Internet-based commerce got a vote of confidence today from credit card processors First Data, First USA Paymentech, and GE Capital, invested $12.5 million in Internet transaction broker First Virtual Holdings.
First Virtual runs an online payment system in which Net users pay for goods with a personal identification number called a VirtualPIN. The VirtualPIN stands in for a user's email address and credit card number and is the only piece of information the user sends in a transaction. Any debits or credits associated with it are matched with a credit card number stored by First Virtual. To establish a First Virtual account, a consumer either faxes or phones in a credit card number. Numbers are never sent over the Internet, and verification of transactions is sent via email.
Until now, the company has attracted mainly small Internet-only merchants and consumers who have access to the First Virtual Web site, company officials said. But the vast reach of the three investors could change all that.
"The investors were not chosen for their money but for the strategic value they bring to the table," said Pierre Wolf, director of strategic planning at First Virtual.
Through the three investors combined, the San Diego-based company will be able to offer its VirtualPINs to approximately 245 million credit card holders and 1.9 million merchants. For card holders without Internet access, First Virtual will offer starter kits through as-yet-undetermined Internet service providers.
First Data and First USA Paymentech are the nation's first and third largest credit card processors, respectively. GE Capital is the nation's second largest processor of "private-label" cards, or cards usable only at a specific store.