1st National of Omaha Will Use Cybercash PC Payment System

First National Bank of Omaha said it has reached an agreement with Cybercash Inc. to help merchants accept credit card payments from personal computers connected to the Internet.

Under the agreement, expected to be announced today, the Nebraska bank's more than 44,000 merchants will have access to one of the pioneering systems designed to process payments and other confidential information over on-line computer networks.

Cybercash, a nine-month-old company in Reston, Va., uses data encryption to prevent credit card fraud on the Internet, which connects thousands of computer networks around the world for commercial, government, and educational purposes.

Sellers of goods and services see the estimated 30 million to 40 million individuals with Internet access as an emerging mass market. But this inherently open system's lack of security has hindered such electronic commerce and spawned Cybercash and several other firms attempting to develop secure payment mechanisms.

First National Bank of Omaha, best known in credit card circles as a processor for mail-order merchants, is the second bank to sign on with Cybercash. Wells Fargo & Co. announced an alliance last December.

The Cybercash project is one of several irons in the fire for First of Omaha in terms of on-line services, said Eric Turille, president of its merchant division.

None of the bank's merchant customers will be on the system for at least a month, said William Melton, founder, president, and chief executive officer of Cybercash.

Thus far, only one of Wells Fargo's merchants is up and running: Virtual Vineyards, a retailer of fine wines that has served for the past month or so as a beta site for Cybercash.

"Some folks have asked us why it took so long to sign our second bank," said Mr. Melton, who earlier in his career founded Verifone Inc., the leading maker of point of sale transaction systems. "We decided to back away from the war of headlines and do some real work."

Now that most of the glitches have been worked out, Mr. Melton said, Cybercash is poised for its next phase - through the latest deal with First of Omaha and by adding 10 Wells Fargo merchants in the next two weeks.

Mr. Melton sees First of Omaha as a model bank partner, not only for its reputation as a merchant processor - The Nilson Report ranked it eighth among bank card acquirers - but for its innovative bent. Recalling his dealings from his days at Verifone, Mr. Melton said First of Omaha is "not technology-phobic."

Also, First of Omaha's healthy share of mail-order merchants - accounting for 10% of the bank's merchant base and 30% of processing volume - can be "fertile territory for these new technologies," Mr. Melton said. He believes these firms are accustomed to making sales without the card itself being presented, and they might find that an Internet/Cybercash transaction would be more secure, and cost them less, than a typical remote sale.

Mr. Melton said that as on-line transactions prove themselves, "the card associations might break down their onerous penalties for (card-not- present) transactions."

"The mail-order people already have better security systems in place than traditional retailers," Mr. Turille said. At the same time, he does not soon expect to see reductions in the higher discount rates that mail- order merchants pay to compensate for greater risks.

Although the Cybercash system currently accommodates only credit card payments, Mr. Melton said it will be ready for debit cards by June or July.

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