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Wal-Mart SET into stone

Wal-Mart blesses Secure Electronic Transactions to become its preferred method for customers to make credit card purchases at its Web storefront.

Wal-Mart Stores (WMT), the world's largest retailer, today blessed the Secure Electronic Transactions protocol to become its preferred method for Internet customers to make credit card purchases at its Web storefront.

Wal-Mart has also named seven partners in its SET effort, a number designed to show that SET software from different vendors can work together and send the message that SET is accepted by some of the largest companies in the world.

Working with Wal-Mart are card brands MasterCard and American Express, certificate authority GTE CyberTrust, SET software vendor GlobeSet, payment processor First Data, card issuer Chase Manhattan Bank, and IBM, which provides SET software and operates the certificate authority for MasterCard.

Wal-Mart, which expects to accept SET purchases from the Internet public by mid-summer, tested SET software and procedures with a trial transaction today.

"As we listen to customers, we continue to hear concerns over credit card security and safety on the Internet," said Robert Davis, Wal-Mart's strategy manager for electronic retailing. "We also have heard concerns and a reluctance in the financial industry to endorse credit cards on the Internet because of the same concerns."

SET, a protocol nearly two years in the making by Visa and MasterCard, addresses those issues, Davis added. "We are very committed to bringing the standard forward. We felt we needed to be an early driver of it and can bring some momentum to it."

Wal-Mart has moved aggressively into Internet retailing since it opened its Web storefront last July. Today, it offers more than 40,000 items in 27 categories, including computer hardware and software. Wal-Mart Online offers many items not available in its physical stores--a $10,000 piece of Unix software from IBM, for example--and has upset some computer resellers.

Wal-Mart also expects to push into books and music CDs, adding 250,000 titles in those categories in the next several weeks.

Although Wal-Mart's move could pressure other retailers to embrace SET, the real gatekeepers in SET's success are banks and other credit card issuers.

"The big question is how quickly [card] issuers will be able to provide consumers with certificates," Davis said. To make SET credit card purchases, consumers need "wallet" software to make payments and a "digital certificate" or identity papers to verify they are authorized to use a particular credit card.

Wallet software will likely be available from various software companies--Microsoft and Netscape intend to build software wallets into their Web browsers--but financial institutions need to issue or arrange for digital IDs for their cardholders.

"The cost to a merchant is relatively inexpensive," Davis said. "The real cost associated with implementation of SET is going to be at the card issuers." He and others expect banks to issue "wallets" with certificates that handle other financial services as well as credit card purchases.