Once reluctant to get too deep into the Internet services business, commercial banks are being pulled toward helping merchant clients set up on-line storefronts.

The demand is emanating from technology vendors who view banks, because of their credit card processing expertise, as natural candidates to boost the new generation in retailing.

Though several banks have willingly taken on this role-sometimes described as that of a trusted agent-others have stayed away because of perceived risks or the uncertainty of entering a field remote from core banking activities.

In the last two months, coalitions of well-known vendors have stepped forward with what amount to paint-by-the-numbers Internet packages for banks to sell to merchants. These programs, combined with the evident popularity of electronic commerce, have piqued more bankers' interest, the vendors say.

"We have created tools so that the banks can resell what would normally be nonfinancial services-that is, Internet services-under their brands," said John Duncan, executive vice president of First Data Merchant Services.

First Data Corp.'s merchant division has teamed up with International Business Machines Corp. and iMall Inc. to offer what they describe as "one- stop e-commerce services" for banks and merchant customers.

First Data handles the card processing. IBM provides Web design through its HomePage Creator software. iMall does the Web hosting and traffic- driving and offers "gateway" links to the payment system.

Assembling these services is "typically a painful process for small merchants" because they "have to deal with five or six providers," Mr. Duncan said. "Now we put that all together in one service."

Some of the dozen banks that maintain merchant alliances with First Data-including Bank One Corp. and Old Kent Financial Corp.-will begin offering the package in June, Mr. Duncan said.

Edward Jenny, global Web solutions manager at IBM Global Services, said the "opportunity is significant" for banks because only a tiny percentage of the nation's 17 million small businesses "are actually on the Internet doing any level of electronic commerce."

The First Data/IBM offering was unveiled May 18. A similar partnership among Hewlett-Packard Co., Vital Processing Services, and several Internet companies was announced April 26.

Also in April, iCat, an electronic commerce division of Intel Corp., introduced a bank-branded merchant storefront service in which Visa U.S.A.- a co-owner of Vital Processing-plays a role.

This week, National Data Corp.'s e-commerce division announced its entry, an "end-to-end" Web site service for merchants offered in collaboration with the Internet services provider PSINet and WorldPay of Britain.

Such collaborations bring on-line services "down to price points that can be justified" for many merchants, Mr. Jenny said. "Four to six months ago, for a small business to create a Web site and actually commerce- enable, it cost nothing less than $10,000 to $25,000."

First Data and IBM charge a $39.95 set-up fee and $35 in monthly maintenance, Mr. Jenny said. The whole thing can be arranged in a day or so, shaving weeks from typical development time.

Without these packages, most smaller companies lack the budget and manpower to do a thorough job, experts say. Among the basic components are an Internet address (or domain name), a Web site (ideally one with pictures of the merchandise for sale), hosting and gateway services, card authorization and settlement, and a way to direct consumers to the site ("traffic-driving").

Some companies overwhelmed by this process simply post static, on-line "brochures." Others do not try to automate credit card acceptance, opting to process card orders manually.

Merchants want Internet storefronts, said Paul Martaus, president of Martaus & Associates, a consulting firm in Mountain Home, Ark., that specializes in the merchant-acquiring side of the card business.

"Everyone is rushing to get on-line because they perceive all this profitability is out there," he said.

Some merchants pay $30,000 or more to build a Web site "and get nothing out of it-they've been robbed," Mr. Martaus said. "The banks do not have a real good handle on how to underwrite this business, and they're not sure the business is real."

Cathy Hotka, vice president of information technology at the National Retail Federation in Washington, D.C., said merchants of all sizes prefer to outsource the building of virtual stores.

"Our guess is that if there are all-in-one solutions that seem to work, they're probably going to make lots of money because there are lots of people who need to get on the Web," she said.

Vital Processing, which competes against First Data in merchant processing, has created an Internet payment gateway that connects on-line storefronts to the VisaNet clearing network. Vital is busy training and certifying software developers in its technology.

