AT&T Corp.'s move to cover credit card fraud losses incurred by users of its on-line service should encourage electronic shopping, industry observers said.
The telecommunications giant said it will take full financial responsibility for the losses of consumers who make purchases with AT&T credit cards using the forthcoming Worldnet service, which will provide access to the Internet.
The announcement has more marketing than financial implications, in that Internet commerce is in its infancy. What's more, current law limits credit card purchasers' liability to $50, and card issuers usually absorb the $50, anyway.
But the fact that a high-profile company would send such a consumer- friendly message could help allay widespread fears about transmitting credit card numbers on-line.
"AT&T is one of the most recognized names in business .... A company like that taking responsibility for on-line commerce adds a lot of credibility," said Rick Spence, an analyst at Dataquest, San Jose, Calif.
"People are fundamentally afraid" of sending out their credit card numbers over computer networks, said Michael Auriemma, president of Auriemma Consulting, which specializes in the credit card market. "Telling them that they won't be liable (for on-line fraud) will do a lot to help electronic commerce."
Anne Morgan Moore, president of Atlanta-based Synergistics Research Corp., said a study by her company last November found that making purchases was the least popular of eight on-line activities, far behind electronic mail, games, and even banking.
Ms. Moore said 84% of those who do not shop on-line indicated security was their primary concern.
However, she added, "if you trade off concerns with enough safeguards or benefits, consumers will want to do it."
It remains to be seen whether consumers will find AT&T's on-line service attractive.
AT&T officials declined to comment on pricing or the number of merchants signed up for WorldNet, which is to be launched this quarter.
They predicted that other card issuers soon would offer similar incentives for on-line shopping. Rivals may not tie their offers to a specific on-line service as AT&T has, said Mr. Spence of Dataquest.