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The battle for credit card market share moves to the online arena
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Visa spent considerable dollars promoting its Verified by Visa program during the past holiday season. A national advertising campaign told consumers that by registering their cards with card issuers participating in that program and by shopping at participating retailers, they were protected against someone else making purchases on their cards. That’s because under the Verified by Visa program, customers use passwords to assure their identity when making a purchase at participating sites. MasterCard’s SecureCard works similarly.
While not all industry experts buy the notion that consumers are that much safer with cards registered with such programs, even many of the skeptics agree that many consumers perceive such cards are more secure-particularly customers who have not shopped online before. Card issuers promoting such programs may be getting a disproportionately large share of the purchases from new Internet shoppers. Visa issuers who got into the market a few months ahead of MasterCard may see the biggest gains in new market share, some argue.
“Issuers who got out in front will have an advantage in that once customers start using that card to shop online, they’re likely to continue to use that card again and again,” says Gartner Group’s Kerr.
Yet, how significant this early-to-market edge really is can be debated. Ariana Michel Moore, an analyst with Celent, says it will take a while before programs such as Verified by Visa can change market share. “Those already comfortable shopping online will continue to use the same cards they always used,” she says. “Where you will see a difference is in customers who were hesitant to shop online before. But I don’t see there being enough of those consumers to affect market share anytime soon.”
Still, card companies must see some potential in working with retailers to acquire market share because they continue to invest in promotions and security programs. Only as Internet volume continues to grow will it become evident how effective those efforts are.
Lauri Giesen is a Libertyville, Ill.-based freelance business writer.
Smoothing online check refunds
The percentage of consumers who pay online by e-check remains small. But that doesn’t mean they’re not an important part of the market-or that the processes that retailers take for granted with credit cards don’t create headaches when retailers try to replicate those processes with check payers.
Take refunds, for instance. When a customer pays by credit card, the retailer knows exactly what to do to issue a refund-the procedures have been long established. The retailer knows immediately that payment is valid and, depending on the agreement with the merchant bank, will receive the funds in a set amount of time. Reversing the transaction is easy enough because a handful of credit card companies have built reversals into the process.
But when a customer pays by check, nothing is as certain. “Right now we have no way to give the money back immediately,” says Vance Brown, chief customer officer at Ritz Interactive Inc. “We have to confirm that the check cleared, then we have to put in the check request, run it through accounting, cut the check and mail it.”
That’s why Ritz, which operates camera and boating sites, agreed to be part of a test of an electronic check refund product from Certegy Inc. “Our process is not very customer friendly,” Brown says.
While some payments processors, such as AmeriNet Inc., have offered e-check refund procedures for several years, others, such as Certegy, are just coming out with theirs. There has not been a standard check refund process because e-checks are still the bailiwick of dozens of payment processors, all with their own procedures-or lack of procedures. By contrast, a few companies set credit card processes and all processors abide by those rules.
In developing the refund process, Certegy has tied each refund to an initial transaction, so the retailer then has a record of the entire transaction, says Jan Whitfield, vice president of consumer not present payment solutions. Similarly, a refund through AmeriNet is linked to an individual transaction, says David Kerlin, president.
By automating, Ritz expects to save $50 to $100 per refund, Brown says. The costs come in reduced staff time to process, fewer calls to the customer to confirm that the check has cleared before a refund is issued, and less paperwork.
The refunds also can be applied to goodwill payments-partial refunds to placate disgruntled customers-or refunds of such costs as shipping charges. “It’s often cheaper for a retailer to refund a $5 charge than to spend $10 of a rep’s time trying to talk a customer out of it,” Kerlin says.