JurPC Web-Dok. 16/2001 - DOI 10.7328/jurpcb/200116110

Nils Behling *

Cyberpayments - Credit Cards Are Here to Stay

JurPC Web-Dok. 16/2001, Abs. 1 - 32


Autorenprofil

A. Introduction

In the 1990's academic commentators, central banks and government agencies were convinced that by the year 2000 new cyberpayment products would carry a very considerable volume and dollar value of payments.(1) However, these predictions have not been much more than wishful thinking. While numerous companies claim to offer complete and working payment processing solutions, most of these applications are not more than unsuccessful attempts to develop an originally online-based payment system.(2)
This paper describes the fundamental characteristics of existing and new payment schemes, reviews existing legislation and gives a perspective on coming developments. It is based on the presumption that, with only a few exceptions, existing payment schemes are technically and legally ready for payments over the Internet and that consequently there is no pressing need for new payment systems.
JurPC Web-Dok.
16/2001, Abs. 1

B. What are cyberpayments?

The term cyberpayments is not officially defined, although it is already widely employed. For that reason it is necessary to give a definition of cyberpayments as used throughout this paper. Generally a payment is the satisfaction of a debt by some means of exchange. According to this two-prong analysis, cyberpayments can be defined as payment systems, which can be employed to pay a debt emanating from cyberspace through the electronic transfer of funds. Even though this definition focuses on obligations that have their origin in cyberspace it does not per se exclude existing real world payment schemes. Abs. 2

C. Where and why are cyberpayments used?

As long as there has been some exchange of goods, there has always been some sort of payment. Cyberpayments are a new payment method, applied to new forms of commerce. To assess the legal relevancy of cyberpayments it is necessary to precisely identify transactions, which call for the use of these payment schemes and to analyze how they differ from conventional transactions. This will be done by differentiating several categories of purchases and the respective payments that are used to satisfy the debts. Abs. 3

I. Three predominant purchase scenarios

In cyberspace three different types of contractual relationships can be distinguished: business-to-business contracts (b2b), business-to-consumer contracts (b2c) and consumer-to-consumer contracts (c2c). Abs. 4
1. B2b contracts
According to a study by Forrester Research, U.S. b2b e-commerce will rise $2.7 trillion in 2004.(3) However, b2b users employ the Web more as a convenient medium of communication and for digital order processing than as a new storefront. With regard to these transactions the delivery of goods will in most cases be facilitated outside the Net and most payments are conventional real space payments.
This is mostly due to accepted commercial practices. Although § 2-511 of the Uniform Commercial Code(4) calls for payment against delivery, it has no application to most commercial sales, which normally carry credit terms.(5) Most commercial sales contracts give certain grace periods for payments or call for installments. Payments are still made using the traditional banking channels or by debiting or crediting against the respective accounts that most of the companies have with each other. While these transactions may be made via electronic fund transfer, these are not consumer funds and consequently they will not be regarded in this paper.
Abs. 5
2. B2c contracts
B2c relations describe a commercial relationship between a selling business and a buying private individual. Unlike in the aforementioned b2b relations, one party in this scenario is not a merchant in the specific kind of goods or services he is dealing for. In b2c relations there are two general categories of online purchases. The first category is the purchase of hardware that is ordered in virtual space for delivery in real space.(6) The second category consists of digital goods that are online for delivery either by direct online download or by allowing online access to information and databases. Each of these purchase categories poses different questions with regard to cyberpayments.Abs. 6
a) Hardware Transactions
Most of the e-commerce revenue is generated by transactions using the Internet as an order medium. In a typical hardware sales setting, the consumer accesses the retailer's web page and browses through the various products by following the respective links just, as he would browse through a catalogue or walk though the aisles of a store.(7) The essential point of the transaction is reached, when the buyer has to select his payment method. Most e-tailers allow their customer to choose between different payment systems, such as check, credit card or other payment schemes. These options clearly include electronic fund transfer. Therefore, hardware transactions are an issue with regard to cyberpayments. Abs. 7
b) Software Transactions
Software transactions take two different forms. It can be distinguished between the download of a software program from the Internet or the access to a database for a fee.
The sale of software for immediate download is similar to the sale of hardware up to the point of formation of the contract and the entering of the payment information. If the customer wishes to download the software immediately, payments by check is not an acceptable method due to the extended processing time. The customer he has to pay by either by credit card or by some other instantaneous payment device, such as some form of cyberpayment.
Abs. 8
c) Micropurchases
In real space, many products cannot be sold profitably except by cash or coin transactions, such as soda from a vending machine, a single pack of chewing gum, or a single photocopy. The cost of processing such transactions via the credit card or check system would destroy any profit margin on these items.(8)
In cyberspace there are similar opportunities for such small purchases. For example customers can access databases where the payment by the customer serves as an entrance fee. The amount of payment can depend either of the duration of access or on the amount of information accessed. While some of these databases operate on a subscription membership basis with monthly billing(9), many business models call for a single per-use fee. In many cases, such as for the download of single magazine or newspaper articles, this fee will only be a fraction of a dollar. With respect to payments, these models require the instantaneous handling of small sums or micropayments. As it will be shown later, electronic fund transfer appears to be the only promising approach to facilitate these transactions and therefore the suitability for micropayments should be regarded as a highly important feature of cyberpayments.
Abs. 9
3. C2c Contracts
The final relevant category of purchases consists of c2c transactions. More and more private individuals discover the web as a convenient place to sell and buy goods from other non-merchants. Among the most popular sales models are professionally organized private online auctions and online yard sales featured by privately owned web pages. The striking difference between b2c and c2c purchases results from the differences of the business infrastructure.
Unlike professional enterprises, private sellers are not set up efficiently to process payments. Where professionally organized auction pages can offer escrow services for their clientele, independent private sellers and buyers still encounter problems of getting paid. Electronic fund transfer could help to solve at least some of these problems.
Abs. 10

