9th Symposium on Finance, Banking, and Insurance
Universität Karlsruhe (TH), Germany, December 11 - 13, 2002

Abstract

Some Reasons for Failure of Internet Payment Systems

F. Thießen

Technische Universität Chemnitz

More than 100 techniques have been developed to enable payments within open electronic networks like the Internet. Most of them aborted. The few still in process do not meet all requirements requested. A study of the Institute for Reevaluation of the Consequences of Technology (Institut für Technikfolgenabschätzung und Systemanalyse), commissioned by the german government, has recovered vacancies within micro payments, peer-to-peer payments and payments with qualities of cash.
Hence, it is not the case, that no operation at all has been developed for these types of payments. They simply cannot find proponents and must be seen as failed. But what are the reasons for that miscarry? In the literature one can find mainly three arguments:

• The argument of power is: There are some participants of the market, who hamper or promote others with instruments of force.

• The argument of functionality says, that systems fail, because the utility, which they give, is too low (i.e. high costs, long waiting time, difficult handling).

• Following the argument of regulation, the procedures, which are rejected by the central banks, withdraw from the competition.

The arguments are still not tested empirically. This is the aim of the present assay. Great store is set by employing reproducible data. Two of the results seem to be particularly worth mentioning:

• These components of the payment systems, which closely cohere with the usefulness to the payer, seem to be of no influence on the success or failure of the procedure.

• Significant dependence (with a confidence interval of 99%) exists - in contrast to the above - between the success of a payment system and the method of implying the intermediary. Systems, which root the cash flows via bank- or credit card-independent third parties, are doomed to fail.