CompuServe Network, which says it transports 1.2 billion credit card transactions per year, is buying IBM's CommercePoint gateway software, which enables banks and credit card processors to accept credit card purchases securely via the Net under the SET (Secure Electronic Transactions) protocol.
"This gives our customers the capability to become SET-enabled," said Janel Crabtree, group manager of managed network services for CompuServe Networks. "It enables banks and processors that use CompuServe Network to handle purchases from the Internet without changing their back-end networks."
CompuServe Network does not process credit card transactions itself, but many banks and credit card processors--including Vital Processing, Michigan National Bank, and National Bank of Detroit--use its secure private network to move payments from merchants to their processing bank. Vital is a joint venture of Visa U.S. and Total System Services that provides card issuing and processing services for smaller Visa banks that want to outsource that function.
The deal is a major one for IBM, but it could get even bigger. In a complex transaction announced last month, CompuServe Networks will merge with UUNet Technologies and ANS Communications to form the Internet division of WorldCom (WCOM).
Both ANS and UUNet already handle some e-commerce services, including Web site hosting, but IBM could have the inside track in selling more SET software after the merger is completed sometime next year.
"Certainly ANS, UUNet, and CompuServe represent a fairly hefty piece of transaction muscle," said Ira Machevsky, e-commerce analyst at Giga Information Group.
"IBM has been positioning itself as the company you can trust for online commerce," he added, noting that CompuServe could have opted for VeriFone, now part of IBM archrival Hewlett-Packard, among others, for the deal.
Still, CompuServe Networks' SET gateway remains in beta and isn't slated to go into full operation until early 1998.
"It's their busiest time of the year in the retail and credit card industry, and most banks and merchants are not willing to make a change now," said CompuServe's Crabtree.
But for a transaction under SET, developed by Visa and MasterCard to make the Net safe for credit cards, both the buyer and the merchant must have SET software. Consumers can obtain SET "software wallets" free from a number of sources, but merchants generally must buy SET "cash register" software.
Big Blue has made SET a major focus of its Internet strategy, and its software is being used in more than 35 pilot projects around the world.
The market could prove hugely lucrative--International Data Corporation expects consumers to buy more than $220 billion in products and services online by 2001, up from $2.6 billion last year.