Visa International said it is working with Carnegie Mellon University to develop an on-line payment system to allow for purchases of low-value items over computer networks.

The Pittsburgh university - known for its advances in digital library technology - has been working for more than four years to create an electronic commerce system allowing open and secure access by merchants and consumers.

The system, called NetBill, was designed for low-cost, intangible items - mostly intellectual property such as data or pictures. Such a system would be viable only if the transaction cost were commensurate with the small dollar values of such "micropayments."

Last September, Visa officials began talks with Carnegie Mellon, seeing this technology as a vital piece in the bank card association's vision of electronic commerce. The San Francisco-based association has taken other steps in this growing marketplace, most notably by signing an agreement with Microsoft Corp. in November to develop data encryption standards for computer-initiated card transactions.

"This is part of an overall effort to develop technology in this area," Bill Powar, Visa's vice president of advanced payment systems, said of the NetBill program.

Aside from its developmental input, Visa will link NetBill to Mellon Bank Corp., which is providing the banking services for a pilot project.

The first precommercial trial, slated for this fall, will involve members of the Carnegie Mellon and other university communities as well as selected private-sector companies, such as software firms and publishing houses.

The pilot is expected to attract more than 10,000 participants by the end of this year, according to Doug Tygar, a director of the NetBill project and an associate professor of computer science at Carnegie Mellon.

Unlike other electronic transaction services in development, NetBill avoids frequent exchanges of sensitive financial information like credit card numbers over the snooper-prone Internet. Also, the transactions are limited to small, low-cost exchanges of information typical of current uses of the Internet.

"Intellectual property distribution is here and now," said Tom Heisey, vice president of global cash management for Mellon Bank.

NetBill requires both merchant-providers and consumers to establish accounts.

When interested in purchasing an informational item, a consumer sends a message identifying himself to the merchant. The merchant responds with a price quote, which the customer can either accept or reject.

If the customer accepts the terms, the merchant sends him an encrypted form of the data. Software confirms the receipt of the goods and sends a notice of the transaction to NetBill.

The merchant also confirms the sale with NetBill.

On the NetBill server, the two ends of the transaction are compared, the money is transferred between accounts, and a final confirmation goes to the merchant. The merchant forwards the receipt with a decrypting key to the customer's computer and the information is automatically decoded.

The entire process can be completed in seconds.

Within this system, any computer user with a NetBill account could act as a merchant, selling anything from academic research to recipes over the Internet.

Mr. Powar said NetBill has an advantage over similar services in that it certifies the legitimacy of both the merchant and the customer, rather than just one or the other. First Virtual Holdings Inc., for example, verifies the process for the customer but does not show the merchant whether or not the customer received the information. Therefore, the merchant is forced to simply trust the customer.

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