the promise of digital wallets

Will improved digital wallets win over shoppers and boost online sales?

Getting customers to come to your Website is hard enough; getting them to complete a purchase is another struggle entirely. According to market research firm Jupiter Communications, 27% of consumers who begin the online ordering process quit before making a purchase because the process is so convoluted and time-consuming.

Although digital wallets were developed to simplify the buying process for consumers, shoppers and even many merchants have hesitated to embrace them. But some online marketers hope that the recent creation of a digital wallet standard will win over consumers and boost online sales.

Defining digital wallets

Digital wallet software allows consumers to securely hold credit card numbers, shipping and mailing addresses, and other personal information for use online. With a digital wallet, consumers don’t need to fill out order forms on each site when purchasing an item, because the information is stored on the wallet and automatically updated and entered into the order form fields across merchant sites. Consumers can apply for the wallets on the Websites of such wallet vendors as Cybercash, eWallet, and Brodia, or they can request them from their credit card companies and banks. As for the merchants, some wallet vendors require a commission on every purchase made with an digital wallet; others charge merchants a flat fee for processing the cardholders’ transactions.

Since the introduction of the wallets in the mid-’90s, the technology has changed from client-based to server-based. The first generation of wallets required the consumers to download the software – a major deterrent for shoppers – and input their credit card and personal data. The information was then securely held on the consumers’ hard drives.

Because the newer, server-based wallets store the consumers’ data on the server of the financial institution or wallet vendor, consumers no longer have to download software. And for the merchants, the server-based wallets help safeguard against fraud by using digital certificates – attachments to the electronic messages that verify the identity of the user.

Customers can also store on their server-based wallets data such as favorite shopping Websites and product preferences. This detailed information, in turn, helps online merchants personalize their Websites for each customer. “We can target cheaper products, blow-out specials, or special discounts to an individual on our Website based on the preferences that customer includes in his wallet,” says Ken Hawk, founder/chief energizing officer at iGo Corp., a Reno, NV-based cataloger of accessories for mobile professionals.

Building a standard

So far, consumers remain slow to accept the digital wallet technology. Part of the problem is awareness: Online research firm found that only 26% of Internet buyers even understand the capabilities of digital wallets, while 58% were completely unfamiliar with the technology.

More important, banks, credit card companies, software vendors, and others have flooded the marketplace with so many distinct, incompatible versions that marketers can’t reasonably support each one. “Consumer confidence in shopping online will increase only when the industry standardizes the payment and ordering process,” says Gordon Jones, chief information officer at, a Menlo Park, CA-based virtual-only computer cataloger. “Just as digital wallets simplify the process for the consumer, a standard formatting language will simplify the process for merchants.”

To that end, a number of vendors have joined online merchants such as, Dell Computer, Omaha Steaks, and iGo Corp. to create a universal digital wallet format called Electronic Commerce Modeling Language (ECML). According to its supporters, ECML provides a simple set of guidelines that enables Web merchants to accept digital wallets from multiple vendors.

Merchants can adopt ECML to modify the HTML pages they use to support transactions and to rename existing order form names to comply with the ECML fields. “It’s really just programming changes rather than new software or hardware,” Jones says. There are no licensing or usage fees associated with ECML., a New York-based online apparel shopping mall, is so convinced that ECML will increase sales that it has invested $1 million in a complete redesign of its site that includes rebuilding the transaction system at every level to embrace the new standard, says president/CEO Ben Narasin. has more than 100 merchants, each with its own transaction system, but consumers at the mall can now buy from several stores with one checkout process rather than rekey order information with each merchant. While not all participating merchants are required to incorporate ECML into their systems, will provide incentives for those that do. “It’s really in their best interest,” Narasin says. “Positive experiences from other merchants using ECML at should show them the way.”

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