Nabanco, the top processor of credit card transactions for merchants, has become the first in that business to embrace Microsoft Corp.'s secure transaction technology for on-line credit card purchases.

The alliance is similar to one announced late last year by Visa U.S.A. and the Redmond, Wash.-based software giant. They are working jointly on a system to ensure the security of payments initiated over open computer networks.

Nabanco said the technology, using data encryption, is scheduled to be tested this summer. It will enable merchants to accept bank card payments from on-line sources such as the Internet and interactive television. The transactions would ultimately be integrated into the existing payment infrastructure, with heightened security.

Tom Johnston, product manager of advanced consumer technology at Microsoft, said Fort Lauderdale-based Nabanco will be able to roll out the software to its merchant clients by yearend.

While electronic purchases are not yet a major factor in credit card processing, "we're trying to be ahead of the curve," said Donald Y. Sharp, senior vice president of corporate communications at First Financial Management Corp., Nabanco's Atlanta-based parent company.

"There's a lot of talk about electronic payment activity," he said. "We want to be prepared to provide our customers with the opportunity if they need it."

Richard Lonergan, executive vice president of point of transaction for Visa U.S.A., said Visa, Nabanco, and Microsoft are moving toward industrywide standards for secure on-line transactions.

"We want your computer to be able to order from any merchant in the world safely," Mr. Lonergan said.

The Internet, which reportedly has 30 million to 40 million users, generated an estimated $200 million worth of commerce in 1994. Visa said transaction volume is rising 1% each day.

Mr. Johnston said there are an estimated 398 financial services firms with registered domains on the Internet, an increase of 197% from 1994.

Other companies such as Netscape Communications - which has partnerships with MasterCard International and First Data Corp. - Cybercash Inc., and AT&T Bell Laboratories have also been developing encryption alternatives. Nabanco went with what it perceives as the industry leader.

"We think Microsoft is extremely good at what they do," said Mr. Sharp. "They're addressing the needs of our customers to provide secure transport of information."

Other firms may offer limited capabilities, but "our solution is the best one for everyone to use," said Mr. Johnston. "We're optimized for payments, we offer end-to-end transaction security, we're network independent, and we respect the relationships that exist between issuing banks and merchant acquirers."

First Financial said the technology will substantially reduce the risks of fraud-related chargebacks, a key area of concern for on-line merchants.

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