e-Wallet article with a mention of CKFR. I would imagine that a direct debit using CKFR services tied in with the USPS pay@delivery will be one of the Passport options.
Noise
****************************
E-Wallets: Chasing The Holy Grail of E-Payments
Merchants would like to keep card issuers out of the e-wallet picture.
By Joseph McKendrick
The Players
It seems just about everybody has been in on the e-wallet act at some point in time.
One click, and you're out. During the go-go dot-com years, the electronic wallet concept came to fruition, promising a quick means for consumers to apply stored payment information toward online purchases with one or two clicks. E-wallets came in two flavors: those facilitated by individual online merchants, and those offered by third-party vendors and credit card issuers that can be used across multiple merchants. Both merchants and banks recognize that e-payments are a steadily growing area of opportunity. According to Needham, MA-based TowerGroup, consumer-to-business payment volume is expected to top 31 billion transactions annually by 2005, creating a market worth an estimated $443 billion.
Lately, however, it appears that online merchants have gained the upper hand in e-wallet positioning, while third-party wallet providers have languished. American Express' heavily promoted Blue Card e-wallet was recently terminated, with barely half a percent of Blue cardholders using the wallet, according to Richard Crone, vice president of Dove Consulting Inc. of San Carlos, CA, and a former executive with CyberCash Inc. Wells Fargo stopped supporting its e-wallet in early August, with a similar meager fraction of customers using the service. Adoption of Discover's Deskshop—which emphasized heightened security features—has been equally disappointing thus far.
Analysts agree that the general-purpose wallets have been more trouble than they're worth to consumers. These existing general-purpose e-wallets have been challenged for several reasons, according to Richard Cornelius, partner with Accenture, based in New York. "They haven't worked as advertised, they've been confusing for consumers, and third, they haven't met consumers' needs. That's been a challenged model. A lot of the e-merchants now have their own kind of service at their sites."
"I used American Express' wallet, and it was pretty clunky," observes Aaron McPherson, research manager with International Data Corp. of Framingham, MA. "Most consumers don't see the value in bothering to download and install wallets. The form-filling function just did not provide that much value to consumers. Merchant sites didn't consistently support it, and many merchant sites will store user information anyway, like Amazon's one-click method. So you don't even need a form filler in many cases."
General-purpose e-wallets also have received lukewarm acceptance from vendors. For example, CyberCash's InstaBuy service "required merchants to add plug-ins into their storefronts, for true one-click transactions," says Crone. "Anything that changes the storefront, or the purchase sequence, or adds steps, is resisted by the merchant."
Time Savers
E-wallets, which are application or services that enable consumers to store billing, shipping and payment information, speed up the processing of a merchant's checkout page. With e-wallets, consumers do not need to repeatedly fill out order or registration forms on each site. Order fields are automatically filled across merchant sites. E-wallets can be client-side offerings—stored on the consumer's PC or browser, or stored on the server side. Third-party wallet providers offered a single registration that could be applied against a number of merchant sites.
Currently, the strongest third-party entry into e-wallets at this time is Microsoft's Passport, a suite of services that is also being tied to its next operating system, Windows XP. Passport offers e-wallet capabilities, and stores users' wallet information in a data center at Microsoft.
When users click the Passport express purchase link on a Web site, they are redirected to a co-branded Passport wallet page where they can choose the credit card and shipping/billing address information they want to use. Some retailers have announced support for Passport, including Ashford.com and MyShoppingClub.com.
Microsoft's model may ultimately succeed, since multi-purpose e-wallets will need to be incorporated into broader services infrastructures, says Accenture's Cornelius. "E-wallets will be successful when they're part of a broader offering," he says. "Part of Microsoft's vision is a broader offering that includes the payment functionality as part of broader functionality. It's challenging for a standalone wallet to meet the basic requirements—standards, security, systems and simplicity—as opposed to something's that's embedded as part of a broader part of the infrastructure."
Registration
E-wallets offer a wealth of data and brand loyalty to providers. For this reason, there has been an ongoing push and pull between online merchants and third-party payment vendors. "Credit-card issuers wanted to create a digital credit card that could be branded, and link them back to the issuer every time a purchase was made. It was a tactical and visual reinforcement of the brand," says Crone. "But it was costly, requiring customer relationship management to issue these wallets, manage the passwords and promote the use of them."
Acceptance of e-wallets has grown, particularly among online merchants such as Amazon, which claims a patent on one-click checkout technology. "That concept has been pretty successful," observes Cornelius. The bottom line is the potential data gold mine that comes from registered users. "Every merchant wants you to be a registered user," says Crone. "One of the key hooks for a merchant to retain the registration is to get you to enroll your payment instrument with them. Payment is a great way to link identification to the interaction with the customer. Plus, the power position on the Internet, or any business, is the registered enrolled customer base."
Thus, if a customer registers with a third-party wallet holder, such as a credit card issuer, data goes to this outside party, says Crone. "That natural conflict exists with wallets. The merchant wants to hold the registration, whereas with e-wallets, the credit-card issuer or the e-wallet vendor holds the registration data. Why would Amazon want to share one-click shopping data with its competitors?" Instead, Amazon has created a massive marketing network of cooperating Web sites with its one-click payment system, he adds.
New Opportunities
While the role of banks supporting standalone general-purpose wallets is uncertain, the inevitable growth of e-payments and e-commerce are paving related opportunities. For example, McPherson foresees the rise of "intelligent assistants" that can add security and value to online transactions.
For example, "some of the ways we can already see this happening is with the one-use credit card numbers that Discover and American Express are now using." In this approach, consumers are either assigned a single credit number for one transaction - thereby disabling the number for future transactions. Or, a credit card number may only be activated at a single retailer's site.
Electronic bill presentment and payment also presents a new horizon for credit-card issuing banks, according to Crone. For example, bill aggregation services can provide access to various sites, including auctions, banks and credit cards.
Institutions such as Bank of America have forged agreements with CheckFree Corp. to support its EBPP service. Another service, Spectrum EBP LLC, which is jointly owned by J.P. Morgan Chase & Co., Wachovia Corp., and Wells Fargo & Co., is a service that is used by Chase and several other banks. For example, Chase recently announced the launch of a bill management center that uses Spectrum, allowing customers to not only make payments on their Chase card bill, but also make payments to other billers.
While issuers may have not made the connection to online audiences through e-wallets, online bill payment offers another avenue. "Of all billing classes, credit card issuers are one of the most successful to sign up customers to EBPP," says Crone. An average 10 percent to 20 percent of issuers' customer bases have already enrolled to use EBPP. "Prior to this, they didn't have the online connection. Now they do, and theoretically, they could start to provide wallet technology through this." However, he adds, American Express, which has been successful at offering online bill payment, never linked this service to their failed e-wallet.
Joseph McKendrick is a writer based in Doylestown, PA. |
