash product, Digicash's version of electronic money downloaded from customers' bank accounts is stored on their PC hard drives.
Daniel M. Eldridge, vice president of Ecash business development for Digicash, was dismissive of Cybercash's planned electronic coin product. "It's not cash," he said. "Cash is a bearer instrument, and that doesn't sound like a bearer instrument to me."
"It's going to take a little more than a game company to bring forth a low-value payment system for the Internet," Mr. Eldridge added.
But Mary Doyle, an analyst at Link Resources Inc., a market research firm, said she viewed the "virtual arcade" idea as a "great application" for a new digital coin product.
Other technology experts expressed caution over Cybercash's announcement, saying the riddle of finding a cost-effective way to arrange Internet microtransactions has proven difficult to solve.
