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Big banks back digital certificates

Eight banking giants will issue digital certificates that vouch for the identity of companies involved in business-to-business commerce.

Aiming to boost large transactions over the Internet, eight banking giants said today that they will issue digital certificates worldwide that vouch for the identity of companies involved in business-to-business Net commerce.

The for-profit venture would create a single, global certificate authority that holds a "root key" and would authorize member banks to issue digital certificates. The new entity also would specify business rules and practices that the financial institution would be required to follow.

The banks, joined by certificate authority firm CertCo, include Bank of America, Bankers Trust, Barclays Bank, Chase Manhattan, Citibank, Deutsche Bank, Germany's Hypo Vereinsbank, and Holland's ABN Amro.

"This venture seeks to address the key missing link in e-commerce today, particularly in the business-to-business environment," said Guy Tallent, chairman of the new organization and an electronic commerce vice president at Chase Manhattan. "That is establishing verifiably the identity of trading partners in open network."

The eight founding banks have invested a total of $10 million to date in the venture, a spokesman said. The banks count 5 million business customers, a huge potential base to issue digital certificates, both to companies and their employees. Although the organization lacks banks based in Asia and Latin America, it intends to expand rapidly to several hundred banks in the next few months.

The venture brings established, trusted brands to the digital certificate market, where most players today are young, technology-based companies like VeriSign, Entrust Technologies or GTE CyberTrust, which today issued a statement in support of the banks' new venture.

E-commerce analyst Scott Smith of Current Analysis, a former banker himself, rates the venture a good start but one that still must prove itself in operation.

"I'm waiting to see the next movements to judge the longer-term potential," Smith said, noting that bank-based ventures like IBM-led Integrion and the SET credit card protocol have to date not been roaring successes. Nor did early efforts in online banking and bill payment take hold quickly. But he expects something firm from the new group by late next year.

"If these companies execute on this, it will be not only a boost for cross-border trade but for their bottom lines," Smith said. "The major multinational companies are looking for someone to step into that trusted third-party role."

Smith also counts today's announcement as a coup for CertCo, a young New York firm spun out of Bankers Trust several years ago to focus on digital certificate activities targeted at the financial sector.

Bankers said today that they envision their digital certificates being used for online procurement, supply chain management, paper-intensive international trade, securities trading, and cash management.