Teaming for Net payment

Bundling to chill Big Blue, VeriFone and VeriSign will market their Internet payment technologies jointly to financial institutions and Web merchants. Their combined offering matches the technologies offered by IBM, which, like VeriFone, is making a big push into Internet payments.

The move combines the payment software of VeriFone, a unit of Hewlett-Packard, with digital certificates issued by VeriSign, so that banks and merchants can process credit card payments under the Secure Electronic Transactions (SET) protocol.

The partnership grew out of VeriFone and VeriSign finding themselves paired in many bids around the world, both sides said.

"Customers told us, 'We'd like a single focal point for products and service, and we'd like you, VeriFone and HP, to be that point,'" said George Hoyem, vice president/general manager of VeriFone's Internet unit.

Under the partnership, VeriFone will resell VeriSign's certificate authority (CA) services. VeriFone gains a technology it needed for a complete offering for SET. VeriSign greatly expands its marketing reach through both the global sales forces and distribution channels of VeriFone, the world's leading vendor of card-readers for retail countertops, and through parent HP, the world's second largest computer vendor, after IBM.

SET is a protocol pushed by Visa and MasterCard for Internet card payments. Banks, merchants, and buyers must have both special SET software, which VeriFone sells, and digital certificates that vouch for their identities. As a CA, VeriSign can issue SET certificates for all three parties.

IBM and VeriFone are the two leading providers of software for many SET trials around the world, but VeriFone lacked the CA piece. IBM offers both a CA service and software so banks can issue their own certificates to merchants and consumers.

Both VeriFone and IBM have payment gateway software for banks and payment processors, merchant cash registers for retailers to accept card payments, and "wallet" software for consumers to hold and manage their digital IDs and payment card information.

"We've seen the VeriFone solution in a great majority of financial institutions we talk to," said VeriSign CEO Stratton Sclavos. "In most cases, it's one of two leading vendors for the final solution, so we're partnering with the guy we know is going to be in the lead position."

Although today's formal announcement stressed SET, VeriFone also can resell other VeriSign certificate services too--certificates to vouch for the identity of Internet servers under the Secure Sockets Layer (SSL) protocol, S/MIME certificates for secure email, and other certificates for home banking or online stock trading.

"IBM is definitely one of the companies that will be challenged by this offering," Hoyem said. "It positions us favorably against them."

Although the partnership is not exclusive for either side, VeriFone primarily will offer VeriSign certificate services. Sclavos said VeriSign won't seek similar bundling pacts with any other vendors.