Within two weeks of their merger announcement that shook the electronic payments world, Hewlett-Packard Co. and Verifone Inc. are taking on another big-name partner.

Microsoft Corp., though not joining those companies in the acquisitions game, is taking its business relationships with each of them to a new level in the interest of promoting electronic commerce.

Calling themselves "the triad," the three plan to announce today that they will work closely to stimulate acceptance of the MasterCard-Visa Secure Electronic Transactions protocol for Internet payments.

The arrangement is nonexclusive, each member remaining free to pursue other alliances that may at times compete with one another. But this is clearly a trio that could wield considerable influence in the emerging electronic commerce realm.

They sound as if they are taking responsibility for the protocol, known as SET, into their own hands. They said no other vendors have put together an "end-to-end, integrated joint initiative" supporting the standard.

International Business Machines Corp., a staunch SET supporter that recently announced a merchant system incorporating the protocol, may dispute that claim. But triad officials emphasize they are building bridges between pure technology and the payments expertise Verifone represents.

SET, which Microsoft had a hand in drafting along with such rivals as IBM and Netscape, was designed to ensure safety and security of credit card transactions on the Internet. But expectations that the standard would by now have led to sizable on-line credit card volumes, allaying consumers' security fears and in turn boosting all forms of electronic commerce, have not been met.

Competition among software suppliers can only help, said Steve Herz, senior vice president of electronic commerce at Visa International. While all parties agree on SET as a foundation, the market will decide who has the best packages and implementations.

The triad announcement "is representative of an industry embracing secure payment technology and intent on getting it deployed in the marketplace," Mr. Herz said. "We are very delighted."

"These players bring interesting and complementary capabilities," said Steve Mott, senior vice president of MasterCard. "It sends another strong signal to the marketplace of support for SET."

Hewlett-Packard, Microsoft, and Verifone say they are jointly capable of shortening the SET timetable with their combination of hardware, software, and distribution.

"Separately, we are each best of breed," said Carol Upton of Hewlett- Packard's electronic commerce solutions group. "We will be even better together."

"We will have banks live in June," vowed Cathy J. Medich, director of marketing in Verifone's Internet commerce division.

Microsoft, revealing its SET-related ambitions for the first time, is throwing new products into the mix, including a "virtual wallet" for making payment choices on a personal computer screen.

Microsoft will not be the first with this concept-Cybercash Inc. heavily promotes one version, and Verifone sells vWallet, which will also be part of the triad offering-but it is filling a necessary void for SET to flourish, said Jonathan Weinstein, Microsoft group product manager, Internet commerce.

"We don't have an interoperable solution on the consumer side," Mr. Weinstein said as the companies previewed their alliance last week. "It is our responsibility to ensure there is a common user interface and architecture so that the consumer will know where to turn."

He said it will be an open system that accommodates different types of payments, adding, "A number of companies will announce support for the Microsoft Wallet."

Working with Verifone, Microsoft will include an "SET payment module" in its wallet for credit card transactions. And Mr. Weinstein said Microsoft intends to distribute the wallet in the Explorer 4.0 Internet browser, due this summer, and in the next version of the Windows operating system-an indication of how instrumental Microsoft can be in delivering the new payment capabilities to millions of desktops.

"When SET was not complete, the distribution of wallets was not a concern," Ms. Medich of Verifone said. "Now the wallet and our collaboration with Microsoft become an important piece of the puzzle."

Microsoft is also announcing Site Server, Enterprise Edition, a new merchant product for electronic commerce. It will be combined with various Verifone and Hewlett-Packard components, and with digital certificate programs from GTE Corp. and Verisign Inc., in an SET Pilot Package for banks and other companies getting into the first phase of activity. The cost will be $600,000 to $800,000, depending on the scope of the effort or number of participating merchants.

SET has been maligned for being overly complex and taking longer than necessary to reach the market. Some critics blamed political wrangling between the MasterCard and Visa camps in 1995 and 1996 for doing lasting damage, though the hostilities are said to be long since buried.

Several SET demonstrations and pilots have been held or are under way, but the underlying systems comply with an experimental version of the protocol. The long-anticipated "production version," known as SET 1.0., is scheduled for release in June and, after various procedural steps, is supposed to be in full operation late this year.

Just last week, MasterCard and Visa said SET 1.0 had passed an important "compatibility test" conducted by Science Applications International Corp., with participation by IBM and others.

The triad said its pilot package has "an easy upgrade path" from the trial to production versions.

Hewlett-Packard and Verifone, which were jointly offering electronic payment systems for about a year in advance of HP's $1.2 billion acquisition announcement April 23, laid the groundwork for three early triad signings: BankAmerica Corp.'s BA Merchant Services unit, Sumitomo Bank of Japan, and a multibank SET project in Singapore.

The triad companies are now engaged in joint sales calls, concentrating on more than 60 banks that have expressed "pilot intentions" in 19 countries. Ms. Medich said typical pilots will each have 10 to 20 merchants and up to 2,000 consumers. The global number of consumers-the first wave of wallet users-will thus potentially be tens of thousands.

Ms. Medich and Ms. Upton pointed out that the three companies have few business overlaps, making it easy to work as partners. Aside from the close HP-Verifone relationship that led to a merger, Microsoft turned to Verifone to built payment capabilities into its merchant servers, and Hewlett- Packard and Microsoft in March together announced an extensive enterprise computing strategy.

A statement due for release today spells out the triad rationale:

"Microsoft's prevalence in the desktop arena will help initiate merchants and consumers to Internet commerce, while HP's vast experience in enterprise-solutions integration will ensure tight cohesion among the various technical elements of the end-to-end solution. Both vendors have chosen Verifone because of its history of leading SET development and compliance and extensive relationships with financial institutions."

"This relationship, with its global reach and broad set of capabilities, is perfectly positioned to become the standard-bearer of electronic commerce," said Glenn Osaka, general manager of HP's enterprise systems business unit. u

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