The route to future customer loyalty may be through electronic wallets, a Verifone Inc. executive said at the American Bankers Association Bank Card Conference.
"Do not abandon control of the wallet," urged C. Lloyd Mahaffey, senior vice president of global marketing and development at the Hewlett-Packard Co. subsidiary.
"The wallet in the browser could be a strategic asset," Mr. Mahaffey said of the billfold-like images on computer screens that consumers can use to make payment choices for World Wide Web purchases.
He said the industry should not "commoditize" the wallet, but rather make it central to each customer relationship, in part by adopting two of the bank card industry's current technological hot buttons: smart cards and SET, the Secure Electronic Transactions payment protocol.
SET is closely tied to the virtual wallet concept. To avoid transmitting credit card numbers over the Internet, SET relies on digital certificates, issued and managed by banks or other "trusted third parties," to authenticate buyers and sellers.
Mr. Mahaffey said that as bankers focus on the workings of SET, which is probably a few months away from widespread public availability, they will be drawn toward smart cards as a means of streamlining the certification process.
"I worry about all the noise we are making about the security problem when we should be worrying about how we are managing security," the Verifone official said. Acknowledging SET has attracted some criticism for its complexity, he said setting up a wallet under the standard only has to be "three clicks" on a computer mouse.
Robert Olson, co-founder of the Web retailer Virtual Vineyards and a participant with Mr. Mahaffey in a panel discussion Sunday, represented the SET skeptics by saying, "I don't think the consumer cares."
In an interview later, Mr. Olson said the consumer most likes the idea of "handing over a credit card, and that requires no clicks." Irrespective of a security protocol like SET, "a smart card solves the problem" of authentication.
"The consumer doesn't care that it's SET," Mr. Mahaffey conceded at the conference-opening "colloquium," which his company sponsored. "The consumer views it as taking his bank's wallet and starting to engage in commerce.
"The consumer will look to the bank or Visa or MasterCard" for assurance. "That's where the (brand) equity is."
"The Internet allows for a higher level of security, if you know what you are doing, than you have in a physical environment," said Wells Fargo Bank executive vice president Dudley Nigg, another panelist.
An ardent Internet commerce advocate, Mr. Nigg talks up multi- application smart cards. He foresees them holding credit, debit, stored value, and other services, and a digital certification function.
He previously said Wells plans to combine smart cards-it is a 30% owner of Mondex USA-with its on-line banking service, now up to 350,000 subscribers.
Largely agreeing with Mr. Mahaffey, he said he views the electronic interface to on-line customers, incorporating a wallet, as a key competitive weapon.
Mr. Nigg also stumped for what he called a "killer product"-electronic presentment and payment of bills.
"Are we going to be playing here or are we not?" said Mr. Nigg. "We have an obvious role-consolidation of information for the customer and twinning it with bill payments."
He called the bill presentment concept "very powerful," as typified by MSFDC, the joint venture that Microsoft Corp. and First Data Corp. recently formed.
The entire Internet-based process would involve no consumer fees and an estimated 45 cents per transaction to the biller, well below the $1.10 for a paper transaction.
He contended the Internet ultimately could be a big money-maker because "70% to 80% of the customer interface costs are fixed. Add more and more customers and the costs stay pretty much the same."
