Six major banks and payment processors announced support Wednesday for Microsoft Corp. software designed to promote Internet commerce.
Microsoft developed the software, Merchant Server 1.0, with Verifone Inc. It conforms to the Secure Electronic Transactions protocol for credit card payments and is said to make it easy for merchants to set up shop on the World Wide Web in as little as a month.
The financial institutions and processors that have signed on are BankAmerica Corp., Citicorp, Wells Fargo & Co., Royal Bank of Canada, First USA Inc., and Dean Witter, Discover & Co.'s Novus unit. They plan to handle a variety of on-line payments functions for merchants.
Microsoft chairman Bill Gates conceded that Merchant Server addresses "an area that today is very, very small," but added, "We believe there will be explosive growth."
Bankers said their business customers are hankering for sales outlets on the Web.
"You have to fight them off with a stick," said Adrian Horsefield, senior manager of alternative delivery products at Royal Bank of Canada. The bank, Canada's largest, plans to use the Microsoft software to open a "virtual mall" in March.
Citicorp is planning a pilot program in Germany. Wells Fargo, BankAmerica, First USA's Paymentech unit, and Novus have agreed to recommend Merchant Server to customers.
For the banks, the software serves as "virtual bricks and mortar," said Hatim A. Tyabji, chairman and chief executive officer of Verifone. "A lot of the talk (about on-line commerce) is about to be translated into reality."
Michael Dusche, Microsoft's banking industry manager, said "a huge banking opportunity" beckons.
"There's so much apprehension whenever Microsoft does anything in the banking community," he said. "We will let the banks remarket the product, offering it directly to their merchants."
With the banks in control of the payment system, Mr. Dusche said, a participating institution could decide to offer incentives to merchants and consumers who used the bank's credit cards for on-line payments.
Microsoft, of Redmond, Wash., and Verifone, of Redwood City., Calif., said last summer they were collaborating on a system to ensure secure electronic payments, built on the bank card industry's SET standard.
Verifone, the leading supplier of point of sale terminals, contributed its VGate and VPos systems, which securely whisk payment information between Internet buyers and sellers.
Other companies have come forward with similar offerings for merchants, including Netscape Communications Corp., Oracle Corp., and Open Market Inc. But several observers said the Microsoft-Verifone program appears to be the most comprehensive and has the advantage of being backed by companies merchants know and trust.
"A whole host of people are delivering merchant server technology," said Ray McArdle, group executive for technology at First USA Paymentech in Dallas, adding that the combination of Microsoft and Verifone "is potent."
"It's a more powerful product to the merchant community, and it's simple and inexpensive to use," he said. "Almost any merchant can afford to become involved in this new channel."
Scott Smith, an electronic commerce analyst at Jupiter Communications in New York City, said that while other companies are providing "components," Microsoft's software is "the most comprehensive so far."
"We see the merchant server as a breakthrough product," said Cathy Medich, Verifone's marketing director. "It's really targeted to helping a merchant run his store."
One drawback, Mr. Smith said, is that the software works only on Microsoft's Windows NT operating system. "Like most of their offerings, it looks great, sounds great, but there are lots of hidden strings attached," Mr. Smith said.
To date, most merchants have had to rely on a patchwork of software tools and payment techniques to do business on-line.
"It's been tough for businesses to set these sites up," Mr. Gates said. "Many companies have spent over a million dollars setting up an Internet commerce site, and many of those just aren't so compelling."
Mr. Dusche said small merchants will be able to set up a virtual store for as little as $3,500. At more sophisticated on-line stores, shoppers will be able to see more than just a flat image of each product.
"If you're looking at a handbag, you'll be able to turn it around, open it up and look inside," Mr. Dusche said. "It has to be a compelling experience for the user - they have to be able to see more than text."
Among the first merchants using the product will be the bookstore of the University of California at Los Angeles. The system will allow students to enter a course number and order books directly, without waiting in line. The Tower Records site will allow browsers to listen to snippets of music.
About 50 merchants have said they will use the technology to open such stores by yearend.
Jane Moy, vice president and general manager of electronic commerce at Novus Services, called the Microsoft-Verifone merchant server "the first step" toward ubiquitous Internet commerce.
