Throwing its weight behind a futuristic electronic coin system for Internet payments, Deutsche Bank has agreed to deploy Digicash Inc.'s system in Germany.
The alliance, between the world's 11th-largest bank and a small but sophisticated technology firm, has significant repercussions for electronic commerce both here and abroad.
For one thing, the partnership would bring the ability to purchase goods and services over the Internet to a sizable consumer population.
For another, the venture gives shape to the steadily changing landscape of on-line transaction systems. Banks and technology companies are eager to determine which payment mechanism will ultimately prove most useful and acceptable on the Internet, and the varying merits of credit cards, electronic checks, and digital cash are a topic of hot debate.
Deutsche Bank's imprimatur is a strong endorsement for Digicash's electronic coin system - called Ecash - which American banks have been slow to adopt. Mark Twain Bancshares of St. Louis, the only U.S. bank using Ecash, began a trial of the computer-based currency in November.
Deutsche Bank, with headquarters in Frankfurt, has begun testing Ecash and plans to offer it to its 6.5 million retail customers later this year.
"This is a big deal for us," said David Chaum, founder and chief executive officer of Amsterdam-based Digicash. He is a noted cryptographer who holds numerous technology patents.
"This should send a strong signal to banks everywhere that Ecash is really happening."
Ecash is Digicash's trademarked name for its electronic payment system. The company also builds and develops smart card systems.
Ecash is designed to let Internet users make "micropayments," or small cash transactions for which using a check or credit card might be considered cumbersome. Examples range from buying a magazine article or stock quote over the Internet to ordering home delivery of a pizza.
To use Ecash, customers buy a stash of virtual "coins" from their bank and store them on their computer hard drives. When they wish to buy something from a vendor who accepts Ecash, they click on an icon. The sale amount is deducted automatically from their coin stash and the vendor can instantly redeem the coins at the bank.
Privacy is one of the key selling points of Ecash: Unlike some rival payment systems, Digicash's product allows consumers to make purchases anonymously.
In the United States, bankers have expressed reluctance about Ecash, saying they feel more comfortable with the idea of converting more conventional payment methods to Internet use.
But Ecash already has been embraced by the largest banks in Finland and Sweden, and the agreement with Deutsche Bank represents a significant coup.
"The Internet now is not a system on which you can send money, but the aim is to make this possible," said Klaus Thoma, a Deutsche Bank spokesman.
Mr. Thoma said the Internet enjoys broad acceptance in Germany, where consumers want to be able to make payments "cheaply and quickly."
"There were many systems and we chose one," Mr. Thoma said. "It is our aim to use cybermoney."
Daniel M. Eldridge, Digicash's chief representative in New York, said Deutsche Bank's clout would change people's minds about the viability of Ecash in a way that Mark Twain cannot.
"They're bigger than any U.S. bank, and they're acting on things on which other banks have yet to act," he said.
Mr. Eldridge described Deutsche Bank as "an institution that has the capability to move markets, and the ability to deploy Ecash on a large scale."
Though Digicash has been spreading its tentacles worldwide - opening an office in Australia, and forming partnerships with Merita Bank of Finland and Postgirot of Sweden - its competitors have been making a bigger splash in the United States.
Cybercash Inc. of Reston, Va., made waves on Wall Street when its initial public offering was issued in February, and interest in the company's Internet "wallet" - which would accept payments by credit card, electronic check, and a type of digital cash that is unrelated to Ecash - has run strong.
David E. Weisman, an analyst at Forrester Research in Cambridge, Mass., said Digicash's system seemed naturally suited to Europe, "where people feel more comfortable exchanging foreign currencies."
He said the United States' "credit card culture" was a drawback for acceptance of Digicash but a boon for the Cybercash wallet.
"I question the need for a digital currency that's not tied to the smart card in the physical world," said Mr. Weisman, who has persistently criticized the "complexities" of Ecash.
But Marc Rotenberg, director of the Electronic Privacy Information Center, called Ecash "very well suited to the needs of the Internet" and heralded the Deutsche Bank announcement as "very big news."
"Anonymous payment schemes are exactly what the Internet needs, and the sooner we can put these in place, the more quickly real commercial activity can begin," Mr. Rotenberg said.
Mr. Chaum serves on the board of directors of Mr. Rotenberg's organization, but Mr. Rotenberg is not affiliated with Digicash.
Like Mr. Weisman, Mr. Rotenberg also chalked up Digicash's greater acceptance in Europe to cultural differences.
"The Europeans just get crypto in a way that Americans just don't," Mr. Rotenberg said. "There's been some reluctance among the banks, which are naturally conservative, to look at new monetary instruments."
But Mr. Chaum predicted that Ecash would catch on in America because "Americans would prefer to be able to pay with cash."
He said: "One reason you're seeing the major banks in the European countries lining up behind Ecash and you're not seeing that in the U.S. is because there's not one dominant bank in the U.S."