The digital wallet, one of the early misfires of Internet commerce, is back in vogue-at least on the supply side.

Bankers, Internet merchants and portal companies, and numerous software providers are rallying around the idea of on-line, virtual versions of the wallets from which consumers make their payment choices at points of sale.

The flashing of an on-screen wallet, resembling the real thing in conventional transactions, should raise consumers' comfort level, the reasoning goes. And with recent refinements in the technology, consumers could come to expect the convenience of "one-click shopping," which they now enjoy at single sites like, anywhere they go on the World Wide Web.

But the evolution and outcome are not nearly so clear-cut. If wallets are everything the suppliers and supporters say they are, then rousing battles for control-over wallet distribution, customers' loyalty, and their payment preferences-will likely ensue, with banks and their credit card brands in the thick of it.

Citibank, for example, is deep into experimentation with a wallet system from a San Francisco startup, Transactor Networks Inc.

First Union Corp. is "aggressively pursuing" wallet technology, senior vice president Edgar Brown said at an Electronic Funds Transfer Association meeting last fall. "If we own the payment mechanism, we ought to own it on- line as well as off-line."

Even before the battles begin in earnest, wallet advocates are struggling uphill, in part because they fell so flat in the first generation.

The early wallets had to be loaded on personal computer hard drives and then mastered by their owners-both rather arduous processes that hindered SET, the credit card industry's Secure Electronic Transaction protocol, which has a digital wallet requirement.

The stunningly negative public response sent wallet pioneers such as Cybercash Inc. and SET software specialists such as GlobeSet Inc. back to the drawing board to create "thin wallets," storing and crunching most of the necessary numbers on central servers instead of customer PCs.

The notion of server-side wallets appealed to Web shopping-center builders like America Online, Yahoo, and Lycos. This was, after all, how merchants like Amazon and Music Boulevard and Virtual Vineyards were able to streamline their transaction processes and make shoppers feel familiar and welcomed on repeat visits.

Still, consumers are "not screaming for wallets," said electronic commerce analyst Vernon Keenan, founder of Keenan Vision Inc. in San Francisco. "I don't see any benefit to consumers. Wallets are an excellent example of technology wagging the dog."

The current state of affairs is reflected in Forrester Research Inc.'s estimate that on-line shoppers stop short of paying for what they accumulate in Internet "shopping carts" 66% of the time.

Consumers are frustrated and merchants are not closing all potential sales in a market that Forrester projects will grow from $51 billion in 1998 to $1.4 trillion in 2003.

Cambridge, Mass.-based Forrester found shoppers do not like having to enter details such as name, credit card number, and billing and shipping information each time they purchase something.

Some of the new electronic wallets "don't require installation of special software on the PC," said Mr. Keenan. "All they require is a browser."

Plus, the wallets let consumers store information once and pull it up wherever they may shop.

But in Mr. Keenan's view, most people do not shop on-line frequently enough to be irritated by data entry.

Citigroup's e-Citi unit is in the middle of a three-month test of CitiWallet, using Transactor Networks software. Consumers register their personal information only once. Purchases from participating merchants then require only a login and password procedure.

The goal, said Gail Hoffman, vice president of electronic commerce at e- Citi, "is to store information securely and privately in your bank, and use that information each time you shop," reinforcing Citibank's role as a guarantor of trust.

Assuming the pilot is successful, Ms. Hoffman said she expects the bank to offer CitiWallet to its cardholding customers in the second quarter.

The terms of Transactor Networks' agreement with Citibank are not public. The vendor does not charge consumers or merchants but collects referral fees and commissions from marketing activities.

The company hopes to sign more of the top 50 world banks and several hundred more on-line merchants. "We believe it's important to support consumer choice in banks and in wallets," said Ron Martinez, founder and chief executive officer of Transactor Networks.

Its wallet can be used at 100 merchant sites, including, a consortium of 10 organizations. About 40 are accessible through the CitiWallet.

Consumers install the wallet using their Netscape or Microsoft Internet Explorer browsers. Besides initiating purchases, consumers can check on the status of orders that have been placed.

