In an alliance that brings together two of the best-known quantities in the payments and transaction security businesses, First Data Corp.'s merchant processing subsidiary will begin selling online merchants digital certificates from Entrust Technologies Inc.
First Data says digital certificates, the passports of the online world, are a natural fit in the payment giant's efforts to offer merchants a soup-to-nuts package for enabling Internet commerce. In the last 18 months First Data Merchant Services of Omaha has built up its merchant offerings from core payment processing services to include Web design and hosting, Internet payment gateway services, and other e-commerce offerings.
Entrust, of Plano, Tex., is a prominent digital certificate provider. First Data will market the Entrust certificates through banks, processors, and www.fdcerts.com. Additionally, First Data will promote the offering directly to Web developers and wireless application providers. The joint effort - a nonexclusive, five-year agreement - will begin sometime this quarter.
Entrust's certificates use a browser icon to verify that online merchants are who they appear to be.
The validation guarantees the security of the information flowing between the consumer's browser and the merchant's Web server.
First Data, anticipating a boom in wireless commerce, plans to resell certificates for Web servers as well as for servers that run on the wireless application protocol, or WAP. In the latter model, a consumer would look for the security icon on their mobile phone or other remote device.
"For some time, we've been filling out the value chain for Internet merchants here at First Data," said John Duncan, general manager of First Data's Internet commerce group. "All Internet merchants need a certificate if they've got a Web server. Entrust provides us with that security solution."
The agreement affords Entrust a handsome distribution channel and a potential foothold in WAP-server certificates. First Data is "by far" the largest payment processor the company has signed with and the first to agree to distribute WAP-server certificates, said Ian Gordon, director of business-to-consumer solutions at Entrust. So far, WAP-server certificates have only been sold directly to merchants.
The companies will jointly run advertising and other promotions, and Entrust gets to tap into the hefty sales force behind First Data. The partners have a revenue-sharing agreement, and First Data's clients will earn income on the certificates they sell.
"We're pleased to work with First Data to capitalize on the unprecedented growth of e-business," said John Ryan, president and chief executive officer of Entrust.
Andrew Jaffrey, a senior analyst at Robertson Stephens in San Francisco who covers First Data, said the announcement is another "brick in the e-payment house" First Data is trying to build. "If you make both parties to a transaction feel more comfortable and confident," he said, it's more likely "that the transaction will take place. That benefits First Data."
Charles Rutstein, senior analyst at Forrester Research, said most consumers are not worried about online fraud.
"Today, most merchants and most consumers are very comfortable with the status quo," he said. "Most people tend to believe that in the long term, we'll be using digital signatures for [many] purposes, but of course, in the long run, we'll all be dead too."
Mr. Duncan suggested that merchants want security regardless of how badly consumers want it. Entrust sold 100% more certificates in the first quarter of this year than in the fourth quarter.
"I'm not sure" consumers recognize the need for a certificate, he said, "but I think the numbers speak for themselves that more and more certificates are being sold each quarter."