NUMBERS GAMES, CONTINUED

Corporate curiosity about personal computer use, the Internet, and other elements of an emerging electronic marketplace has researchers and survey organizations working overtime.

Their numbers are encouragingly big. At least 30 million households are said to be PC-equipped, though many are still without modems for connecting to the outside.

Perhaps 10 million to 20 million people have used the Internet and commercial on-line services, though this may be disappointing to believers in a piece of research for Commercenet last year. Compiled by the A.C. Nielsen organization, it put the Internet number at 24 million but was later criticized by an academic adviser to the project.

At the same time, the demographic and market-research conclusions are cautious. Business executives are advised that the electronic-commerce revolution will come, but not overnight.

Computer Intelligence Infocorp of La Jolla, Calif., said PCs were in 35% of the 98 million U.S. households at the end of 1995. That was up a couple of percentage points on the year.

As might be expected, PC penetration is highest among people under age 40.

The maturing of Generation X and the cohort to follow means that in 2005, 122 million consumers - in addition to many of the 76 million Baby Boomers - will be ready for fully electronic financial services, banking consultant Edward Furash wrote in Robert Morris Associates' Journal of Lending & Credit Risk Management.

Meanwhile, in a sign that PCs are "broadening and deepening," Computer Intelligence Infocorp said penetration rates rose sharply last year across all age groups, and the relative growth was faster among lower-income than higher-income households.

But Dataquest in San Jose, Calif., which saw only 29% PC penetration as of Dec. 31, is warning of PC saturation and a decline in shipments to U.S. homes within two years.

Input of Mountain View, Calif., said individual-to-business transactions on the Internet will soon be overtaken by business-to-business commerce, which will pave the way for the ultimate explosion in electronic commerce.

"Those companies who don't believe the Internet will pay off are simply looking at its external use," said Brad Meinert, Input's Internet program director. "Internet technology will be used extensively within the corporation as an application development platform and will continue to threaten popular enterprise applications such as Lotus Notes and SAP."

Input projects electronic commerce - goods and services traded electronically - will rise at a compound 36% rate from $135 billion last year to $610 billion in 2000. That projection would be only 4% of total global commerce; less than half of it would be done over the Internet's World Wide Web.

CRIME AS A DETERRENT

One in four information security managers are reluctant to use the Internet for business purposes. The reason: security risks.

InformationWeek reported the finding from a telephone survey in February of 100 corporate security officials.

And according to a larger poll conducted by the magazine and Ernst & Young, the threat may not be only a matter of perception. Responses from 1,290 information systems executives showed that one in five companies had sustained break-ins or attempted break-ins via the Internet. The actual incidence may be higher, the surveyers said, since only half the executives were confident they could detect security breaches.

The break-ins were occurring in spite of security measures. Among companies in the survey, 71% used Internet firewalls to protect their data, 61% anti-virus techniques, and 57% password systems. Fifteen percent of respondents said they used data encryption, while 9% said they used one- time passwords.

In a similar poll conducted this year by the National Computer Security Association, 250 information security chiefs from large organizations were asked about security problems, and 55% said they had experienced Internet- related breaches in the previous 12 months. Almost all said they planned to increase spending on computer security.

REGULATORY 'BABY-STEPS'

Bank regulators, with strong encouragement from bankers and elected officials, have kept their distance from electronic money, on the theory that the technology needs time to mature before it is regulated.

But questions come up and have to be confronted. All the principal financial agencies gave Security First Network Bank a once-over, and a seal of approval, before it opened on the Internet last fall.

Around the same time, but with little notice, Federal Deposit Insurance Corp. counsels Joseph DiNuzzo and Jeffrey Kopchik issued opinions on potentially thorny legal questions.

They said a company facilitating "secure cash transactions over the Internet" would not have to be regulated as a deposit broker. On another inquiry, they tried to clarify when electronic money can be defined, and advertised, as an insured deposit.

Thomas Vartanian, a lawyer delving into E-money issues (see his article on page 14A), said the fundamental question, whether for stored-value cards or Internet cash, is "Where is the Money?" The FDIC has taken "the first baby-steps in determining when money on the Internet is a deposit."

In March, when the Federal Reserve proposed its first, limited smart card rules, Governor Edward Kelley called them "a first look at the subtleties, complexities, and ambiguities we're going to have to face."

CORKY WATTS, a Los Gatos, Calif., mortgage banker, created the Mortgate Mart Web site to provide "a wealth of information for consumers to help them navigate the process of getting a loan." Visitors can locate mortgage professionals near where they live, calculate monthly payments, and get daily updates on interest rates. Mr. Watts reported "6,000 to 7,000 hits a day ... and my data base of mortgage professionals is up to about 2,000." (www.mortgagemart.com.)

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