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Beyond Digital Wallets.

Internet Payment Services as Ecommerce Boom or Bust

It has been the most basic of economic facts for all of human history: integral to every commerce system is a payment methodology. Bartering hides for beads. Trading symbols of value--paper money, coins--for a meal or a haircut or a book. And most recently--so ubiquitous that we forget that this is really a very new economic invention--exchanging a promise of eventual payment, in the form of a check or signed credit card slip, for goods and services of just about any kind.

The ecommerce system is no different. It absolutely must have a payment methodology for it to function at all, what's more for it to flourish and prosper. But does ecommerce need a payment methodology uniquely its own?

Prehistoric folks would have been flabbergasted at the concept of coinage or paper money. Mere decades ago, the concept of a credit card would have boggled our ancestors. Now we in the infancy of the ecommerce age are struggling with a myriad of issues about how to best exchange payment for product via the Web. We confront issues such as privacy, security, and ease-of-use.


Enter, in the mid-1990s, the concept of the Digital Wallet, which seemed simple enough: both consumers and online merchants agree to adopt a digital wallet vendor as a payment intermediary. Rather than entering credit card numbers for each transaction, the consumer could simply "charge" their purchases to the digital wallet vendor (which, of course, had already gathered pertinent credit card and billing information from the consumer.) Rather than losing money on smaller sales (credit card companies charge merchants a fee for each transaction), merchants could collect "micropayments" via digital wallets from consumers for, say, purchasing a song, a periodical article, or a bit of game time.

But by and large, the new ecommerce marketplace regarded digital wallets through dubious eyes, then yawned and turned away. In this case, virtual theory was better than virtual reality. Using a digital wallet meant forms to fill out and/or software applications to download and maintain--making the ecommerce process more cumbersome than seamless. Security and privacy issues didn't really go away in the minds of consumers. And merchants had to worry about compatibility--being enabled with digital wallet A when potential customers might be enabled with digital wallets B, C, or D. Plus, to many, attempts to make "virtual cash" seem "real" only came off as awkward. In fact, not so long ago, it seemed that digital wallets would disappear altogether.


But innovators on new frontiers don't give up so easily. Digital wallets--or their descendants at least--are making a comeback. Models vary for this new generation of ecommerce payment methodology, although the one thing everyone interviewed agreed upon was that they offer Internet Payment Services, or Web-based Payment Systems, or the behind-the-scenes software to make ecommerce payment systems go. Uniformly, these companies did not want to use the term digital wallets, thank you very much. By any name, these latest offerings include:

* No fees or software for consumers. These services work directly with ISPs (Internet Service Providers), telcos, and content providers.

* Double-blind type privacy. Because these Internet Payment Services work with established client bases--such as ISPs--consumers do not have to turn over private or financial information to yet another company; the required information is held with a company the consumer already (presumably) trusts with this data. And while the details of purchases (item, cost, online merchant) are held by the Internet Payment Services, this information does not need to be shared with the ISP.

* Security. All models include using secured technology.

These models seem to offer a win-win-win scenario for consumers, content providers, and ISPs. Consumers can make purchases easily, with privacy and security issues addressed, without ever entering a credit card number, since purchases are aggregated to the bill from their ISP--whom they've already trusted with financial and personal information. Because the model makes Web-based purchasing easier and more worry-free, content providers can presumably sell more content--including inexpensive items such as a song, an article, or usage of a game or software--that could not be charged to a credit card due to prohibitive fees. And ISPs can offer Internet Payment Services as a value-added benefit to their customers, letting them target individuals with occasional purchasing needs.

The remaining issues, at least to those offering Internet Payment Services, seem to be who will grab the greatest ecommerce market share and how soon will such services emerge as an ecommerce standard-rather than just another start-up venture in the digital world. Additionally, current models are still geared toward business-to-consumer transactions. How such models might serve, or evolve to support, business-to-business transactions largely remains to be seen.


"What we offer is not a wallet solution," explains Geoff Watson, iPIN's Director of Marketing. "The way a digital wallet works is as a form filler. Our service is completely Web-based, with no client-side software. We're really a digital payment system, offering transaction services and clearing as well as transformation of currency, so global purchasing is simplified."

