Sept. 11, 2000

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Credit-Card Companies Target Security And Data Issues

By Sam Dickey

redit-card companies have two things on their minds these days: security and data. Concern that card numbers and personal identification will be stolen still intimidates potential Web shoppers who routinely use their cards at brick-and-mortar stores, says Scott Thompson, CIO at Visa USA Inc. in San Francisco. "We have to bring that same confidence to Internet sales for the consumer and the business," he says.

Easing consumers' lingering fears has led to some technological innovation during the last year. For instance, to protect against fraud, Equifax Inc., a credit service in Atlanta, rolled out its Paynet Secure products during the last year, consisting of Paynet ID customer authentication, and Paynet Check and Paynet Card transaction guarantees. The authentication product verifies not only "wallet information"--name, address, Social Security number, etc.--but conducts a dialogue with credit-card customers at a Web site, querying them on questions that only they would know, such as the name of the institution that holds the mortgage to their homes, or the dollar amount of their monthly car payment.

Companies that sell over the Web gain, too. Online merchants pay transaction rates that are as much as 60% higher than their counterparts in the physical world. "Our verification product and payment products will help resolve the confidence problem and resolve the chargeback problem merchants experience," says Rich Crutchfield, Equifax's executive VP for E-commerce.

While the qualms over the Internet may discourage some credit-card use online, overall use is burgeoning. Visa USA processed 40 billion transactions last year, pushing card companies toward business-intelligence initiatives designed to help them manage data and market themselves more efficiently.

Providian Financial Corp., a card issuer in San Francisco, has amassed about 80 terabytes of data in seven distinct Informix Corp. data warehouses running on Sun Microsystems servers. The company saves data on individual card-holders, and transactional data on what they do with their cards. "Everybody's heard of one-to-one marketing," says Tahl Milburn, director of technology strategy. "We try to tailor individual parameters to specific customers."

Like other credit-card companies, Providian markets itself primarily by direct mail, although it introduced its Aria.com Web site this year as an additional marketing channel. The advantage of the data warehouse, however, is that by targeting a mailing based on documented data from different sources, companies get a better return with less waste. Information from testing indicates what kind of offer is likely to work.

That testing includes playing with annual percentage rates and teaser rates, for example, offering use of the card free of charge for an introductory period, or examining how the card looks or what materials are included in a mailing. Testing is ongoing. "There's no final answer to what customers will and won't buy, otherwise we'd be finished by now," Milburn says. "The formula always changes."

Capital One Financial Corp., a Falls Church, Va., credit-card issuer, also exploits data in its warehouse to tailor card products to specific groups and individuals. It can issue a card for customers who have had credit difficulties in the past, or issue low-priced cards to people with excellent credit ratings. The warehouse data is used to identify specific market niches or affinity cards for special interest groups.

The data are also used to measure customer satisfaction. "There are some concerns that lead to better satisfaction rates than others," says Marge Connelly, Capital One's senior VP of operations and IT. "This helps us target where we need to do process reengineering to improve our CRM."

For credit-card companies, Internet technology has been a boon and a bane, providing new marketing channels and communication with customers, yet requiring the resolution of remaining doubts about using purchases over the Web. While systems such as data mining and data warehousing are powerful marketing tools, the success they have wrought have led to new challenges due to sheer volume.

Return to main story, "Wireless Technology Pays Dividends"

Illustration by Jeffrey Fisher

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