You have to hand it to Hewlett Packard and VeriFone, both of which have been working diligently over the past 24 months to develop a secure infrastructure to support legitimate electronic commerce.

And now that ambitious objective is a bit closer to reality with the announcement of HP's acquisition of VeriFone.

The hustle on the part of both companies is impressive. VeriFone, recognizing its core competency and leadership role in the physical world, has been meticulously structuring partnerships and alliances that will reinforce its dominance in the virtual payments universe. VeriFone's mission: to bring best-of-breed players-each possessing strong, but different core competencies-together. Count among these allies: Oracle, Netscape, Microsoft and AT&T. This has always been good news for banks. Comfortable with VeriFone in its traditional authentication and payments role, banks having that relationship extend to cyberspace can only alleviate their concerns about further erosion of their role in the payments business.

Similarly-and with equal vigor-HP is creating a little buzz of its own, refocusing the organization's strategy on providing solutions to the financial services marketplace that will help build an electronic commerce infrastructure. Two crucial elements of that infrastructure are smart cards and Internet security-both of which HP has defined as critical to its financial services strategy, and, not surprisingly, done so through its relationships with other players, notably GemPlus, Informix and Mondex on the smart card side. And HP's acquisition of SecureWare's Internet System Security business-known today as Virtual Vault-put it firmly on the map with a security solution. Post-acquisition, the question for bankers to consider is not if electronic commerce will emerge, but when and how do they gainfully participate.

The combined initiatives of HP and VeriFone play heavily in banks' favor, if, that is, bankers respond to the opportunity. But this will require banks to embrace partnerships with such organizations, or cede control of the payments business to willing and able nonbank rivals.

Devising alliances and partnerships that work to help your organization achieve its business objectives is no easy task. Remaining undecided about who you will partner with is like waving a white flag.

Survival in the virtual world means that banks must focus on transferring their "value" to customers from the physical world to an electronic playing field. The challenge is one of structuring profitable business models, not trying to reinvent the institution as a technology company. Electronic commerce is just one area in which banks can command a leading role by identifying the right technology partners. In a business where product is increasingly commoditized, fostering added value is what will differentiate banks from their competitors, and that's all customers care about.

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