Credit card companies race to provide e-commerce services

MasterCard, Visa, American Express and Discover have recently beefed up e-commerce offerings through shopping websites, partnerships and acquisitions in a bid to stave off payment providers like Paypal and Google Checkout.

The financial services companies are offering discounts on online shopping, fraud protection and more convenience in international purchases, in an effort to make e-commerce a more integral part of their brands and insinuate themselves into customers’ online shopping experiences.

“The card companies have to make sure that they are relevant. These guys are not oblivious to the fact that new entrants have taken a bite out of the purchase volume,” said Allen Weinberg, payments consultant for Glenbrook Partners, a payment strategy consulting firm. He said services like Paypal and Google Checkout have evolved from upstarts to major players in the rapidly growing e-commerce arena while bricks-and-mortar credit and debit card spending has remained fairly flat. “If you’re Visa or MasterCard, you have to be concerned about that,” he said.

Visa is moving aggressively to promote, and add to, its e-commerce capabilities. The company recently initiated a marketing program for its Rightcliq online shopping service. The platform not only allows customers to store their payment card numbers with the service, even for competing cards, but also offers to track order delivery status.

Visa also acquired CyberSource, the online fraud prevention and payment gateway, this year. The company said its goal was to enhance its role in online purchases and to strengthen its connection to the more than 295,000 merchants CyberSource serves.

American Express announced last month that members will be able to use Membership Rewards points toward purchases on Discover Financial Services said it will collaborate with Firethorn Holdings on the soon-to-be-released Swagg mobile gift card application, which will allow shoppers to purchase, customize and exchange gift cards on their smartphones.

“On the supply side, it’s a great time to be online,” said Mike Boush, VP of e-business for Discover, adding that financial services companies are flocking to e-commerce because that’s where consumers are going.

MasterCard bought UK-based payment services company DataCash Group for $520 million in August to expand its online commerce business. It also launched the MasterCard MarketPlace, a discount site for card members, with e-commerce company NextJump. Geoff Iddison, group executive of e-commerce and mobile at MasterCard, describes the company’s efforts as not only offering a “funding mechanism” for consumers as they historically have, but also a “value mechanism,” inserting themselves into areas of the consumer-to-merchant value chain. Iddison said e-commerce has become a more desirable place for payment services companies as more consumers have become comfortable spending in new ways and in larger quantities.

“People wouldn’t pay $500 to $600 five years ago for a plane ticket online, but now they are willing to [do so],” said Iddison.

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