The Story of

By | June 5, 2009

In the late 1990s, virtual currency sites such as and were all the rage, where they offered alternative payment systems for consumers to use on ecommerce sites instead of paying with a credit card. At the time, consumers were a lot more cautious about giving out their credit card information online. Plus, there was a huge market of people who wanted to buy things online but did not have a credit card. has now won this battle, but in 2002 I jumped on the bandwagon and started my own cyber money site: I created it mainly for use on one of my ecommerce sites, but I also hoped that if it worked well for me other sites might pay me to use it. It was totally new and nothing like any of the competing payment systems.

My test site for it was, where people could check to see if they were owed unclaimed money by the government. They could search for free, but if their name was on the list they had to pay $10 to find out how much they were owed and how to collect it. Since I was just selling a username and password to, my cost for each new user was $0, so it was a good site for testing a new payment system. If payments did not go through, I had nothing to lose. If for example I used it on my vitamin or flower sites, losing even one payment could cost me hundreds of dollars.

My idea for was to allow people to buy now and pay later, giving them instant payment approval, with no credit card or credit check needed. All they had to do was fill out a short form with their name, address, and email address and then promise to pay the money within 30 days, and their order would be instantly processed. My system would then email them a bill, and if they didn’t pay after 15 days it would keep emailing them until they paid. They could pay the bill by mail by check or money order.

On my site I talked about how if they did not pay we would send their account to a collections agency and their bad debt would be reported to all 3 credit bureaus. I made all of that up of course, just to scare people into paying. After a few years, I also changed my online form to ask people for their Social Security number to make things sound more official and so they would think I could track them down more easily if they didn’t pay. In reality that part was fake too.

To test how well worked, I added it as a 3rd payment option at, in addition to credit cards and online checks. The only problem with this type of test was that it was a little hard for me to know how many new sales I was getting from DigiCredit, because some of the DigiCredit users would have paid by credit card or check had I not offered the DigiCredit option. As soon as I added the DigiCredit to the site, my daily sales increased significantly, so it seemed that the majority of the DigiCredit sales were new sales I would have otherwise lost, so that was good.

What really was important in all of this though was figuring out the collection rate on the sales, since I had no idea ahead of time what percentage of customers would actually pay their bill. I knew some sales would be fraud (a much higher rate than usual since it was easy to just give a fake name and email address on the DigiCredit form) and some customers would not pay because they were unhappy with the website (it is much easier to ignore the bill than for them to actually contact me to request a refund like they had to do for a credit card). If for example only a few people ever paid the bill, DigiCredit would be a failure because it would just take real sales away by customers who otherwise would have paid me by credit card or check.

It turned out that around 20% of the DigiCredit customers paid their bill. Most paid in the first month. Sending additional collection emails after that did not result in that many additional payments. Frequently customers would email me to make sure their payment was received, so they would not be reported as late. Some customers even emailed me upset that their checks had not been cashed (to save trips to the bank, I only deposited the checks once a month).

Even with 4 out of 5 DigiCredit customers not paying, offering DigiCredit on my site still gave me a 10%-15% overall increase in my revenue, so I was happy with it. Another advantage for me in using was that unlike with credit cards, there were no discount fees, monthly fees, or chargeback fees for the disputed/fraudulent payments. Chargeback fees would usually amount to 5%-10% of my total sales. My only cost was the time it took to process the payments (I had ot mark each account as paid and sign each check and deposit it).

There were several times that my credit card processing was down, and I switched only offering DigiCredit as the payment option. My sales went up by over 500%, but since I only collected 1 out of 5 of those payments, overall the income worked out about the same. Maybe if I had tried to do more with the collections end of it, it would have made a lot more money. Over the years I received a few inquiries from other sites who wanted to use DigiCredit, because I don’t think the site owners would have liked the haphazard way I ran things, so I never followed up with them.

All of this is similar in ways to what now offers, but actually does some real verification using the address and last 4 digits of the customer’s Social Security number, and they also charge the customer interest on the debt. When started offering as a payment option it became a hit and the company was later bought out by eBay for $945 million.

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