"We tried to have multiple packages so that acquirers and their merchants have choices that fit their individual needs," said Donna Embry, senior vice president of marketing and product development at Vital in Tempe, Ariz. "We are not tied to only having to offer a certain (digital) wallet or type of payment mechanism."

Vital is "really expecting to blow this out," Ms. Embry said. A series of marketing meetings is scheduled for June, at which Vital-a 50-50 venture of Visa and Synovus Financial Corp.'s Total System Services subsidiary- plans to give bank clients a heavy dose of education about how they can work with merchants on-line.

"There are some acquirers that are comfortable and willing to take the risk," Ms. Embry said. "Those early adopters are champing at the bit, trying to set them up as fast as they will come."

Other banks "are more cautious," willing to work with someone on the Internet "if they already have a physical relationship with the merchant," Ms. Embry said.

A third group of banks "is saying, 'There is no way I'm going to touch the Internet'-but they're the same ones that never touched mail order."

Several banks active in merchant acquiring declined to be interviewed for this article. One that did want to describe its activities is Fifth Third Bancorp of Cincinnati, which runs its own merchant processing business through its Midwest Payment Systems subsidiary.

Helping Web merchants is "a pretty big business, and it's growing like crazy," said Gary Reich, vice president of Midwest Payment Systems.

Most banks are "just getting into phase one" of the process: authorization and settlement of on-line card transactions, Mr. Reich said. His company has developed a product, MVision, that helps merchants with credit card settlements and dispute resolution.

Midwest Payment is "moving into phase two," which Mr. Reich described as "finding technology partners that can provide storefront design and development, 'shopping cart' development, security, and order fulfillment." Among the retailers using the company's electronic commerce services are Macy's, Office Depot, and Sprint, he said.

"We're getting a significant demand from our merchants," he said. "We see the next 18 months as an explosion in Internet business."

The role being articulated for banks in on-line storefronts is quite different from that of two or three years ago, before the Internet was widely used for retail commerce. A handful of banks experimented with hosting on-line malls for retailers. First Union Corp., which trademarked the term "cyberbanking," was at the forefront with what it called a cybermall. Wells Fargo & Co. was also in the vanguard when it became one of the only banks eager to facilitate card payments for stores such as Virtual Vineyards.

Bank-coordinated on-line malls never took off, and technology specialists picked up the slack. Companies including Cybersource Corp. and Cybercash Inc. and the latter's ICVerify division carved niches in the enabling of Internet transactions.

The First Data-IBM partner iMall is said to be the largest on-line mall. The Santa Monica, Calif., company-in which First Data bought a 12% stake in November-has formed alliances with companies that register domain names, host sites, and do other Net services.

Mr. Jenny of IBM said Internet transactions are a logical extension of the services that banks offer to conventional merchants.

"First Data has 2,500 marketing representatives in conjunction with the banks who actually call on retail merchants," Mr. Jenny said. "Now, that rep can not only sell a card-swipe machine or a keypad; on top of that he can sell the merchant account and actually enable the merchant to create an Internet store.

"They've doubled the productivity of that sales call and provided a very nice service to that merchant."

Paul Sonderegger, an analyst at Forrester Research in Cambridge, Mass., said the number of nonbank companies vying to put merchants on the Web seems to increase steadily. "There is a demand for some trusted entity to provide a turnkey e-commerce solution for small and medium-sized businesses," he said.

He warned of overselling simplicity. "This idea that you can offer a merchant a package that can be set up in a 'templatized' way is a fallacy," he said.

Charles Marc Abbey, a principal at First Annapolis Consulting in Linthicum, Md., said the market for storefront services is in flux, with "a whole lot of companies with different strategies pursuing different pieces of the value chain." He praised the First Data/IBM approach, saying it is "very comprehensive" and "looks like a winner."

Mr. Abbey estimated there are 400,000 active Web sites in the United States, including 200,000 that take transactions and 50,000 that handle card processing on the Internet.

"When you compare that to the universe of four million card-accepting merchants, arguably there is a whole lot of growth left in the business," Mr. Abbey said. "There are not going to be millions of Internet merchants, but there are likely to be hundreds of thousands."

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