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Japan Gets First SET-Compliant Internet Service

NTT Data Corporation, Japan's largest financial infrastructure service provider, on January 29 began commercial operation of a SET-compliant Internet gateway for its CAFIS (Credit and Finance Information System) network.

Retail outlets and online shopping sites can use the new CAFIS Internet Shopping Service to process credit card purchase authorizations and transmit account data securely via the Internet.

The move brings CAFIS, a nationwide network linking some half-million terminals and over 1,500 credit card companies, financial institutions, and merchants, into line with the global SET (Secure Electronic Transaction) standard for electronic commerce originally developed by MasterCard International and Visa International.

"SET is a worldwide standard for credit card transactions," said Yukiko Ohmi, chief of sales and marketing in NTT Data's Financial Network Division. "Since the Internet has no borders, it was important that Japan adopt the worldwide standard."

The SET-compliant payment gateway at the CAFIS Center translates encrypted SET-format messages sent by merchants via the Internet into NTT Data's proprietary CAFIS or CDS (Credit Data-transfer System) format, and vice versa.

An important added component of the SET elements built into the CAFIS Internet Shopping Service is a Japan Payment Option designed to handle unique Japanese credit practices, such as semi-annual bonus payments and installment purchases.

CAFIS has been providing online business-to-business credit authorization and financial transaction services in Japan since 1984.

When it became evident in 1996 that development of a domestic SET-compliant infrastructure was critical to the smooth development of business-to-consumer electronic commerce, NTT Data organized several leading credit card companies as well as encryption technology, merchant service, and cardholder software vendors into a CAFIS-SET study group.

Limited operational trials of the CAFIS Internet Shopping Service started in December 1997, with the service passing a crucial MasterCard approval inspection in December 1998.

Final approval by Visa International is expected by the end of March.

The fee for the CAFIS Internet Shopping Service is 350,000 yen (US$3,119) per month, plus 1,000 yen (US$9) additional for each merchant information file.

The 3.5 yen (3 US cents) per transaction processing fee is reportedly 25% cheaper than alternative processing methods.

The integration of SET into the existing CAFIS network is significant in that merchants and credit card companies can process SET transactions without the need to install new systems.

Ohmi said the most difficult part of the integration process was and is ensuring interoperability.

"Many vendors claim their software is fully SET-compliant, but we find that is not always the case. Our interoperability tests are not yet completed, but so far we have confirmed that merchants can use IBM, Maithean, and Toyo Information Systems software to connect to the gateway."

Online shoppers can use a SET-compliant PC application called Wallet to verify a participating site's identity by means of a digital certificate before making their purchase.

"The issuing credit card companies will distribute this special software to their cardholders for free," said Ohmi.

NTT Data expects the new CAFIS Internet Shopping Service, in conjunction with the CAFIS-based Proxy Authorization Switching Service it introduced in November 1998, to speed up card authorization processing time and reduce card fraud.

This first commercial implementation of SET in Japan is likely to lead to the further spread of the SET standard and could prove a much-needed boost to Japan's fledgling electronic commerce market.