It's easier than ever to give your credit
cards a shopping workout on the 'Net
By Libby Wells • Bankrate.com

If you haven't shopped online lately, you might find that your credit card has morphed into a new kind of tool, one with expanded capabilities.

Financial and technology companies are working overtime to devise products and policies that will make consumers feel safe and comfy at the cyber stores.

Here's a look at what some of the industry biggies are doing to lure customers into the e-shopping arena.

One of the major developments is in digital wallets. E-wallets are evolving from rote paperwork helpers into sophisticated personal assistants.

Basic e-wallets store cardholder information such as account number, name and address, and spill it onto the charge and delivery forms that cyber shops require at checkout. This eliminates the need for buyers to type in the same information at every store.

Wallets go to work
Several of the biggest card issuers are putting digital wallets to work. Providian Financial, MBNA, Wells Fargo and Capital One all have teamed with a California e-commerce company, Brodia, to make the wallet the hub of the shopping experience.

Brodia's wallet is a comparison shopper, record keeper, junk mail guard dog and product search expert.

The wallet stores information for multiple credit cards and users don't have to be a customer of one of Brodia's partner banks to use it. You can download the wallet from Capital One, for example, and use a competitor's credit card.

The wallet incorporates a technology that lets customers search for and compare products based on criteria such as product features, merchant choices and price. Keyword search capability bolsters the consumer's chances of finding what they are looking for.

"Many shoppers don't really know how to shop and compare on the Internet," says Ted Goldstein, Brodia's chief technology officer.

The wallet also saves and organizes purchase records, and lets you request or refuse e-mails from merchants.

Goldstein said the wallet will be evolving and performing more duties, such as including more details in purchase records, and tracking rewards points and bonuses.

"We're trying to reinvent the credit card for the Internet and do it in a way that respects people's privacy," says Goldstein. "This is all an extension of what the credit card can do."

Follow the bouncing logo
Discover's digital wallet, DeskShop, shadows card members as they browse the Web. Customers who sign up for the service receive a Discover icon that sits on their desktop. As they surf the 'Net, they see the logo wherever they go.

When the customer is ready to make a purchase, she clicks on the icon and DeskShop completes the forms that cyber shops require for charge and delivery. DeskShop is linked to the user's account, so there is one bill.

American Express is making a big impression in the online marketplace with Blue, the first smart card to make a nationwide debut in the United States.

Since its introduction last fall, the card with a computer chip has become tremendously popular. A March survey by Brittain Associates found that six months after its introduction, Blue has more than 1 million users.

"From the demographic profile of owners, it's clear that Blue is attracting a young, professional and well-heeled consumer group," says Bruce Brittain, president of the Atlanta research firm.

Here's how it works: The chip embedded in the card contains information that authenticates the user. This is called a digital certificate. Using a smart card "reader" that plugs into the PC and a personal identification number, the shopper accesses their electronic wallet from the American Express server.

The PIN and digital certificate are a two-edged security sword. Once the wallet is unlocked, it automatically fills out account and shipping information, a convenience that takes care of the No. 1 reason most people give up before they reach the cyber checkout counter.

"The Blue card is the most significant recent innovation in credit cards," says Les Riedl, senior vice president of Speer & Associates Inc., an Atlanta-based consulting company.

"It has done phenomenally well. They have plenty of cards out there, which should cut down on fraud," he says.

The cost and perks are attractive, too. Blue has no annual fee, a 0 percent annual percentage rate for six months, going to a fixed rate as low as 9.9 percent, depending on your credit. The card features a rewards program, Blue Loot, and the smart card readers are free through May.

The readers can be ordered at the Blue Web page. "It's usually delivered within a week," says spokeswoman Judy Tenzer.

Brittain says Blue is attracting a lot of users because of the cost, not the technology. "They are attracting some people who are not Internet active at all," he says.

Limited liability
In a concession to Internet security concerns, Visa, which has more than 50 percent of the card market, has eliminated financial liability for U.S. credit and debit card customers who are victims of fraud. In addition, it wiped out the two-day reporting requirement. There are 330 million Visa credit and debit cards in the United States, according to the company.

The zero-liability policy went into effect April 4. Prior to that, consumers were responsible for up to $50 of unauthorized transactions. The policy applies to Internet and physical transactions, but was enacted with Internet buyers in mind.

"We did it to promote online shopping," says spokeswoman Erica Cover.

A note of caution, though: PIN-based transactions are not covered because they aren't processed through the Visa network.

"Every time you enter a PIN, it goes through a regional network," explains Visa spokeswoman Liz Tung. "Regional networks accept all kinds of transactions, so Visa has no control over the security."

That means if you insert your credit card into an ATM for a cash advance, and a PIN is required, you're not covered by the new policy.

Person to person
One development on the horizon in the online shopping world is person-to-person credit card payments. Wells Fargo, the leader in online banking, is taking the front position again by partnering with eBay, the popular auction site where regular folks sell everything from Barbie dolls to cars.

Wells Fargo's purchase of a large chunk of eBay's online payment operation will give eBay access to the bank's payment processing and customer service to support its massive online trading post.

"This alliance brings reliable and secure online payments to millions of new buyers and sellers from the comfort of home," Dick Kovacevich, president and CEO of Wells Fargo, said when the partnership was announced in March.

Brodia's Goldstein says banks are the natural conduits for online shopping. "They have the best privacy, security and government oversight," he says.

But there are lots of payment options percolating in cyber space. Internet startups are developing systems that let Web shoppers pay for certain items through their Internet service providers or phone company.

Brittain says the online shopping landscape is so mercurial that it will take awhile before it becomes apparent what will work and what won't.

"All this changes so fast, it's hard to say what's the newest and greatest."

Only one thing is certain, he says. "Being able to shop online is going to become part and parcel of our social fabric because it's convenient."

-- Posted: April 17, 2000