[0] Source: One of the investors in my company was involved fairly early in PayPal. We've had many conversations about this matter, especially regarding another company I was working with at the time that was building an "anonymous" wallet.
E-gold used username/password pairs and seemed to be making pretty good progress towards solving the 'using someone else's account' kind of fraud.
The kind of fraud that killed e-gold (and I think, the harder kind of fraud to solve) is "he sold me a defective whatsit" or "after I paid him, he never sent my thingamajig"
If you don't solve that harder problem, you quickly become known as the payment method of choice for criminals.
And it works right now. In the Netherlands there is a system called iDEAL that works like this:
1. You go to a seller's site e.g. bol.com (which is like amazon). 2. You fill your cart and click checkout. 3. You get sent to your bank's site with a page that displays the amount and a button "pay". 4. The bank then transfers the money to bol.com.
They stated as a design goal that you shouldn't be able to back out of a transaction once it's gone through. The problem was that the system became popular with sellers of fraudulent goods, and this does, eventually, start to cause problems.
I suspect that iDEAL has some way of letting you report fraud and get a refund from your bank if you get ripped off. they probably have some form of chargbacks, etc.
Charging back is not easy, but it is not a problem in the least. It's only a problem when you buy from people you don't trust (but then I wouldn't want to give them my credit card number at all!). This does happen on sites like ebay. The risk is moved from the seller to the buyer. For sites like ebay you need a middle man to be safe, only now you need it as a buyer instead of as a seller.
I've heard of E-Gold, and may have created an account- but I've never used them. I just IM'd three of my friends - one had heard of it, two hadn't. None had ever used it. They all frequently use both Paypal and Amazon (one is a prime member).
I realize that anecdote is not the singular of data, but, a quick glance at Wikipedia, shows that at their peak, E-gold only had 5 million accounts - 2.5% of what Apple has today. (And, in Apple's case, these accounts are connected to an actual Credit Card customer)
So - two things to be aware of:
o E-Gold was relatively small. When you are small, you can't afford to hire the high-level risk management talent. These people are rare, and very expensive. Therefore, one of the critical tasks of _small_ payment processors (not the large ones, Apple/Google/Amazon can afford their salaries and departmental budgets) is to survive long enough and not get shut down by making these mistakes. I'm certain Paypal, when it was smaller, also came close to the abyss several times before they got to scale.
o Of course, the way you get to scale is you make yourself attractive, _or_ you subsidized your payment processing with the rest of your business. (Think about Microsoft buying their way into Console Entertainment)
I'll agree that fraud and risk management are important, but I do not believe that they are barriers to success for the companies the author had identified, they are more important to the smaller players (E-Gold).
For the larger players the question they have to answer for sellers is "Why should we use you? Which consumers are using your system that would make it worthwhile to going to the hassle to adding you as a payment option?" For the consumers it is "What do you do better than my existing Credit Card/Paypal Account which has served me well as a consumer?"