Paying for it: Are e-payment technologies letting us down?

As the pressure mounts on online content providers to bring home the bacon, the market for payment technologies should be booming. So why are so many companies struggling to stay afloat? In part three of her series on online payments, Sally Watson finds out if the technology can meet the challenge.

First published 13.9.2001

Last month micropayment provider Qpass quietly packed its bags and slipped out of Europe. The disappearing act hardly made headlines, but has left some of the UK's biggest publishing groups in the lurch.

The Daily Telegraph, Financial Times and The Guardian were all planning to launch services using the US firm's technology, but were forced to scramble for last minute alternatives as the company closed its offices in Germany, Ireland, Spain and the UK.

Why the retreat? Evidently the software company found the going a little too tough: "The take-up of digital content on the user side has been significantly slower then everybody hoped," admitted the company's European MD, Bill Barnard.

"Content providers are ready to go, but not so much that they're ready to invest lots of money in it."

At a time when some of the biggest players in the industry are dipping their toes into the payment market, the flight may seem a little hasty. But Qpass isn't alone in blaming providers and merchants for being overly cautious.

Payment specialist WorldPay has seen considerable success in the credit card and subscription markets, but its micropayment service WorldAccount has struggled to get off the ground.

Launched 12 months ago, the account acts like an online wallet for the consumer, to be charged up and then spent at registered merchants. WorldPay takes its slice as a percentage of the transaction, but admits its success has been limited.

"There hasn't been a huge take-up rate, although we are starting to see the beginnings of that," said WorldPay COO David Sear.

The fact that WorldAccount can number its consumer users in the hundreds - compared to almost 50,000 customers for its FuturePay subscription service - speaks volumes.

So is it content providers or consumers who are dragging their feet? According to Russell Allen, CEO of PremiumServe, it's both, and the only answer is to make online payments more straightforward.

PremiumServe offers a drop-dial service which disconnects surfers from their standard ISPs and connects them to a premium rate line which can charge either a single price or per minute rate for web services. The charge is then added to the users' phone bills.

It's an idea which has proved popular in the US and Allen believes can transfer to Europe. "People already have the phone line to connect to the internet, so it makes sense to bill via it," he said. "With broadband at home the opportunities become even more interesting - then you don't have to disconnect from your standard internet connection while using the premium line."

UK forecaster, onlineweather.com, has already bitten the bullet. A few weeks ago it launched its first premium rate charges, a move which has brought mixed reactions from customers.

"We pre-announced we were going to be charging for some services and got a lot of feedback from our users," said MD Douglas Yule. "The majority were hostile to the idea but a surprising number - about 25 per cent - took a more positive line."

Yule isn't altogether happy with the results. Lack of customisation means the premium section of the site has a very different look and feel, and he admits he's disappointed by the uptake. Yule would also like to be able to offer a wider range of microbilling options to his users, but has been unable to find a supplier who can offer a range at a reasonable price.

He added: "I'd rather be working with a single provider but that's dependent on them being able to offer a varied billing solution. If not, we'll have to try and put something together ourselves using different providers."

GlobalCollect, the payment arm of the Dutch Post Office, aims to bring together as many different existing methods as possible. The company has just been in the UK to launch its online service, WebCollect.

"We provide one infrastructure which processes all domestic payment systems globally," said CEO Jan Manten. "The more payment options you have, the higher the customer response."

The company offers bank transfer, cheque, credit card, debit card and invoice services, but despite building its business on diversity, it doesn't yet handle any of the new online payment systems.

"I have my doubts about other payment services. New offerings like Digicash are not yet proven technology and there's no huge consumer demand," said Manten.

Manten is backing digital wallets as the most likely technology to succeed, but says he won't add them to the WebCollect system until he sees them working in practice.

It's not just internet firms which have to worry. A report from consultancy Ovum last month predicted mobile companies will have to charge for content if they're going to succeed. It cites the free model on the fixed internet as a mistake and says there are strong indications the days of free content are numbered.

Qpass' Barnard agrees: "Europe is further behind the US in terms of acceptance and by nature more conservative. Mobile use may be ahead here, but m-commerce is growing much faster in the US.

"Initially mobile services in Europe were given away free, but in the US they have charged from the start. Services like ringtones are already being paid for by Americans, but they're very hard to sell over here."

But Barnard claims his company hasn't been put off the European market completely: "It's about getting the timing right, but I believe very strongly in the business model and the market. We'll be back," he said.

Yet just as the market looks set to improve, many of the most innovative technology providers have run out of cash. Digicash sold its intellectual property to eCash Technologies and CyberCash sold its payments business to VeriSign.

Scratch the surface, and you find a yawning gulf between content providers and technology firms, with each blaming the other for the slow rate of adoption.

In the meantime, European customers will remain firmly rooted in old-fashioned payment methods.