Northern Telecom said it will provide security technology for an Internet payment system that is nearing the testing stage in Canada.

The system, Pay Pro Network, will accommodate on-line banking and shopping and will accept credit card, debit card, and eventually smart card payments. Cardholders would enter personal identification numbers on pads attached to their personal computers.

Northern Telecom's software, Entrust 2.0, will allow for the encryption and authentication of funds transfers and other sensitive information.

Internet Payment Processing Inc. is working with other Canadian companies to design Pay Pro to conform to the security standards of Interac, the national debit card network.

"With PINs and encryption, we can offer a virtual automated teller machine with full banking services over the Internet," said Gary R. Bartholomew, president of Internet Payment Processing.

Pay Pro is scheduled for a 1,000-user test in November, with a national launch to follow next spring. Users would receive the PIN pads - which also function as readers of magnetic stripe and smart cards - after purchasing $29.95 start-up kits from their Internet service providers.

Northern Telecom's Entrust software is based on public key encryption technology from RSA Data Security Inc., and incorporates digital signature and key-management functions.

Among other companies contributing to the Pay Pro project are Digital Equipment Corp.'s Canadian subsidiary and International Verifact Inc., the leading Canadian manufacturer of point of sale terminals.

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