II. How to pay for these purchases

Since sales cannot go forward without payment, the next step is to analyze whether existing payment schemes provide technically and legally sufficient means to make these payment or whether there is any need for new payment systems. Accordingly, the predominant methods to satisfy debts and their suitability for cyberpayments will be analyzed.Abs. 11
1. Credit cards
Credit cards are payment devices that allow the consumer to make purchases within certain guaranteed limits as defined by the issuer of the card. The law of credit cards is well regulated. The use of credit cards is federally controlled by the consumer protection provisions of the Federal Truth in Lending Act(10) (TILA) and the Federal Reserve Board Regulation Z(11) (Reg. Z). Issuing institutions are also subject to the federal Financial Privacy Act(12) (FPA). Abs. 12
a) Technical aspects of credit card online use
To use a credit card in most cases it is sufficient to present the merchant with the card number and the cardholder's name and expiration date of the card. These data can be conveniently transmitted over the Internet. Furthermore, credit cards process funds by electronic means. Therefore, they technically qualify as cyberpayments under the definition of this paper. Yet, credit cards are subject to certain percentage or flat fees, which have to be paid by the merchant accepting the card.(13)These "discount rates" range from one half to seven percent of the transaction value, depending on the contractual relations between the bank and the merchant.(14) Discount rates and the general transaction cost make credit cards generally unsuitable for micropayments. Additionally, the need to establish a merchant account with credit card issuer prevents c2c users from accepting credit cards. Yet, the success of c2c sites such as ebay(15) or amazon.com auctions(16) shows that c2c e-commerce can be easily facilitated without credit cards. Abs. 13
b) Consumer protection and security
Most purchasers still prefer credit cards to other electronic payment systems that are currently on the market.(17) This is due to three factors. Abs. 14
aa) Familiarity
Many customers still don't feel confident with e-commerce(18) and prefer a familiar payment method.(19) Credit card payment is one of the most accepted and most utilized payment schemes in real space. Therefore, it is not surprising that many customers do also rely on credit cards for their Internet purchases.Abs. 15
bb) Finality
A payment is final when it no longer can be revoked.(20) Among all traditional payment methods, credit cards enjoy the lowest degree of finality.(21) Even months after their use, a user can contest a charge on his credit card bill. The mere fact that a merchant accepts credit cards gives the user a guarantee of recourse in the event of a dispute regarding the underlying transaction.(22)
Despite these facts, some purchasers believe the use of credit cards for online purchases is dangerous.(23) A look at the rules of Reg. Z proves that there is no basis for this assumption. Reg. Z requires that before a card issuer may charge a cardholder for a transaction, the consumer must present the card for identification.(24) Since identification methods are not yet readily available for use over the Internet, the cardholder can easily and successfully contest a charge on his card. This may change with the adoption of the SET Standard, which requires the use of digital signatures in connection with online credit card transactions. However, the development of the SET standard came to a halt in early 1999 and work has not been resumed in a large scale.
Even if a consumer is found to be liable for an unauthorized use of his card, the TILA and Reg. Z cap the liability amount. Under these provisions, consumers are only liable for the first $50.00 of losses incurred by the unauthorized use of the card.(25) For the online use of credit card, this means that even if a card is illegally intercepted by an unauthorized third party, the card issuer cannot charge the consumer's account for more than $50.00. Any sum exceeding this amount will either be charged back to the merchant bringing the charge or it remains on the respective issuer of the credit card.
Abs. 16
cc) Float
The float of credit cards is substantial, in view of the fact that they give customers access to an instant line of credit.(26) For customers, this feature means that they can buy more than they actually can spend at that specific time. If customers pay their monthly dues in time, the credit is even interest free. While this is not an original online feature of credit cards, it is another element that contributes to their user friendliness.Abs. 17
c) Privacy
One point that seems to operate against the use of credit cards online is a privacy concern. Use of the card requires the customer to give sensitive private data to the merchant who later transfers it to the card issuer in exchange for payment. The transaction is stored in the issuer's database and later appears on the customer's invoice. Every transaction is fully traceable. While the FPA prohibits issuing institutions from disclosing personal financial information, this law does not apply to merchants. However, most professional Internet commerce sites already apply certain privacy policies and it is up to the consumer to review these policies before he decides to deal with a merchant.Abs. 18
