Frustrated at the failure of SET software to "break out" into the Internet mainstream, GlobeSet Inc. set out to redefine the problem.

One of its redefined solutions, a newly configured digital wallet for consumers, emerged in mid-June. Its counterpart for merchants, GlobeSet ServerPOS, was announced last week.

With these, GlobeSet may have begun to change the tenor of debate over why the credit card industry's SET-Secure Electronic Transactions-protocol has failed to catch fire.

GlobeSet came to the simple conclusion that the requirements for SET were uneconomic, said chairman and chief executive officer Michael K. Cation.

That has become almost a truism since GlobeSet and others in this niche, including bigger names like International Business Machines Corp. and Verifone Inc., started late last year to sell software built to the SET 1.0 production standard.

SET has, in fact, become a whipping boy in the computer trade press, which has been highly critical of the attempts by technology companies, MasterCard International, and Visa International to ingratiate their standard into Internet commerce practices.

PC Week reported last week that there were signs of backtracking-that the older and in some ways less adequate SSL, or Secure Sockets Layer, standard could become more entrenched as SET fails to muscle it aside.

SET supporters are sticking to their guns, hoping to convince retailers and consumers that the newer specifications expose them to far less risk. At the same time, the SET establishment is recognizing the need for a long- term commitment, and even GlobeSet's aggressive strategy allows for gradual transitional steps from SSL to SET.

But GlobeSet is also pushing a fundamental technological reform.

As much of the SET community tackled the sales, marketing, and education parts of the problem, Mr. Cation and the more than 100 employees of Austin, Tex.-based GlobeSet bored into the technology and attacked the obstacles that seemed to prevent successful pilots from emerging into full deployment.

"If there is one word you will hear from our company this year, it is 'deployment,'" Mr. Cation said. The products announced in the last several weeks, ServerWallet and ServerPOS, "are results of our focus on deployment."

Apparently ahead of others, GlobeSet addressed the costs and unwieldiness of digital wallets-the personal computer software that credit card customers need to initiate on-line transactions-by transferring the processing burden to remote servers, such as those a financial institution might operate in its data center.

ServerWallet is "thin client" software that, according to GlobeSet, occupies 50 kilobytes of PC memory and can be downloaded in 12 seconds. One of the problems with "fat" wallets, it said, is they require 4 megabytes and take 19 minutes or more to download.

ServerPOS, similarly, frees an on-line merchant from having to host its own payment system. It would rely instead on data-center or Internet service provider support.

"Merchants are in business to sell merchandise and get paid, not become experts in payment systems," said Dennis Jolly, GlobeSet's vice president of sales, marketing, and operations. "With GlobeSet ServerPOS, we are providing a product that allows them to achieve their business goals.

"Today's reality is that customers have been struggling with some barriers," Mr. Jolly continued. "We have developed a solution that we feel will help eliminate those barriers so e-commerce can be easy, secure, and inexpensive for all parties involved."

It remains to be seen if GlobeSet's server-based breakthroughs can break any logjams. Said one observer of the SET scene, "I like the GlobeSet guys and would like to see them succeed. Unfortunately, the odds are against them."

This source, a veteran payment services executive, said the SET process is so complex that all marketing, economic, and technology elements must be precisely aligned. He said GlobeSet contributes only a piece of the puzzle.

But ServerWallet and ServerPOS got good reviews from Scott Smith, an analyst with Current Analysis Inc. of Sterling, Va., who has been highly critical of the overall SET record to date.

"GlobeSet again has introduced into SET a more streamlined and operationally efficient placement of critical components in the transaction chain, allowing users to realize operational efficiencies," Mr. Smith wrote in a "Competitive Intelligence" report on ServerPOS.

"We believe this model will be followed by GlobeSet competitors," he added, "which are also currently pressed to find fixes to move SET progress along and realize some return on the expensive development investments made in the protocol."

Mr. Cation said GlobeSet's server diversion resulted from a nine-month "skunkworks" with several major banks around the world, participating confidentially.

