processors are planning to work with Cybercash Inc. to allow retailers to accept payments over on-line computer networks. U.S. Bank of Oregon, Mellon, First USA, Norwest Corp., Compass Bancshares, and National Bank of the Redwoods of Santa Rosa, Calif., all said they plan to pilot Cybercash's secure transaction system, which encrypts credit card numbers on the Internet to prevent fraud. Magdalena Yesil, vice president of marketing for Reston, Va.-based Cybercash, also said the company was working with First Union Corp., Boatmen's Bancshares, and Nabanco. But none of these companies would confirm their dealings with Cybercash. Until recently, Cybercash had been providing on-line security to merchants through two merchant-processing banks: Wells Fargo & Co. and First National Bank of Omaha, Neb., which is active in the mail-order and telemarketing fields. The accelerated activity among some of the leading card processors reflects the banking industry's growing comfort and acceptance with the new breed of on-line commerce, and to some extent it is apparently a response to growing merchant interest. Cambridge, Mass.-based Forrester Research recently predicted that on- line transactions will represent $6.9 billion out of $2.1 trillion in overall retail spending by the year 2000. According to the recent nationwide consumer survey by American Banker and the Gallup Organization, 12% of personal computer owners have already conducted some kind of electronic commerce. These and other surveys indicate that the "cybercommerce" market may be poised for faster than expected growth. Meanwhile, "Banks are more sophisticated about this than people think," said Seamus McMahon, a managing vice president at First Manhattan Consulting. Mr. McMahon said bankers view potential sales over the Internet as an extension of their wire transfer business, as "just another network they have to stay in control of." Richard Comandich, a senior vice president at U.S. Bancorp, said it plans to sign an agreement with Cybercash soon and work with merchants on a pilot in the next couple of months. Mr. Comandich said his confidence was enhanced by the fact that Cybercash was founded and led by William Melton, a founder of point of sale terminal maker Verifone Inc. But ultimately, Mr. Comandich said, he believes "it's very important for banks to be presenting themselves" rather than vendors as the service providers. Representatives of Mellon Bank, First USA, Compass Bank, and National Bank of the Redwoods said they also plan similar, limited testing in the coming weeks. The banks, by and large, hope to roll out the services to larger numbers of merchants sometime in 1996. First USA has for several months been working with First Virtual Holdings Inc., another company that allows merchants to sell goods on-line. It uses an alternative electronic mail system that does not use encryption. Pamela Patsley, president and chief executive officer of First USA Merchant Services, said the First Virtual system has been quite popular but attracts smaller and less conventional merchants that provide mainly information-based products. First Virtual has more than 800 merchants and 40,000 registered buyers, she said. Cathy Medich, the president of CommerceNet, a consortium of banks and other companies seeking to do business over the Internet, said this type of service is needed because there are "lots of merchants out there already selling goods on-line, and the credit card is the natural payment."

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