Aiming in the short term to cash in on the online holiday shopping season, several major banks — including Chase, Citigroup, Bank of America, and First Union — have formed partnerships with Internet retailers and begun promoting the merchants’ goods on bank-sponsored Web sites.

Experts say the strategy, which is ultimately meant to improve customer loyalty and foster e-commerce, is risky. They say that it puts the banks in the position of vouching for the e-tailers — which have spotty track records for on-time shipping and a penchant for abrupt shutdowns — and that it remains to be seen whether these alliances can generate worthwhile revenue. Still, the potential seems vast for sites like, which can be reached by click-through at At chaseshop, under the familiar blue Chase Manhattan Corp. logo, people are invited to select from 4.5 million products supplied by 25,000 merchants. Those who submit a “personalized shopping profile” will receive special sale offers and digital coupons tailored to their tastes. Cardholders are promised “extra benefits” and reminded that, “as a valued cardmember, you will not be liable for any online purchases if your Chase credit or debit card is used without your authorization.”

For months leading up to the holiday shopping season, research firms were pumping out extravagant Internet spending predictions. Forrester Research Inc. of Cambridge, Mass., said consumers would spend $10 billion between Thanksgiving and New Year’s online — twice what they did last year. But while volume is ahead of 1999 levels, it has been well short of the breathless expectations, and merchants such as are saying the shortfall may be fatal.

Some promising numbers have come out: Visa U.S.A. announced that its VisaNet processing network handled a record $1.7 billion in e-commerce transactions between Nov. 24 and Dec. 11, double last year’s total of $842 million.

No matter how the 2000 holiday shopping season turns out, banks say they plan to stick with their online malls.

“We see this as clearly not a revenue-generation strategy for us. It really is a customer-retention strategy,” said Benita Lefft, senior vice president and e-marketplace director for First Union Corp. In November the Charlotte, N.C., bank opened ShopFirst, which is analogous to in that the bank’s brand name is at the top of the site, wares from myriad merchants are available, and discounts are given to First Union customers.

“We will measure the value of cross-sales to our customers, of account retention, of increased deposit levels,” Ms. Lefft said. “That’s how we will use this site.”

She said that First Union has a revenue-sharing agreement with ShopFirst merchants but that it has no illusions about competing with the Amazons of e-tailing.

First Union was among the banks that pioneered the online mall concept in the early days of Internet shopping. Back then — about five years ago — banks thought that offering goods through retailers would be a good way to build momentum for online banking. But the moves were premature.

Now that consumers have grown accustomed to doing business on the Internet, e-malls are coming back into vogue. Russell L. Wehrlin, senior vice president of Speer & Associates Inc., a financial services consulting firm in Atlanta, said banks hoping to boost their Web traffic are wise to become partners with retailers rather than just set up links to their Web sites.

“I don’t think it’s necessarily a ‘build it and they will come’ type of scenario,” Mr. Wehrlin said. “It’s the additional personalized opportunities that may be the key to increasing stickiness.”

Sridhar Chityala, senior vice president and e-commerce executive at Chase Manhattan, the nation’s largest merchant acquiring bank, said brings together the company’s in-house credit and merchant acquisition divisions. The objective, he said, is to give customers a convenient shopping experience that will promote Chase credit cards as “the payment instrument of choice.”

Mr. Chityala said the 13-month-old site has had few problems, and he noted that merchants must meet “very strict” creditworthiness, income flow, and service-practices criteria.

Chase put a lot time into ensuring that customers would not experience the problems often associated with online retailers, Mr. Chityala said. Shoppers are advised if products are unavailable before orders are processed, and in the few instances when mistakes were made, he said, they get an apology and a gift certificate or other compensatory token.

“We were very proactive in managing that aspect,” Mr. Chityala said.

Bank of America Corp. has taken the same tack as First Union and Chase Manhattan. Its online “shopping network” offers discounts for Bank of America cardholders guarantees safety.

Citibank has taken a slightly different approach. It has tied a holiday promotion to its new Click Citi credit card, which was designed expressly for online purchases. People who apply online for the Click Citi Platinum Select — as well as those who make purchases with their Citibank credit cards — are entered into the Hot New Toy of the Week Sweepstakes. The grand prize is a $3,000 shopping spree at

Mr. Wehrlin of Speer & Associates said programs like,, and the Click Citi sweepstakes could help banks gain incremental business from customers who require payment plan arrangements or credit. About 90% of online purchases are made with credit cards, he said.

Analysts say online shopping raises a host of other considerations for banks, a big one being trust.

“One thing banks have to be cognizant of is that if consumers are shopping through their sites, they are going to have to be prepared to take some of the potential backlash that could come about if fulfillment problems do recur,” Mr. Wehrlin said in an allusion to incidents in the 1999 holiday season. “When transactions are being conducted through their site, regardless of the merchant that’s fulfilling the order, they will be attached to it in some way.”

Rembert de Villa, vice president of the global financial practice for A.T. Kearney Inc., a New York consulting firm, said banks should consider how disputes would be handled if routed to a retailer’s call center. “There’s trust in brand,” he said. “The No. 1 and No. 2 issues in any discussion are, How reliable is your product, and if there is a dispute, Does my brand get tarnished?”

First Union’s information security division audits ShopFirst retailers, and merchants must agree in writing to live up to the bank’s security standards.

“It’s very important to us that our customers continue to trust us,” Ms. Lefft said. “If we’re going to sponsor a site on the Internet, we want to make sure the same level of trust a customer has in a financial center is what they experience on the Internet as well. It’s a challenge, but we’re serious about it.”

Turning to the traffic issue, Mr. Wehrlin said that while a bank Web site is likely not the first place a consumer will go to shop, financial institutions have an opportunity to personalize relationships with clients by giving them more services, including shopping.

A.T. Kearney’s Mr. de Villa said identifying the path that leads a consumer to a purchase is the Holy Grail of e-commerce.

“That puzzle is still unsolved,” he said. “So you find people are partnering with everyone and their brother and betting that the broader their offering on the supply side, the broader their reach will be on the demand side.”

Banks and other companies will start to emphasize better targeting in electronic commerce, Mr. de Villa predicted.

“Chapter one of the Internet revolution was all about hedging your bets and at least making sure you’re playing the game,” he said. “Chapter two will be about focus.”

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