American Express has fallen into line behind the technical standard that MasterCard and Visa negotiated for card payments over the Internet.
American Express said Thursday that it will use software from Microsoft Corp. that will enable secure processing of card payments for on-line purchases. The resulting payment system, due to be available in the second half, will comply with the bank card associations' Secure Electronic Transactions protocol, which Microsoft had a hand in developing.
The endorsement by American Express Travel Related Services Co. brings the Internet a giant step closer to replicating the conventional point of sale terminal networks that accept all cards in a standard fashion.
While credit card industry observers expected American Express to support data encryption and other security techniques covered in the protocol, the New York-based charge card giant had not tipped its hand prior to Thursday's announcement.
MasterCard and Visa had toiled for several months on the security issue in separate camps, with Microsoft on Visa's side. The bank card groups announced Feb. 1 that they agreed to produce a single document, which was posted on the Internet for comment last Friday. The Microsoft-American Express license agreement is an example of the Secure Electronic Transaction implementations likely to follow.
Also on Thursday, Science Applications International Corp. of San Diego, which worked as a consultant to Visa on the secure transactions protocol, said it will be offering financial institutions, networks, and merchants "a wide range of (related) business solutions" including consulting, digital certification, and systems integration.
Visa and MasterCard issued a joint statement saying American Express made "a very positive move for the burgeoning electronic commerce marketplace."
"The adoption of the SET protocol and launch of this capability will enhance security, increase the confidence of consumers and merchants, and will dramatically increase the level of business over the Internet," said David Bauman, vice president and general manager of interactive services at American Express.
Its deal with Microsoft is nonexclusive. American Express is likely to forge agreements with other companies such as Netscape, provider of the most popular Web browser, Mr. Bauman said.
Tom Johnston, Microsoft's lead product planner for Internet platforms and tools, called it "a strong vote of confidence that two of the three leading brands are working with us in this area." Visa has already decided to license Microsoft's product, which is as yet unnamed.
James Chen, president of V-ONE Corp., an Internet security vendor in Rockville, Md., said, "Visa and MasterCard usually take the lead in developing schemes for credit card transactions, and other companies follow that trend." The Microsoft license will "probably save American Express a lot of implementation headaches."
Dan Johnson, a product manager at Spyglass Inc., the Naperville Ill.- based company that will assist Microsoft in developing secure transactions software for non-Windows operating systems like Macintosh and Unix, said the deal "means there will be one major way to conduct credit card transactions on the Internet." While Microsoft may have an edge over the competition with the endorsements of Visa and American Express, "they will all speak the same language (and) that will help to move commerce ahead on the Internet."
The Discover program is still to be heard from.
Mr. Johnson said, "No one has a choice now. They can't propose a different way of doing things ... and I don't think they'll want to be out of the Internet."