Focus on Personal Finance
The Coming Boom in Cyber-Cash

BY RICHARD J. ALPHONSO, JD, CPA/PFS, M.S.T.

A new way to transfer funds offers you a wealth of opportunities.

If you watched Star Trek and were amazed at the futuristic technology used on the starship Enterprise, you'll be mesmerized the first time someone beams money into your e-mail in-box. And it's not spam either, so resist hitting the delete key.

In this month's column, I'll introduce you to a new payment transfer concept that's taking hold on the Web. And I'll show you how to take advantage of the new currency that's changing electronic commerce -- cyber-cash.

A NEW KIND OF COMMERCE

Cyber-cash is the generic term used to allow you to send and receive virtual cash via the Internet. You may be experienced at paying your bills using a service such as Check Free or your local bank. However, cyber-cash can be a much more powerful financial tool.

With cyber-cash, you can send and receive cash via the Internet, shop online using your virtual cash account, sell goods and services online, as well as send and receive auction payments for items purchased on a site such as eBay.

HOW TO USE CYBER-CASH

You first need to open a virtual bank account with a service provider. Although PayPal was one of the first, many more are coming into the market as the demand for this service builds. Usually, opening the account is free. You then tie your virtual cash account to your local bank account or to your credit card, or both. To take full advantage of this cash transfer system, your friends, family and business associates should become registered users of the service. Then, when you get that panic call from your child away at college and she's in dire need of cash, you can instantly send her the cash via email.

If you're a registered user, you can send a payment to anyone with an e-mail address just by writing a dollar amount on an online form. When the e-mail is sent, the payment is debited from your account and electronically transferred to the recipient's account immediately. The recipient gets an e-mail saying "you've got cash." The recipient technically doesn't have to have an account with your provider; however, having one makes it easier to withdraw the money. With PayPal, completing the form registers the recipient as a user. And once you open your account, you can even secure a separate PayPal ATM debit card so you can withdraw money at an ATM or pay for goods and services.

Many everyday uses exist for this type of service. You can shop securely knowing that all you have at risk is the money in your virtual cash account. Forget putting in your credit card or bank account information. Literally thousands of retailers and vendors are now gearing up to receive virtual payments for goods and services.

And you can confidently participate in online auctions such as eBay knowing that you have cyber-cash neatly tucked away in your account. Though it was one of the pioneers in providing buyers with its own cyber-cash payment system, eBay now accepts other service providers such as PayPal and Billpoint.

Finally, how many times in your ophthalmic practice have you dreamed of setting up an electronic shopping mall, say, for your optical shop. Now you can do it in our virtual economy. All you have to do is tie your Web site directly to an electronic cash register, such as VeriSign's Cash Register, PayPal, Billpoint or Microsoft's .NET Passport. You can then accept Visa, Mastercard and virtual cash. Remember, strong purchasing power exists in older teenagers and younger adults who can't qualify for a credit card but can easily set up their own virtual cash accounts.

COMING TO A BANK NEAR YOU!

As this market expands, third-party service providers will be offering these services through your local bank. The faster you learn about this wave, the quicker you can ride it.

Richard J. Alphonso, JD, CPA/PFS, M.S.T., is president of The Financial Advisory Group, Inc. in Houston. The Financial Advisory Group {(713) 627-7660} provides personalized fee-only financial planning, investment management and business consulting services.