The Trintech software will enable Visa's bank partners to accept credit card transactions without having to invest in their own software or adding technical staff. Those two factors have kept some risk-averse banks away from the Net. As a result, nonbanks have built Internet businesses, bypassing banks and connecting online merchants directly to credit card processors.
"I see the crosshairs lining up on companies like CyberCash and PaymentNet," said Paul Hagen, an analyst at Forrester Research.
The goal of the acquisition is to boost Visa and bank services by delivering "secure but practical protection" for Internet-based transactions, according to Steve Ryan, senior vice president at Visa USA.
"We are providing an enabling infrastructure to our member banks that they can leverage to their merchants," Ryan said. The payment gateway service for banks supports both Secure Sockets Layer (SSL) encryption for transactions and Secure Electronic Transactions (SET), a Visa-backed protocol that hasn't had much success in the United States.
Visa's move comes as online sales to consumers, where virtually all purchases are paid for by credit cards, is picking up. An estimated $3 billion was spent online over the last holiday season, and sales have continued to grow, with forecasters predicting an even bigger holiday season this year.
Banks have reason to worry, Forrester's Hagen said. First Data Corporation (FDC), which is not a bank but processes a large number of card transactions, reported last year that it had 3,000 online merchants as customers. The figure is now 35,000.
"Service companies are taking transactions from the Internet, passing them to processors like FDC or PaymenTech, charging 45 cents, and not doing anything but routing the transaction," said John McGuire, Trintech's chief executive.
The Visa payment gateway will give banks direct, secure access to Visa's network for processing payments, thus circumventing intermediaries.
"Visa would be charging considerably lower fees, and banks will point merchants directly to the gateway," McGuire added. "They are targeting very large retailers or e-tailers."
Adding Internet transactions will help banks with retailers that operate both in physical and virtual stores, Hagen said. If a brick-and-mortar retailer had a physical-world bank that didn't accept Net transactions, it used to be that the retailer would have to find an Internet processor for its sales. Now the incumbent bank can argue that retailers should use the same company for both transactions.
"The e-commerce effort has been separated from other efforts, and over time I think those will come together," Hagen said. "Retailers will see that there's no reason to process payments in the store vs. on the phone vs. the Internet in a different way."
The nonbank processors aren't standing still, however. CyberCash in March 1998 bought ICVerify, which sold payment software to large storefronts in the physical world. VeriFone, now a unit of Hewlett Packard, has introduced its "integrated payment solution" that handles both Net transactions and those from real-world storefronts.
Other intermediaries, such as CyberSource, have added additional services along with transaction processing.
"You can't just be the person who does transactions," Hagen said. "You've got to add value like fraud-detection software, but you can bet your buck that banks will do that, too. The big trick will be to add a lot of value and integrate with a lot of banks."
That's already the strategy at PaymentNet, said chief executive Philippe Courtot, who regards Visa's new service for banks as potentially competitive.
"What we do is more than credit card payments," he said. "Our strategy has been to add value-added services on one hand and to penetrate the marketplace as much as possible. Ultimately you don't see us competing with Visa."