When Microsoft Corp. announced last week that it was introducing a "virtual wallet" based on the Secure Electronic Transactions protocol, many in the electronic commerce world cheered.

SET, designed to secure card-based purchases over the Internet, has been viewed as a key to the future development of on-line commerce.

MasterCard and Visa came to an agreement last year on SET, but actual implementation has been slow.

International Business Machines Corp. and MasterCard are testing an SET- compliant Internet commerce system in Europe, but a true end-to-end transaction-through links among consumers, merchants, and banks-has yet to take place in the United States.

With Microsoft's unveiling of its Wallet software, and with its related announcement of an alliance with Hewlett-Packard Co. and Verifone Inc. to provide a complete SET software package, industry analysts and even some of Microsoft's E-commerce rivals were heartened.

"With SET development so far, there has been one critical missing piece, and that was the consumer," said Victor Wheatman, an analyst with the Gartner Group in San Francisco. "With the involvement of Microsoft and the likelihood of trials with major banks this summer, it appears SET is starting to overcome the technological hurdles."

Mr. Wheatman said bankers will find that Microsoft's SET efforts will not run counter to their interests.

"Microsoft has been put up as the bogeyman, but I'm not sure they really want to get into banks' space," he said, adding that Microsoft's reputation for reliable and easy-to-use technology can help make SET-based payment systems more palatable to consumers.

"Banks, while they like to think they own the customer, have not necessarily shown the greatest acumen in their technology approaches to consumers," Mr. Wheatman said.

Jonathan Weinstein, group product manager for Internet commerce at Microsoft, agreed with Mr. Wheatman's assessment of Microsoft's intentions. "In terms of the electronic commerce standards we are trying to support, including SET, we want financial institutions to provide guidance," he said. "We don't want to tell financial institutions what to do-it's a collaborative effort."

He added that while banks and the card associations hope SET will reduce the opportunity for fraud and thus stimulate Internet transactions, Microsoft sees it as just another way to get more people to use personal computers.

Mr. Weinstein said the Microsoft Wallet, which Windows-based PC users can use to select various payment methods and shipping addresses for goods purchased over the Web, can assist banks in convincing consumers that with SET, the Internet is safe for shopping.

"The value the Wallet adds is what we're very good at, which is making software that is easy to understand and gives a pleasant user experience," Mr. Weinstein said.

Mr. Weinstein noted that the Wallet will allow banks to include payment mechanisms under their own brand names, which should assuage yet another of bankers' fears that their cyber-identities will be overshadowed by Microsoft's.

Even Cybercash Inc. of Reston, Va., a pioneer in developing a virtual wallet, was among 10 Internet payment-technology companies that have agreed to support Microsoft's strategy.

"We endorse and support the Microsoft Wallet because we are a provider of services to financial institutions and merchants that helps them facilitate Internet payments, whether the consumer is using a Cybercash wallet or a Microsoft wallet," said Richard Crone, vice president of Cybercash.

"To us, it's a great vote of confidence for the architecture that we've designed."

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