Basically, the model is that both consumers and content providers register with iPIN (, but purchases are totaled over a month and added to the consumer's ISP bill.

When registering with iPIN, consumers share only their ISP account name and password--no credit card or other personal information. Becoming an iPIN user is free of charge, quick, and doesn't require any software. iPIN consumers simply click on the iPIN logo to make a purchase. At the end of the month, these purchases are added to their ISP bill. (iPIN does offer an option for consumers to register directly with the company if their ISP does not offer iPIN, so that purchases can aggregate on a credit card.)

To become iPIN-enabled, content providers must install software from iPIN (also free), a process that takes one to two hours, says Watson. iPIN makes its revenue from a transaction fee split between content providers and ISPs. All information in the iPIN process is transacted using SSL (Secure Sockets Layer) technology. Founded at the end of 1997, with product development begun in 1998, iPIN launched in Europe at the end of 1999, and was expected to launch domestically during the first quarter of 2000.


Still, a site must be iPIN-enabled in order for an iPIN consumer to use iPIN to make a purchase. Although iPIN states that the number of iPIN-enabled content providers is growing continually, as of December 1999, there were only about 60 iPIN-enabled content providers, primarily selling music ( and movies ( And that leads back to the tricky chicken-and-egg problem that's been faced by digital wallets--how do you amass enough consumers, content providers, and ISPs under one Internet Payment System for it to really be worthwhile for everyone? And will a service like iPIN ever be of interest to business consumers?

Watson is optimistic. "The business potential could eventually be as big as or bigger than the commercial side. For example, the service side of business--renting software applications or financial news and research--could be served by iPIN. A corporate account could be set up much like a personal account, with subaccounts for individual employees or departments."

The latter is critical to corporate libraries that need to charge back their services. But why should consumers want to use a service like iPIN, rather than entering a credit card number to make a purchase via the Web?

"Our core proposition is purchase anonymity," says Watson. "We don't get any private information from the ISP, we just know the details of what's been purchased. On the other hand, we don't share those details with the ISP. The only person who knows all the details of the purchase is the purchaser. The number-one reason people give for not making purchases online is fear of losing privacy or security in the process. The iPIN model takes care of that."


"What is unique about Trivnet," explains Moti Dolgin, Trivnet's President and CEO, "is that we can enable an entire base of users--at an ISP or telco--at once with our WiSP service. For users, WiSP is free and requires no registration or software, because our service resides with the ISP or telco."

While individuals can also register to have WiSP bill Web-based purchases to selected credit card accounts, the real value of WiSP--the Internet payment service offered by Trivnet (, in fact, not having to do anything at all to use WiSP. Once an ISP or telecommunications company installs WiSP, all of its customers are WiSP-enabled--and it takes just a click to make a purchase, the charges for which are added to the ISP bill. Content Providers then need to be WiSP-enabled as well, with about a one-hour installation of software. Trivnet makes its revenue from a percentage of each WiSP-executed transaction.


"The key benefit to users is that they don't have to use their credit cards to make purchases online," explains Dolgin. "As far as content providers go, our service makes it possible to handle small purchases, or micropayments, for which processing fees would be too high to handle with credit cards. With WiSP, content providers can let consumers aggregate small amounts until a certain threshold is reached."

While Trivnet's WiSP solution is "initially geared more to the consumer market," says Dolgin, "during the first half of 2000, we will look at ways for businesses to potentially use WiSP as a way of transacting business. The business-to-business potential is there."

Privacy and security are handled easily in the WiSP model, says Dolgin. "It's very simple. We don't ask for any information via the Web. We automatically identify and authenticate through the ISP side. We do not receive any information about users, who can click on content and accept it for purchase in as few steps as possible. This system supports impulse-buying and eliminates the abandonment that occurs with the usual shopping cart. Our experience shows that our system results in people completing transactions five to ten times more frequently than in using the traditional method of having to enter a credit card number."

Trivnet's technology was developed in Israel, where WiSP is almost universally available. "We're new in the U.S., but we're in discussions with a number of ISPs and telcos, here and internationally," says Dolgin. "Our ultimate goal is to be everywhere, and we've gotten off to a good start."


