Credit cards soon may have to share the electronic commerce spotlight with other methods of payment.
Plastic should remain the most popular on-line payment vehicle for the next few years, experts said. But consumers are expected to grow increasingly comfortable with smart cards, electronic checks, and digital cash for Internet purchases.
Jupiter Communications, a New York-based electronic commerce research firm, estimated that credit card payments accounted for 88% of the $1.25 billion in on-line transaction revenue in 1996.
By 2000, however, credit cards' share will drop to 51% of the year's projected $7.3 billion in total electronic commerce revenue. Smart cards will account for 13%, electronic cash for 16%, and electronic checks for 17%, Jupiter said.
Several companies are trying to chip away at credit cards' dominance. Micropayment technology companies, such as Digicash Inc. of Palo Alto, Calif., and Cybercash Inc. of Reston, Va., are pushing systems that would facilitate Internet payments under $10. The Financial Services Technology Consortium, a New York-based alliance of banks and technology companies, is working on several electronic commerce initiatives, including one for electronic checks. Credit cards are "pretty well entrenched" in electronic commerce because much of the necessary infrastructure already is in place, said Nicole Vanderbilt, Jupiter's digital commerce director.
Electronic commerce companies use credit card networks to process transactions on the back end, and security standards-such as the Secure Electronic Transaction protocol-have been created.
Still, industry experts see plenty of room for other payment methods. Electronic cash and smart cards will capture 80% of the under $10 charge market by 2000, according to Jupiter. However, companies promoting these payment methods have a long way to go to gain acceptance.
Cybercash is working to make digital cash more popular on the Internet. Company founder Bruce Wilson is counting on an untapped market for small monetary transactions on the Web.
"The best fit for micropayments is digital goods," Mr. Wilson said, such as downloaded reports, pictures, graphics, and software.
Smart cards, which have yet to catch on in the U.S. market, may find new life on the Internet. Several computer manufacturers and the makers of WebTV are building products which include smart card readers. "The fact that you can buy a device that has a smart card slot in it at Sears is pretty powerful, making it a little more mass-market than people imagined," Ms. Vanderbilt said.
Electronic cash backers will face competition from digital check supporters.
The Financial Services Technology Consortium is piloting an electronic check system that uses the existing bank-clearing and settlement infrastructure, while also utilizing new technology such as digital signatures and certificates for authentication.
Paper checks currently are the most popular noncash payment method, said Frank Jaffe, the consortium's electronic check project director.
"Consumers have shown they want to have more choice and control," Mr. Jaffe said. "Different payment methods are desirable in different situations."
