Credit card issuers target Internet shoppers

As online shopping continues to gain popularity with Internet users, electronic wallets are starting to play a greater role in e-commerce. These are the equivalent of purses in the real world that contain information about your credit card number, billing and shipping addresses.

Industry analysts estimate that about one-third to two-thirds of all Internet purchases are abandoned before checkout, mainly because of the tedium of filling out onscreen payment forms. With wallets, a user need only enter his information once, and then it is stored on a centralised, secure server for future use.

The main companies testing wallets, as might be expected, are the credit card issuers. They are throwing their weight behind wallets because the more someone shops online using their credit cards, the more money they can make from the transaction fees. So, they believe, ease of use is the key to increasing online credit card purchases.

The first three credit card issuers in North America to pilot wallets are Royal Bank of Canada, MBNA International, and Providian Financial. Together, these institutions have 30 million credit card holders who are potential electronic wallet users.

In each case, they are using PowerWallet from QPass which won the "Best E-Commerce Application" award at Internet World in Chicago last month. Two other major players in the wallet provider business are Brodia (formerly Transactor Networks) of San Francisco and CyberCash of Reston, Virginia. Wallet providers develop the software behind electronic wallets.

Mr Cornelius Willis, vice-president of marketing at Seattle-based QPass said: "Our goal is to have 100 million cardholders by the end of the summer"' through alliances with additional card issuers. While Royal Bank and Providian are only testing the PowerWallet, MBNA is also testing wallets from the other two vendors, Brodia and CyberCash.

"As our customers become increasingly active on the Internet, we want that experience to be as safe, secure, and easy as possible," said Mr John Cochran, executive vice chairman of MBNA. "Electronic wallets allow us to achieve these objectives."

One reason these card issuers choose the PowerWallet is because its software is quite sophisticated. QPass worked with eHNC, the Internet division of San Diegobased HNC Software, to build intelligent form-filling capabilities into the PowerWallet.

"PowerWallet learns new forms as the Internet continues to change," said Mr Allan McGale, a vice-president at Royal Bank of Canada in Toronto. This allows merchants to change the content of their forms and the wallet will automatically adapt. For example, PowerWallet can go to any site it has never seen before, understand the questions being asked and put the right information in a box. It supports Electronic Commerce Modeling Language, a recently introduced standard for wallets that is backed by MasterCard, Visa, American Express and numerous technology and Internet-marketing companies. PowerWallet also captures receipts, shipping information and can keep track of passwords.

Royal Bank plans to launch its branded version of the PowerWallet in October because "we want a meaningful number of people in the market in time for the Christmas season," said Mr McGale.

Last year Christmas shoppers spent $3 billion to $4 billion online (€2.8 billion-€3.74 billion), according to Boston Consulting Group. The total is expected to jump to between $9 billion and $10 billion this year.

Royal Bank will first pilot-test the wallet with "several hundred thousand" cardholders, eventually offering it to all of its five million card users, Mr McGale said. Royal Bank's Internet subsidiary in the US, Security First Network Bank, may offer the wallet free to its banking customers.

"We're at the stage where we're learning about wallets and consumer behaviour," Mr McGale said. "We want to make sure the issues that are important to consumers are covered."

Providian Financial in San Francisco has signed a letter of intent to use PowerWallet on its Aria.com website. Begun two months ago, Aria.com offers to make instant decisions on credit card applications. Eventually people who sign up for a card would be able to get an electronic wallet at the same time.

Providian plans to start its pilot test in the autumn. "We expect to go to full roll-out this year," said Mr James Rowe, senior vice-president and head of electronic commerce at Providian.

QPass and eHNC designed PowerWallet "to give banks the option to develop consumer affinity and promotional programmes online," QPass's Mr Willis said.

But one expert warned against putting too much emphasis on this aspect of electronic commerce marketing.

"Banks see form-filling as equivalent to monthly statements stuffed with advertisements," said Mr Vernon Keenan, Internet commerce analyst and founder of Keenan Vision in San Francisco. "But consumers will quickly see the commerciality of the initiatives and will not be enthralled."'

Mr Keenan was sceptical about the potential of wallets in general. Banks are "going overboard," he said. "It's a case of a big institution foisting new technology on consumers when they're not asking for it."

Even though consumers may not be clamouring for wallets, portal services like America Online, Excite and Yahoo are not deterred and have announced plans to launch wallets of their own.