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VeriFone is SET for Web

The company will announce it is shipping secure electronic transactions software for use by banks, merchants, and consumers.

3 min read
VeriFone today said it is shipping software for banks, merchants, and consumers to handle credit card purchases securely over the Internet, supporting version 1.0 of the Secure Electronic Transaction (SET) protocol.

VeriFone appears to be the first vendor to ship complete SET 1.0 software, edging out IBM, which ships its merchant payment software next month.

VeriFone, acquired in April by Hewlett-Packard, dominates swipe machines to authorize credit card payments at retail counters.

VeriFone vice president George Hoyem said the company hopes to shift that dominance from the physical world to the Internet, aiming to snare 70 percent of Internet storefronts with its "cash register" software. That would duplicate VeriFone's market share among merchants in the physical world.

Jupiter Communications analyst Mildred Wulff said, "VeriFone has the ability to leverage those relationships" and to sell them VeriFone SET software.

But, she cautioned, broad merchant adoption of SET for Internet transactions will require other measures, such as lower rates for SET transactions.

And Aberdeen Group e-commerce analyst Chris Stevens thinks any SET news amounts to not much these days. "None of these SET announcements are significant until the client software exists on the desktop, which it doesn't. It's absolutely useless without it," he said.

Wulff noted, "If they can get big merchants like Amazon.com and Barnes and Noble, that would encourage the small merchants to go ahead and adopt."

To grab that market share among merchants, next month VeriFone will unveil "store in a box" offerings that include HP PC hardware, merchant server software, VeriFone's vPOS cash register software, a database, and a Web server. For less than $20,000, merchants can get an integrated Internet storefront from a single vendor.

The first "store in a box" products will be introduced with merchant software from Microsoft and iCat in November. VeriFone plans similar deals with PC hardware vendors NCR, Digital Equipment, Compaq, and Dell.

But IBM is mounting a strong challenge, matching VeriFone offerings of merchant software, "software wallets" for consumers, and gateways for banks and payment processors. Both have announced SET trials with major banks around the world.

Jules Street, an analyst with Killen & Associates, said, "There are a number of approximations, but nobody else I know of [beyond IBM and VeriFone] has all the pieces together."

IBM's wallets and gateways are due to ship November 14; its eTill merchant software will ship December 15, along with software for certificate authorities (CAs) to issue digital certificates, which the SET protocol requires to vouch for the identities of all parties in Internet card transactions. VeriFone is not offering CA software, but its software works with digital IDs from two major CAs, VeriSign and GTE CyberTrust.

Hoyem said, "We are aiming to have our gateways installed in 50 percent of banks and financial institutions around the world." And many also will distribute VeriFone wallets to credit card customers.

Spain's Sistema 4B, a card payment processor that represents 38 banks, will be VeriFone's first customer to implement vGate 4.0, which serves as a secure gateway between the Internet and the secure private networks used to process card payments.

Among other VeriFone customers are payment processor First USA Paymentech, Bank of America Merchant Services, Wells Fargo Bank, Royal Bank of Canada, and Sumitomo Credit Services.

VeriFone said altogether, banks and processors representing 200 banks around the world will use vGate. Most also will distribute VeriFone's vPOS merchant software to their Internet merchants, who number more than 1 million.

VeriFone has created its "cash register" software as a module that can plug into Web storefront software from multiple vendors, including Microsoft, Netscape, Open Market, Oracle, and iCat.

SET version 1.0 was published on June 1, after more than two years of work by sponsors Visa, MasterCard, and their technology partners.

Issues remain, however. Hoyem said most consumer wallets from different vendors now work with other vendors' cash register software, but Web storefronts must use payment software from the same vendor as their bank's. That interoperability glitch is less critical for overall commerce, however, since merchants generally use one payment processor for most of their transactions.

VeriFone has tied its Internet payments strategy to a separate initiative promoting smart cards for use as electronic cash for small purchases in the physical world. For the future, the company sees what it calls "Personal ATMs," or smart-card readers, integrated into computer keyboards so users can transfer e-cash on and off their cards for Internet purchasing.