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SET cooperation under fire

A small SET vendor criticizes IBM and VeriFone's joint effort to ensure compatibility of their software that implements the SET protocol.

A joint effort by IBM (IBM) and VeriFone to ensure compatibility of their software that implements the SET (Secure Electronic Transactions) protocol for safe Internet card transactions is being criticized by a small SET vendor.

Calling Tuesday's IBM-VeriFone announcement "a self-serving marketing ploy," Tim Sullivan, chief technical officer of Maithean, urged Visa and MasterCard, sponsors of the SET protocol, to distance themselves from the VeriFone-IBM plan.

"We saw this announcement of interoperability testing in a closed environment as a situation where IBM and VeriFone are defining what interoperability is, and Visa and MasterCard are going along," Sullivan said in an interview.

Maithean also charged that IBM and VeriFone have repeatedly ignored Maithean's efforts to test interoperability with the bigger companies' SET software and said it fears the new plan will exclude other SET vendors.

Spokespeople for IBM and VeriFone said both companies are eager to work with all SET vendors on interoperability, but began with each other because they have a majority of SET pilots between them.

"We think everyone will benefit from our work," said one IBM spokeswoman, pointing to a reference guide the two companies will publish next year. Both companies said they are working with other SET interoperability initiatives Visa and MasterCard are sponsoring.

MasterCard vice president Steve Mott said he endorsed the IBM-VeriFone pact on the explicit condition that it be open to other vendors.

"When we agreed to participate, they said they were more than willing to work with other vendors," Mott said. His favorable quote in the IBM-VeriFone press release was similar to what he has said regarding other interoperability efforts, including one involving Maithean.

That counters Maithean's contention in endorsing the VeriFone-IBM plan--that the two card companies are favoring the two biggest vendors, which control more than half of the nascent SET market today.

Like the two bigger companies, Maithean is writing SET software for banks, merchants, and consumers. On October 30, it announced that NTT Data, a subsidiary of Japan's giant NTT, will use Maithean's merchant and consumer "wallet" software for a SET pilot. But Maithean says IBM, which is providing the bank "gateway" software, won't test interoperability with Maithean's software in that test.

"They're in the driver's seat, and they're not motivated to do interoperability testing with anybody else," Maithean president Mark Wolfe said.

E-commerce analyst Scott Smith, of Current Analysis, attributed the controversy to tension and frustration among SET vendors.

"It's the age-old battle of interoperability vs. advantage. It would be foolish to say that IBM and VeriFone weren't seeking to gain strategic advantage by this," Smith said, noting that VeriFone and IBM have both avidly promoted SET.

Smaller SET companies have been hurt financially by how slowly SET has rolled out, he added. "A lot of their livelihood is dependent on how fast SET goes through. They feel drawn in by promises of major players that haven't been fulfilled."

Visa and MasterCard intend to hand responsibilities for SET compliance, interoperability testing, and future versions of SET to a new entity dubbed "SETco" that would include other credit card companies that have endorsed SET. However, those discussions have lingered for months, although a SETco announcement involving American Express and Japan Credit Bureau could come any day.

In its "open letter" to Visa and MasterCard, distributed today to a mailing list of SET developers, Maithean charged IBM and VeriFone with seeking "an oligopoly in the SET marketplace" with an "isolationist" strategy. "Their latest announcement, which addresses interoperability between their products but excludes the SET vendor community at large, is consistent with this strategy," Sullivan's email said.