First Virtual Holdings Inc. has announced licensing agreements with two transaction processing leaders for its "buyer" and "seller" VirtualPINs.
The San Diego-based company concluded separate agreements at the end of March with First Data Corp. for 350,000 "buyer" PINs and First USA Paymentech for 200 "seller," or merchant, PINs.
VirtualPINs are the personal identification numbers that stand in for credit card and merchant ID numbers in Internet payments. They are crucial components in First Virtual's design of a secure payment system that does not risk the transmission of actual card numbers over open networks.
The PINs' distribution through First Data and Paymentech could accelerate the acceptance of First Virtual's approach.
First Virtual is one of about 50 companies trying to cash in on Internet commerce by making it simple and secure for consumers.
"These commitments are second to getting people to use them," Jerome Svigals, a Redwood City, Calif.-based electronic banking consultant, said of the First Virtual deals. "I don't see the demand on the consumer side."
Mr. Svigals said the main problem with Internet commerce is "educating the merchant" to view electronic commerce as a marketing advantage.
Terms of the licenses were not disclosed. Hackensack, N.J.-based First Data said its agreement was relatively modest.
"First Data will work with issuing banks to identify customers who may bank on-line" and pre-enroll them for a PIN, said First Data spokeswoman Melissa Baron.
"Anything that helps consumers conduct Internet transactions more easily will affect their level of usage," she added.
She said First Data expects to roll out the PINs in the next six to nine months and is already working with several bank clients, although she would not say which.
First Virtual called the deals "pretty sizable."
"A purchase of that size by two major shareholder reflects significant confidence in our system," said Michael Schauer, president of financial services, First Virtual Holdings.
First Data, First USA Paymentech, and GE Capital Services have invested a combined $12.5 million in First Virtual.
Mr. Schauer said First Virtual has processed 350,000 Internet transactions since the company's inception in 1994. He said 3,000 merchants and 200,000 consumers have used the system.
Mr. Schauer said First Virtual is currently not set up to work with First Data on the merchant side. He said First Virtual does settlement and capture of its transactions with Paymentech, a leading competitor of First Data.
He added First Virtual aims to work with all of the transaction processors in Internet commerce.
For its part, Paymentech said it considered the licensing agreement a pilot.
"The Internet is still an emerging market for us," said spokesman Rodney Bell. The First Virtual deal "is not significant within the overall business, but it is of strategic importance."
Paymentech has targeted several hundred merchants it thinks are suitable for the VirtualPINs, and plans to reach them through a direct mailing. It expects to roll out the seller PINs within six months.
Paymentech currently has processing arrangements with electronic commerce operators AT&T SecureBuy, Cybercash Inc., and CommerceWave Inc.
"We need to be able to process different types of solutions" for merchants, Mr. Bell added.
