Beenz.com Closes Internet Currency Business

Online currency provider Beenz.com announced late 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 any compensation 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 order to 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 for performing activities such as visiting a Web site, shopping online, or logging on through an Internet service provider. The beenz e-currency could then be spent online with participating Web merchants around the world.

Forrester analyst James Crawford pointed to both Beenz' and Flooz' lack of scope as the main driver of the 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 a critical mass of places to use it -- usability -- and there has to be a critical mass of ways to obtain it -- availability. I don't think Beenz or Flooz achieved either."

Cards are King

A common argument against alternative Internet currency is that credit cards are a superior payment option for 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 online are not going to have any more faith in a technology-based payment system like Flooz or Beenz," Crawford said, citing anecdotal evidence from Forrester'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 have the mechanisms to accept them, according to Crawford.

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