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Will micropayments revolutionize e-business?
Although the Internet and the Web are an excellent means for providing digital content and online services, currently almost all such content and services are provided for free. Imagine what content and services could become widely available if the vendor could charge a small fee and sell to any consumer via the web. Because of fees charged by credit card companies, (such as minimal fees of about 25 cents), credit cards cannot be used for charging very small amounts. Enabling merchants to sell items for just a few cents will open many exciting new markets in the e-business community.
IBM Micro Payments, developed by the IBM Research Lab in Haifa, is an emerging technology that allows buyers, sellers and billing systems to profitably sell content, information and services over the Internet — for as little as one cent. The system allows financial institutions, telcos and internet service providers to operate a billing server, providing services
to consumers and merchants, with easy interoperability with other billing servers. An automated compiler tool transforms existing HTML pages, creating 'click and pay' links with either fixed or dynamic prices. Content and service providers can take advantage of the extensive set of APIs and authoring tools that extend OEM services and products to include micropayments.
- Off to a great start
After taking part in the establishment of the SETTM(Secure Electronic Transaction) protocols for credit card transactions over the Internet, Dr. Amir Herzberg and Hilik Yochai began work on one of the first
micropayment systems, known at that time as MiniPay. These efforts started in early 1996 – by July, the first prototype system was up and running. A technical-feasibility pilot was done with the Danish telco and largest ISP, TeleDenmark, during March-July 1998. This pilot used a beta version, with two interoperable billing servers, three merchants and several hundred buyers; there were no significant problems that arose. By August 1998, MiniPay became known as IBM Micro Payments and version 1.0 was released. In March 1999, an OEM version called Poseidon MP was announced by ATOS, a major European payment systems provider and IBM business partner, who is offering support for IBM Micro Payments. Version 1.2, providing full multiple currency support, is scheduled for release in July 1999, with plans for deployment by several major telcos and financial institutions.
- What makes IBM Micro Payments unique?
The scalability and interoperability of IBM Micro Payments makes it unique among micropayment technologies.
This allows many billing servers (i.e. banks, ISPs, telcos, etc.) to work together. It is this aspect that ultimately
enables widespread credit card use.
The Micro Payments business model allows each party involved to determine their own billing system and how much they trust this billing system. Each party is exposed to risk only from someone with whom they have a direct business relationship. For example, a buyer deals only with his own billing server, whereas each merchant deals only with its own billing server. These two billing servers can then interact directly or through a third billing server that is trusted by both parties - whether directly or through other indirect business relationships. Furthermore, each billing server can set separate credit limits for each buyer. Buyers in turn, can limit how much money they want to put into their wallet or asked to be notified when their purchases go beyond a certain threshold.
Basically, each party manages its own risk.
IBM Micro Payments is also the only micropayments mechanism to offer true support for multiple currency transactions, without forcing users to work in specific currencies. Interoperability is crucial in order to gain the critical mass we need for this technology to really take off.
- IBM Micro Payments components
The system offers three different components:
IBM Micro Payments Billing Server for Windows NT or AIX.
All server and client management functions are conducted through the Billing Server application. This includes adding, disabling or deleting clients, setting credit limits, currency rates and commission rates, establishing relationships with other Billing Servers, processing payment to Merchant accounts, and signing daily certificates.
IBM Micro Payments Merchant Server for Windows 95, Windows NT, or AIX.
The Merchant Server application lets you manage Merchant accounts and set up HTML Page Per Fee Links. Functions include opening new Merchant accounts, viewing existing accounts, depositing purchase orders, and clearing deposits.
IBM Micro Payments Client Wallet for Windows 95.
Buyers must install the IBM Micro Payments Wallet in order to purchase items sold through Micro Payments links. The Wallet is downloaded for free and enables clients to open accounts, delete purchases, view their current balance, and specify the amount above which purchase orders should be confirmed.
Wallets can work well beyond firewalls.
Both the Billing Server and Merchant Server applications include APIs that enable the applications to be integrated within existing billing systems or to extend existing payment services.
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