Flexible friends cause problems for e-commerce developers in a rare story of old business quickly taking over a new niche.

A year after alternative e-currencies such as Beenz and Flooz burst onto the Web scene, their founding companies are conceding that a strategy shift is needed after surprisingly nimble credit card companies have overtaken the niche.

"I don't get the sense that alternative currencies on the Internet have gained any traction, and credit cards will continue to dominate e-commerce," said Paul Jamieson, a senior analyst at Internet research company Gomez. Credit cards, "are something that consumers are used to; they are accepted nearly everywhere online and offline," Jamieson said. "Flooz and Beenz just can't offer the same versatility now or over the next few years."

Robert Levitan, chief executive of New York based Flooz.com, said his company saw the changes and has shifted away from e-commerce to a business-to-business model. Flooz's strategy is to focus on the corporate gift market, for companies to reward their employees by using Flooz.

"We always thought (the shift) would happen, but didn't know it would be such a large part of our business so soon. Our investors are happy with the change and want us to focus more on this," Levitan said. Flooz is not alone. Beenz.com, another leading e-currency site based in New York, has also moved toward a business-to-business model rather than solely appealing directly to consumers.

Credit card companies were not even at the starting line in the early days of e-commerce, creating an opportunity for alternative payment systems. But in the race to become the primary payment method on the Internet, big companies like American Express, Visa, MasterCard and Discover Card are running neck and neck in the lead -- while the pioneers have steadily lost their footing.

Alternative currency companies launched last year with the notion that they could beat the Old Economy standards. They promised lower fees to merchants, privacy, ease of use and security to consumers. But the credit card companies have responded vigorously in the last year, wiping out the chance for alternative currencies to get established.

For example, NextCard, the first Internet-only issuer of credit cards, initially offered features with guarantees against credit card fraud and easy online approval of card applications. But since then, the major credit card companies have added similar services that compete with NextCard's appeal -- and have the added value of being established, trusted companies.

Instead, the alternative currency companies have sought out new niche markets. Like Flooz shifting to the corporate gift market, Bothell a Washington based eCash Technologies company said it is targeting certain demographics, like teenagers without credit cards or people who do not want their credit card information on the Web.

"You will never catch me arguing with the fact that credit cards are completely owning the (business-to-consumer) zone right now," said John Filby, chief executive of eCash. "But the (dominance) is by default. There was no alternative available like you see in the physical world."

In the bricks-and-mortar world, cash, credit, checks and debit are among the several options available to people. Filby said he thinks those alternatives can be translated to the Web through alternative currency companies.

"Once alternatives are presented, I don't think credit cards will control everything on the Net," Filby said.

But as quickly as niche markets are explored -- like prepaid cards for teenagers -- the credit card companies have moved in to play the spoilers.

"Any alternative monetary products that are offered by these start-ups are being neutralised by the credit card companies," Jamieson said.

For the teen market, Visa earlier this year introduced Visa Buxx cards. These cards have a pre-loaded value and are accepted where ever the Visa credit card logo is displayed.

For those afraid to place their credit card information on the Internet, American Express, Discover and others have introduced products that create "disposable", or one-time-use, credit card numbers, which allow consumers to make purchases while keeping their actual card numbers hidden.

"While these startups' whole survival is based on stored-value products taking off, the survival of the credit cards is based on what they already control," said James Van Dyke, a senior analyst at New York-based research company Jupiter Media Metrix.

Credit card companies have also moved quickly to establish themselves in the business-to-business industry. Their efforts may be putting a dent in the plans of companies like eCash and escrow services like Escrow.com and I-Escrow.com to carve out a niche in that multi-trillion dollar opportunity.

One promising niche market for the alternative currency companies is overseas, where credit cards have yet to take control, mainly because of cultural biases.

"People around the world don't use credit cards the way Americans do, relying instead on debit cards or cash," said Stephen Limpe, Beenz chief financial officer. "There is a need for a technology to cater to those cultural differences."

Despite a hostile competitive landscape, eCash and Beenz say they hope to go public if the markets stabilise, while Flooz has no plans in the works.

Until then, the companies say they have the financial backing to keep plowing forward, eCash's Filby said the company is on the verge of receiving another round of funding.

But the major credit card companies have plans in the works, too. "The labs of the major credit card companies are also busy working on projects -- like stored -- value products, micro-payments and bio-security cards -- and getting ready for future consumer adoption," Jupiter's Van Dyke said.

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