William Melton has had it with all the questioning about the safety of Internet payments and commerce.
It's time to spread the word that the risks are under control, the founder and chairman of Cybercash Inc. said at the Cyberpayments '96 conference in Dallas last week.
"We must have the banks stand up and say it's secure. That's all it takes," said Mr. Melton.
He said he is well on his way toward promoting the same level of payment efficiency and reliability on the Internet that a previous company he started, Verifone Inc., did in automating card transactions at the point of sale.
There was once lots of "fear and trembling about automated teller machines and how people would be afraid to trust them and use them," Mr. Melton said. "But the banks got together, competed for that business, and now it's a nonissue."
Sitting alongside Mr. Melton during a panel discussion, Jay M. Tenenbaum, a pioneer in commercial Internet development and chairman of the CommerceNet consortium that is promoting such activity, suggested that security should be off-limits as a competitive matter.
Indeed, the banking industry's unity behind SET - the Secure Electronic Transactions protocol spearheaded by MasterCard and Visa and supported by an all-star cast of technology providers - was invoked repeatedly as evidence that the problems can be solved, if they have not already been.
Mr. Tenenbaum dismissed the public concerns as "misperceptions."
International Business Machines Corp., one of the SET project members, posted a handwritten sign next to its exhibit space at the conference. An arrow on the sign pointing to a "SET demonstration."
Barbara Fox, Microsoft Corp.'s point person on SET, devoted much of her talk, "A Look Down the (Information) Highway," to advances in data security.
"Everybody tells us Internet security is the problem," said Ms. Fox, Microsoft's "senior architect" for electronic commerce. "But how bad is it really?"
Even the less robust encryption systems available are hard to crack, Ms. Fox said. Collective actions like SET should be fostering confidence, not raising more questions, she said.
Even if based on "misperceptions," public opinion has created a difficult challenge for the advocates of this new wave of electronic commerce. And it's not just in the consumer realm.
Ms. Fox pointed to International Data Corp. research showing that 70% of large and medium-size companies view Internet security as insufficient for commercial activity, and 32% consider that to be "the main roadblock."
Steve Mott, senior vice president of MasterCard International, citing research commissioned by his organization and others, said 88% of the still small number of Internet purchases are made by credit card - good news for MasterCard and Visa and a strong impetus for their SET standard, which numerous companies are rushing to implement before the year is out.
But 65% of Internet users who have not become electronic consumers see security as "the greatest drawback," Mr. Mott said.
The security issue's dominance of the agenda - the conference was organized by the National Automated Clearing House Association with "sponsorship" by AT&T, Cybercash, and Microsoft (American Banker was among a few "co-sponsors") - is probably an accurate reflection of reality.
As impatient as he sounded to get on with the creative challenges of marketing goods and paying for them "in virtual space," Mr. Melton of Cybercash spoke of the need for "hierarchies of trust."
Each member of the hierarchies - which could be headed by banks or organizations they own, like MasterCard and Visa - would certify the commerce taking place within its own part.
Mr. Melton said the traditional essence of banking, which he defined as "presence, credibility, relationships, and liquidity," may be transformed by the virtual realities of cyberspace, but don't disappear.
"Banks have the franchise on credibility," he said. Their "spires of trust" could provide the same kind of reassurance in on-line communities that church spires did in medieval cities.
"Internet banking is the same as traditional banking except there are no geography or time constraints," Mr. Melton said. "People will be known by digital signatures, and transactions guaranteed by digital certificates. We will be living in all kinds of webs or hierarchies of trust allowing for liquidity to be delivered faster, more conveniently, efficiently, and economically."
He said that the hierarchies will proliferate, but that this will only provide for the flexibility banks need.
"No one answer is best for banks," Mr. Melton said. "You will need to participate in several. ... The plurality will give you the freedom to develop your niche."
Cybercash was only one of the leading lights in new-age payment systems represented on the Cyberpayments program. Daniel Eldridge, head of the New York office of Amsterdam-based Digicash Inc., spoke for its E-cash system. Matthew S. Miller of Wells Fargo bank discussed Mondex, the smart-card- based cash technology developed by National Westminster Bank of London and currently in an 800-employee pilot at Wells.
Russ Jones of Digital Equipment Corp. discussed the emerging phenomenon of micropayments, which could go as low as fractions of a penny to pay for small bits of Internet content. He covered several such schemes, including Digicash's E-cash and Carnegie-Mellon University's Netbill. But he spent more of his time on what he knows best - his own company's Millicent (patents pending).