Mr. Martinez said he aims to roll out his service for the most part in the current quarter and eventually build a data base of consumer preferences based on their on-line purchases.

"We have listened to banks, merchants, and consumers to make sure that we've eliminated all barriers to adoption," Mr. Martinez said.

Citibank is not exclusively tied to Transactor Networks. Ms. Hoffman said it is talking to many vendors in the field. An affiliate, Universal Card Services, has worked with a wallet based on Mondex electronic cash technology.

Transactor Networks was chosen because its technology was ready and its philosophy meshes with Citibank's, Ms. Hoffman said.

"Our interest in wallets is really very consumer-focused," she added. "We believe in our research we have an opportunity to make the consumer experience more convenient and more private for shopping on the Internet."

Cybercash of Reston, Va., which has been around longer, has completely reversed its original "thick wallet" strategy, which was "a tremendous obstacle to use by consumers," said Russ Stephenson, senior vice president at Cybercash.

As many as two dozen financial institutions worldwide had distributed about two million of Cybercash's thick wallet. But "utilization was low," said Denis Yaro, executive vice president of Cybercash.

It introduced the server-side Instabuy wallet last August.

"Neither merchants nor consumers really liked a client-side approach," said Mr. Yaro, who is in charge of Instabuy. "It was too cumbersome and didn't fully take advantage of the Internet."

Instabuy gives consumers a safe and consistent buying experience, and financial institutions a platform to establish their presence on-line, Mr. Yaro said.

"Wallets are a marketing vehicle, a way to acquire customers in the on- line world, retain existing customers, and cross-sell to them," he said. "They can also drive more utilization of banks' payment instruments."

Payment and shipping data are stored on Cybercash's secure servers. Consumers can enter information and use the same wallet and password at different merchant sites.

Instabuy "is like a universal charge card that is accepted at virtually any merchant," said Mr. Stephenson. The wallet holds a variety of payment instruments and related data, including credit cards, checking accounts, and frequent-flier or shopper points. One-click shopping is available just by clicking on an Internet banner ad.

Cybercash has entered into a cross-marketing agreement with First USA, Bank One Corp.'s credit card company, to reach both merchants and cardholders.

"We're very excited and bullish about our relationship with First USA," said Mr. Yaro. "In the coming months we expect to announce other domestic and international banks that will offer the Instabuy functionality to their customers."

Cybercash may also work with others, including portals, to offer the wallet. In the next week or two, CyberCash is expected to announce the first merchants who will accept the Instabuy Wallet.

Though the switch to server-based wallets may have broken the logjam, there are differences of opinion.

Mark Greene, vice president of Internet commerce at International Business Machines Corp., said the aggregation of personal information on a store's server creates "a sweet spot for hackers." That is one reason that IBM and others who helped develop the SET protocol posited wallets on the consumer's PC.

But Mr. Greene added, "To the extent that a server wallet makes things easier, we're for it."

Officials at eWallet of Pasadena, Calif., a Transactor Networks rival of the new generation, vote for PC storage rather than to "trust some server in the sky," said Francis Costello, eWallet's chief operating officer.

The wallet as an icon on a home computer "is valuable 'real estate' to a financial institution," Mr. Costello said. He said eWallet plans to enter into partnerships with banks, but that he is not yet sure what form these will take.

Since eWallet was launched in November by Idealab, an Internet innovation company founded in 1996, more than 250,000 consumers have downloaded the Windows application for free.

To make a purchase, a customer enters his name and password. Previously entered billing information, which is stored in an encrypted format on the hard drive, comes up automatically.

Until now, Mr. Costello said, shopping on-line has been "a pain. You need to remember passwords. The experience has been fairly negative and the abandonment rate at the checkout screen has been fairly high."

One drawback of eWallet-or any client-based approach-is that it can operate only on the machine to which it is downloaded. Mr. Costello said his company is working on something that would allow wallets to be used on different computers. Smart cards, if they could be read by PCs, have been suggested as a way to make card data and related digital certificates portable.

Whatever the technique, Internet wallet providers are unanimous in wanting to see volumes grow. "It's all about creating transactions," said Mr. Yaro of Cybercash. "We win if Internet commerce grows."

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