Bankers have no more than two years to act if they are to prevent Internet portal companies from stealing their business, the chairman and chief executive officer of Cybercash Inc. said last week.

"Unless banks move fairly rapidly to leverage their position, consumers will gravitate toward whoever will provide them with convenience," said Cybercash founder and payment system entrepreneur William Melton.

"Banks will wake up in three years and realize that their financial data are in the hands of the Yahoos of this world," Mr. Melton said in an interview shortly after his keynote address to the Comdex computer show in Chicago.

The popular portals are "definitely realizing the economic power of the sticky customer relationship," he said. They are taking advantage of high stock valuations to buy up companies in the areas of chat, e-mail, and calendaring. That attracts more and more "eyeballs," in Internet parlance, that can be "sold" to merchants for a cut of revenues.

"They are doing everything they can to make the relationship stronger and sell it at handsome profits," Mr. Melton said.

He called the highly capitalized Internet portals and search engines "unstoppable." For banks, "it is time-critical. Banks have a short time to be major players."

Four-year-old Cybercash has managed to endure through the electronic commerce market's rapid changes, and it has adjusted its vision in the process.

Initially, Cybercash wanted to create "the most efficient payment system we could," Mr. Melton said. But it has since realized that "efficiency in payment systems per se is not the most critical factor." Merchants are more interested in increasing sales than in reducing transaction costs.

"As merchants migrate to the Internet, they are saying, 'How do we get the attention of consumers?' These are all sales and marketing issues," Mr. Melton said, adding that banks can offer help on these issues and get paid for it.

If banks don't, portals will, Mr. Melton said. Cybercash wants to make electronic commerce easy for merchants, he said, and to help banks provide the desired tools.

"We're now in the business of making electronic commerce simple on the Internet and in the physical space," Mr. Melton said. Merchants, he added, do not want to be in one world without the other.

Banks, with their huge customer data bases, are "sitting on something that is potentially very profitable," he said. They can act as intermediaries for information, something that credit card lenders MBNA Corp. and First USA are doing with affinity marketing, for example.

"Because customers trust financial institutions, they can provide preferred deals," Mr. Melton said. "And because of the position they're in, they can facilitate sales and make profits. We believe banks are critical because they've got the huge numbers that merchants want access to."

He said banks need to reduce their credit card merchant discounts, the processing fee expressed as a percentage of a sale, to about 1.5%.

Cybercash is working with 200,000 merchants, he said, including 10,000 on-line, and the latter total is growing by 800 a month.

The Reston, Va., company is also working with major merchant-acquiring credit card institutions worldwide, including Barclays in the United Kingdom and First USA and its parent, Bank One Corp.

These companies have signed up for Instabuy, Cybercash's digital wallet technology, which Mr. Melton said is the company's main focus right now. A $2.5 million television and print advertising campaign has begun to promote the one-click shopping service.

Cybercash's biggest competitors, he said, are stores that process payments themselves, such as Amazon.com, and sites like America Online and Yahoo that have proprietary wallet systems.

This prompted Mr. Melton to ask: "What role will bankers play? Will consumers trust large portals or work with aggressive, trusted banks?"

Though Cybercash is not making money, analysts are expecting it to have positive cash flow by the first quarter of 2000. Mr. Melton said 80% of his revenue comes from merchants, the remainder from banks.

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