The Tech Scene: Bank One: Passport Is ‘Special’ — Because Microsoft Backs It

Microsoft Corp.’s plan to get consumers to store their personal information in electronic wallets that can open doors at unrelated Web sites has been blasted by consumer privacy groups and beset by security problems.

But Microsoft’s $5 billion R&D budget and its relationships with hundreds of millions of computer-using consumers speak much louder to Kevin Watters, the president of Bank One Corp.’s consumer Internet group.

In December, the Chicago company became the first financial institution to say it would use a collection of Web services from Microsoft known as .NET, including the Passport authentication service that purports to let consumers use the same ID and password wherever they go online. It was joined last week by Citigroup Inc., which announced a similar plan.

Bank One rolled out the first iteration of its .NET relationship with Microsoft this month by letting its customers gain access through bankone.com to Microsoft’s bCentral small-business services. These include Web hosting, e-mail marketing, lead management, and appointment scheduling, none of which Bank One offered before.

The bCentral services are built on and advance Microsoft’s .NET platform, into which it has poured billions as the Internet’s proliferation puts pressure on the company’s mainstay software business.

.NET has a couple of strikes against it. Security problems have cast doubt on Microsoft’s ability to manage the reams of personal data it would collect through Passport. .NET has also raised the ire of consumer privacy groups, which fear that Microsoft will make improper use of the personal information it collects in Passport.

All this comes from a company that at times has been seen as a thorn in the banking industry’s side. Microsoft created some resentment, for example, by trying to build a business around electronic bill payment and presentment, a service many banks view as central to their offerings.

Partly in response to what they see as the Redmond, Wash., giant’s growing influence on the Web, companies including American Express and MasterCard International have aligned as the Liberty Alliance to develop their own single-sign-on system, which they say will be more open than Microsoft’s.

Avivah Litan, a vice president and research director at Gartner Inc., said that “a lot of banks are really worried” about Microsoft and .NET. There are those that view Microsoft as a predator, while for others it is a security issue or an open-standards issue, she said. “Some are reacting very adversely, some are not.”

Mr. Watters is squarely in the latter camp. “Microsoft is a great technology company — the best ever,” he said.

Microsoft is a worldwide leader in technology development, he reminded, and its massive R&D budget is already paying off for his company several ways. Bank One’s Web site has become “much quicker” since the company started working with .NET, he said, and the consumer applications on it are clean, crisp, and easy to navigate.

From a marketing perspective, Bank One’s having Microsoft at its side in consumer and small-business campaigns is “a very big positive,” Mr. Watters said. Microsoft as a cobranding partner in bCentral, for example, “is an endorsement to our small-business customers that the solutions we’re providing meet their needs,” he said.

In addition, Bank One expects to be able to offer services such as personal financial management for less cost than the competition “because we are working with our partner in an efficient way,” he said.

There has been much talk about privacy problems with Passport, but “we’ve been on the same page with privacy since the beginning,” Mr. Watters said. “Personal information is owned by the customer and will not be shared” between Bank One and Microsoft. Customers can opt in to Passport, and those who do so will be required to give their name, e-mail address, and ZIP code.

Bank One is addressing security concerns by requiring customers to still use their Bank One authentication routines to access their financial information on the site. Citigroup is doing the same.

Having Citi and Bank One on its side is huge for Microsoft, which has only gotten about 150 Web sites (nearly a dozen of them owned by Microsoft) to accept the Passport single-sign-on service introduced three years ago.

These sites make up a miniature digital world. Consumers who have Passport — there are about 200 million, most of whom were automatically given it when they signed up for other Microsoft services such as e-mail or instant messaging — can cruise between sensitive areas of these sites without having to reenter their ID information. They can also buy from the sites without having to reenter credit card information, which is also stored by Passport.

So far, this is the extent of Passport’s much-touted convenience — one that the public does not necessarily crave. According to a Gartner report issued in October, 61% of people who use Passport do so because Microsoft makes it a prerequisite to gaining access to other Microsoft services. Only 3% use it to avoid reentering data.

For financial institutions, however, a relationship with Microsoft seems to have a lot to offer. Citigroup, for example, will be promoted as the top card in consumers’ Passport wallets whenever they make purchases on Passport-enabled sites. Purchases made through MSN alone, which gets 230 million visitors a month and pitches products ranging from antiques to pet supplies to cars, could give Citi a huge flow of new online customers.

Bank One has struck an entirely different set of agreements with Microsoft, one that indicates the vast possibilities of working with a company so intertwined in people’s computing lives. Under the three-year, $30 million deal, Microsoft will get paid every time it helps sell a Bank One product, and Bank One will be rewarded for getting its customers to use Microsoft technologies.

In the next phase of the relationship, Microsoft and Bank One will combine Money 2002 Deluxe, Internet Explorer, and bankone.com to create a version of Microsoft’s personal financial management software that highlights various Bank One products.

After that, they will collaborate in building Bank One products into Microsoft’s Great Plains accounting software for middle-market companies. Finally, Bank One will use Microsoft’s .NET Alerts, a service that incorporates Passport, to send instant notifications about accounts. Separately from the joint projects, Bank One has agreed to advertise on MSN and to market the Internet service to its customers.

Mr. Watters practically swoons about the potential. Besides being “easy to work with and very responsive,” he said, Microsoft has technology expertise that, when combined with Bank One’s financial product knowledge, will help his company “develop something special.”