On-Line Banking: Virtual Wallet Regaining Its Currency in the World of Electronic Commerce

American Banker, February 11, 1999 | Go to article overview

On-Line Banking: Virtual Wallet Regaining Its Currency in the World of Electronic Commerce


BY CAROL POWER

The digital wallet, one of the early misfires of Internet commerce, is back in vogue-at least on the supply side.

Bankers, Internet merchants and portal companies, and numerous software providers are rallying around the idea of on-line, virtual versions of the wallets from which consumers make their payment choices at points of sale.

The flashing of an on-screen wallet, resembling the real thing in conventional transactions, should raise consumers' comfort level, the reasoning goes. And with recent refinements in the technology, consumers could come to expect the convenience of "one-click shopping," which they now enjoy at single sites like Amazon.com, anywhere they go on the World Wide Web.

But the evolution and outcome are not nearly so clear-cut. If wallets are everything the suppliers and supporters say they are, then rousing battles for control-over wallet distribution, customers' loyalty, and their payment preferences-will likely ensue, with banks and their credit card brands in the thick of it.

Citibank, for example, is deep into experimentation with a wallet system from a San Francisco startup, Transactor Networks Inc.

First Union Corp. is "aggressively pursuing" wallet technology, senior vice president Edgar Brown said at an Electronic Funds Transfer Association meeting last fall. "If we own the payment mechanism, we ought to own it on- line as well as off-line."

Even before the battles begin in earnest, wallet advocates are struggling uphill, in part because they fell so flat in the first generation.

The early wallets had to be loaded on personal computer hard drives and then mastered by their owners-both rather arduous processes that hindered SET, the credit card industry's Secure Electronic Transaction protocol, which has a digital wallet requirement.

The stunningly negative public response sent wallet pioneers such as Cybercash Inc. and SET software specialists such as GlobeSet Inc. back to the drawing board to create "thin wallets," storing and crunching most of the necessary numbers on central servers instead of customer PCs.

The notion of server-side wallets appealed to Web shopping-center builders like America Online, Yahoo, and Lycos. This was, after all, how merchants like Amazon and Music Boulevard and Virtual Vineyards were able to streamline their transaction processes and make shoppers feel familiar and welcomed on repeat visits.

Still, consumers are "not screaming for wallets," said electronic commerce analyst Vernon Keenan, founder of Keenan Vision Inc. in San Francisco. "I don't see any benefit to consumers. Wallets are an excellent example of technology wagging the dog."

The current state of affairs is reflected in Forrester Research Inc.'s estimate that on-line shoppers stop short of paying for what they accumulate in Internet "shopping carts" 66% of the time.

Consumers are frustrated and merchants are not closing all potential sales in a market that Forrester projects will grow from $51 billion in 1998 to $1.4 trillion in 2003.

Cambridge, Mass.-based Forrester found shoppers do not like having to enter details such as name, credit card number, and billing and shipping information each time they purchase something.

Some of the new electronic wallets "don't require installation of special software on the PC," said Mr. Keenan. "All they require is a browser."

Plus, the wallets let consumers store information once and pull it up wherever they may shop.

But in Mr. Keenan's view, most people do not shop on-line frequently enough to be irritated by data entry.

Citigroup's e-Citi unit is in the middle of a three-month test of CitiWallet, using Transactor Networks software. Consumers register their personal information only once. Purchases from participating merchants then require only a login and password procedure. …

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