Start-up of the month: Ecommerce without tears - or credit cards

You may do a lot of buying online but there are still millions of web users afraid to give out their credit card numbers. Step forward CAST Technologies, a company which may just have an answer. Joey Gardiner reports...

A lot of people say they won't shop online because they don't trust the internet. They question the security of ecommerce transactions. This is despite them - pardon the truism - giving their credit cards to waiters in restaurants or voicing details over the phone for orders.

Computers can and will be hacked, and with the recent proliferation of high-profile vulnerabilities and viruses, confidence in the medium isn't likely to rise anytime soon.

UK start-up CAST Technologies is a company that says it can solve this. It has a technology which can assure consumers and businesses they're not putting anything at risk when people buy on the web. Such security could prove a boon to ecommerce.

And despite VC money being hard to land now, it's a small tech firm that feels sure it can build a successful business.

CAST's technology is based around a system that creates a new, temporary credit card number for a consumer every time he makes a purchase. In deployment the technology is linked to systems in a bank which verify a number's authenticity and identify the user.

After the transaction the temporary credit card number can never be used again, so there is no benefit to someone stealing the number, and no risk in recording details. Additionally, a consumer knows he never has to put his static credit card details into a website.

Chris Johnston, CAST Technologies CEO and founder, reckons his company has the potential to get millions more people buying online. "The beauty of the system is that it completely eliminates fraud in any type of credit or debit card transaction but still gives consumers a simple and consistent journey when buying online," he said.

"In addition it fully authenticates all three parties in an ecommerce transaction - the consumer, the merchant and the bank - so that everyone can be sure who they are dealing with."

It does this by using a special algorithm to generate new credit numbers to the internationally recognised ISO standards. Consumers generate a number using a device with a smartcard and banks would have the matching system built into their back end servers. Any MasterCard or Visa credit card user would be able to make use of the system.

The biggest problem is that the system requires end users to have a smartcard - something many are reluctant to do. However, CEO Johnston believes things are changing. "All European bank cards will have to contain smartcards by 2004, mobile phones already have smartcards and HP and Compaq say every PC they ship will have a smartcard reader by the end of the year," he added.

"The solution we are talking about is using technology that is widely available now."

Just a year old, the firm already has employees in London, New York and Helsinki, despite being a tiny operation.

But, in the grand traditional of technology start-ups, it has big ambitions. It has got to where it is today on just £1m of private investment but has given up looking in the VC pool for more money.

Johnston said: "The enthusiasm just isn't there in the VC community right now. They just don't want to know about technology start-ups, at least not at a price which any company would go for."

He is also critical of British VCs who don't back innovative businesses in the UK: "This is maybe a reason why we in the UK invent most things but prosper from few! This is why we're looking for a large partnership to enable the business to develop as it should."

Johnston thinks the intellectual property of the company - both its staff and a patent on its technology - will be worth a lot to the right company. The start-up has been valued at up to £20m, though its founders are reluctant to put a price on their baby.

It has already worked in partnership with smartcard maker Gemplus to produce special credit cards with screens that display the CastIron temporary credit card number and it has also spoken to system integration houses and credit card companies about possible tie-ups.

However, Johnston is sanguine about the prospects in a difficult market. He said: "This is not about consumers immediately purchasing everything via their mobile phones - applications like these are going to take a long time to appear. This is about companies pulling down one of the largest barriers to ecommerce uptake. The value to this is clear for all to see."

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