d) Preliminary result with respect to credit cards
As seen above, the use of credit cards online is convenient and secure. Also, the acceptance rate among consumers is very high since credit cards are a familiar payment method in real space. The large number of credit card users results in a high bargaining power of these customers and therefore most online merchants accept these cards. The only real negative factor is that credit cards can't be economically used for micropayments.Abs. 19
2. New payment methods
The field of competitors that try to win the race to be the one and only electronic payment scheme is growing constantly. Naturally, every player claims that his method is the soon to be accepted standard for such payments. Despite these marketing efforts, most systems are based on similar basic technologies. There are several technical setups that can be differentiated: stored value smart cards, stored value software, wallet and credit card based schemes and direct billing solutions. Since it is not possible to analyze all the different schemes, this paper focuses on the most prominent solutions.Abs. 20
a) Smart cards
Smart cards, such as the Mondex Card(27) or the German Geldkarte(28), are credit card sized plastic cards with a computer chip embedded in the card. Payment information in the form of currency value is stored on this chip and can be retrieved with specially designed card readers. This feature makes smart cards independent from central servers and allows potentially anonymous transactions. Moreover, smart cards allow the performance of complex operations, such as cryptography.(29) Smart cards can store up to 80 times more information than magnetic stripe cards(30) and their "smart" nature allows utilization for multifarious tasks, from payments to door access.(31)
With respect to their use for online payments, smart cards seem to offer certain advantages to customers and merchants. Smart cards can store complete sets of customer account data, including name and shipping address, buying preferences, previous purchases, etc.(32) Since these data are stored in the card's memory, the customer does not have to fill out order forms. Furthermore, by utilizing the card's encryption abilities, the information can be transferred securely from the buyer to the seller.(33)
An advantage of smart cards is that they allow the transfer of fractions of their stored value and therefore are suitable for micropayments. Moreover money can easily be transferred from one card to another. Finally, smart cards allow for easy real space interaction with cell phones employing the GSM standard.(34) This could make them interesting for m-commerce transactions.
Abs. 21
b) Software based solutions
Software based solutions are payment schemes that operate by utilizing some software program and the user's PC.Abs. 22
aa) Stored value systems
Stored value systems operate on the basis of prepaid electronic tokens, which the consumer obtains from a bank and later spends at a merchant's web page. The most promising attempts to establish such a unique cyberpayment scheme was the Netherlands based DigiCash, which also had co-operations with the Deutsche Bank in Germany and the Mark Twain Bank in the US. Although already bankrupt and now named eCash, DigiCash / eCash is still a noteworthy project due to the effort that went into the development of its system and the prototypical technical setup. Likewise, DigiCash has been reengineered several times and many electronic payment systems still use it as a point of orientation for developers.
DigiCash developed a blind signature cryptographic protocol, which permits the creation of electronic tokens that can circulate as a anonymous money substitutes in an electronic environment.(35) The advantage of a DigiCash like system lies in the fact that the customer can generate tokens for any given value. Consequently the system is suitable for micropayments. Other stored value systems are Compaq's Millicent(36), the IBM Micro Payments(37), the "gift solution" flooz.com(38) or beenz.com(39).
A rather eccentric scheme is the e-gold(40) system, a truly gold-backed Internet currency.(41)Quite appealing sounds a system called Paypal(42), which allows beaming money via electronic mail, cell phones and web enabled pocket organizers, such as 3com's Palm Pilot family.(43)
Abs. 23
bb) Wallet and credit card based systems
Wallet systems such as Instabuy(44) or the Microsoft Passport Wallet(45) centrally store consumer credit card information and release it on a mouse click of the consumer to the buyer. The advantage of these systems is that they are time saving applications since the user does not have to fill out long order and shipping information for his web purchases. The software automatically provides the respective data and lets the use choose between several previously entered credit cards. Since these systems are credit card based, they are not suitable for micropayments.Abs. 24
