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When will the e-wallet open?

Amid industry doubts about consumers and merchants adopting e-wallets, new standards and technology emerge to help streamline the online shopping experience.

4 min read
It's been at least three years since the first company tried to sell the idea that e-wallets would ease shoppers' online checkout.

In a space teeming with such competitors as Microsoft, CyberCash, and America Online, enter Brodia, formerly Transactor Networks, a start-up that asserts handling online payments isn't enough. Brodia's new service adds features to organize the consumer's shopping experience by screening junk email, guarding privacy, and storing receipts and records.

Doubts persist about getting consumers and merchants to use wallets, which have been around since at least 1996, when Netscape put wallet software into its Web browser. E-wallets help users track passwords, avoid filling out the same forms online many times, and improve privacy and security.

Despite wide support, larger merchants report escalating consumer sales without using them. In fact, "one-click buying" schemes from individual merchants, an innovation led by Amazon.com, represent a new barrier to those who champion a universal wallet that works on many Web sites. "One-click buying" entails storing a buyer's credit card number, shipping address, and other information on the merchant's server so repeat customers could simply click a button to make a purchase.

"Water flows downhill and as long as the current system is easier than a new one, the water will stay where it is," said Paul Hagen, an analyst at Forrester Research.

Forrester estimates about half of Internet storefronts have some kind of "express shopping" capability now, a number that is expected to grow to 80 percent by year's end. Analysts question whether merchants with their own "one-click buying" feature will have any incentive to accept wallets that work with competitors.

Certainly small merchants have everything to gain by backing e-wallets, because they may pick up new business by using them. But larger companies such as Amazon, which are constantly expanding into new business categories, may be inclined to lock customers into their own one-click system.

Despite skepticism, the emergence earlier this month of the first standard for wallets, called ECML or Electronic Commerce Modeling Language, may boost e-wallet adoption. ECML--backed by Visa, other credit card companies, Microsoft, and other wallet vendors--is designed as a universal format for presenting payment and order forms for e-commerce sites.

Historically, wallets have required consumers to download and install large files on their own PCs. Lengthy downloads limited adoption, as did the fact that early wallets worked on only a few sites because they required merchants to sign up with a specific wallet vendor to participate.

The Brodia service, scheduled to launch today but is now delayed, uses a "server side" wallet, which means the user doesn't need special software on his machine. Instead, Brodia stores user data on a secure facility that a consumer can access from any computer with a password.

But competition from big players such as Microsoft could limit the potential of smaller wallet vendors. In March, Microsoft announced its "Passport" service that, like Brodia's, includes a digital wallet. Passport is due to go into public beta testing next month on Microsoft Network and other participating sites.

Jupiter Communications analyst Lucas Graves said consumers benefit most from forms that are easier to fill out, and that will be facilitated as ECML is adopted.

Merchants are jumping onto the e-wallet bandwagon because they see a significant percentage of their shoppers abandoning online purchases part way through the process because checkout procedures are too complex or arduous, Graves said.

"If wallets were widely used, it would significantly reduce the drop-off rates for online shopping," he said. "But at the same time, it's doubtful consumers will go out on their own volition to sign up for wallets for the purpose of making shopping simpler." The key is to make it easier for consumers to sign up for wallets--either at checkout in a merchant store or when installing a new operating system or Web browser.

Brodia is offering two ways to persuade consumers to use its service--get trusted partners such as financial institutions to market the service, and add other services on top of the wallet to benefit consumers.

Brodia's service is free to consumers and many merchants. The company plans to make money from affiliate fees that give it a percentage of a consumer purchase, and from "bounties" for signing up new credit card customers, for example.

"We turn control back to the consumer," said Andrew Boer, Brodia's vice president of strategic development. "We are the only one that is doing something beyond filling in forms."

Brodia's free service will be available from its Web site and through financial institutions. It organizes records of orders placed, creates direct links to the customer service arms of online merchants, and customizes the user's product preferences. It also sets up a separate address for commerce-related email, manages multiple credit cards and shipping addresses, and lets consumers earn rebates or special offers from e-tailers, including Reel.com, CDNow, Barnesandnoble.com, and eToys.

Brodia's first distribution partner is credit card issuer MBNA. The company also intends to let affinity groups, such as nonprofits or activist organizations, offer the service. Rebates can be directed to sponsoring nonprofits, for example.