Beenz.com Closes Internet Currency Business

Online currency provider Beenz.com announcedlate Thursday that its currency would be invalid as of August 26th. The company’s collapse comes just one week after rival e-currency site Flooz.com suspended its operations.

Unlike Flooz, which closed abruptly, Beenz is giving its customers a 10-day notice. The Beenz.com home page says that any beenz remaining in a member’s account after 12:01 am (EST) on August 26th will be invalidated and the member will not be entitled to anycompensation of the invalidated beenz.

Published reports said that Beenz.com, originally founded in 1998, will close offices in Europe and Asia, but will keep its New York offices open in orderto manage the sale of its assets.

Reports also stated that the company is not out of money, but is curtailing expenditures in order to bring some value to shareholders.

Coin of Realm?

Beenz.com allowed consumers to earn beenz forperforming activities such as visiting a Web site,shopping online, or logging on through an Internetservice provider. The beenz e-currency could then be spent online with participating Web merchants around the world.

Forrester analyst James Crawford pointed to bothBeenz’ and Flooz’ lack of scope as the main driver ofthe companies’ downfalls.

“In order for any payment system — online or not –to work, it has to meet two ‘critical mass’ criteria,”Crawford told the E-Commerce Times. “There has to be acritical mass of places to use it — usability — andthere has to be a critical mass of ways to obtain it– availability. I don’t think Beenz or Flooz achievedeither.”

Cards are King

A common argument against alternative Internet currencyis that credit cards are a superior payment optionfor online shoppers, due largely to their already widespread use.

Beenz and Flooz were aiming at the segment of the population who will not or cannot pay online with credit cards, due to inability to obtain the cards, or simply mistrust of using them online. According to Crawford, however, that marketing strategy was misguided.

“People who shy away from using credit cards onlineare not going to have any more faith in atechnology-based payment system like Flooz or Beenz,”Crawford said, citing anecdotal evidence fromForrester’s most recent study of consumer behavior.

Ready, Set, Debit

Stored-value credit and debit cards affiliated with existing credit card companies offer a better value proposition for retailers because they already havethe mechanisms to accept them, according to Crawford.

The analyst expects to see more partnerships like the oneestablished in 2000 between American Express and 7-Eleven,in which American Express offered pre-paid debit cardsfor online purchases that consumers could buy at 7-Eleven.