cc) Direct billing
Some systems use software that allows the user to make purchases, which are later billed trough the ISP or phone bill. Most prominently are Echarge Phone(46), which is a web front end to the 800/900-premium rate telephone billing network, and iPIN that bills charges on the monthly ISP bill.(47) Abs. 25
c) Legal analysis of original cyberpayment systems
With exception of credit cards, there exists no specific legislation with respect to cyberpayments. Therefore it is necessary to analyze existing legislation to determine its applicability and to detect gaps.Abs. 26
aa) Banking regulation
New payment methods raise the question whether they should be subject to banking regulation. An answer can be derived from analyzing what services the respective company offers. For example, when a customer "purchases" a certain amount of electronic tokens from a stored value system issuer(48), this transaction is very similar to depositing that same amount of money at a bank with the right to withdraw those funds upon demand. If companies are performing functions similar to that of a bank, they should be subject to similar regulations. Some countries are already making a step in this direction, e.g. Germany places smart card issuers under banking law supervision.(49) This may also bring about a solution to the question of who guarantees the payment of stored value systems.(50) So far the value on these systems is only backed by the promise of the issuing company to guarantee payment. To prevent the collapse of an electronic cash issuer and losses for its users, it would be favorable to require certain reserve requirements and some form of insurance through insurance companies such as the Federal Deposit Insurance Corporation(51) (FDIC). In the event of a bank failure, the FDIC protects deposits that are payable in the United States. Nevertheless, this would not effect international cyberpayments, since deposits that are only payable overseas, and not in the United States, are not insured.
A different question is, whether a company that issues electronic tokens, should be required to maintain all or some of the received funds as a reserve. While there exists no law on this issue, some orientation may be found in credit card regulations, which mandate that non bank credit card issuers have to keep certain amounts of the consumer funds as a reserve, and that allow only limited investments of these funds.
An important issue with regard to stored value systems is the escheat or slippage. This is the stored value that is never retrieved by the user due to loss of a smart card or other circumstances. With any stored value system, there will unavoidably be funds remaining that have not been used and have not been redeemed by the customer. While most states have some form of legislation requiring that unclaimed property be turned over to the state(52) it is less than clear whether this applies to stored value systems.
Abs. 27
bb) Liability
It is not clear how liability issues are solved between the user of a new payment method and the issuer, such as what happens if the user loses his smart card or accidentally erases his hard drive. How is he protected against false claims and double charging? A possible solution may be found in the Electronic Fund Transfer Act(53) (EFTA) and the Federal Reserve Regulation E(54) (Reg. E). The aim of this legislation is to "establish the basic rights, liabilities, and responsibilities of consumers who use electronic fund services and of financial institutions that offer these services" and to guarantee "the protection of individual consumers engaging in electronic fund transfers."(55) Reg. E requires the issuing institution of an ATM or debit card to provide the customer with periodic written statements, which allow keeping track of every transaction. Moreover, these provisions limit the liability of consumers for unauthorized use and loss to a maximum amount of $500.00. Since the new payment methods use electronic fund transfer it may be favorable to subject them to these regulations.(56) In March 1996 the Federal Reserve Board proposed changes to Regulation E to make it more suitable for stored value transactions over the Internet.(57)Abs. 28
cc) Privacy issues
Another area of concern relates to privacy issues. If a customer enters a shop, selects a good and pays for it with cash, his transaction can be completely anonymous. This is not true for Internet purchases. Most e-commerce purchases operate like mail-order transactions. The customer has to give his delivery address to the merchant and in most cases additional data such as his credit card information. Even in the case of an online delivery of software combined with a 100% anonymous payment scheme the IP address from which the request was made could eventually lead to an identification of the user.
