The online payments company eCharge Corp. has bought a bank-like "industrial loan company" charter so it can protect consumers against chargebacks and fraud in Internet transactions without having to team up with one or more banks.

Seattle-based eCharge will provide such protections on a stored value account that it will formally introduce after Labor Day.

Credit card fraud is 12 times as high on the Internet as in physical stores, and more than 92% of chargebacks come from Internet transactions, according to GartnerGroup.

Truett Tate, president and chief executive officer of eCharge, said the charter also enhances its image. "Getting FDIC and national regulation required rigorous inspection of our model as well as our financial managerial profile, and that is a validation of the company," he said.

But "we don't want to be in the banking business," said Mark Tremont, chief financial officer and chief operating officer of the company. "We want to have a direct relationship with the consumer and the merchant."

eCharge is aiming to be a branded alternative to traditional credit cards at all Internet checkout points. The three-year-old company already offers eCharge Phone, which lets consumers charge online purchases directly to their phone bills.

About 100 merchants around the globe accept eCharge Phone payments, eCharge said, but it did not disclose how many consumers use the service.

eCharge bought its industrial loan company charter from Fidelity Trust of Salt Lake City, a unit of Boston-based Fidelity Investments.

Such charters, which provide Federal Deposit Insurance Corp. protections, are offered only by California, Colorado, and Utah. The Utah charter is considered the most attractive because it lets companies do business in other states while adhering to Utah's more lenient laws.

Industrial loan company charters are becoming more popular as the Gramm-Leach Bliley Act of 1999 closes the door on nonbanks' obtaining regular banking charters.

Though eCharge bought its charter so it could offer consumer protections on Internet payments without relying on banking companies, it will in fact rely on one - Washington Mutual Inc. - to support a new revolving credit product.

Wamu will extend credit for the account, which will let consumers spend up to a preset limit and pay off the debt in full or incrementally with interest.

"Part of our model is to enable financial services institutions and their offerings by partnering with banks," Mr. Tate said.

Five boutique merchants and a small control group of Washington Mutual and eCharge employees are pilot-testing the stored value and revolving credit products, which will be rolled into a single product, Net Account.

The pilot will expand by Aug. 15 to accommodate more merchants, who by then will be able to sign up on the company's Web site to accept its products, Mr. Tremont said.

eCharge plans to initiate a full-scale marketing campaign after Labor Day to promote eCharge Phone and the new Net Account.

NetAccount puts eCharge up against X.com, a leading provider of online payments with 1.6 million customers. X.com will get a national bank charter by buying First Western National Bank of La Jara, Colo., now its partner to provide banking products.

Currently, X.com's payment accounts are not protected from fraud and chargebacks.

Avivah Litan, a research director at Gartner Group, said the challenge for eCharge will be to gain market share.

"Without having some killer application like eBay attached, it is going to be a very uphill battle," Ms. Litan said.

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