He said their various SET pilots led to a single conclusion: The systems were technically unassailable, but "the economics were horrible. When they looked at moving from a 200- or 300-customer pilot to millions of customers, it became pretty obvious that the old way wouldn't work."

That realization was "a defining moment for our company," said Mr. Cation. "We had our hearts in our throats" because GlobeSet, which had early financial backing from Bankers Trust Corp. and Compaq Computer Corp., assumed a mass-market business case would have become clear and brightened its future.

"We saw pilots and bigger pilots, and nothing beyond that," Mr. Cation said. "We could have made some money just doing pilots, but that wasn't what we were about. We wanted to change the world."

In other words, they had to lower the cost of deployment.

Marketing manager Chris Hamilton said a bank looking into electronic commerce with digital wallets would compare its costs with those of credit card issuance-perhaps $1 per account per year.

Maintaining GlobeSet's ServerWallet is supposed to be close to that. By contrast, Mr. Hamilton said, "the fat wallet distribution model is like America Online's cost of a new customer, which is around $282."

"We did the same thing on the point of sale/acquirer side, looking at the costs per merchant relationship per year, and ServerPOS popped out of that analysis," Mr. Hamilton said.

"We picked up a lot of experience with Wal-Mart Stores," he added. "If anybody understands volumes, it is Wal-Mart."

Mr. Cation said the cost differential is mostly not in the price of the software, which GlobeSet does not publish. Rather, it is in service and maintenance. The fat wallet and merchant-server models require intensive help-desk operations that can cost several dollars per customer per year. GlobeSet's server approaches bring that down to pennies, Mr. Cation said.

"You don't become aware of this dynamic until you get out of a pilot and into at least a mini-production mode," he said in an interview last week. "We worked with several large banks that worked out the cost models." With ServerWallet and ServerPOS, "not only is the technology neat, but it also makes business sense."

If ServerWallet and ServerPOS are everything Mr. Cation says they are, GlobeSet could be making a bigger name for itself than it once planned. Having emerged out of Bankers Trust's BT Ventures unit-Mr. Cation is a former vice president of the New York bank-the four-year-old Texas outfit describes itself as the leading SET provider on an OEM basis, which is computer industry shorthand for wholesale or private label.

GlobeSet systems are embedded in offerings from such companies as Entrust Technologies Inc., Hypercom Corp., Sun Microsystems Inc., and Compaq's Tandem division. In recent days it added Otomasyon & Entegrasyon of Turkey and Infinicom Electronic Commerce of Sweden as distribution partners.

GlobeSet was in the forefront of the SET interoperability movement, committing itself to ensuring compatibility between its software and that of any other vendor.

Its SET 1.0 package is at the heart of a U.S. Treasury demonstration announced in early July of Internet payment security using smart cards and elliptic curve cryptography.

GlobeSet was among the first to obtain certification from the MasterCard-Visa compliance-testing body known as SETCo. It has won that distinction for three products-Wallet, POS, and CA (certificate authority). Soon it expects to have the last piece of its SET 1.0 suite, GlobeSet Gateway, similarly cleared to display the SETCo "seal of approval."

Mr. Cation said ServerWallet and ServerPOS have been submitted to SETCo and should be routinely approved because they have much programming code in common with the fat Wallet and POS versions. "If we had to do these from scratch," he said, "the product development would have taken much longer."

CAMPBELL, Calif.-Trintech Group, the Irish-American payment software company, said it has begun SET interoperability testing with International Business Machines Corp.

Linking Trintech's PayPurse, PayWare, and PayGate products with IBM's CommercePoint Wallet, eTill, and Gateway, the effort represents a show of support for the Secure Electronic Transactions protocol for Internet card payments. Interoperability has become a common concern of vendors in the field.

"Ensuring interoperability between all payment companies is essential if secure electronic commerce is to become a reality," said John McGuire, a co-founder of Trintech who is its chief executive officer.

For IBM, which previously made an interoperability commitment with competitor Verifone, the Trintech deal underscores its "commitment to an open payment environment," said Mark Greene, IBM vice president of Internet commerce and digital certification.

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