From a privacy point of view there are minimum requirements. There have to be limits on the amount and nature of data a merchant is requesting and collecting. Generally he should only be allowed to collect the core data necessary to perform a transaction and to secure the merchant against fraud. Additional data collection should only be allowed with the explicit consent of the customer. Moreover, there should be a time limit for the storage of data. Additionally customers must have the ability to request the destruction of their personal data, stored at a merchant's site. The combination of data in order to develop customer profiles has also to be controlled. Many of these provisions are already part of the FPA.
Abs. 29
dd) Policy issues
With respect to their economical relevance, it is not quite clear, whether the new payment schemes are just new forms of existing payments or whether they have at least some influence on the monetary value by generating a new currency.(58) While some legal scholars strongly support the development of cyberpayments as independent global currencies on the Internet(59), these proposals do not give sufficient consideration to economical concerns.
To understand this issue, one has to look at the relevance of money for the economy. Traditionally the national treasuries control the amount of money. However, when new payment schemes are no longer controlled by this system, there is the latent danger that national economies will be harmed. Central banks generate their revenue from the seniorage, by putting out notes and coins.(60) These represent non-interest bearing central bank liabilities. As cash money is replaced by virtual currency the asset holdings and interest on those assets decline.
So far central banks still have control over the total amount of money in circulation and on reserve. Some electronic payment systems however seem to substitute money by generating a new currency that is not bound by monetary controls and is only controlled by the profit interests of privately held entities.(61) While these might have no influence yet, with a steadily growing market for cyberpayments there grows the chance that private currencies will replace the old cash system. The monetary stability could depend on the private interests of large companies that thereby can control national economies at will.
To prevent such a scenario national- and supra-national legislation has to be enforced that vests control in the governments despite the physical form of the currency.(62) Safeguards are necessary that prevent single interest groups from taking influence over national economical interests with unforeseeable results. However, amendments to existing legislation should be postponed to avoid obstructions of the technical development.
Abs. 30
ee) Criminal Law
While cyberpayments will definitely boost e-commerce, they also will have criminal relevance. The easier it is to move large sums of money online, the likelier is a misuse for criminal activities. While especially drug dealers relied in the past on cash money, this form of payment has major disadvantages, especially due to its weight. Cyberpayments do not have to be smuggled but can be transferred in milliseconds around the world. Money laundering becomes a major concern related to new payment schemes.(63)
New payment schemes may be attractive to money launderers for different reasons. Electronic transactions can become untraceable and are extremely mobile. They can easily be anonymous and may not leave a traditional audit trail. Moreover, these systems offer instantaneous transfer of funds with effectively no restrictions.
Given these issues, new legislative and regulatory action, investigative and enforcement techniques, and most important, enhanced international cooperation will be needed to detect and prevent money laundering. The Financial Crimes Enforcement Network(64) (FinCEN) was set up in April 1990 to track money laundering. FinCEN currently develops artificial intelligence programs and databases to control money flows. FinCEN also proposed a "Deposit Tracking System" that tracks large deposits to, or withdrawals from, U.S. banks accounts..
Another criminal law concern is counterfeiting. While tangible currency is relatively protected with various safety features such as special paper and special printing ink, electronic cash, might be easily duplicated. Some products such as DigiCash / Ecash claim to have effective counterfeiting and double spending protections build in the company's product. These products also operate in a closed system where allegedly the digital cash can only be spent once.
Apart from these obvious concerns, criminal law can also hinder the development of certain cyberpayments. 18 U.S.C.A. § 336 provides in its 1994 amended version that "whoever makes, circulates, or pays out any note, check, memorandum, token, or other obligation for a less sum than $1, intended to circulate as money or to be received or used in lieu if lawful money of the United States, shall be fined not more than $500 or imprisoned not more than six month, or both." Every micropayment for a sum of $1 or less is theoretically subject to the fine as proscribed by this statute and legislative changes are necessary in order to deregulate this important commerce sector.
Abs. 31

