ALLIANCES PUSH ELECTRONIC COMMERCE FORWARD

The race to enable merchants to process credit card payments is heating up as top firms form alliances and introduce new solutions to gain an early lead in this burgeoning market.

Last week, Netscape Communications Corp. teamed up with First Data Corp./Card Services Group to offer an Internet payment processing service. Meanwhile, VeriFone {VFI} formed an alliance with Oracle Corp. to bring an integrated, end-to-end payment solution to market.

Although the solutions were developed separately, there are some striking similarities between the offerings. Both processing solutions include the server and gateway technology, as well as consulting services, that merchants will need to set up stores and to authenticate and process credit card transactions online in real time.

Both solutions are offered by leading companies with established clientele and firm ties to the financial and merchant communities. Also, both will rely on the newly released SET (Secure Electronic Transactions) protocol to secure transactions, and both also offer SSL (Secure Sockets Layer) security.

Since there are so many similarities between the offerings, analysts and industry leaders alike say it's too soon to tell which -- if either -- may dominate the market. But they agree that the similarities also indicate that the Internet and financial communities have solved many of the potential problems of conducting commerce online, and that the market is poised for growth. Team Netscape Claims Lead Netscape and First Data believe their solution has a clear-cut lead over the VeriFone/Oracle offering. The reason: It is currently available. The VeriFone/Oracle solution is due out in the third quarter of the year.

"What we are offering is a comprehensive solution that is available right now," said Gregg Gumbinger, director of marketing for electronic commerce for First Data Corp. "By building a relationship with an industry leader and leveraging the payment systems expertise we have, we can give our client banks and their merchants an opportunity to begin taking advantage of this new emerging market for electronic commerce. It is a huge opportunity, and we are very excited to be leading the charge into this emerging market."

The firms already have two merchants using the system -- Netscape's own General Store and Great Food Online, a gourmet food shop. Gumbinger said "many, many" other merchants also have expressed interest in the system.

To take advantage of the service, a merchant must use one of Netscape's commercial application products, which include the Merchant System, IStore, Publishing System, or Community System servers, and have an account with one of First Data's 1,400 banking customers. Using the system, merchants can accept and process Visa, MasterCard, American Express, Discover, Diner's Club, Carte Blanche, and JCB cards.

The system works like this: The merchant's server accepts encrypted credit card information from the consumer's browser. The server takes the credit card number and total and re-encrypts it. The server sends the information to the gateway, which translates it for transmission over existing, private financial services networks. First Data receives the information, and sends it across the network to the issuing bank for authentication. When First Data receives authentication -- usually in less than eight seconds -- it forwards that information to the merchant. At the end of the day, the merchant's server encrypts and sends the day's batch of data to First Data, which processes the payments.

Since the SET specification was just released last Friday, the Netscape/First Data product currently uses 128-bit SSL technology to secure transactions. As a result, merchants can only sell securely to consumers using an SSL-enhanced browser, such as the Netscape Navigator. SET-compliant versions boasting 768-bit encryption will be added this year, said Charlie Jadallah, Netscape's director of financial services markets.

Netscape's Jadallah believes the system will encourage merchants to go online -- and potentially reach a global audience. "I think that once the solution is exported the global opportunities are enormous," he said. "It will revolutionize commerce." Oracle/VeriFone Believe Embedding Is Key Although the Netscape/First Data solution is already attracting merchants, Oracle and VeriFone think that their solution offers significant benefits that could give them the edge when it is released. For one, the solution already has the backing of major financial institutions, such as Wells Fargo Bank. Secondly, the solution is scalable and will allow for other types of transactions -- including cash, checks, debit cards, smart cards, and micropayments when the standards for such transactions are established. Third, the solution offers a free browser component for consumers that merchants will be able to distribute.

To take advantage of the Oracle/VeriFone solution, merchants will have to use Oracle's WebServer software. The current version of WebServer offers authentication and encryption capabilities, as well as a connection component that allows the server to draw from Oracle databases. The server also works with eight different firewalls. VeriSign will provide the Class Three certificates needed to authenticate merchants.

To enable the server for electronic commerce, Oracle will embed VeriFone's virtual terminal software into it later this year. The virtual terminal software will enable the server to extract credit card numbers and other payment information, re-encrypt it, and translate it for transmission across private banking networks. For merchants, the solution works a lot like the Netscape offering. Consumers will send payment data, which the server will re-encrypt and translate for banking networks and whisk it out to a payment processor -- generally a financial institution -- which will authenticate and process the transaction. The authentication takes the same amount of time -- two to eight seconds.

Initially, Oracle and VeriFone will offer two different levels of payment modules for merchants. One will enable credit card processing and basic payment management features. The other will include extensive administrative functions for complete transaction reporting.

Oracle, like Netscape, will use its network of 5,400 consultants to work with merchants to create online stores. "We think that many potential merchants already have a lot of data they need for electronic commerce stored in their databases. Oracle can bring that data out and turn it into an electronic storefront," said Karen White, senior vice president of strategic planning for Oracle. "Our approach is not to couple products, but to integrate them tightly to support any merchant and any form of payment from the consumer."

To make it easy to use, the Oracle/VeriFone solution also will include free browsers for consumers. Oracle will integrate VeriFone's Internet Pay Window technology into its PowerBrowser. The Pay Window is a type of virtual wallet that can store credit card numbers, and later virtual cash and checks. Consumers also will be able to use other browsers. Netscape charges $49.95 for commercial versions of its browser, although students, nonprofit organizations, and beta testers can receive free copies.