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Confusing alliances in VeriFone deal

A closer look at VeriFone's announcement of financial software shows the tangled web of alliances in Internet commerce.

VeriFone's unveiling of Internet commerce software comforted the traditionally skittish but key banking industry, but it also uncovered the tangled web of alliances and competitors that characterizes the electronic commerce evolving on the Internet.

"We just need to let things sort out," said Andres Espineira, a product manager at Netscape Communications, which is both a partner and a potential competitor to VeriFone.

That could take some time. For example, VeriFone owns 10 percent of CyberCash, which has consumer software that could compete with VeriFone's vWallet. VeriFone also owns about 12 percent of Terisa Systems, which is developing software tools to create secure transaction systems on the Web. VeriFone will sell finished products, not tools, but the two companies could cut into each other's markets.

Likewise, VeriFone last month announced an Internet commerce alliance with Netscape, but that company was conspicuously absent from this week's announcement. Instead, Netscape arch-rival Oracle appeared prominently at VeriFone's event.

VeriFone also faces competition from some of the very companies it aligned itself with in Tuesday's announcement, though none match VeriFones close ties to the banking community.

Netscape and Microsoft, for example, are developing merchant software that could compete with VeriFone's vPOS. Competition could be even stiffer for the wallet software that consumers will use make purchases over the Net. VeriFone's vWallet won't be ready until early 1997, but CyberCash already has its wallet in distribution.

Microsoft and Netscape have both announced plans to have wallets available later this year.

"I don't know who makes money out of the wallet," said John Gould, CEO of Terisa Systems. "It's got to be the loss leader. Anybody's wallet has to be interoperable with SET [Secure Electronic Transactions protocol, which Visa International and Mastercard International are supporting]."

VeriFone clearly hopes the Web browser companies, principally Netscape and Microsoft, will build a SET-compliant wallet into their browsers. At this juncture, however, company plans are anybody's guess.

But bankers drew some security from the announcements by VeriFone, which is a comforting name to the financial institutions that process credit card transactions.

VeriFone provides 65 percent of the countertop terminals used by retailers to authorize credit card purchases, making it a familiar and reassuring name to bankers, credit card processors, and others who must buy into Internet commerce if it is to succeed.

"They are the right company to be doing this," says Dudley Nigg, executive vice president at Wells Fargo, one of the most aggressive banks in adding Internet services. "We have been working with Verifone for 16 or 17 years. That comfort and trust will be important."

International bankers see VeriFone as a safe choice for cyberspace. "We believe VeriFones unparalleled expertise and resources will enable us to deliver Internet commerce solutions that work," Frank Moore, a Royal Bank of Canada vice president, said in a statement.

VeriFone intends to use banks to distribute its vPOS software, which Web merchants will use for storefronts that accept card payments. That follows the practice in the physical world, where retailers often get VeriFone's gray box to authorize credit card purchases from their merchant bank.

"We have the loyalty and migration path through financial institutions and credit card processors," Hatim Tyabji, VeriFone CEO, told CNET. In addition, VeriFone thinks it has a head start against rivals.

"There are no declared competitors today," says Tjabji. "None of our traditional competitors are close to entering the virtual world."

George Gan, president of Malaysias Hitechniaga Group, a systems integrator, acknowledges that Internet commerce remains a volatile field. As he sums up the situation: "It's about moving ahead in a very uncertain environment."

Related story:
VeriFone secures Web commerce