First banks go live with online b-to-b payment system
A group of four major banks based in Europe and the U.S. on Monday said they're going live with a system that's designed for use in processing large electronic payments between different companies.
The technology, developed by New York-based consortium Identrus, provides identity confirmation, security and a legal framework for large financial transactions. That's supposed to make it easier for banks to do business on the Internet and to help them give commercial customers ready access to online payment capabilities.
Bank of America in Charlotte, N.C., and European financial institutions ABN AMRO Holding, Deutsche Bank and HypoVereinsbank are the first to deploy business-to-business payment applications based on the system developed by Identrus, which was formed last year by a group of eight banks. Other members of the consortium include Barclays, Chase Manhattan and Citigroup.
An Identrus spokeswoman said business customers of the participating banks are eligible to receive an Identrus-approved digital certificate and a smart card. They would then use the smart card to log on to a Web-based system that lets them make electronic payments to other companies that also have Identrus certificates, she said.
Other companies make similar promises - for example, VeriSign in Mountain View, Calif., also offers authentication services for online payments. The Identrus spokeswoman said VeriSign's technology supports the Identrus system and is also being used by Bank of America.
But Identrus differs from vendors such as VeriSign because it's a vendor-neutral consortium of financial institutions and as such is the closest thing that the business world has to a global standard for securing large-scale electronic payments, said Avivah Litan, an analyst at Gartner Group in Stamford, Conn.
"You need a bank-owned consortium to pull [the development of such a standard] off," Litan said. However, she added, a recent Gartner survey showed that moving to digital certificates for processing business-to-business payments isn't a high priority for most companies, with less than 1% of transactions involving the technology at this point.
"User IDs and passwords work fine today," Litan said. "I don't think digital certificates will be a total failure, but it's going to be an uphill battle [for Identrus and other proponents]."
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