No presenter seemed more impartial or diplomatic than Gail Grant, vice president of Open Market Inc., one of the most recent beneficiaries of the stock market frenzy for IPOs of electronic commerce system providers.
Ms. Grant devoted only one of her 30-odd slides to Massachusetts-based Open Market, focusing instead on some basic Internet education ("12 commercial banks have gone on-line each week since August 1995").
She concluded that "commerce on the Internet is a paradigm shift, not simply an evolution of technology." But she conceded that a lack of standards and of a "certification infrastructure" poses obstacles to Internet commerce.
Stratton Sclavos, president of Verisign Inc., the Mountain View, Calif. company that wants to provide the infrastructure for digitally authenticating buyers and sellers, said he has only in the last 18 months become convinced that the Internet's World Wide Web would emerge as the "information superhighway" that visionaries had imagined.
He ascribed the progress to the "people, brainpower, money, and innovation being applied," but said most of the accomplishments to date have been "low-hanging fruit."
"We still have a far, far way to go" before the Web is "the dominant electronic commerce platform," Mr. Sclavos said. Speaking to bankers, he said the opportunities are so vast that "you have the first right of refusal to capitalize on them."
"Five years from now you'll look back and hardly remember that you didn't do things like bill presentment, bill paying, banking, and clearing" on the Net, he said. "Several California banks would tell you today that they have gained customers just by allowing inquiries on their Web sites."
Predicting Internet-based commerce will "become mainstream over the next five to 10 years," said James C. Kwock, director of AT&T EasyCommerce Online Transaction Services. Companies from four major areas - financial, order processing, computer services, and telecommunications - are best placed to profit, he said.
Though many observers view the Internet as a "disintermediating" medium, threatening the roles of "middle people" between buyers and sellers, Mr. Kwock said new types of intermediaries will have to emerge, particularly to assist smaller businesses in coping with electronic commerce technicalities.
Financial institutions can be among the leading servicers, he said, because "we can't underestimate the trust factor."
Federal Reserve Governor Edward Kelley Jr. delivered what has become a standard disclaimer from key banking regulators: Despite their avid interest in monetary innovations, they don't want to regulate prematurely.
Concerns about criminality and threats to payment-system integrity are legitimate, Mr. Kelley said, but risks obviously will be slight until electronic money alternatives gain wide acceptance.
"If these systems spread more quickly than expected or involve issuance in a way that poses risks to the system, then the concerns would be greater, and with that the likelihood of regulatory activity.
"But we don't see this as a prospect at this time."
Lee H. Stein, chairman and chief executive offer of First Virtual Holdings Inc., another of the Internet payment system developers, made what he said was a rare conference appearance. He said First Virtual has been quiet from a publicity-seeking standpoint but has signed 170,000 people in 144 countries to use its Virtual PIN for Internet ordering.
First Virtual has been something of a maverick from the digital money fraternity. Placing no faith in today's encryption techniques, the company works with First USA Paymentech and Electronic Data Systems Corp. to process credit card payments over a private E-mail system.
"Sensitive financial information is never to be on the Internet," Mr. Stein said. "Has anyone here yet seen a hierarchical, encryption-based certification authority working at the consumer level?"
The question did not endear him to the true believers in the crowd.
Mr. Stein also has been something of a pariah for raising a red flag about a security threat called "keyboard sniffing." Credit card numbers could be stolen by reading keyboard input patterns from a distance, Mr. Stein warned.
After bringing that to the attention of government authorities, Mr. Stein said, "we got horrible publicity - we were called self-serving and fear-mongering."
Not backing down, Mr. Stein said the hazard persists - and may be worse, because he learned that passwords could be at risk along with card numbers. He said he took some comfort from the fact that Cybercash Inc., one of his critics, designed a "soft keyboard" - a screen-based mouse-input method that ameliorates the sniffing threat.
But Mr. Stein has not shaken the self-serving label. One of his adversaries pointed out privately that Mr. Stein took his concerns public just as some of his competitors were basking in the glow of IPO attention and as SET, which uses data encryption, was coming together.
The National Automated Clearing House Association, which organized the first-time conference with support from Financial and Business Media Associates of Cleveland, declared the event a success, with 300 people attending. Fewer than half were bankers, though - which Mr. Melton lamented.
William Nelson, Nacha executive vice president, said there will be a Cyberpayments '97 next June in the Washington area. Regional versions in Hong Kong, Tokyo, and Sydney are being planned for this November.
