Entrust Technologies Inc. has won a bank data security assignment in Asia that may eventually make all others seem small in comparison.
As part of a joint project with Sun Microsystems Inc. and Beijing Data Systems, which is the prime contractor, Entrust sealed a deal to supply digital certificate technology for a national Internet commerce initiative coordinated by the People's Bank of China.
Given that China has the fastest-growing Internet population, let alone the biggest total population in the world, Entrust is in a position to take digital certificates and related public key infrastructure technology to an unprecedented scale of operation.
Digital certificates are regarded as the driver's licenses of electronic commerce. They would be issued by trusted parties -- certificate authorities -- such as banks and government agencies that are capable of binding a given electronic credential to its rightful, individual identity. In theory, parties to an Internet transaction, though they may not know or see each other, could be confident of each other's authenticity.
The biggest bank certificate authorities to date, including a pioneering one that Entrust supplied to Bank of Nova Scotia in Toronto, have issued no more than 200,000 to 250,000 certificates. Certificate authorities, or CAs, with even 20,000 or 50,000 users are considered sizable. Entrust and competitors such as Verisign Inc. and GTE Cybertrust have run into some skepticism about their ultimate scalability.
Germany, for one, has mandated digital signatures for electronic transactions, which will require certificate issuance to millions of people and businesses. Identrus LLC, a joint certification venture of several multinational banks, has contemplated 5 million or more for business-to-business commerce.
In the face of China's big numbers, "we are extremely comfortable ... and so are they," said Bob Heard, senior vice president of marketing and business development at Plano, Tex.-based Entrust.
China's Internet market is multiplying at a rate of two to three times a year and is expected to reach four million to six million people next year. People's Bank, which is the central bank and principal regulatory authority, has called for a comprehensive Web authentication system with a centralized public key infrastructure, or PKI.
The Entrust Direct and Web Connector products would form the "security backbone for China's financial certification authority," said Xiaoxin Shi, general manager and director of Beijing Data Systems, a 10-year-old company that was signed to provide hardware, software, and a "turnkey network solution" for People's Bank of China. It chose Sun Microsystems, a top provider of Web-backbone technology, to supply the server computers.
The central bank, in turn, has assembled 12 commercial banks for the financial CA project, among them Bank of China, Industrial and Commercial Bank of China, Agriculture Bank, Construction Bank, Merchant Bank, Shenzhen Development Bank, and CITIC Bank.
"We are ecstatic about this opportunity," Mr. Heard said. "This is potentially the largest CA anywhere in the world by several orders of magnitude. This is a huge win for us in the fastest-growing Internet economy in the world."
He said it will be "well into the new millennium" before the Chinese certificates number well into millions or hundreds of millions for business-to-consumer commerce. But business-to-business efforts "will kick in quickly, and there will be sizable numbers by next year."
Mr. Heard said the Chinese plan should be encouraging to bankers around the world who are trying to stake out strong positions on the Internet.
In China, "their secure infrastructure backbone is seen entitling banks to a leadership position," he said. "That is what is visionary about this. Banks are looking to the technology to ensure they hold onto the franchise."
"This contract represents our first in China, a country that is rapidly expanding its Internet connectivity," said John Ryan, president and chief executive officer of Entrust.
Mr. Ryan, who joined Chinese banking dignitaries in Beijing for a signing ceremony last week, said the China deal combines with "our established presence in Japan ... for a strong foothold in the Asia-Pacific region. We are pleased to provide our proven Web solutions to the bank to help enable their trusted Web communications and transactions."
In Japan, Entrust formed a joint venture with a strategic ally, Secom Co. Ltd., and other shareholders, including Bank of Tokyo-Mitsubishi, NTT Data Corp., and Sony Corp.
Entrust got its start as a subsidiary of Nortel Networks in Canada and is now publicly held. Its first-half 1999 revenue of $36.6 million was 75% ahead of the 1998 figure. The company posted a profit of $1.2 million, versus a loss of $1.2 million a year earlier.
For all of 1998, Entrust lost $23.8 million on revenue of $49 million.
The company has trumpeted its relationships with several banks, including Chase Manhattan Corp., J.P. Morgan & Co., Royal Bank of Scotland, and Bank of Bermuda, as well as potentially large-scale public initiatives such as one with Royal Mail in the United Kingdom. Because of its unique regulatory and coordinating position, People's Bank of China seems capable of topping all those if certificates skyrocket with consumer electronic commerce.
