In a move designed to ease consumer concerns about online security and cut down on credit card fraud, American Express (NYSE: AXP) rolled out a new product Thursday that will allow its cardholders to use disposable credit card numbers for online purchases.
The new service, called Private Payments, will be available to American Express small business and consumer cardholders in the United States within the next 30 days.
“While the Internet has dramatically eased the way consumers research and purchase products, it also has increased concern for protecting privacy and security,” said Alfred F. Kelly, Jr., group president of U.S. Consumer and Small Business Services at American Express.
A recent survey by Gartner Group-owned cPulse showed that 24 percent of online shoppers are extremely dissatisfied with their online encounters. Topping the list of customer concerns was online security.
One Time Use
Private Payments will allow American Express cardholders who register for the service to shop at any online merchant that accepts American Express and make purchases without providing their actual card numbers. Cardholders will have the option of visiting American Express every time they want to make an online purchase or downloading a software package that will install a Private Payments icon on their desktop.
Using Private Payment adds a step to the online shopping process. When users visit an e-tailer and are ready for checkout, they will need to log on to American Express — using the Private Payment icon or visiting the site — and select the American Express card that they want to use to pay for their purchase.
After making their selection, a unique credit card number and expiration date will be generated by American Express. Cardholders then use this number to consummate their online purchase. The item purchased will be charged to the cardholder’s selected American Express card and will appear on the monthly billing statement.
Building E-Shopping Confidence
Consumers are not the only ones that Private Payments will benefit, according to American Express. The company believes that merchants will see increased Web traffic as the increased security provided by the product turns window shoppers into buyers.
A survey released in July by Gartner said that retail fraud occurs 12 times more often on the Internet than offline. Notably, Web merchants bear the liability and costs in cases of fraud, while credit card companies generally absorb the fraud for traditional retailers.
American Express said Private Payments will limit fraud because each number is designed to be used for a single purchase and to expire after the merchant authorization process is completed. Upon expiration, the Private Payments number cannot be used again, thwarting any potential thievery.
American Express said that Private Payments is only the first in a new series of products that will provide customers with greater choice and protection when browsing and shopping online.
Later this year, the company plans to introduce a product that will enable customers to choose how much of their personal information they share when they browse the Web. This new offering will be developed in conjunction with Privada Inc., a digital privacy infrastructure provider. American Express has made a minority investment in Privada.
In June, American Express rolled out a pilot program in Texas selling pre-paid Internet shopping cards at 7-Eleven convenience stores. Kelly could not comment on how Private Payments will affect the nationwide roll-out of the Internet shopping cards.
Kelly said that American Express will be adding additional products to address consumers’ privacy and security concerns, but declined to provide details.