Digital Transactions Authoritative, insightful and timely information for payments professionals
Mer-Tec Inc., an online transaction processor based in Lewisville, Texas, will switch on a micropayments service next week for handling online payments and rights management for digital content, with an emphasis on song and video downloads. The service, which Mer-Tec calls SecureCastle, will open with about 10 independent artists as content sellers and comes about six months later than officials expected (Digital Transactions News, Aug. 9, 2004). “We ran a little over on our time frame and made the decision to do a little more beta testing,” says James McIntosh, president and founder of Mer-Tec and a veteran of the transaction-software industry. He projects more than 100 content sellers will be using the service to peddle song and video downloads by the end of the year. He says a few SecureCastle accounts have been set up for testing, but declines to project how many buyers will be using the system by year's end. In addition to the independents already signed, McIntosh says Mer-Tec has entered discussions with “a whole slew” of other artists looking for ways to sell their wares online. He says the company wants to sign up larger labels and content sellers, as well, and is in negotiations with unnamed companies as well as with charities looking for ways to enable small-value donations on the Internet. “I would like to become the eBay of digital content,” McIntosh says, referring to Mer-Tec's strategy to sign up larger content distributors. He declines to project transaction volumes. For now, the company is focusing on music and video, with the latter available in both streaming and downloadable file formats. It will offer to encode content for rights management, and then charge a per-transaction fee for each sale. McIntosh says Mer-Tec is still tweaking pricing but will announce it next week. Last summer, he promised SecureCastle would be competitively priced, in some cases undercutting established and emerging micropayments processors. Mer-Tec, which in 1996 helped Tower Records become one of the first brick-and-mortar retailers to go live on the Internet with an e-commerce site, is joining a growing list of processors seeking to allow sellers of sub-$5 goods to market their wares online without seeing transaction fees eat up their profits. Competitors include PayPal Inc., the San Jose, Calif.-based unit of eBay Inc., as well as newcomers like Waltham, Mass.-based Peppercoin Inc. and BitPass Inc., Palo Alto, Calif. PayPal introduced new, tiered pricing last summer, with pricing of 1.9% plus 30 cents per transaction at the highest volumes. For music downloads, it charges 2.5% plus 9 cents. Peppercoin, which relies on transaction aggregation, charges what it calls a list price of 5 cents. BitPass charges 15% for payments under $5, and 5% plus 50 cents for those over $5. With SecureCastle, consumers will establish and fund accounts with Mer-Tec that will behave much like checking accounts, meaning they can put in and withdraw money at any time. If they fund the accounts through a credit card, Mer-Tec will stand in as the merchant, passing on credit card fees to consumers. To buy through SecureCastle, consumers will be directed via a log-in window to a site set up by Mer-Tec, securecastle.com, where they will receive a temporary account number, which they will use on the merchant's checkout page, along with a personal identification number. Mer-Tec authenticates the PIN, the temporary number, and funds availability before allowing the transaction to proceed. To manage the distribution of digital content like songs and movies, Mer-Tec is incorporating digital-rights management software from Microsoft Corp. Mer-Tec will also license SecureCastle to merchants as an add-on to their existing shopping-cart systems. Mer-Tec is concentrating on online retailers for now but doesn't rule out moving to the physical point of sale later on. That, he says, will require a secure authentication system, such as fingerprint readers, to establish buyers' identities. Currently, buyers on SecureCastle need only reveal an e-mail address, except when using a credit card to fund accounts. In that case, they must provide address data, including street address and zip code.
