Microsoft To Phase Out Passport Payment Service

In an effort to boost user adoption of its portable e-wallet system, called "MSN Wallet," Microsoft (Nasdaq: MSFT) has announced that it will phase out its Passport Express Purchase system over the next several months.

Microsoft said the Express Purchase system, which allows customers to buy an item by entering a username and password at a host of e-commerce sites, will continue to operate until March 2003, giving merchants "time to get through the holiday season without needing to make changes to their site."

Phasing Out

The company said all Express Purchase data collected to date will be destroyed when the system is shut down. In addition, no information will be transferred between the two systems, forcing all Express Purchase users to become Passport members.

According to Microsoft, more than a dozen online retailers have signed up to use the new system, which will debut this month on Ritz Interactive Web sites, such as RitzCamera.com and WolfCamera.com. Kmart, OfficeMax, BlueNile.com, Fossil, the Sports Authority, Fogdog and Nordstrom will also introduce the wallet program in coming months, and may offer discouints or other incentives to lure new users.

Jim Barr, general manager of MSN Shopping, said the system's goal is to make online shopping as "simple and dependable as sending e-mail."

Sins of Forefathers

However, the move also may be aimed at helping Microsoft distance its Wallet system from the privacy questions that have dogged Passport. Microsoft recently settled charges with the Federal Trade Commission (FTC) that it had misrepresented the Passport option to some computer users.

Microsoft claimed in January that it had signed up 20 million users for its Passport system, which offers portable passwords and e-commerce buying information. Many analysts have questioned that figure, but most have acknowledged that Passport has seen rapid growth.

At the same time, consumers may have been spooked by the FTC investigation and the fact that the system requires them to store all their personal information in a single location.

Matter of Time

Still, most analysts seem to believe that as long as consumers feel their information is secure, they will use a system that allows them to avoid retyping passwords and remembering specific digital identities for the growing number of sites they buy from on a regular basis.

"People don't want to keep entering passwords and filling out forms over and over again," Aberdeen Group research director Kent Allen told the E-Commerce Times. "But they are also increasingly sophisticated about security. It's almost a catch-22."

Hoping to break that logjam, Microsoft is emphasizing the security of its new offering, noting that all MSN Wallet payment and address information will be encrypted and stored in a database at access-controlled facilities, and that "many other safeguards," such as comprehensive data filtering, will keep the data from being read or intercepted by third parties.