Just In Time Solutions ( creates its BillCast software for telecommunications, credit card, insurance companies, and other similar institutions to electronically deliver bills and collect payment via the Internet. At first blush, what the company offers seems very different from iPTN and Trivnet--and in some ways it is. After all, Just In Time Solutions' BillCast software is not used in the process of selling goods or services over the Web--it's used to enable payment for already-established services (telephone, insurance, for example) via the Web. No impulse-buying here--those who pay their bills via BillCast technology are sending payments to companies with whom they have established--perhaps long-time--relationships.

But though a far-distant cousin of digital wallets, Just In Time Solutions' model is an important part of the payment methodologies arising in the world of ecommerce. Founded in 1995, Just In Time Solutions is the leading provider of software solutions for Internet-based billing and, to use the company's phrase, Interactive Customer Care applications.

"At its most basic, our solution lets our customers send bills electronically and then receive payment electronically," says Brian Valente, Sr., Director of Marketing for Just In Time Solutions. "But we're really about helping our service providers leverage the electronic bill as a basis for developing customer relationships."


"A paper bill can account for the use of service of, for example, a telco," Valente explains. "It can show payment received. Or a change of address. But really, in this day and age, this is a crude way of billing. Via the Internet, billing can become an interactive marketing and customer care tool. For example, if changes need to be made to an account, these can be done in real-time via the electronic bill and sent straight back to the payee. This methodology lowers the cost to the business of billing and account management while giving the consumer a self-service environment that's immediate and interactive."

Even with this level of detailed account information, security is not an issue, says Valente. Just In Time helped pioneer the Open Financial Exchange (OFX) standard for bill presentment, which specifies the format and protocol for delivering bills via Internet. OFX and SSL technologies ensure that the data transmitted via BillCast is safe, says Valente, who likens his company's model to providing an electronic envelope for delivery of bills and payments. Just as in postal service delivery in the brick and mortar world, the deliverer doesn't see the data inside the envelope.

Valente also believes that Internet Payment Services, including electronic bill presentment, have tremendous growth potential, including their use in business sectors. According to Valente, 1.7 billion bills are sent out in the U.S. each year--only 3-5% of which are sent electronically--but some estimates put electronic delivery of bills at 30-50% in three to five years.

"The electronic model of bill presentment and payment is growing via grassroots," says Valente.


Globeset ( is the only company interviewed which uses the term "wallet" as part of its description for its product: the BankTone Electronic Wallet.

"Our present wallet solution, BankTone," Ricki Boyle, Globeset's Vice President of Marketing, points out, "is different than initial wallet applications, which were large and had to be downloaded to the client side. BankTone is a server-based wallet."

The BankTone Electronic Wallet, made available in October 1999, resides with financial institutions and credit card issuers, which make the service available to their customer base. Because these customers already have relationships with these institutions, and because these institutions already have customers' personal and financial data, the issue of trusting yet another organization with these data is eliminated. Consumers complete a "Universal Order Form," click an onscreen activation button at their financial institution's site, and can then shop with their BankTone Electronic Wallet at content providers, currently over 1,000, who are BankTone-enabled. However, consumers can only make BankTone-enabled purchases if they reach the content provider through their financial institution's portal.

"Our business model is to provide this wallet payment solution to financial institutions, and to align these financial institutions with merchants who are compatible with BankTone," explains Boyle. "We offer BankTone as a white label product to financial institutions, who can offer it under their own brand name. We really see ourselves as being a technology provider who enables financial institutions to function within the ecommerce world."

There is no cost to consumers or merchants for the use of BankTone; Globeset makes its revenue from the financial institutions that deploy BankTone.


Security is a point of pride with Globeset, which was founded in 1996. Globeset, along with major credit card companies and others, was one of the developers of the Secure Electronic [Transaction.sup.TM] (SET) protocol for secure payment transactions via the Internet. "SET technology authenticates consumers as well as merchants," says Boyle. "Compliance standards are rigid." Using encryption technology to protect information, SET validates all parties in a transaction.

