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Plan Would Put a Bank in Every Browser

An open payments system built into Web standards could transform online life, if the proposal takes off.
January 18, 2013

Over the past few decades, a handful of open standards for rendering and sharing text and imagery between computers—better known as the World Wide Web—have helped upend businesses worldwide. But these Web standards do not cover ways of transferring money or selling content, leaving us to fumble for credit cards and PayPal account details when it’s time to cough up.

That could be set to change. A group affiliated with the body that maintains Web standards hopes to establish an open standard for transferring money online. If the plan is successful, Web browsers could come with features that make it much easier to buy and sell things or transfer funds over the Internet.

“Buying something on the Web today is a fairly awful experience that we’ve just gotten used to,” says Manu Sporny, founder of startup company Digital Bazaar and a member of the Web Payments community group, formed to propose the new standard. “We’re working on making financial services a core part of the Web and the way that it operates to make it easy for people to exchange value on the Web.”

The group’s intention is to supplant proprietary online payment networks such as PayPal with an open standard, like the one that specifies how e-mails are exchanged. Just as anyone can send an e-mail, anyone using software based on the payments protocol would be able to exchange money for free.

The group imagines that people would load money into their account to spend via the service. Fees would still be levied on transactions, but competition would be expected to keep them down.

The group includes representatives from academia and several companies, including the browser maker Opera and Russian search giant Yandex. Although the group is affiliated with the Web’s standards body, the W3C, it is not endorsed by it. However, its recommendations could be picked up to begin the path toward formal standardization, a route that has worked for other technologies in the past.

Much of the discussion by the community group working on the new standard has focused on areas that have long troubled the Web, such as making it easy for small sums, known as micropayments, to be paid for online content, and for individual creators such as musicians to sell their content without an intermediary. There would be no minimum transaction size, allowing people to send even fractions of a cent if their payments provider supported that.

The group is still considering several possible ways to implement its idea, but the final specification will define ways that providers can make transfers securely, and allow websites to implement purchasing systems without being allowed to access a person’s account details.

One of the most developed approaches under discussion is a system called PaySwarm, a proposed open standard developed by Sporny’s startup. “It’s kind of like PayPal, but it’s patent- and royalty-free,” he says. He plans to release the software in about a month. Companies that wish to offer their own payment services can use PaySwarm, and Web page owners can integrate “purchase” buttons and other functionality to handle payments and donations. Web standards often start out as contributions from a single company. For example, a standard being created to allow voice/VOIP calls from Web pages, WebRTC, originated with open-source software released by Google.

But the standardization effort faces challenges. Established companies such as PayPal have little incentive to switch to an open protocol. “We’ll have to hit critical mass, but we don’t know where it will come from, exactly,” Sporny acknowledges. He suggests that the new standard would likely start out in one community, as an easy way to start transacting money, before growing in popularity and attracting broader attention.

Advocates of open Web standards are fond of pointing out that they have tended to win out in the long term. For example, the closed, proprietary networks operated by Compuserve and AOL were outcompeted by a larger profusion of many smaller, open Web services.

Companies that make Web browsers would likely build in support for the feature if it became popular, says Sporny. “We are in constant contact with the browser makers,” he says. “They know that we’re working on this.”

Eileen Burbidge, an investor in and advisor to Flatrr, a startup that provides a way for people to make very small donations to content producers online, says that there’s plenty of evidence that micropayments make sense online. She points to the success of crowdfunding platforms such as Kickstarter, where many contributions are just one dollar, and a recent move by music service Grooveshark to enable Flattr users to automatically donate small sums to artists when they play their songs.

However, Burbidge is unsure that new standards will help advance the cause. “I’m not sure that the technical specifications will get the traction – it’s the use cases that will do that,” she says, and finding mainstream ones outside early adopters already using services such as Flattr will be a challenge, with existing payment systems so entrenched.

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