Microsoft Passport targets credit cards

Microsoft hopes to extend its Passport online identification system into authorizing credit card payments.

The software giant will strike a partnership Tuesday with security-software maker Arcot Systems, which builds online payment systems for merchants and for banks that issue Visa and MasterCard credit cards. Arcot makes the systems behind Visa's own Verified by Visa program as well as a similar program in development at MasterCard.

Under the deal, Microsoft and Arcot plan to offer, later this fall, a service that will let banks require computer users to type in their Passport username and password to authenticate Visa or MasterCard credit cards.

Passport is an authentication service that stores users' personal information and passwords and lets them surf the Web without having to constantly re-enter data at different sites. According to research firm Gartner, the service has about 14 million registered users.

The new security measure would let banks and e-commerce Web sites verify the identity of online buyers and ensure that they aren't using stolen credit cards, said Brian Arbogast, Microsoft's vice president in charge of Passport.

Arcot, which competes against Cyota, Orbiscom and others, is the leader in the fledgling online credit card authentication market, Gartner analyst Avivah Litan said. So the Arcot partnership legitimizes Microsoft's Passport as an online authentication technology. It also benefits the credit card companies because they can tap into Microsoft's large base of customers, she said.

"It's good for Microsoft because up until now, no one stood behind the authenticity of the (Passport) identities. You can register as easily as 'Donald Duck' as you can with your real name," Litan said. "Now (Passport users) are linked to credit card companies. There is going to be a bank or credit card issuer standing behind the identity."

Microsoft has always offered an option for people to store their credit card information on Passport, but only 14 percent of Passport users did, because they didn't feel the system was secure enough, Litan said.

"People will start trusting the system now that it's linked to credit cards and has protection by Visa and MasterCard," Litan said.

Visa has a program, called Verified by Visa, that allows banks that issue Visa credit cards to authenticate online purchases. Arcot has captured the brunt of Visa's business with its systems, so the deal gives Microsoft access to most banks using the authentication systems, Litan said. MasterCard is currently testing a similar online authentication program, which Arcot's products also support.

Under both those programs, when computer users want to make a purchase online, a window pops up asking Passport users for their name and password, said Arcot CEO Ram Varadarajan. Besides verifying identity through Passport, Varadarajan said, credit card issuers have other options, such as banks' own username and password systems as well as smart cards.

Varadarajan said Arcot may also support the Liberty Alliance Project, which seeks to establish a standard for online identification that's an alternative to Microsoft's Passport. Liberty Alliance was created by Microsoft rival Sun Microsystems.