Digital payment system

At this stage, e-commerce may be stuck due to surfer fears of credit card theft. But on the horizon are micro- payment companies, offering solutions that enable surfers to pay online for products involving very small sums, without disclosing credit card numbers or any other identifying details over the 'Net.

"We're just releasing a new version of WiSP with new features," Trivnet (Israel) general manager Efrat Boker says, "It deals, for example, with various currencies [the previous version dealt only in dollars - H.G.]. Another new feature is multi- lingualism. To date, the product operated only in English. It is now available in other languages, including Japanese and Chinese."

"Globes": Why are you addressing the small sums niche market?

"Our technology can be used for any amount, but we limit the monthly purchasing amount because of our risk model. Small sums limit our risk and also limit the customer's risk. At this stage, we still want the public to get used to using our product. We believe they will be less afraid of using it if the sums involved are small.

"This also explains why we're concentrating on products like games, music, various data archives including newspapers, legal material etc. These are digital products delivered by the vendor to the customer over the Internet, with no shipping costs involved. Another saving in cost stems from the fact that duplication and manufacturing costs are lower than for non-digital products. The bottom line is that it's less expensive for the vendor, the customer and for us."

How do you earn money?

" We earn commissions on each deal, normally 20% for small amounts like $1-1.5. Commission percentages fall as the price rises. Our software calculates the commission, so we're also more efficient than credit card companies - we don't have complicated and expensive infrastructures or tens of thousands of employees."

What's your advantage over other collection systems?

"Our two main advantages to customers are that they don't need to post their credit card numbers on the 'Net and they don't need to provide any identifying details, meaning no one need know what they purchased. We are very sensitive to worldwide concerns about privacy. Some companies fall apart over this issue. Our software includes a patented automatic identification mechanism that enables us to identify users by an ID number alone.

"In other words, customers connected to WiSP-enabled ISPs are identified by ID numbers the moment they click on the product they want to buy. This way, there is no way anyone can know their names or identities. The product features automatic identification, account management, transaction management and supplier-customer communication.

"The software debits all amounts accrued over the course of the month from the customer's account, and at the end of the month sends the total to the ISP. The ISP adds the charge to the customer's Internet or telephone bill, but never knows what products were purchased.

"The only thing the ISP knows is that, at the bottom of the bill, is a line debiting the customer for a certain amount. The user, on the other hand, can enter our site and see details of the purchases made."

What about vendors?

"The software has another mechanism for totaling all payments made during the month, categorized by vendor. At the end of the month, vendors receive payment on all the purchases we've handled. They can see details of which products were purchased and when, but cannot see who made the purchases."

What's your target market?

"In general, any product that can be sent over the 'Net may be purchased through us. Currently, our main customers are newspaper archive users. Lately, there's been increased interest in buying computer games, and we recently added music. Analysts anticipate that games and information [archives] will be the markets with the biggest traffic."

When will you begin to be profitable?

"It's very difficult to know at this point when we'll start becoming profitable. The forecast is sometime in 2001, but a great deal depends on the number of content sites. I think it will take another year or two until the idea spreads significantly enough."

What is your marketing model?

"We're in contact with large telecoms linked to Internet providers. The intention is for each of these organizations to market the product in their countries. We're not planning to sell directly.

"Local telecom operators sign up vendors and ISPs. They also operate our product, receiving a commission on every purchase. This works as an incentive. It's in their interest to have a lot of deals, which motivates them to sign as many contracts as possible."

Trivnet was founded at the end of 1997 by Saar Wilf and Guy Ruvio, who decided to set up a start-up following their military service. They met Amir Galili, one of the founders of software company Emultek (now E-SIM), and made a joint decision to focus on the micro-payments sector. Three weeks after starting development, the trio found a solution, registered a patent and set up the company.

The company's first investor was the Veritas Venture Partners fund, which invested in it in 1998. Later, Israeli funds Magnum and Star, an investment fund from Singapore, and Singapore Telecom invested in the second round, when the company raised $13 million.

The competitors

At the moment, Trivnet's most significant competitor is iPIN of San Francisco, which was founded in 1997. IPIN's disadvantage is that shoppers must disclose both user name and IP passwords at the time of purchase. iPIN believes this makes the system more secure. iPIN also translates prices into the local currency. Other potential competitors are electronic wallet companies.

"Our new version, on the market in two weeks, also offers translation of the product price into local currency," Boker says. "As for passwords, WiSP users can choose their own password if they so wish, but the system does not ask for them. We think the password thing is a nuisance to users and takes away some of the spontaneity of shopping, thus reducing the number of impulse purchases. We believe users prefer not to disclose their passwords and user names over the 'Net for security and privacy reasons as well."

Aren't you afraid of opposition by the credit card companies?

"I'm assuming that, currently, credit card companies are not built for small sum collection. Otherwise they would be doing it," Boker says.

Published by Israel's Business Arena on 20 June, 2000