D. Conclusion

While electronic commerce is booming, the available new payment systems still operate more than unsatisfying. No company has so far managed to establish a product that allows the user to conveniently conduct his transactions online. Moreover, the legal basis for these products is very unstable.
Yet, there already exists a product that operates reliable and consumer friendly in the online environment. As seen above credit cards are a very favorable payment scheme for almost any online transaction. Moreover, they are already widely spread and accepted by the consumers. And in combination with electronic wallet software, their use is of uncompared ease.
The only missing peace of the puzzle is micropayments, which can't be facilitated with credit cards in a cost efficient manner. Smart cards may prove to be the application of choice for micropayments, since they fulfill the essential requirements of security, ease of use, and familiarity to customers.
For these reasons global electronic commerce does not need electronic payment systems other than credit cards and micropayments in the form of smart cards. Moreover, this means that so far there is no need for extensive legislative action. Existing legislation is capable of dealing with most of the products that are currently on the market and it would not be wise to try supporting or impeding the development of any product by any kind of additional regulation. The law has to follow the technology and not vice versa.
JurPC Web-Dok.
16/2001, Abs. 32

Fußnoten:

(1) See Department of the Treasury, An Introduction to Electronic Money Issues (Conference Sept. 19-20 1996), at http://www.occ.treas.gov/emoney/papinf.htm, visited 05/01/00. OBEC Conference 1997, http://emn.derecho.uma.es/obec/ponencias/po101Petra.htm, visited 05/01/00.

(2) One of the most promising systems, DigiCash, had to file for Chapter 11 relief in November 1998. However, its know-how has been subsequently acquired by eCash, which, notwithstanding the unsuccessful start, has the eager goal "[…]to become the worldwide standard for electronic currency through technological expertise, customer service, and integrity." http://www.digicash.com/Company/, visited 05/02/00.

(3)http://www.forrester.com/ER/Press/Release/0,1769,243,FF.html, visited 05/05/00.

(4) Hereinafter UCC.

(5) See UCC § 2-511 comment 5.

(6) An example would be the order of any commodity from one of the online retailer sites such as http://www.amazon.com or http://www.buy.com, both visited 05/05/00.

(7) If the customer finds a product that is appealing to him, he can select it and place it in his virtual shopping cart. If he finally decides to purchase the product, he has to check out of the catalogue part of the merchants web page by following a link that takes him to the payment page. There the customer can review the goods he has in his cart and either return to the catalogue part, abort his visit to the store or proceed with perfecting the contract. If he chooses the last option he has to decide on the quantity of goods he wishes to purchase. The seller will then check his database for availability of the goods and make an offer for their purchase.

(8) E.g. the processing of a check or a credit card transaction for $1 will cost much more than its face value. Therefore new payment schemes must be able to handle these small payments.

(9) Examples are the legal databases Westlaw http://www.westlaw.com and Lexis http://www.lexis.com, which allow access only against payment, all visited 05/08/00.
(10) 15 U.S.C. §§ 1601 et seq.

(11) 12 C.F.R. §226.

(12) 12 U.S.C.A. §§ 3401 et seq.

(13) Barkley Clark & Barbara Clark, The Law of bank deposits, Collections, and Credit Cards, P 15.02.

(14) Clark & Clark, supra at 15.02.

(15) According to the company, ebay lists about four million articles in over four thousand categories and has 1.5 million page views per month. http://www.ebay.com, visited 05/05/00.

(16)http://www.amazon.com, visited 05/05/00.

