In the foyer of Cybercash Inc.'s office in Reston, Va., hangs a tinsel rocket ship adorned with paper streamers and the words "Cybercoin is launched!"
It is a hopeful metaphor for the company's mission: to convince bankers and others that a pot of gold awaits those who find the right way onto the much-hyped new medium.
Dozens, maybe hundreds, of companies are in the race, and at the moment, Cybercash seems to be at the front of the pack. The two-year-old company has a proven leadership team, a jolt of funds from Wall Street, and the confidence and partnership of a growing cadre of banks.
Cybercash makes software that facilitates Internet payments. At the core is an "electronic wallet" for buying items with credit cards from on- line merchants.
Last month, the company enriched its wallet with electronic coins. The virtual equivalent to a stack of chips at a casino, the Cybercoins are meant to be spent on things that cost between 25 cents and $10, perhaps news articles, pictures, or software.
Several powerful banks - including First Union Corp., Wachovia Corp., and PNC Bank Corp. - are planning to offer Cybercoins in pilots. Others, including Wells Fargo & Co. and BankAmerica Corp., already offer the Cybercash wallet with its credit card capability.
Cybercash officials hope their early entry gives them an edge. But they are bracing for competition with "major, well-funded players," said William N. Melton, chief executive officer and co-founder of Cybercash. "There is not going to be a single, major, well-funded player that doesn't have its finger in the pie someplace."
That is good news and bad news, Mr. Melton says: "If we were the only ones there, you might say we were ill-advised and were pouring money down returnless holes. But when you have every single major player from AT&T to IBM to all the card associations playing - you name it, they're there - it will happen."
The "it" is Internet commerce. Bankers, transaction processors, and system vendors seem viscerally convinced that electronic commerce is poised for takeoff. They are less sure how the ascent will proceed.
"No one knows who's going to win this thing," said Michael P. Duffy, group executive of direct marketing operations for First USA Paymentech. "There's a keen amount of interest, but the public hype is probably out in front of what's actually happening."
First USA Paymentech, one of the leading processors of card transactions for merchants, is handling payments for Cybercash. But there is no exclusivity: First USA also has processing agreements with First Virtual Holdings and Open Market, two competitors in Cybercash's realm.
Paymentech chief executive Pamela H. Patsley described her company as the leader in the "non-face-to-face market."
"It's our strategy to work with several of the leading solutions that are coming to market," she said. "Certainly, Cybercash is a leader in this industry."
First Data Corp., which also does processing for Cybercash, shares the philosophy of backing any product that shows promise of acceptance.
"This is a new thing, there's nothing out there filling that role, and this is the first one to market," Chuck White, a First Data senior vice president, said of Cybercoin. "I think the banks are essentially in the same position we are: they want to make sure they are providing the support that the market needs."
Banks, too, are working with multiple partners, seeking as much insight as possible on a business full of question marks.
"It's easy and smart to have partnerships with these competing ventures," said Martha C. Campbell, until recently a senior vice president at BankAmerica. She helped bring Cybercash's wallet to the bank.
"My sense is that we're still so early into this market . . . that it's really hard to tell who's going to be a keeper and who's not," Ms. Campbell said. "Some of them may become the standard providers and survive, but I think it's quite likely none of them will."
Like BankAmerica, Wells Fargo is offering the Cybercash wallet for credit cards, but has not yet decided on Cybercoin.
"We're aware of it and we're looking at it - we're looking at all options available to our customers," said Debra B. Rossi, Wells' senior vice president of electronic payment solutions.
Cybercash's own strategic partners include Mondex International, the smart card developer, and Verifone Inc., the transaction automation pioneer Mr. Melton founded in 1981.
Ironically, Verifone is promulgating its own scheme for Internet payments and has its own set of bank and technology partners (some also allied with Cybercash).
Hatim A. Tyabji, Verifone's CEO, resigned from Cybercash's board this year to avoid any conflicts of interest. Even so, executives at each company say they do not intend to step on one another's toes; Verifone's systems are geared toward larger-ticket items than Cybercash's.
"When we're mature and running, we would anticipate that probably 40% to 50% of our corporate income will come from the coin product," Mr. Melton said.
Another 30% to 35% would come from an "electronic check" the company plans to add to its wallet in early 1997. The virtual check would draw against a consumer's bank account when a purchase was made.
Only 15% of income is ultimately expected to come from credit card payments.
"The biggest opportunity for us will be digitized goods that will be sold for a small amount of money," said Gene Reichers, Cybercash's chief financial officer. "Some of our overseas partners think the single biggest market will be electronic games."
First Union buys into Cybercash's notion that there is "an interest in paying for small things as you go," said Parker Foley, vice president and director of electronic commerce.
Beginning in November, First Union customers will be able to download a bank-branded wallet and experiment with micropayments among 25 to 30 merchants. The pilot will last three or four months, Mr. Foley said.
"There is a niche that Cybercoin fills nicely, where credit cards aren't really efficient because the transaction is so small," Mr. Foley said.
