First Virtual Holdings

First Virtual was one of the first Internet payment systems to be available to the public, becoming fully operational in October of 1994. A main goal of this company was to create an Internet payment system that was easy to use. Neither buyers nor sellers are required to install new software, (though automated sale processing software is available). If you have access to Internet email, you can sell or buy over the Internet using the First Virtual System.

The First Virtual payment system is unique in that it does not use encryption. A fundamental philosophy of their payment system is that certain information should not travel over the Internet because it is an open network. This includes credit card numbers. Instead of using credit card numbers, transactions are done using a First VirtualPIN which references the buyer's First Virtual account. These PIN numbers can be sent over the Internet because even if they are intercepted, they cannot be used to charge purchases to the buyer's account. A person's account is never charged without email verification from them accepting the charge.

Their payment system is based on existing Internet protocols, with the backbone of the system designed around Internet email and the MIME (Multipurpose Internet Mail Extensions) standard. First Virtual uses email to communicate with a buyer to confirm charges against their account. Sellers use either email, Telnet, or automated programs that make use of First Virtual's Simple MIME Exchange Protocol (SMXP) to verify accounts and initiate payment transactions.

The following steps occur during a sale when using the First Virtual payment system:

1. Merchant requests buyer's First VirtualPIN (usually through a form on a WWW page).
2. Merchant can then check whether the VirtualPIN actually belongs to a real First Virtual account that is in good standing. Merchants can verify accounts by using the following programs; Finger, Telnet, email, or the FV_API utility.
   • Note - Verifying the account is an optional step in the sale process.
3. The merchant then initiates a payment transaction through First Virtual. This payment transaction is initiated by sending the following information either by email, Telnet, or a SMXP enabled program to First Virtual;
   • Buyer's First VirtualPIN
   • Merchant's First VirtualPIN
   • The amount and currency of the sale (Not everything is processed in dollars!)
   • A description of the item for sale
4. First Virtual generates an email request to the buyer to confirm the sale. This email request contains the following sale information:
   • The merchant's full name
   • The amount of the sale
   • A description of the item bought
5. Buyer confirms sale by sending a YES response to back to First Virtual
   • A buyer can also respond NO, to state that they are unsatisfied with the item and are unwilling to pay, or FRAUD, to state that they never made the purchase and someone must have stolen their VirtualPIN.
   • If a buyer does not respond in a reasonable time, their account is suspended.
6. First Virtual sends a transaction result message to the merchant, indicating whether the buyer accepted the charges.
7. After a waiting period, (91 days after buyer's credit card has been charged), the amount of the sale minus transaction fees are directly deposited into the merchant's account.
   • Note - The 91 day waiting period is in place to protect First Virtual from buyers who dispute the charge on their credit card and have the credit card company chargeback First Virtual for all or part of the sale.
   • Merchant assumes all risk!

The First Virtual payment system has several advantages and disadvantages over other payment systems used on the Internet.

Advantages:

• Neither buyer or seller needs to install any software in order to use the system.
• Buyers are virtually 100 % protected from fraud. No charges are processed against their account without their confirmation.
• Purchases are essentially anonymous. The merchant is never given the buyer's name from First Virtual.
• It is extremely easy to become a merchant, or seller, under First Virtual. First Virtual does not screen merchants, nor do they require merchants to have a special business accounts established with a bank. All a person needs to sell merchandise, services, data, etc.. over the Internet is an ordinary checking account.
• First Virtual has very low processing fees compared to other Internet payment schemes or even straight credit card processing.

Disadvantages:

• Merchant assumes all risk!
• Extremely long waiting period between when a sale is made and when payment is deposited in the merchant's account.

I strongly urge that anyone interested in learning more about First Virtual visit their WWW site. It contains detailed descriptions of everything involved plus the forms necessary for opening an account. They have also recently published a paper discussing their first year on line, Perils and Pitfalls of Practical CyberCommerce.