'Virtual Debit Card' Aims To Combat Online Fraud

R.A. Hettinga rah at shipwright.com
Tue Nov 16 15:28:10 EST 2004


<http://online.wsj.com/article_print/0,,SB110056759053675009,00.html>

The Wall Street Journal


 November 16, 2004

 MONEY


'Virtual Debit Card' Aims
 To Combat Online Fraud

By JENNIFER SARANOW
Staff Reporter of THE WALL STREET JOURNAL
November 16, 2004; Page D2


Consumers typically have been wary of using bank cards online. One bank's
solution is to get rid of the cards.

In an effort to ease customers' concerns about fraud and identity theft
when shopping online, PNC Bank has launched a new checking account with a
"virtual debit card." In addition to a regular debit card that can be used
at automated teller machines and in stores, the "Digital Checking" account
comes with an "eSpend" card. The card is basically a piece of paper with an
account number, expiration date and verification code for making purchases
online, over the phone and by mail order. Customers can set a daily limit
for their eSpend card (say $1,000) and once that amount is spent,
additional purchases won't be approved.

PNC Bank, a unit of PNC Financial Services Group Inc., Pittsburgh, hopes
the eSpend card will attract people who want to make purchases online with
their debit card but are uncomfortable doing so for fear of making their
bank account vulnerable to fraud.

If an unauthorized person obtains a customer's eSpend number, only the
specified daily limit could be taken out of a customer's bank account. If
this occurs, PNC says customers aren't liable for the charges. Purchases
made with the eSpend card show up separately on bank statements. The
account, which is aimed at online-banking customers, also comes with
identity-theft reimbursement insurance, a debit card rewards program and no
fee for using non-PNC ATMs. The account has a monthly $11 service fee
unless customers opt for direct deposit of paychecks or government checks
such as Social Security, and pay at least three bills online.

The eSpend card comes as debit cards are quickly overtaking cash and checks
as preferred methods of payment. According to a report from the American
Bankers Association and Boston-based Dove Consulting, 31% of in-store
purchases were made with a debit card last year, up from 21% in 1999.

Consumers typically have been wary of using debit cards online because,
unlike credit cards, they are directly tied to bank accounts. But online
use of debit cards is starting to grow. In the first quarter of this year,
Visa debit cards were used for 46% of online purchases, up from 43% a year
earlier, according to Visa International.

Analysts are skeptical about how excited consumers will be about PNC's new
card. "I think it's an interesting idea but if you look at consumer usage,
consumers are using their debit cards online today in increasing numbers,
so it's unclear how much of a demand there would be for a card with that
unique application," says Tony Hayes, a Dove analyst.

Other banks have long offered similar credit-card products as a way to
encourage purchases on the Internet and reduce the amount of fraud they are
liable for. In June of 2002, for example, Citigroup Inc.'s Citibank
launched free, downloadable software that allows credit-card customers to
obtain a new disposable account number each time they make a purchase
online. A downside: Such "virtual account numbers" can't be used when a
credit card must be shown at pickup.


-- 
-----------------
R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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