(17) Peter Wayner, Electronic Cash for the Net Fails to Catch On, N.Y. Times on the Web, Nov. 28, 1998, http://search.nytimes.com/search/daily/homepage/bin/fastweb?getdoc+cyber-lib+cyber-lib+2960+0+wAAA+Electronic%7ECash%7Efor%7Ethe%7ENet, visited 05/05/00.

(18) Sarah Jane Hughes, A Case for Regulating Cyberpayments, 51 Admin. L. Rev. 809, 820.

(19) Kerry Lynn Macintosh, The New Money, 14 BerkeleyTech.L.J. 659, 661.
(20) 5 Hawkland UCC Series § 4-109:01 (1999).

(21) Jane Kaufmann Winn, Clash of the Titans: Regulating the Competition Between Established and Emerging Electronic Payment Systems, 14 Berkeley Tech L.J. 675, 679.

(22) However, credit card issuers tend to penalize merchants that exceed a certain amount of charge-backs. This move is currently presenting a tremendous threat to cyber-porn sites, which traditionally have a high charge-back rate.

(23) Brian W. Jones, The Risk of Paying Over the Net, 12-DEC Utah B.J. 8.

(24) 12 C.F.R. § 226.12(b)(2)(iii)-1.

(25)15 U.S.C. § 1643; 12 C.F.R. § 226.12(b).

(26) Under 15 USCA § 1666 a credit card issuers extend "credit" to an individual or an organization when it opens or renews an account, as well as when a cardholder actually uses his credit card to make purchases. American Exp. Co. v. Koerner, U.S.La.1981, 101 S.Ct. 2281, 452 U.S. 233, 68 L.Ed.2d 803, on remand 655 F.2d 672.

(27) http://www.mondex.com/, visited 05/05/00.

(28)http://www.sparkasse.de/ecommerce/gk/gk.htm, visited 05/05/00.

(29) The first smart cards have been introduced in Europe in the mid 80's as memory cards for payphones. The worldwide smart card market is estimated to be 4.7 billion units, amounting to $6.8 billion within the next two years http://www.smartcardbasics.com/overview.html, visited 05/05/00.
(30)http://www.mastercard.com/ourcards/smartcard/faq.html, visited 05/05/00.

(31) Smart cards can perform miscellaneous tasks. They can serve as entrance cards and loyalty cards that can keep track of customers and reward them. Other uses can be found in telecommunication, campus payments, and in healthcare. In Germany the health insurers issued smart cards to their members that store insurance data.

(32) Imagine a hotel where the guest booked the room over the Internet and paid with his smart card. The card can be encoded to serve as the key to the room, the payment method for the restaurant, the access to the parking garage and even payment for vending machines, and to store wins in the hotel casino.

(33) However, there in no 100% security as a French example shows where the secret access code of thousands of smart cards was posted on the Internet. The total level of fraud is nevertheless very low with 0.02% of all transactions per year. France Getting Smart Over Cards, http://wired.com/news/politics/0,1283,34974,00.html, visited 05/05/00.

(34) In Finland it is already possible to pay soda machines by pushing a button on the widely spread cell phones. The latest development in smart card technology is biometrically enhanced smart cards. While the up to date models require the user to remember and enter a PIN, these cards authorize the user by scanning fingerprints or his retina.

(35) The DigiCash system operates with three different accounts. The customer needs a checking account and a DigiCash account and the bank needs one anonymous pool account for all customers that participate in the system. If a customer wants to make a payment with DigiCash, he transfers a certain dollar amount from his checking account into his DigiCash account. By utilizing the DigiCash software he then creates an electronic token in the form of a binary file on his home PC. After sending the file to his bank, the bank certifies the token with an encrypted serial number, debits the DigiCash account in the amount of the token value, resends the certified token to the customer, and credits the pool account for the value of the token. If the customer wants to spend his tokens he send them to a merchant who transfers them to the bank for verification. If the bank verifies the signature of the token, the account a merchant keeps with the bank is credited for the token value and the serial number of the token is taken out of circulation in order to avoid double spending. It is important to notice that the bank only keeps record of the serial numbers in circulation but not of the respective customers that received the certified tokens. Therefore, DigiCash allows anonymous spending of the tokens.

(36) http://www.millicent.digital.com/, visited 05/05/00.

(37)http://www-4.ibm.com/software/webservers/commerce/payment/mpay/index.htm, visited 05/05/00.

