A unique and alternative payment solution, eCharge Phone allows customers to bill purchases to their local phone bills. Currently, eCharge is only in place for merchants who offer immediate fulfillment - the ones most affected by Visa and MasterCard''s newest chargeback policies. Using eCharge Phone, customers can get at the goods in real time.

eCharge Phone can handle payments ranging from $1 to $300, as well as recurring subscription charges, such as ISP charges. Their merchant network currently includes such well-publicized sites as ClassMates.com and McAfee.com.

In order for customers to use eCharge Phone, they have to be connected to the Internet via a dial-up line. eCharge will be adding the capability to handle payments of those connected via DSL, ISDN, and cable in the near future, but dial-up is still the king with 93% of home Internet users. (TR''s Online Census, published by Telecommunications Reports International).

eCharge Phone should be especially appealing to that 32% of the U.S. population that don''t own a credit card, making shopping online difficult for them. Forrester recently reported that 39% of those online that had not shopped did not do so because they didn''t own credit cards.

Merchants receive payment after the local phone companies have received payment from the customers and have in turn paid eCharge. Customers can deny having made the purchase (chargebacks), but there''s no penalty to the merchant when this takes place. For merchants, unlike with credit cards, once they have the money, it''s theirs to keep. Since all charges are for services that are delivered in real time, the incremental cost to the merchant of denied payment is low. The chargeback rate with eCharge Phone is trivial compared to credit cards, according to Ron Erickson, Chairman of eCharge.

eCharge is currently live in the U.S., Canada, England, and Sweden, with plans to go into many other countries.

About 100 merchants are currently using this solution, but since the customer doesn''t need an account to use it, its success doesn''t depend on size of network of merchants.

How It Works
Merchants install a special icon on the checkout page. The customer actually downloads the product before paying for it, but since it''s encrypted he can''t get at it. The customer''s modem is disconnected from his ISP, then dialed into a 900 number, where the actual charging of the phone bill takes place. At that point, the customer is also given the decryption string. After the charge is made and the customer downloads the key to decrypt the software, the customer is disconnected from the 900 service, dialed back into his ISP, and reconnected to the merchant to receive an order confirmation/thank you page. All this happens transparently, so the customer isn''t baffled by the strange behavior of his computer. The customer is never asked to provide any personal information as part of the eCharge payment process, so it''s completely non-invasive. eCharge gets all the information it needs from the direct phone call to its 900 number.

The merchant must make a very small change to its checkout page to add the HTML code for the eCharge icon. It must also install server software that communicates with eCharge so that it knows when the purchase has been consummated on the eCharge system.

The customer must have IE or Netscape 3 or above, and be willing to accept a Java applet to use eCharge. AOL 3 and 4 support eCharge, but AOL 5 does not yet (as of 5/17/00).

Fees, Costs, Etc.
The cost to merchants to offer the eCharge Phone option is a one-time $50 set-up fee, plus an 8.25% per transaction fee. The customer also gets hit with a consumer fee ranging between $.50 and $2.00, on a sliding scale depending on the size of the order. Merchants can pick up the consumer fee, if they choose.

Delivery Guidelines
Merchants can apply to become eCharge merchants directly on the eCharge site. The application is similar to a merchant bank application, but less rigorous, since payments aren''t rendered until they''re received. Applications are usually turned around within a week.

Overall
eCharge Phone is a good way for merchants to get around the Visa and MasterCard restrictions on immediate fulfillment merchants. It''s also an excellent way to get at the 32% of customers that don''t own credit cards. Customers have to be willing to experiment with what is basically a new technology for most of them.

Pros: No chargeback penalties. Simple implementation. Simple application. No reserve requirements. Multi-currency issues are irrelevant for the four countries in which eCharge is live. Merchant can increase incremental sales by reaching customers who don''t have or won''t share credit card information online.

Cons: Delay between services rendered and payment received since money must be received by the local Telco before it is deposited into merchant''s account. Unfamiliar technology may be daunting for customers. Only works for customers with dial-up connections.

Alexis D. Gutzman is an E-commerce Technology Author and Consultant and author of The HTML 4 Bible, FrontPage 2000 Answers!, and ColdFusion 4 for Dummies. She can be reached at agutzman@internet.com