for the Internet, is taking up the cause of credit cards.
Not content to wait for electronic wallet technology to be perfected, Mr. Chaum is proposing a way for any cardholder to pay any merchant anywhere on the World Wide Web without having to worry about software compatibility.
In keeping with Mr. Chaum's renown as a cryptologist and advocate of privacy, he says his method is replete with security measures and anonymity options on multiple levels. Given that he wants to stimulate credit card usage and perhaps enter into cooperative relationships with banks, Mr. Chaum said he is optimistic that his system will catch on in ways that the technically elegant but commercially premature E-cash system, which brought him notoriety earlier in the decade, did not.
Mr. Chaum said he learned from his struggles after founding now-defunct Digicash Inc. nine years ago that "it's all about deployment and adoption." His patented E-cash could have been accessible at virtually any personal computer, but it was useless without merchant acceptance.
"My view is, you have to get to all merchants," Mr. Chaum said in an interview. "The only definition of money is ubiquity," and he said the virtual wallet proposals from computer and software vendors fall far short of that.
He would create ubiquity for secure credit card transactions by serving as a trusted intermediary between buyers and sellers. A consumer who might be hesitant to "pull the trigger" on an on-line purchase -- a common outcome even at reputable "e-tailing" sites because of security and privacy fears -- could go to Mr. Chaum's Web site for peace of mind.
His system would not just authorize or verify the cardholder. It would generate a one-time card number, using the standard 16-digit format, specifically for that transaction. Even if it were compromised -- which Mr. Chaum said is next to impossible because of a multiple-computer configuration with requisite cryptographic safeguards -- the card number's uniqueness would stifle any attempt at illicit use or re-use.
More to the point of what he is trying to accomplish, the account number would be transferred with relative ease to the merchant's order form, regardless of the technology employed. Both sides in the transaction are assured of the payment's validity, even if the cardholder is a stickler for privacy, is buying a digital commodity such as software, and does not want to provide a mailing address to the seller.
Mr. Chaum hinted that he is shopping his brainchild around to banks and other companies, but he would not be specific about any progress he is making. He said the revenue -- or revenue-sharing -- propositions could vary according to desired business model or "scenario." Fees could be collected from cardholders or from servicing of transactions. Mr. Chaum's payment company, as yet unnamed, could theoretically be or own a MasterCard or Visa member bank, or form alliances with association members.
"Huge amounts of money are being thrown around to make credit cards safe for the Internet," Mr. Chaum said, and he expects to benefit from that.
This marks Mr. Chaum's return to the banking and payments scene after the Digicash bankruptcy, an ignominious end for a pioneering Internet commerce venture. Built around Mr. Chaum's vision and some still valuable patents, Digicash succeeded at getting institutions as prestigious as Deutsche Bank and Credit Suisse to experiment with E-cash.
The currency appeared on computers as "coins," issued and managed by banks, typically for micropayments. Digicash's board was fronted by Massachusetts Institute of Technology professor and Media Lab head Nicholas Negroponte, who was influential in attracting venture capital and engineering a relocation two and a half years ago from Mr. Chaum's Amsterdam base to Silicon Valley.
Mr. Negroponte recently acknowledged "losing my shirt" in the investment but said he is still a believer in the need for digital cash.
Digicash never established what technology theorists call a network effect -- the profit-generating combination of sufficient holders of E-cash and places to use it. After Mr. Chaum stepped aside in 1997 to take the role of chief technology officer, the company went through two chief executive officers, Visa veterans Michael Nash and Scott Loftesness.
Mr. Loftesness, who is influential in Silicon Valley venture financing circles, presided during the bankruptcy proceedings that culminated in August with the $8 million sale of Digicash's assets to eCash Technologies Inc. of Bothell, Wash. The lead owner is Ruloff Capital Corp. of Vancouver, British Columbia, with Digicash backers August Capital of California, Applied Technology of Boston, and Glide-IT Fund of the Netherlands retaining interests.
The new owner of E-cash and its key "blind signature" encryption patents is within weeks of talking publicly about its plans, a spokesman said.
Mr. Chaum said he is working with a "work-around blind signature" that is different from that of E-cash. He said there is no shortage of 16-digit account numbers, and he makes provisions for recycling them over time.
Mr. Chaum "is one of the truly brilliant people in this industry, and we are aware of his idea," said Ron Martinez, chief executive officer of San Francisco-based Brodia, a leading developer of electronic wallet technology.
Mr. Martinez said the concept is "one to track," adding that his chief technology officer, Ted Goldstein, "has had some conversations" with Mr. Chaum. Mr. Martinez also pointed out that there are many competing wallets and wallet alternatives on the market and not all will survive a shakeout.
Another of the supplier executives, CEO John McGuire of Trintech Group, wondered if Mr. Chaum's proposal can fly given bankers' desire to reinforce their customer relationships, perhaps assisted by branded wallets.
Mr. Chaum said his system "can do wallets" too. His technology is closely related to the automatic form-filling techniques incorporated in software from Brodia, Trintech, Microsoft Corp., International Business Machines Corp., Globeset Inc., and others, which offer varying degrees of instant compatibility with merchant sites.
But Mr. Chaum said it will take time for "the machinery of wallets" to come together, which is why he has something else "with more compelling benefits" waiting in the wings.