(38) Flooz http://www.flooz.com/ is accepted by 60 websites so far, among these are Barnes & Noble http://www.bn.com/, ToysRUs http://toysrus.com, and Martha Stewart http://www.marthastewart.com, all visited 04/15/00.

(39)http://www.beenz.com/splash.html, visited 05/02/00.
(40)http://www.e-gold.com/, visited 04/15/00.

(41) Users have to buy gold in order to fund their accounts. They can transfer weight units to other customers that also maintain accounts with e-gold by entering the recipients account number and a password.

(42)http://www.paypal.com/cgi-bin/webscr?cmd=index, visited 05/04/00.

(43) With the widely acceptance of the Bluetooth technology this system could be a big step in direction m-commerce.

(44)http://www.instabuy.com/, visited 05/05/00.

(45)http://www.passport.com/Consumer/default.asp?PPlcid=1033, visited 05/05/00.

(46)http://www.echarge.com, visited 04/10/00. Consumers utilizing this system are billed through their telephone bill.

(47) http://www.ipin.com/, visited 04/10/00.

(48) This could be a smart card or some software system.

(49) The example of traveler check seems to indicate that a self regulated system can work without major problems.
(50) Compare Julian S. Millstein, Jeffery D. Neuburger, and Jeffrey P. Weingart, Doing Business on the Internet: Forms and Analysis, 12.03.

(51)http://www.fdic.gov/, visited 05/05/00.

(52) Ellen D'Alelio, "Smart Cards and Escheat" Electronic Commerce and Banking Law Report, Vol. 1, No. 1, p. 15 (May, 1996).

(53) 15 U.S.C. § 1693 et seq.

(54) 12 C.F.R. § 205.1 (1999).

(55)12 C.F.R. § 205.1(b) (1999).

(56)E.g. the Clinton administration's Consumer Electronic Payments Task Force favors this solution. Compare The Report of The Consumer Electronic Payments Task Force, April 1998, p. 50.

(57) See 12 C.F.R. Part 205.

(58) 31 C.F.R. § 103.11(h). reads: "Currency. The coin and paper money of the United States or of any other country that is designated as legal tender ant that circulates and is customarily used an accepted as a medium of exchange in the country of issuance. Currency includes U.S. silver certificates, U.S. notes, and Federal Reserve notes. Currency also includes official foreign bank notes that are customarily used an accepted as a medium of exchange in a foreign country."

(59) Macintosh, supra at 664.
(60) Paul Mizen and Eric Pentecost, eds., The Macroeconomics of International Currencies, 1996, 77 et seq.

(61) In small scale such private currencies do already circulate, for instance as air miles. Beginning this May the over 38 million members of the American Airlines frequent flyer program can earn additional miles by purchasing goods on AOL. Ecash 2.0, The Economist 02/21/00.

(62) E.g. Germany applies the Banking Act to electronic payment systems.

(63) There are various definitions, which describe the term 'Money Laundering'. According to Article 1 of the draft European Communities (EC) Directive of March 1990 money laundering is the conversion or transfer of property, knowing that such property is derived from serious crime, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in committing such an offence or offences to evade the legal consequences of his action, and the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from serious crime. Therefore money laundering is the process by which illegally obtained money is given the cover of having originated from some legitimate source. It allows the launderer to maintain control over the proceeds and to provide a seemingly lawful facade that places the proceeds out of the reach of prosecution.

(64) http://www.treas.gov/fincen/, visited 04/10/00.
* Nils Behling hat die erste juristische Staatsprüfung im November 1998 abgelegt und hat von 1999 bis 2000 ein LL.M-Studium an der Saint Louis University School of Law (USA) mit dem Abschluß Magister Legum absolviert. Seit 1999 ist Nils Behling Doktorand am Institut für Rechtsinformatik der Universität des Saarlandes mit dem Dissertationsthema "Medienrecht - Konzeption eines Universitären Curriculums". Daneben arbeitet er im Juristischen Internetprojekt Saarbrücken mit. Seit August 2000 ist Nils Behling Rechtsreferendar in Düsseldorf.
[online seit: 22.01.2001]
Zitiervorschlag: Autor, Titel, JurPC Web-Dok., Abs.

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