Processing of digital colour images becomes more and more important as respective markets like digital photography and digital document managing grow exponentially. Resolution, quality and file size of digital images generated by digital cameras increased tremendously over the last years, pushing the development of complex data archiving solutions for web based applications, allowing users to host their digital images.Downloading of images for processing purposes requires fast data transfer in order to reduce waiting times. As the available bandwidth mostly is not sufficient, only new image compressing formats based on wavelet technology offer a satisfying solution: images may be processed only on a quicklook, generated out of the high resolution image. A protocol of the changes will be transferred to the back-end server, starting the changing processes on the original high resolution image hosted on the back-end server.The paper presents the online image processing technology in detail based on a reference application used in the digital photoservice. That includes demonstration of the online image processing features like image optimisation (cutting, rotation, mirroring, colour changes etc.), image effects (Pop Art, passepartout, solarisation etc.), text functioning etc.In addition the paper will explain the wavelet compression technology, which becomes part within the new standardised image format “JPEG2000”.