Broadcom's Samueli banking on smart cards
[now think about convergence and DTV- STBs are coming with smartcard readers built in. Gemplus supplies just such a reader]
Henry Samueli has bought many technology companies for Broadcom Corp., the
high-flying chip maker he co-founded. Now he has acquired a personal stake in a
bank with big ambitions for electronic transactions.
Samueli has become an investor in Irvine-based Commercial Capital Bank, a
company emerging from the recent acquisition of Riverside-based Mission Savings
and Loan by Financial Institutional Partners Mortgage Co. of Irvine.
Bank officials decline to say how much of Commercial Capital Bancorp Samueli
owns, other than to call his stake "significant." Mission recently was renamed
Commercial Capital Bank and moved to Irvine, just. a couple of blocks from
Broadcom's base in the Irvine Spectrum.
Mission's purchase price of $4.8 million was relatively low compared with other
deals Samueli has been involved with. But what the bank's executives have planned
could be a big play-a chip-based smart debit card that could allow for secure,
real-time payments via the Internet.
"This will create the means of enabling online debit transactions on the Internet,"
said Stephen Gordon, chairman and chief executive of Commercial Capital Bank.
"This online payment methodology cannot be utilized today unless you're going
through off-line credit-card associations."
Gordon said the bank is looking to raise $75 million in funding from investors other
than Samueli. Gordon said the bank has other "major individual and institutional
investors." He declined to identify them.
A Broadcom spokesperson said the bank is a personal investment of Samueli's and
that Broadcom is not involved. Samueli, whose stake in Broadcom is worth $8 billion
last week, was unavailable for comment. (Separately last week, Broadcom said it is
buying British chip maker Element 14 for about $595 million.)
According to the federal government's Office of Thrift Supervision, Gordon owns
9.7% of Commercial Capital Bank. Two other company executives, Treasurer Scott
Kavanaugh andDavid DePillo, the bank's president and chief operating officer, have
7% and 1.8%, respectively.
The executives established Commercial Capital Bancorp in the wake of the Mission
Savings and Loan acquisition earlier this year. It is a holding company for
Commercial Capital Bank and Financial Institutional Partners Mortgage. The latter is
described as the state's fourth-largest lender for apartment buildings.
But the big bet is expected to be the bank's smart debit cards. While the vast
majority of the world's commerce is done through cash, checks and bank wires,
credit cards rule on the Internet, Gordon said.
"The Internet system is forcing on consumers a different payment methodology than
they prefer," he said.
But some people are apprehensive about using their credit cards online, Gordon
said; because they want privacy and they don't want their credit-card numbers
stored online.
Alternative to Credit
A consumer who goes online typically can click on four payment methods-American
Express, Visa, Master Card and Discover. Gordon envisions a consumer clicking on
a fifth method-the smart debit card.
"This will create the fifth button-the card that uses an encrypted digital signature,"
Gordon said. "It would bypass Visa, Master Card, American Express and Discover."
Other companies are developing their own smart cards or others means of online
payments, such as VeriSign Inc. of Mountain View and Plano, Texas-based Entrust
Technologies Inc. But Gordon contends no other online payment method does what
Commercial Capital's card does.
The company envisions that merchants will like its smart debit cards for a couple of
reasons. Payment will be immediate and guaranteed for merchants, who will be able
to decrease the 3% to 4% interchange fees paid to credit-card companies.
"Instead of getting 95 cents to 97 cents to the dollar, merchants will get closer to 99
cents with our technology," he said.
Gordon said he and the other investors decided to buy a bank rather than starting
one from scratch. Mission Savings and Loan has a federal thrift charter with a clean
balance sheet and streamlined operations, he said.
"We weren't taking on somebody's vision of what a savings and loan should be," he
said.
Pilot Program
Commercial Capital is a member of a nationally sponsored pilot program that is
developing and demonstrating technical standards, business practices and
operational rules for the deployment of smart debit card technology, Gordon said.
The program will be unveiled in the coming month.
The bank has established partnerships with entities including Irvine-- based BIZ
Interactive Zone and Wave Systems Corp. of Lee, Md.
In a deal announced last week, Wave Systems is supplying $10 million worth of
software and application development services for deployment of a security system
being developed by BIZ. That security system, called the Secure Solution Provider
is set to be deployed in five million digital set-top boxes.
Broadcom will be providing chips used in the proposed security system. Another
Irvine company, Litronic Inc., has signed on to provide a broadband silicon processor
system for high-speed encryption based on Broadcom chips.
The bank executives have been close-mouthed about the project, but a hint of what's
to come and the close relationships among the players could be seen in a series of
press releases issued over the past month by Wave Systems.
New Paradigm
BIZ Interactive Zone's chairman is Marvin Winkler, who's also chairman and chief
executive of Gotcha International LP of Irvine and a partner with Samueli and others
in Broadband Interactive Group, a company developing extreme-sports content for
the Internet and television. Gordon also is on the board of directors of BIZ Interactive
Zone. Samueli, Winkler and Gordon are good friends.
BIZ Interactive Zone predicted that its Security Solution Provider will create "a new
paradigm" for secure transactions in the real-time exchange of authenticated
financial and intellectual information.
"The SSP system will turn the Internet inside out by moving core security and
e-commerce functions out to the edge, and into a user's Internet access device,"
said Rob Gorman, president and chief operating officer of BIZ Interactive Zone.
Commercial Capital Bank is designated as the exclusive financial clearinghouse and
issuer of smart cards for all e-commerce transactions that use the product
technology.
Gordon: "The Internet system is forcing on consumers a different payment
methodology than they prefer."
Copyright CBJ, L. P. Oct 9-Oct 15, 2000 |
