WWW has Caused Tremendous
Change to Business

• Online catalogs
• Technical support
• Product announcements
• Advertising
• Career Opportunities :)
• Financial Information

Current Big Issues

• Secure payment schemes
• Microcent transactions
• Other issues (time allowing)

Secure Payment Schemes

The major issue restraining the commercial use of the WWW is the lack of a common, trusted, secure system of paying for products or services

Payment Schemes

• First Virtual
• CyberCash
• NetBill
• Digicash
• Millicent
• MasterCard's Secure Electronic Transactions (SET)

First Virtual

• Set up an account with credit card over the phone
• Receive a VirtualPIN (ID number)
• Orders are confirmed through email
• All money transfers done off Internet
• Cost to user is $2 annual fee, to vendor is $0.29 per transactions plus 2% of price

A First Virtual Transaction

• User gives VirtualPIN to vendor
• Vendor verifies VPIN through finger, telnet, email, or fv-api
• Vendor emails First Virtual with VPIN and amount of sale
• FV confirms transaction with user through email
• User answers email with 'yes', 'no', or 'fraud' (to immediately cancel VPIN)
• FV bills user's credit card, notifies vendor of confirmed transaction, deposits income into vendor's account

CyberCash

• Credit card transactions since April, 1995
• World-wide export license of 1024-bit RSA encryption algorithm
• Offers electronic coin (CyberCoin) as micropayment product ($0.25 to $10)
• Browser independent
• Netscape to bundle CyberCash's CyberCoin into Netscape LivePayment (Oct 7, 1996)

A CyberCash Transaction

• User chooses item, vendor returns invoice
• User sends encrypted payment info
• Merchant strips order info from payment info (credit card/account number remains encrypted)
• Merchant forwards encrypted payment info to CyberCash
• CyberCash decrypts and sends transaction to merchant bank, who passes credit card traffic to credit card vendor

A CyberCash Transaction (cont)

• Credit card vendor returns authorization to merchant bank
• Merchant bank returns authorization to CyberCash
• CyberCash sends authorization to vendor
• Vendor passes product to consumer
• Total time (claimed by CyberCash) 15 - 20 seconds

NetBill

• Electronic commerce project at Carnegie Mellon (currently in alpha on campus)
• NetBill accounts linked to conventional financial institutions
• Kerberos authentication at intermediate stages, RSA public key at final stages
• Requires 'Money Tool' software on user's machine

A NetBill Transaction

• User chooses item, window pops up with order info -- user clicks 'Buy'
• Vendor sends encrypted product to user's machine
• Vendor sends verification of encrypted transport, account info and decryption key to NetBill
• NetBill confirms sufficient funds, stores key, and returns report to vendor
• Vendor sends key to user
• User's software decrypts product

Digicash (ecash)

• Purchase/Deposit 'coins' from bank (Mark Twain in St. Louis, EUnet of Finland)
• From that point, coins exist on local hard drive (can be replaced like travelers checks)
• Software installed on client machine handles transactions
• Uses public-key cryptography
• Anonymous, like physical cash
• Double spending problem

Millicent Proposal (DEC)

• 'Scrip' is electronic currency
• Each vendor issues their own scrip to brokers
• Brokers issue broker scrip to users so users don't need to buy each vendor's scrip
• Goal to reduce costs and increase transaction rate -- makes microcent transactions feasible

MasterCard SET

• Partners with GTE, IBM, Microsoft, Netscape, Visa, others

"MasterCard, together with these partners, has developed a single method that consumers and merchants will use to conduct bankcard transactions in cyberspace as securely and easily as they do in retail stores today" (www.mastercard.com/set)

Secure Payment Thoughts

• PC Week 4/10/95 says there is just as much danger in using a credit card at the mall as on the Internet!
• Credit cards allow chargebacks when a card is used without permission or the vendor doesn't send the purchased product

Until a big name (MasterCard, Netscape, Microsoft, etc.) makes a big push to gain consumer confidence, payment schemes won't be widely used

• My guess is CyberCash or Millicent

Current Big Issues

• Secure payment schemes
• Microcent transactions
• Other issues (time allowing)

Microcent Transactions

• Online services have individual items that could be sold for a fraction of a cent
• Web pages, newspaper articles, stock prices, horoscopes, academic papers
• USA Today from Monday, Oct. 21 had roughly 126 articles and cost $0.50 = $0.0040 cents/article
• Some articles could be broken into smaller pieces

Why Microcent?

• Users more likely to create a $0.001 relationship with an unknown vendor than a $1 or $10 relationship

"Scrip is not worth stealing, unless you can steal lots of it, and if you steal lots, you will get caught." -- Mark Manasse (Millicent -- DEC)

• Users less likely to steal content because the original is inexpensive
• Revenue goes to content provider, not (necessarily) to service provider -- stimulates quality WWW content

Against Microcents

• Current advertising model works -- easier to keep up with 100 advertisers than thousands of small microcent transactions
• Technology not available to support microcent (yet)
• Fraction of total cost of product that pays for the transaction must be small

Other Web Commerce Issues

• Usage-based pricing (Digital Silk Road includes pricing info in the protocol headers -- pay per packet)
• Pricing as a means of congestion control (are you willing to pay to get bandwidth? -- dynamically done with smart pricing)
• Shareware/Demo software as a marketing medium (Doom, Quicken Lite)
• Internet as public relations front (IBM/Lotus merger on the web during the press conference)