First Data Corp. has reached preliminary agreements with four bank merchant-acquirers to offer an Internet discount coupon system, one it says can give banks a new role in online commerce.

Sites using the Yclip system would invite Internet visitors to register their credit or debit cards, and would offer "paperless coupon" discounts to those who have. The discounts are automatic for purchases with registered cards at participating sites or stores.

Various Web companies have created roughly similar systems and are signing up merchants directly. But the First Data system puts banks at the center, where they can use their bank card and processing expertise to offer more value to their merchant customers.

First Data, the Atlanta-based payments company, created the paperless-coupon system in conjunction with Yclip Inc., an Internet start-up in Austin, Tex., that builds advertising technology. First Data bought a 16% equity stake in Yclip in January.

Plans for the system were announced last week, and First Data says Wachovia Merchant Services, Sanwa Merchant Services, Unified Merchant Services, and First Virginia Merchant Services have signed letters of intent to market it.

John Duncan, executive vice president of Internet commerce at First Data, said he expects many more First Data clients - including leading merchant-acquirer Chase Merchant Services - will want to be resellers.

"I fully expect that we'll probably get full commitment from all of our banking channels," Mr. Duncan said. "This product is pretty powerful for them. It really differentiates them for their merchants."

First Data is also marketing Yclip to bank card issuers, so that they - as well as participating merchants - will encourage customers to register for the system. Only MasterCard and Visa card holders are eligible to register.

"If I have multiple cards in my wallet, and one of my banks happens to provide this promotional offer to me, that card may become top-of-wallet," Mr. Duncan said. Issuers could differentiate the Yclip system if they choose, he said, creating a loyalty point scheme in addition to a direct coupon program, for instance.

Kevin Gallagher, director of e-business strategies at Wachovia Merchant Services, said the Yclip system reflects new conditions in the merchant-acquiring industry, in which merchants are asking for additional help in confronting the Internet. "In the past, the only amount of advertising that a lot of the acquirers did for the merchants was to give them a Visa and MasterCard sticker," he said.

Wachovia Merchant Services, which processes roughly $8 billion annually, had been researching different incentive systems for several months before choosing Yclip, Mr. Gallagher said. "The technology itself is above any I've seen in the marketplace," he said. Other systems were not able to send through a credit at the same time that the purchase was debited, creating consumer confusion, chargebacks, and unnecessary customer service calls, he said.

One other benefit of the Yclip system is that, unlike direct mail campaigns, merchants pay only when a card holder actually redeems a discount, Mr. Gallagher said.

The Yclip system, which Wachovia has slated for a "soft rollout" in June, fits with the many retailers and restaurants within Wachovia's merchant portfolio of 33,000 locations, Mr. Gallagher said. "If you go into a restaurant - maybe you're taking your date in there, or your wife - you feel a little bit uncomfortable putting down the 50%-off coupon at the dinner table," he said.

Many companies are trying to bridge the gap between online advertising and offline purchases, but Yclip and First Data say their system leverages the unique largesse of First Data, the leading processor of card transactions for both merchants and bank issuers. The two companies have signed a 15-year agreement to jointly develop software. Yclip has also agreed not to work with another card processor for 18 months after the system is first used.

When Internet surfers visit a bank Web site, an Internet portal, or an online coupon site, they will be prompted to register for the Yclip system.

From then on, the registrant will be presented with merchant promotions while surfing the Web. A card holder who clicks to view a particular offer will be able to redeem it later, simply by using the registered card at the corresponding merchant's online site or physical store. The card holder will be able to request that e-mails be sent to confirm the discounts, or will be able to watch for a credit to appear on the credit or bank card statement.

"There are no systems requirements or changes necessary to participate," Mr. Duncan said. Merchants just "put a promotion together, and the rest of it is fully integrated by us and Yclip."

Yclip, a software provider, does not interact directly with merchants or consumers. The plan is to register card holders and distribute merchant promotions through banner ads and at various savings sites or other "consumer aggregators" on the Web.

Among the aggregators that have agreed to participate are Inc., Vicinity Corp., LLC,, and Yclip and First Data plan to approach Internet advertising agency DoubleClick Inc. and the other ad networks, Mr. Duncan said.

Chicago-based CoolSavings, another company in which First Data recently invested, has more than seven million registered users who receive targeted online coupons, rebates, and free samples, according to First Data. Currently, CoolSavings promotions must be used online or by being printed out and taken into a physical store. First Data plans to use the Yclip system to help transform CoolSavings' paper-based program into a completely electronic offering.

CoolSavings is "limited mostly to calling on primarily online brands like Amazon," said Luis Gonzalez, chairman and chief executive officer of Yclip. "With our technology, [it will] be able to call on gasoline service stations and restaurants and offline retailers where the large advertising budgets really are."

According to The Yankee Group, a Boston-based research firm, 83% of Internet shoppers research products and services online before making offline purchases. Of the $200 billion spent annually by advertisers in the United States, however, only 3% is spent on Internet advertising.

Despite most of this money going to brands with an online presence, merchants are "choosing not to spend their dollars online because they don't feel that they get the measurability or responsiveness that they should get given the one-on-one nature of the Internet," Mr. Gonzalez said. "Yclip really solves that problem. We let them open a dialogue with that consumer on a discrete and anonymous basis."

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