Wells Fargo & Co. will work with Cybercash Inc. on a secure way to complete on-line credit card and other transactions over the rapidly growing, widely accessible computer network known as the Internet.

The San Francisco-based banking company said it will test the Cybercash system with a handful of its merchant customers early next year.

Now, all of California's Big Three commercial banks have staked out early positions in the race to process payments on the interactive networks that comprise the information superhighway.

All three bank companies -- Wells, BankAmerica Corp., and First Interstate Bancorp -- belong to CommerceNet, a California-based consortium exploring new electronic commerce mechanisms.

Banc One Corp., and several dozen nonbank companies are also participating in CommerceNet.

Each California bank has a different partnership arrangement: Wells, with Cybercash; Bank of America, with Netscape Communications Corp.; and First Interstate, with First Data Corp., which in turn is in an alliance with Netscape.

Cybercash and Netscape are also CommerceNet participants.

Wells Fargo's decision is a boost for Cybercash, a Reston, Va.-based company recently organized by Bill Melton, who previously founded the point of sale terminal manufacturer Verifone Inc.

He has set out to replicate on the Internet the transaction-authorization process that electronic terminals revolutionized in retailing.

While Wells, like other banks experimenting on the Internet, will initially concentrate on credit card payments, the Cybercash system will also be designed to handle debit and cash transfers.

Wells Fargo's card-accepting merchants have already been taking orders from consumers via computer networks, according to Debra Rossi, the bank's senior vice president and division manager for electronic payment services.

But credit card account numbers and other sensitive information cannot be transmitted in conventional fashion over public computer networks because the data could be intercepted and used fraudulently.

Wells and Cybercash, as well as some of the other groupings, want to use data encryption to mask the transmitted information and thereby improve merchant sales and customer convenience on the expanding web of personal computers that comprise the Internet.

"Both consumers and merchants have been looking for convenience," Ms. Rossi said.

"I think we're going to see aggressive growth in this area, and not just among sophisticated merchants."

Cybercash and its rivals -- including Netscape, Open Market Inc., and Microsoft Corp. in an alliance with Visa International -- are focusing on encryption systems that would allow transaction data to be conveyed securely over the Internet.

A competing alternative, currently being marketed by First Virtual Holdings Inc., lets orders be entered over the Internet, but payment data flow over a parallel, secure network operated by Electronic Data Systems Corp.

Fewer than 20 of Wells Fargo's 26,000 merchant customers will pilot the on-line Cybercash payment service during the first quarter of 1995, Ms. Rossi said. But the list of companies that are interested in employing it "runs the gamut from small-business customers to very large merchants, like sporting goods stores," she added.

Cybercash and Netscape are promoting themselves as bridges between the staid realm of banking the dynamic and confusing world of on-line computer networks.

"We're the translator of the Internet," said Mr. Melton, Cybercash's chief executive officer. "We translate from Internet protocols to banking protocols and back again."

Mr. Melton said there are similarities between the interactive services and other recent innovations in banking delivery systems. But he added, "The belief that the Internet is going to be important is stronger than the belief earlier on that terminals were important to the merchants."

In Bank of America's Dec. 5 announcement with Netscape, the bank's senior vice president of merchant processing, Sharif Bayyari, said his research had identified "the fastest, most secure, and most open environment for on-line payment processing."

"Other payment options on the 'net' come with high transaction risks, bypass payment systems, and open the way to fraud and consumer liability," Mr. Bayyari said.

"This approach eliminates those concerns and allows companies and consumers to feel comfortable and confident conducting business on the Internet."

Wells to Test Interactive Home Services via Cable

Eager to approach electronic commerce from all angles, Wells Fargo & Co. will be testing cable-based interactive services for personal computers in several California households next month.

With the aid of Viacom Cable and the semiconductor manufacturer Intel Corp., San Francisco-based Wells Fargo intends to offer on-line banking and shopping services via cable.

Wells will pilot the services in 50 homes in the San Francisco Bay Area, according to Lorna Dubay, a spokeswoman for the bank.

It has been offering home banking via personal computer since 1989, she added.

The CablePort technology, as it is called, promises to combine the bandwidth and speed of cable -- said to be up to 1,000 times faster than telephone modem -- with the interactivity of personal computers.

This will let Wells deliver services with a high standard of sound, video, and graphics not available with modem, according to Intel.

Other companies working with Intel to help facilitate this on-line system include Intuit Inc. and Netscape Communications Corp., companies that have been active in the emerging electronic commerce arena.

Intuit, which is being acquired by Microsoft Corp., makes Quicken, the leading personal finance software. Netscape competes with Cybercash Inc. -- a company with which Wells is allied -- to help financial institutions secure transactions over computer networks.

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