Netchex may sound like a breakfast cereal for cyberpunks, but that's not quite what its creators have in mind.

Netchex is yet another entrepreneurial entry in the increasingly popular Internet-payment-system sweepstakes.

Net1 Inc., the year-old company responsible for Netchex, is betting that it packs enough crunch to compete with bigger, more established providers of secure electronic payment technologies.

Muscling in on the space of MasterCard and Visa, Microsoft and IBM, and even recent start-ups like Cybercash and First Virtual won't be easy for Net1, which is living off a $1.5 million private placement.

The Phoenix-based upstart is trying to promote its own system definition - one that can accommodate electronic check payments and eventually card- type transactions, fully compatible with existing infrastructures - which it hopes will attract a desirable array of alliance partners.

"The difference between the other methods and ours is that absolutely no critical account information goes across the Internet in any transaction," said Russell Davidson, Net1's president and chief executive officer.

"We are looking to partner with companies," Mr. Davidson said. "We are not looking to immediately get into slugfests with the Quickens or the Cybercashes or the Verifones, but we believe what we have is a unique technology that can be used by anyone."

While most of the alternatives base their security on public key cryptography, which involves the two-way exchange of codes to decipher an encrypted message, Netchex relies on a private key system.

A shopper using Netchex would be able to place an order over the very public arena of the Internet, but would pay for it through a secondary, private network.

"The public key people will get very defensive about this, but under their system all of the information necessary to crack the code is sent with every transaction," said David E. Saxton, a founder of Net1.

"Once you crack one transaction, you have an open doorway to that person's sensitive information," Mr. Saxton said.

With Netchex, less than half the information necessary to complete a transaction is sent over public lines, Mr. Saxton said, while the rest flows over a secure private channel.

Though Net1's primary focus is on an electronic check, company officials say the technology is flexible enough to accept credit card payments and digital cash.

"We have a unique, stand-alone technology," Mr. Saxton said. "I do expect the world to beat a path to our door."

So far, that path is not cleared. The company has also suffered internal setbacks, including disputes among its founders and a complete turnover among the top executives.

The turmoil has delayed product development and hindered relationships with banks and other companies.

Mr. Saxton, a former stockbroker, had a falling out with communications network developer Robert Moore, a co-founder, over strategy. Both left the company, leaving Mr. Davidson, a former development manager for Grubb & Ellis who joined Net1 in October, in charge.

Although Mr. Saxton said he had officially rejoined the company, Mr. Davidson insisted that Mr. Saxton was a consultant, not an employee. "I'm just trying to get him to be a team player," said Mr. Davidson, as both men bombarded this reporter with telephone calls disputing one another's job descriptions.

Mr. Saxton was involved in securing extra funding for Net1, which he said was imminent.

Even with a cash infusion, the company would be months away from bringing Netchex to market, and outside observers give it little chance to succeed.

"They're not looking at creating something new or revolutionary, just an additional way of creating a payment draft," said Frank Jaffe, a senior systems consultant at Bank of Boston and project manager for the Financial Services Technology Consortium's electronic check effort.

"Just moving the payment instruction or authorization outside of the Internet is only one component to making a secure solution," Mr. Jaffe said.

He contended that the technology consortium, a cooperative effort of several of the nation's biggest banks, is taking a more sophisticated and forward-thinking approach toward an electronic version of the check.

"What we're trying to do is move the concept embodied by paper checks into the future," the Boston banker said. "Our approach is a little bit more long term."

Banks have not met Netchex with open arms. Mr. Saxton said Wells Fargo was "very interested." But Debra Rossi, the Wells Fargo electronic payments executive who met with Mr. Saxton and his partners, said the meeting was merely routine.

"A lot of people come in and talk to us and this was one of them," Ms. Rossi said. "We will continue to meet."

On the plus side, Netchex has some credibility in the technology community, including an endorsement from RSA Data Security Inc., the leader in commercial encryption systems. Incorporated in Netchex is an RSA Data tool called BSafe.

"They're using a very popular and very trusted encryption engine, one that we developed," said Kurt Stammberger, technology marketing manager for RSA. "RSA laboratories did review their implementation and gave it their seal of approval."

Magdalena Yesil, vice president of on-line services for Cybercash Inc., said Net1's technology could potentially complement her company's products. Cybercash currently facilitates credit card payments on the Internet.

"They are a collaborator rather than a competitor," Ms. Yesil said, adding that she was not completely familiar with Net1 and that the companies were not working together.

Net1 completed a prototype last summer. Browsers who visit the company's World Wide Web site - www.netchex.com - can experiment with it.

After downloading the Netchex software, a consumer would set up a "membership" with the company, offering identifying information and bank account numbers.

Anyone whose hard drive crashed would not lose money and would simply have to reinstall the software, Mr. Davidson said.

Mr. Saxton emphasized that Netchex need not be a proprietary product. He envisions a day when both "Wells Fargo Netchex" and "Bank of America Netchex" would be available to Internet users.

"In my mind, banks are clearly our natural market to private-label this product," Mr. Saxton said.

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