Digital Wallets such aseWallet and PrivaSeek aim to use their leverage with consumers to sell marketing services to merchants, much as a portal does. Meanwhile merchant- and bank-based solutions (for instance the various SET-compliant systems) have to distribute compatible clients for end-to-end verification and transaction processing. This revenue model requires adoption of Digital Wallets by consumers.
Consumer adoption represents a major hurdle for all client based Digital Wallets. Recently, eWallet had a base of more than 250,000 downloads but estimated fewer than 100,000 users had ever "gone live" with the software installed (Jupiter Communications). Only a small fraction of those had ever made a purchase using the wallet.
Jupiter Communications predicts that the active user base for merchant-independent consumer wallets will not reach two million by 2001. They suggest that the core wallet benefit of shopping convenience won't be compelling enough to drive widespread adoption. A Jupiter Consumer Survey asked online households to choose between several digital wallets, each designed to simplify the online ordering process. More than 50 percent of respondents said that they would prefer to complete forms themselves each time they buy online; 35 percent said they prefer to store shipping and billing information locally (in either a wallet application or their browser); just 10 percent opted for managing their shopping vitals through a financial institution (see chart below).
Consumer Convenience Won't Be a Powerful Wallet Driver
Jupiter Communications, 1999
Digital Wallets' core benefit is the ease of sharing information with more than one Web Site. This core benefit also creates consumer hesitation. In addition, privacy concerns create an opportunity for digital wallets designed and promoted explicitly as a consumer protection service or privacy management system.
Wallet Technology Choices Account for Privacy Concerns
Do you agree with the following statements about online privacy and digital commerce?
Source: Jupiter Research, 1999
The simplicity of making multiple purchases at multiple sites with the convenience of a single interface remains the major consumer benefit of a multi-site Digital Wallet. But both client-side and server-side wallets have the opportunity to deploy a range of more compelling features and benefits. These features will be central to wallet adoption and, in the long run, will serve to differentiate not just digital wallets but merchants themselves.
Merchants Enjoy present-day Leverage to Boost Wallet Value
Additional Benefits – (Source: Jupiter Communications, 1999)
PrivacyNearly every digital wallet provider emphasizes compliance with major privacy initiatives such as TRUSTe (a nonprofit privacy program) and Better Business Bureau Online (BBBO), and claims to let users control how their information is shared. However, some wallets, such as PrivaSeek and PassLogix, present privacy and/or password management as their core feature. Privacy management offers a near-term opportunity for third-party wallets to distinguish themselves from merchant- or portal-run systems, in which information is assumed to be used for later marketing. Privacy features arenecessary, but not sufficient for consumer adoption.
Receipt management. A crucial value-add for any digital wallet is offering consumers the ability to review purchases across sites, but only if the system is implemented almost universally—an unlikely prospect for several years. Many merchant sites and nearly all wallet solutions already offer limited ability to view transaction history, but only for transactions they process.
Financial/tax integration. Beyond simple receipt management, multisite digital wallets also have an opportunity to integrate with common tax or financial software like Quicken. Such functionality will prove an important differentiator for consumer-targeted wallets in the long run (especially client-side software), but even more than receipt features, it must work at every merchant a consumer visits to be useful—and this won't be the case for at least three years.
Bill presentment. Digital wallets offer a natural platform for online bill presentment by major utilities and card companies, for instance. Bill presentment is a very compelling value-add for consumers, and makes the most sense in a bank-run digital wallet, either server-based or client-based, rather than in an independent or merchant-run wallet.
Shopping bots. Shopping bots, including product searches and merchant lists, are built into wallets today—eWallet, for instance, sells that real estate to merchants as a marketing opportunity. A separate long-term opportunity exists in independent, user-programmable intelligent agents that can be set to monitor merchants for particular deals
Loyalty programs. Digital wallets can combine with online loyalty programs, such as Netcentives, in two compelling ways: First, they can allow users to spend and/or accumulate loyalty points with purchases made through the wallet, and second, they can allow users to track and manage their loyalty points through the wallet.
Coupon delivery. Giving consumers the ability to receive discount coupons and offers from retailers and particularly from manufacturers is a potential, if minor, near-term driver for digital wallets. Direct manufacturers' incentives find the best vehicle in a merchant-independent wallet, though cooperation with store wallets is also feasible.
Spending allowances. Children's spending allowances (or gift certificates) represent an immediate value-add that individual merchants, networks of merchants, portals or third-party wallet solutions (such as CyberCash, which is currently working on programmable allowances) can deploy.
Micropayments. Jupiter predicts that small purchase systems, enabling consumers to buy content or services at prices (generally $.50 to $3) too low to be practical under credit card payment, represent a major potential consumer market. However, though micropayment-enabled wallets are in discussion at a variety of technology vendors, such systems require a combination of back-end integration and consumer adoption that will remain out of reach for the next two years.
Third-party wallet solutions such as Transactor Networks and CyberCash are poised today to drive some consumer adoption by rolling out features such as receipt management across merchants. But Jupiter notes that an inflection point occurs when standardized client wallets are built into the OS or the browser, and server-side wallets can leverage consistent client functionality to introduce new features.
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