SAN FRANCISCO (09/08/2000) - American Express Co. (AXP) unveiled a new e-commerce security product Thursday that enables shoppers to buy goods online with a disposable credit card number that can be used for only one transaction.
The new product, Private Payments, will be linked to a customer's account. It is designed to ease consumer fears that credit cards or personal information could be stolen when they make a purchase online, American Express officials said in a press conference. It will be available to all U.S. consumer and small-business accounts within the next 30 days.
"This is truly unique, in that the account number that you know and love ... does not cross over the Internet at all," said Alfred F. Kelly Jr., group president of U.S. consumer and small-business services.
A similar system is being tested overseas. In England, online bank Marble and Allied Irish Bank are testing technology developed by Orbiscom that gives online shoppers a virtual credit card, which generates a unique identifying number for each transaction.
American Express cardholders who want to use Private Payments can request a number at the American Express Web site or download the software. The software automatically activates an American Express pop-up box when the user is about to make a purchase on a site that accepts the credit card. The box assigns the consumer a number and enters it into the credit card field on the Web store's site.
Kelly said the technology is the first in a series of online privacy and security products that American Express is developing. Later this year, American Express plans to introduce a second product that lets customers control the amount of personal information they share while surfing the Web.
Kelly said various studies show that 60 to 75 percent of customers fear that their credit card information will be stolen on the Web. Meanwhile, he said, e-commerce companies tell American Express that one of their biggest frustrations results from the large number of customers that abandon their shopping carts just before they're asked to pay.
But consumers are largely protected from online credit card fraud by a federal law that caps personal liability for unauthorized charges at $50. Merchants, who can find themselves stuck with the tab, face the greater risk. In one of the most highly publicized e-commerce fraud cases this year, Expedia Inc. (EXPE) announced that it would take a charge of $4 million to $6 million in the third quarter to cover the cost of purchases made on its site with stolen credit cards from November to February.
And not everyone agrees with American Express officials' contention that security is an overriding concern for consumers. "Most consumers are pretty comfortable when they use their information on retail sites," says Diane Schreiber, a spokeswoman for Jupiter Communications (JPTR) . On the downside, she says, cloaking too much information in an online sale limits retailers' ability to personalize their offerings to shoppers.
One Jupiter consumer survey, however, found that 68 percent of respondents who do research but don't actually buy products online feel that better security of credit cards and personal information would increase their willingness to purchase online.
It's people like that who would be attracted to the American Express product, said Jupiter analyst Fiona Swerdlow. She adds, "Over time, as people become more used to buying online, those fears drop dramatically. [The product] is something that I think people may grow out of."