NatWest, Intertrust launch e-commerce currency
But has Magex that magic touch? We're not so sure
Analysis British High Street bank NatWest yesterday unveiled Magex, its bid to become the Barclaycard of e-commerce. The company's pitch is that providers of digital content need a secure yet flexible method of selling their wares, and buyers need a (you've guessed it) secure yet flexible of paying for it. And, wouldn't you believe it, that's what it claims it offers. Magex -- daft name or what -- the company is a subsidiary of NatWest's credit and debit card operation, and essentially spoofs credit card transactions into digital currency. Punters register with the service, download the wallet application, and fill it with virtual Magex dollars and cents (paid for by credit card) which they can spend on goods and services. Magex then uses NatWest's credit card transaction engine to ensure manufacturers, merchants and Magex itself all take their cut. All of which, for all Magex bosses' claims, isn't remotely new. CyberCash tried this a couple of years back, as have a handful of other companies, many of them, like Magex, backed by major national banks. They couldn't make a real go of it -- CyberCash makes its money selling back-end transaction software. Hardly a positive prognosis for Magex. There's a difference, however, and that's the involvement of content management and protection software vendor Intertrust. Magex focusing its efforts on the sale and distribution of digital data, rather than the more 'traditional' role of e-commerce as a online alternative to mail order. As MIT's Nicholas Negroponte might put it, Magex is about selling bits, while Amazon is about selling atoms. Previous digital currencies were simply an alternative to Visa and Mastercard transactions, essentially ways of combining lots of small payments into a credit card transaction that's financially viable. At the same time they promoted themselves as a safe alternative to transmitting credit card details across the Net. The trouble was, customers were persuaded by the likes of Amazon that credit cards are safe, and digital content providers couldn't get into a microtransaction -- 20c to view a page of data, $1 to print it, that kind of thing -- frame of mind. Magex is gambling that the can at last be persuaded to do so because the Intertrust software ensures they can protect their digital wares from piracy. It reckons that the ability to easily copy digital data is what made microtransactions impossible in the past, and it points to the evolution of the online music business as case in point. Technically, then, Magex has the right components to make it work. The difficulty remains in persuading people to use it. That can only happen if content providers and merchants use the system as a payment method, and given the ubiquity of credit cards, it will be us against some stiff competition. Customers are notoriously conservative about payment methods -- it's taken over ten years of major advertising to persuade British buyers to use debit cards instead of cash and cheques, and even now there are plenty of them who don't trust plastic cards -- and they may prefer to stick with what they know, ie. Visa and Mastercard. The other option is for content providers to force buyers to register with Magex. Again, there may well be consumer resistance to this 'use Magex or fornicate off' approach. Interestingly, Intertrust doesn't appear to have an exclusive relationship with Magex, so if, say, Visa were to offer the same service but with its own branding, it's public profile might well be enough to attract both content companies and buyers far more quickly than Magex, an unknown commodity, can. To match Visa and Mastercard -- and these are the guys to beat -- Magex will have to allow other banks and organisations to join the network. Unfortunately, at yesterday's launch, Magex wasn't able to say that it's getting that support, or even much from content providers. It wheeled out Reuters, whose business model fits Magex's approach very well, but where were the major music companies and the major software vendors? Preparing to talk to Intertrust about setting up their own schemes, maybe. And Magex needs Intertrust far more than Intertrust needs Magex. Magex is a clever new take on the old 'digital currency for micropayments' concept, one that could, as the company hopes, create the basis for new modes of online business. The trouble is, it may well be rather better known financial institutions that ultimately profit from the idea. ®
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