As is the case with other Internet Payment Services, BankTone is currently geared toward consumers. "Today, businesses rely on the corporate credit card to make online purchases," says Boyle. "The business-to-business area is more complicated than the consumer area, but I do believe digital wallet solutions like BankTone can eventually address corporate purchases."


"Payment is a necessary part of a business infrastructure," acknowledges Cornelius Willis, Vice President of Marketing for QPass. "But it's only one part of that infrastructure--and it's not really the most interesting."

Consumers who wish to use QPass ( register via the QPass Web site by submitting a short online form. After successfully registering, QPass-enabled consumers need only click on a "Q" icon at Qpass-enabled content providers or, as QPass prefers to call them, featured partners. Outside of the network of QPass featured partners, registered users can make purchases at any online merchant. QPass' PowerWallet technology enables QPass users to click on the QPass button on their browsers' toolbar wherever there's an online form to fill out for making purchases. QPass then completes the form, "grabs" the online receipt, and adds it to the QPass bill, which is then charged to the user's credit card number, entered once upon registration. QPass membership is free to consumers.

But, as Willis points out, QPass sees this as only one part of enabling ecommerce. QPass focuses much of its efforts on working with content providers, serving as their outsourced provider of Web-based business infrastructures, covering needs from authenticating consumers to billing, collecting, and processing payments to customer support. QPass, which was established three years ago, makes its revenue from a portion of each transaction.

"We're really the only company of our kind developing these kinds of merchant relationships," Willis says. "Payment is a relatively small portion of doing business. The digital economy needs much more than simple payment mechanisms--it needs efficiency. Frankly, it's much cheaper for content providers to do business using us than in any other way."


As of December 1999, QPass had 15 content providers as premium partners in its QPass network, including information and business content providers such as The New York Times on the Web, The Wall Street Journal Interactive Edition,, Newsbytes, STAT-USA, Today's Headline News,, and

Willis anticipates that this network of premium providers will be "well into the hundreds by the end of 2000." In fact, QPass is currently working on partnering with one of the major online information services to provide an Internet payment infrastructure for its archival data. QPass, says Willis, is focusing its development of future partnerships on content providers of business-to-business information, entertainment (such as music providers), and life-long learning (such as adult education and self-improvement courses).

As for privacy, QPass has a clear privacy policy on its Web site, says Willis, and QPass is a certified participant in the BBB OnLine privacy program as well as being a licensee of the TRUSTe Privacy Program.

And security is not an issue when using QPass, says Willis. All transactions are conducted via SSL technology. "There is no documented history of SSL being cracked," says Willis, "even after millions of transactions."


No one can accurately predict when (or if) an Internet payment system will emerge with broad-based appeal to and acceptance by both consumers and businesses. Clearly, companies involved in the enterprise of creating such a system believe the potential is there.

Business users may be tougher to convince.

Reva Basch, ONLINE and E-Bay magazine columnist, author of Researching Online For Dummies, and proprietor of her own information brokerage firm, says she doesn't see the advantage of digital wallets, or Internet payment services, for many Internet commerce applications.

"They could be of value in situations where a merchant--say, a sole proprietor research company--doesn't accept credit cards, or when micropayments are involved," says Basch. "And, I could see some kind of digital wallet arrangement being useful in escrowtype situations."

Noreen Curran, Research Manager at A.T. Kearney, says that currently consultants use corporate credit cards to make any necessary business purchases, either off- or online.

Neither Basch nor Curran considers concerns over security as a factor in using Internet payment services, although Basch would like to know who was behind a digital wallet, before feeling confident about her privacy being maintained.

Boom or bust for Internet payment services? As with any venture on a new frontier, only time will tell. All anyone can say for sure is that eventually, ecommerce will settle on a payment methodology--either wholly adopted from the brick and mortar world, modified from an existing methodology, or uniquely its own. And eventually, ecommerce participants will take it for granted as the norm.

Sharon Gwyn Short was employed for many years with a major online host company and is now established in her own marketing communications company.

Communications to the author should be addressed to Sharon Gwyn Short, Principal, Cornerstone Communications, 901 Decker Drive, Miamisburg, OH 45342;
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Author:Short, Sharon Gwyn
Geographic Code:1USA
Date:Apr 1, 2000
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