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Re: e$: WSJ, CyberCash, and the Falling Barometer

(c) 1994 Dow Jones & Company, Inc.
Enterprise: System Planned For Shopping On the Internet ---- By Jared 
Sandberg Staff Reporter of The Wall Street Journal

  As millions of computer users browse the Internet for a burgeoning array of 
goods and services, most can look but not buy. 

  That may soon change. 

  A new company called CyberCash Inc., formed by executives from the Internet 
and the electronic-payment industries, plans to introduce a system that will 
allow on-line browsers to pay for an item, either by credit card or through 
bank transfers, over the global computer network. CommerceNet, a new on-line 
system funded by Apple Computer Inc., BankAmerica Corp. and others, expects 
to adopt the CyberCash system by year's end. The company has talked to 
America Online Inc., which has one million subscribers and to which it has 
close ties. 

  By clicking a "buy" button, CyberCash users could approve electronic 
transfers to merchants from checking and credit-card accounts. Companies 
could pay invoices, and e-mail penpals could settle bets with the point of a 

  But to do that, CyberCash must first persuade banks that the system is 
secure from on-line theft, which may be its toughest challenge. "I don't 
think there's a system that is adequately secure that has been placed on the 
table," says Sholom Rosen, a vice president for Citicorp, who says he isn't 
familiar with CyberCash. Even if one emerges, he adds, "it's going to be 
tough to get everybody to agree on the same system." 

  While some companies, including Citibank, are planning their own 
business-to-business electronic payment systems on the Internet, CyberCash is 
aimed at the millions of consumer and business users who browse the Internet. 
"We want to make the Internet safe for commerce," says CyberCash's co-founder 
and president, William N. Melton, and "provide safe passage from cyberspace 
into the banking world." 

  Private on-line services use proprietary software to move funds, which 
reduces the risk of thieves breaking into the system. But only subscribers 
are permitted to make on-line purchases, and then only from participating 
merchants. For example, fewer than 3% of the people who frequent the 
CompuServe "mall" each month buy anything. 

  The Internet, by contrast, is an unsecured free-for-all that uses "open" 
software to let tens of thousands of computers link up. That means more 
computer jocks know how it really works, increasing the chances of a 

  Mr. Melton is in a good position to overcome the banks' security concerns. 
He founded Verifone Inc., which makes the devices retailers use to authorize 
credit-card charges. He sits on the board of America Online and helped launch 
Transaction Network Services Inc., a data transmission network for six of the 
12 largest credit-card processing centers. TNS is expected to be part of 
CyberCash's private banking network. 

  CyberCash's co-founder is Dan Lynch, founder of Interop Co., a trade-show 
subsidiary of Ziff Communications Co. that hosts the biggest Internet 
gatherings. Other partners include Stephen D. Crocker, one of the Internet's 
architects; James Bidzos, president of RSA Data Securities Inc., a leading 
software-security firm; and Bruce Wilson, a former Nynex Corp. executive and 
one-time board member of the Electronic Funds Transfer Association, a banking 
trade group. 

  The Internet today is one big yard sale of computers, t-shirts, books, 
compact disks, rope sandals, legal services and hundreds of other products -- 
with almost no way to buy. An estimated 500 companies, from travel agencies 
and art galleries to real-estate brokers and a Volvo dealership, have put up 
storefronts. Most offer only product information and customer support. To 
make a purchase, a browser must phone a vendor. 

  "It's a very clunky way of conducting electronic commerce," says Jayne 
Levin, editor of the Internet Letter, a newsletter aimed at business users. 
She estimates the current value of Internet transactions at a "piddling" $10 

  A few pioneers have passed credit-card numbers safely on the Internet. In 
July, an electronic bookstore received its first payment over the network. 
Last month, a small startup retailer in Nashua, N.H., sold its first compact 
disk on-line. Almost no one, however, has been able to automate payment by 
bringing banks directly on-line, which is CyberCash's goal. 

  Its approach would let users punch a few keys to ask their banks to set 
aside money in a "digital purse." When the customer clicks on a "buy" icon, 
the merchant's computer would pass the request to CyberCash's network, which 
would forward it to the bank. If funds are available in the "digital purse" 
or a credit-card account, the money would get tranferred from bank to 
CyberCash to merchant. CyberCash would receive a small fee for each 
transaction from the banks. 

  "The transaction is processed instantaneously -- while you wait," says Mr. 
Crocker of CyberCash. He says the company is working to secure the system, 
"but there's no question we will have people trying our `front door.'" 
CyberCash plans to spend $20 million on a private network of computers, which 
will separate Internet merchants from users' bank accounts. To protect 
sensitive account information, RSA Data Securities will provide encryption to 
scramble the data, allowing only those who have a special software "key" to 
read it. Customers and their banks will hold the keys. 

  In addition, Cybercash is discussing licensing with David Chaum, president 
of Digicash Inc., a key patent holder for digital-cash technology. Digicash 
emphasizes anonymity: A merchant is told only whether the cash is available, 
not who is paying. 

  Other security measures must be taken. On the Internet, users can veil 
their identities or steal access accounts masquerading as someone else. 
Backers of RSA and CommerceNet, which posts business and product information 
on the Internet, are working on tools to verify user ID and keep payment 
requests private and tamper-proof. Even with those measures, however, 
CyberCash executives concede it will take some potent powers of persuasion to 
get the banks on board. 

  "There is no security on the Internet," says Dan Schutzer, president of the 
Financial Services Technology Consortium, a group of major banks. "Your 
conversations can be tapped, your passwords can be obtained, and your credit 
card number can be filched. Clearly, it's there for the reading for a clever 

 Copyright (c) 1994 Dow Jones and Company, Inc.
 Received via NewsEDGE from Desktop Data, Inc.

Page: 	B1
WS: Wall Street Journal