Start-up targets CyberCash

Just when one competitor of Internet payment service CyberCash exits the business, a new one crops up.

Upstart PaymentNet offers similar services to Web storefronts, and it aims to steal high-profile CyberCash customers to make a name for itself. But PaymentNet, formerly Segue Systems, also enables real-world retailers to use the Net, rather than expensive leased phone lines, to route credit card transactions from their telephone call centers to their bank.

"[Merchants] can consolidate all their different payment networks through the Internet," said Vernon Keenan, a former Zona Research analyst who just began his own consulting practice as KeenanVision.

"Dealing with regular business payments [through PaymentNet] can eliminate the need to maintain and pay for all those leased lines," he added.

PaymentNet's public emergence comes just days after CyberCash announced that it will offer online payment services to 2,000 merchants that formerly used First Virtual Holdings. First Virtual is leaving the Net payment arena to concentrate on Internet messaging services.

Although PaymentNet has been operating quietly for nine months, signing up former CyberCash customers Network Solutions, the Internet names registrar, and one of the Net's first retailers,Virtual Vineyards, it's only now announcing general availability of its service.

PaymentNet currently handles credit, debit, and corporate purchasing cards; its electronic check service is now in beta testing.

"We want to provide the best performance, support, and overall cost of operations in providing an outsourced service for payment processing," said Bruce Hendrix, PaymentNet's chief executive. His goal is to provide different forms of payment for different kinds of purchases, on or off the Net.

That doesn't differ a lot from CyberCash's vision.

"We consider ourselves a leader and a pioneer in the Internet payment space, and our merchant base has grown significantly every month," said Maureen Loftus, CyberCash's senior vice president for corporate marketing and strategy.

CyberCash claims more than 6,000 merchants, including Microsoft, Kmart, and the San Francisco Giants baseball team. It expects to add 750 more next month.

Although PaymentNet uses the Net as a virtual private network for transporting payments, it doesn't use Web protocols, instead opting for a client/server architecture with a file of less than 100 kilobytes integrated in the Web store.

"We link the merchant via the Internet to the established payment networks using our own protocol," Hendrix said. That helps avoid problems like "timing out" messages that create headaches and cost merchants time and effort to straighten out botched transactions.

In the future, PaymentNet, backed by venture capital and planning to be profitable by 1998's fourth quarter, expects to add capabilities to handle electronic data interchange payments as well as other business-to-business payment types.