Digicash Inc., the Netherlands-based developer of an electronic cash system for the Internet, begins its assault on the United States today - from the hinterlands.
In a twist on the tendency to introduce electronic money innovations at big banks, Digicash has announced Mark Twain Bancshares, St. Louis, as the first U.S. licensee of its Ecash system.
Mark Twain, while recently in the news because of takeover speculation (see article on page 9), is completing the legal due-diligence and system upgrades to "go live" immediately, said Frank Trotter, the bank's vice president in charge of the effort.
The effect will be to bring Ecash out of its prior realm as artificial "Monopoly money" and give Digicash a long-awaited U.S. toehold and credibility boost.
Mark Twain will be the first issuer of Ecash for payments by personal- computer users in a trial reaching up to 10,000 users. The cash, transmitted over the Internet and protected by security codes, will typically be used for purchasing software or documents in amounts ranging from "micropayments up to the credit card level," Mr. Trotter said.
Digicash, which has been in business since 1990 and holds several key patents, is competing against several other on-line payment providers. They include Cybercash, First Virtual Holdings, Mondex, Netcash, and Netcheque, each with its own clearing method and technical approach.
Mark Twain Bancshares was drawn in by its disproportionate international interests. It issues deposits in more than 20 currencies, viewed the Internet as a natural extension for its marketing, and saw Ecash as "a good place to begin" improving its payment and communications mechanisms, Mr. Trotter said.
Still, at $2.8 billion of assets, Mark Twain is a far remove from the money-center banks that Digicash's chairman, the American computer scientist David Chaum, has been avidly pursuing. But some observers said a more modest rollout of Ecash could work in his favor, perhaps as a regional tryout for the virtual big time.
In his New York office Friday, Mr. Chaum said he was holding talks with many of the biggest banks in the United States and other countries and that some unidentified banks were under license.
Mark Twain's participation demonstrates that advanced payments technology is within the reach of smaller institutions, Mr. Chaum said. The fact that bigger banks have not signed on shows "there is a tradeoff between size of institution and speed to market."
Digicash now operates Ecash in a "Monopoly money" mode, using the name "cyberbucks." Mr. Chaum said he expects its success - more than 60,000 participants and 70 selling organizations signed on - to spill over into live Ecash, real money you can spend or put in the bank.
Digicash said Husky Labs, an Internet "host" for National Public Radio, Penguin Books, and the U.S. Holocaust Memorial Museum, among others, plans to be a participant.
Along with the Mark Twain announcement, Digicash said it had also licensed Ecash to Sweden Post, owner of the nationwide post office banking and payment system known as Postgirot. Unlike Mark Twain, Postgirot has not revealed plans for a rollout, but Mr. Chaum said its entry indicated "we will be working in all parts of the world."
"Mark Twain is much smaller than Postgirot, but in many ways it is an ideal bank for us," Mr. Chaum said. "It is very profitable and progressive, it does business globally, and the Internet and Ecash play into that."
"Our customer base is entrepreneurial and PC-oriented," said Frank Trotter, vice president of Mark Twain's capital markets group and director of its international markets division. He said international deposits had been a "niche business" that can benefit from "outreach marketing" via the Internet.
"The technology allows a $2.8 billion bank to reach beyond its traditional market size," Mr. Trotter commented.
He said Mark Twain was able to move quickly with Digicash because, unlike many banks its size, it "controls the technology resource," having designed its own deposit processing systems.
The bank also had its legal advisers look into the legalities of digital cash. Mr. Trotter said the legal hurdles were lower than they would be for setting up a full-fledged bank on the Internet, as Cardinal Bancshares of Kentucky recently did with Security First Network Bank.
"Ecash on a computer hard-drive is not a deposit - it's like cash in your pocket," Mr. Trotter said. "When it's in the Ecash mint, it's more like money at a teller window."
Mr. Chaum said Digicash assisted in the bank's legal research and continues to discuss the technology and its implications with banking regulators, who have raised questions about payment-system risks and impacts on monetary policy.
On the stock market, Mark Twain was in the spotlight again Thursday and Friday, but not because of Ecash.
Amid a resurgence of buyout rumors, the share price, after rising $1 Thursday, soared as much as $2 Friday in volume more than 10 times the daily average. The stock was up $1.625 to $39.125 in late Friday trading.
