Continuing the series of Computer Business Review’s profiles of European high flyers we forecast the future for the Dutch Digicash.
When David Chaum, an American born cryptographer, left the Amsterdam-based Center for Mathematics and Computer Science six years ago, he set up a company which had a compelling business plan: it would create its own money. Not printed money, of course, but electronic money, which could be used just like cash, shared between electronic devices, across any electronic medium, and especially the internet. Since then, Digicash BV, has become an international name in global electronic trading, and is widely recognized as the pioneer of electronic cash – or ecash. Digicash’s ecash tokens have been the subject of numerous trials and have been adopted by various banks, service providers, and are used in various projects in Europe, Australia and the US. In Europe, the leading Internet Service Provider, EUNet, now supports Digicash’s ecash. On the face of things, Digicash appears to be in a superb position to become established as a global technology supplier in a high growth market. The use of electronic trading on the internet is forecast to soar dramatically over the coming years, and while the technology was originally used in a Dutch Road Toll system, Digicash is arguably now the leader with its internet based electronic cash system. Despite this, Digicash faces a critical period: so far, the company’s reputation exceeds its level of support and penetration in the market, which is not surprising given that electronic trading is still in its infancy, and, like others, it needs to become firmly established if it is to survive the impact of several competing and perhaps lesser technologies. While Digicash was first to the market, the quick development of the SET secure electronic trading standard will encourage vast numbers of purchasers and merchants that credit card transactions over the internet are safe.
Adopting the Mondex system
Many banks and credit card organizations are adopting the Mondex system, developed in the UK, which is now 51% owned by MasterCard – MasterCard has trialed the use of Digicash too. While Digicash may argue that these are complementary, rather than necessarily competitive systems, it is likely that many users will, at least initially, prefer a system based on the method of payment they already use, whatever the limitations. And there is a danger that Mondex will be preferred for smaller transactions, and credit cards for larger transactions. Certainly, Digicash’s technology is highly regarded, and has several advantages over competing systems. The cryptography used makes it all but impossible for the bank, merchant or customer, or even two together, to commit a fraud. It is also possible to make very small ‘micropayments’ cost effectively; and payments can be made anonymously, just like cash. Part of Digicash’s appeal is that its system behaves like cash, but is controlled by an issuing authority, providing an audit trail for security purposes. But unlike Mondex, that audit trail requires the user to open a trading account – which may deter some users. With revenues still fairly small after six years, Chaum is repeatedly asked, When will Digicash take off? But with publicly floated US rival Cybercash Inc also waiting for the market to catch up, it may be some time before Digicash is secure enough to float.