"We don't believe it would be in our customers' best interests to lock ourselves into one payment system," Mr. Foley said. "Right now, Cybercoin is really the only coin product that's actually going to be nationally available, outside of a couple of very controlled pilots in almost proprietary systems."
He was referring to Ecash, the Internet coin system of Digicash Inc. that Mark Twain Bancshares of St. Louis is testing.
Digicash is often mentioned in the same breath as Cybercash, but its Internet payment scheme is a different breed and has not caught on in U.S. banking. This has not stopped Digicash from criticizing Cybercash.
"Their definition of cash - it's not cash," said Daniel M. Eldridge, vice president of Digicash. "Cash is a bearer instrument. Theirs doesn't sound like a bearer instrument to me."
Mr. Eldridge also denigrated Cybercash's $34 million initial public offering as "puffery . . . They have no earnings and no revenue."
The boom that benefited Cybercash and other hot Internet IPOs is over, but Mr. Melton is unfazed.
"The analyst models on the Street at the time of the IPO said we would do almost no revenue in '96, a fair amount in '97, and would go up rapidly in '98," he said. "Those models are tracking, so there are no surprises. We did tell the Street that the major thing to look for this year was new strategic relationships.
"We said this would be a year of building infrastructure, and I think that is happening."
Cybercash has about 200 employees, most of them in the Reston headquarters or Redwood City, Calif.
Mr. Melton, who established his payments credentials in the start- ups of Verifone and Transaction Network Services Inc., founded Cybercash with Daniel C. Lynch, Bruce G. Wilson, and Stephen D. Crocker.
Mr. Lynch brought on board Magdalena Yesil, a consultant and engineer whose specialty was the commercialization of the Internet, as a co-founder.
"Bill knew that Dan was an Internet guru, and Dan knew that Bill was a founder of Verifone," Ms. Yesil recalled. "Bruce was Bill's due-diligence guy in his investments, and Crocker was the security expert."
Barely a month after Cybercash was incorporated in August 1994, Visa and Microsoft issued a joint announcement that they were working together toward a secure Internet payment system. That could have spelled disaster for the upstart, but its leaders were heartened.
"It shone the limelight right in our area, the turf we had just carved out for ourselves," Ms. Yesil said.
As Cybercash's chief spokesman during its infancy, Ms. Yesil said her job was "to articulate the vision in just a few words, and never be too tired to give yet another speech, to talk to another reporter."
"Early on, we were very much bunched with First Virtual and Digicash, and I think that has changed significantly," said Ms. Yesil, who left Cybercash two months ago to start her own Internet company.
"I tip my hat to them - they've got to be months, possibly a year ahead" of the competition, said Scott Smith, an analyst at Jupiter Communications in New York and a former banker at Wachovia Corp.
Mr. Smith said the Cybercash wallet, once viewed as a proprietary innovation, has set a standard that will heighten the company's appeal to banks.
"Cybercash has got an edge because they've been out there making alliances with banks and processors," Mr. Smith said. "They want to be seen as bank-friendly."
With organizations as varied as Digital Equipment Corp. and Microsoft in the Internet payments mix, how long Cybercash's prominence will last is open to debate.
"Cybercash is in a position of benefiting from the early excitement," said Michael Gould, an analyst at the Patricia Seybold Group in Boston, who recently completed a report on secure Internet payments.
Cybercash and others have filled a void "as more conservative financial institutions are sitting back, watching, and waiting," he said. "Over the long term, however, I think in some manner the role that Cybercash is playing will end up being subsumed by some of the larger organizations."
Another obstacle Cybercash faces - as do other purveyors of Internet-based applications - is that its wallet remains hard to use.
A prototype that consumers can download free from Cybercash's Web site is difficult to install for anyone who is not highly computer literate. It cannot be used with Macintosh computers and is just becoming available through America Online, the most popular on-line service.
Mr. Melton said these kinks will be ironed out. The existing wallet, he said, is more a proof-of-concept than a final product. The ultimate goal is to offer the wallet directly to consumers through their banks, which will brand it and present it in an easy-to-use way.
"One thing we've done better than anybody else is design our system to be integrable with banking back-room systems," said Larry Gilbert, Cybercash vice president and general manager of coin services. "We made a conscious effort from day one to build a system that was easily adopted by banks, that used the types of systems they were accustomed to. We know how difficult it is to make that change."
Mr. Melton says the only thing holding back electronic commerce is the time and effort to get new technology in place.
"Fear of safety, lack of technology were last year's barriers," Mr. Melton said. "Most of those issues have either been put to rest or are now being put to rest.
"Any banker today has a very full plate," he added. "He's got to bring this technology into the suite of offerings he brings to his merchants. He's got to have the operations manuals that go along with that, he's got to build it into his systems."
Mr. Melton predicts the logistical problems will be worked out over the next year, yielding an electronic commerce system controlled by the banks.
"Who are the winners going to be?" he asked. "Obviously, in any mature market there's not going to be a single winner. There are going to be multiple winners.
"But we've made our bet," he said: "on the banks."
