UC Berkeley [School of Information Management and Systems]

[Introduction] [Consumer Issues] [Business Issues] [Financial Issues] [Governmental Issues] [Digital Cash Products:] [Digital Cash] [Digital Wallets] [Micropayment Systems] [Niche Products] [Questions Raised] [References]
[Info Sys 204]

December, 1997

Exploring Digital Cash

Digital Cash

The most revolutionary products developed in financial and Internet circles in decades have been the true "Digital Cash" products. These are designed to convert money to an electronic equivalent, present on either the chip of a smart card, or on the PC of a consumer. These systems generally provide for anonymity of the payee, though not generally for anonymity of the payor, as this person (assumed in most models to be a business) will turn in digital cash to a bank after receiving it. Some of these systems are designed to also allow the transfer of digital cash between users, primarily the smart card models. And these systems also raise the greatest concerns about duplication of electronic currency, money laundering, theft and loss.

Digicash: Digicash is available now at six banks worldwide, and two more will begin issuing it soon in Europe. In the United States, one must open an account with the Mark Twain Bank of St. Louis, Missouri, and the recommended opening balance is a minimum of $100. One then gets "E-Cash" to download and spend. The product is focused on large payments, and the information given does not mention micropayments at all. As with many of these products at this point in time, one must locate a merchant that will accept DigiCash, generally through DigiCash's Web Page. Anonymity of the payor is promised, though the payee must return the E-Cash to one of the host banks to recover the value. E-Cash can be accepted by merchants offline (without checking back to the issuing bank) but online validation seems the norm, as Digicash states that it is"...easy to make copies of your ecash..." There is no provision to transfer E-Cash between users, and it seems to essentially replace the use of a credit or debit card in making purchases anonymously. Digicash is licensing the product to other companies (primarily banks) through non-exclusive licenses, and is currently seeking investors in their own company. The company is also working on smart cards and automated toll payment systems.

Mondex: Mondex International is primarily working on smart cards, which will store electronic value on a chip on the card itself. But they have plans to create "a card reader that attatches to your computer" so that individuals may use these cards online. Mondex can only transfer funds to another Mondex card, but users can transfer funds among each other. The company says that it's extremely difficult if not impossible to duplicate or create more cash for users, as each transaction a card makes is stored as a unique event on that card. "Early Mondex prototype systesm are currently being trialled on the Internet..." and the company has alliances with CyberCash, VeriFone and Sun Microsystems. As with Digicash, the product seems designed for the larger range of transactions, though they do claim that, due to the low transaction cost (unlike a credit card), "transactions of even one cent become viable."

CAFE: This 3 year project begun in 1995 is called Conditional Access for Europe, and is part of a larger project called EC ESPRIT. 13 partners are working to create a secure electronic "wallet," which will allow for purchases from electronic cash or credit accounts, and possibly provide a form of identification for the user. This is a project and not a product right now. The cash value part of CAFE would be based on smart cards, and the identification functions are ambitiously proposed to include, "electronic personal credentials (like passports, driver's licenses or housekey) and medical information." User-to-user transactions are predicted, as is the use of infrared interfaces to conduct transactions with the wallet. The plan is to use DigiCash's E-Cash for the money part of the project, and thus micropayment ability will be determined by E-Cash's abilities in this regard. Trials are now being conducted. Currently employees and visitors at the European Commission in Brussels use a smart card implementation of the CAFE electronic wallt to pay at canteens, coffee shops and vending machines on site. Other trials will be conducted in Greece and Italy next year.

NetCash and NetCheque: These two projects were developed by the Information Sciences Institute of the University of Southern California, beginning in 1994. Only one organization (TEKnology-Laine Inc. of Bremerton, Wash.) is listed as a future provider of these systems. One would open an account with that company, and receive software and electronic currency to spend. Four places that will accept NetCheque and NetCash are listed, though three of these are classified as "coming soon." The information on this product is two years old, and there seems to be no reported progress since that time. The tone of the information is very academic (in contrast to the more recent business-oriented proposals) and the creation of a demo, if not the web site itself, seem to have been the high-water mark for this proposal.

Return to Digital Cash Product Overview
Continue to Wallets and Multiple Payment Products