Mobile accounted for 25% of Ulta's e-commerce revenue during Q2.
Until now, American Express Co. has gotten all the ink about online smart cards. But Boston-based Fleet Bank has launched a smart card-and it hopes to grab part of the market that American Express proved exists. In September, Fleet rolled out the Fusion smart Visa card. And while it may look like just another chip card touting security and easy online shopping, Fleet is pitching as a major feature to merchants that they will pay a lower Visa interchange rate because of the card’s smart chip authentication process. Interchange is the amount of a bank card transaction that the merchant bank pays the issuing bank-and then passes back to the merchant.
Online transactions cost merchants more because the card is not present and thus presents a higher risk of fraud. With the Fleet chip, used with a smart card reader that uses digital certificate technology to identify the card and user, merchants can pay the lower rate on transactions.
Fleet will distribute a card reader that plugs into a consumer’s PC. The shopper inserts the card into the reader, then the card-processing network authenticates the cardholder in real time. The first 100,000 cardholders to request a reader will get one free, says Michael Abbott, Fleet’s senior vice president of ebusiness. Readers will then cost $20 to $25. Abbott says the industry expects computer manufacturers to include readers in keyboards, helping legitimize smart cards.
While Abbott acknowledges that current online shoppers may not be compelled to use a peripheral device for security, 71% of consumers do not yet shop online because security is their top concern. “We want to break down barriers for consumers by having an experience that is as easy as shopping offline,” says Abbott, who also notes that using one password and user ID is easier than remembering different combinations for each web site.
Fleet says merchants would not have to modify acquiring systems. The acquiring bank would require minor software upgrades but Fleet would not charge merchants, says Abbott.
Fleet will promote the card’s introduction in the fourth quarter and will do more online shopping promotion in the first quarter. Merchants can be part of Fusion loyalty programs that can be downloaded onto the chip before the customers receive the card, Abbott says.
First Annapolis Consulting’s Senior Consultant Paul Grill says relying on consumer behavior to make transactions cheaper for merchants is risky. “Merchants need consumers to do something to lower their online risk, but consumers need to see that it’s convenient for them,” Grill says. Other technologies, such as disposable card numbers, may be easier for consumers to adopt because they will satisfy the need for security and won’t require peripheral devices, he says.