Microsoft Corp. has turned over another of its electronic commerce cards, this time with a Canadian data encryption vendor.

Through an agreement with Microsoft Canada, Diversinet Corp. of Toronto said it will provide a unique security backbone for electronic commerce and banking on a large scale using Microsoft's Windows NT operating system.

Diversinet president and chief executive officer Nagy Moustafa, who spends much of his time working out of the four-year-old company's Silicon Valley and Washington offices, said, "I have been talking to people in Redmond," Microsoft's headquarters near Seattle, about taking their efforts beyond Canada.

He said "a long-term relationship with Microsoft (will) open more distribution channels" for Diversinet and raise awareness of digital certificates.

Microsoft has sought to enable and influence on-line commerce, though competitors and even some customers worry that the giant is not entirely benign. From its Internet browser to its digital wallet, from merchant servers to a recent alliance with the U.S. smart card and digital certification specialist Spyrus, Microsoft is clearly spreading its e- commerce wings.

Microsoft watchers are anticipating a more specific smart-card-related announcement soon.

"Smart card is a hot issue, and our solution is designed for smart cards," Mr. Moustafa said in an interview. "Everybody is looking at the smart card for the next generation-not just to verify (digital) signatures but because it gives people something to hold and they feel secure with it."

For now, though, Microsoft and Diversinet are just talking about integrating public key cryptography and digital certificates with Windows NT. Diversinet seeks to simplify digital authentication and confidentiality by reducing the burden of computing and decoding long strings of numbers.

A bank or other service provider would issue a single streamlined certificate to a customer, and then separate permissions for authorized activities. For banks worldwide, Diversinet's Passport Certificate Server can combine with Microsoft's Server Gated Cryptography for high-level, 128- bit encryption.

Mr. Moustafa said he has heard from major U.S. banks that "our permit concept fits with their business model."

"Companies need reliable and secure authentication to benefit" from electronic commerce, said Erik Moll, a Microsoft Canada marketing manager and Diversinet director. "Microsoft and Diversinet are making the deployment of public key infrastructure more practical than ever."

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