On the Web, small change equals big change
Although the Web sometimes appears to be a boundless source of information, it is actually limited to what can be provided either free or for more than the one- or two-dollar minimum required with credit cards.
The ability to charge just a few cents could open up a new world of content and services, from customized news summaries and analyses to specialized searches, translations, reviews and games. Answering that call, an emerging technology called IBM Micro Payments allows e-businesses and billing systems to perform transactions over the Internet for as little as a penny -- profitably.
Micro Payments, developed by a team led by Amir Herzberg and Ilan Zisser at IBM's Haifa Research Laboratory, is not the first attempt to fill the price gap between zero and the credit card threshold. But it could be the first widely successful one. "It's not surprising other attempts have failed," says Herzberg. "You need a critical mass of early users. For that to happen, the system has to be simple for people to participate in. With Micro Payments, you need only one billing server, and you can buy from anyone else -- and anyone else can buy from you."
Unlike with credit cards and some of the other digital cash systems, Micro Payments does not require establishing a network of centrally approved banks and merchants. The system allows financial institutions, telcos, portals and Internet service providers to operate as billing servers, providing services to consumers and merchants. It is easy to add a new billing server to the network of interoperable servers. All that is required is to connect that server with one of the billing servers already in the network. Any risks associated with the server will affect only the servers directly connected with it. This model allows the network of interoperable billing servers to grow rapidly. "Such scalability and interoperability are crucial in order to gain the critical mass of buyers and sellers we need for this technology to really take off," says Zisser.
At the same time, IBM Micro Payments is designed to minimize risk. "Our system is based on a 'consenting adults' principle," says Herzberg. "The parties are exposed to risk only from someone with whom they have a direct, long-term business relationship. Buyers and sellers deal only with their own billing server." Furthermore, a billing server can set separate credit limits for different buyers, who, in turn, can limit how much money they want to put into their Micro Payments Wallet or can ask to be notified when their purchases exceed a certain amount. "Basically, each party manages its own risk," says Herzberg.
THE INTERFACE IS FAMILIAR
Using IBM Micro Payments is a natural extension of the familiar Web surfing interface. To buy information or services, you simply click on an IBM Micro Payments link, and the cursor changes to a dollar sign or cent sign, indicating whether the amount is above or below the user-defined threshold. The actual price is displayed in the status bar at the bottom of the browser. Thanks to its simplicity, the interface was recently recommended for adoption as a standard by the World Wide Web Consortium's MicroPayments Markup working group, which Herzberg chairs.
Herzberg, manager of e-business and security technologies at Haifa, developed a prototype of an early micropayment system, code-named MiniPay, in 1996. In 1998, after a successful technical-feasibility pilot with TeleDenmark -- the Danish telco and the country's largest ISP -- MiniPay was renamed IBM Micro Payments and released in version 1.0. This past March, ATOS, a major European payment systems provider and IBM business partner, announced an OEM version called Poseidon MP. ATOS offers to help telcos and financial institutions establish IBM Micro Payments billing servers across Europe. Version 1.2, to be released in August 1999, can handle any currency. It is slated for deployment by several major telcos and financial institutions.
Chani Sacharen is a technical writer living in
Kfar Sava, Israel..
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