A subsidiary of Household International Inc. plans to introduce what it says will be the United Kingdom's first Internet-based credit card.
The card, which has not been given a name, will be issued by HFC Bank PLC in cooperation with Freeserve, the United Kingdom's largest Internet service provider. The companies have signed a five-year deal and said that by yearend they will unveil a service that includes instant credit decisions on on-line applications.
HFC Bank said it will make $8 million in "exclusivity payments" to Freeserve over the life of the contract, plus commissions for each account opened. The Household unit bought exclusive rights to market the card to Freeserve's rapidly expanding membership, which numbered 1.32 million at the end of June.
"The card will carry a competitive interest rate, and cardholders will be able to access their account details on-line," said Martin Rutland, spokesman for HFC Bank, Windsor, England.
These features have grown fairly common in the United States, where a number of card issuers-notably the Internet upstart NextCard Inc. and the First USA subsidiary of Bank One Corp.-have encouraged consumers to apply over the Internet. The NextCard Visa is intended to encourage on-line shopping.
Competition to acquire credit card customers on-line has not hit Britain yet, Mr. Rutland said. The traditional credit card market has begun to heat up as major U.S. issuers have ventured abroad and begun experimenting with interest rates and other card features.
"The thing that has held the U.K. credit card market together is inertia," Mr. Rutland said. "People see more competitive products, but they say, 'Can I be bothered to fill out another credit card application?'"
With an Internet product, "you can make it easier for customers to apply," he said.
HFC Bank, wholly owned by Prospect Heights, Ill.-based Household, has been offering financial services in the United Kingdom since 1973 and entered the credit card business five years ago, Mr. Rutland said. It is the country's fifth-largest card issuer.
Among its products are a cobranded card with General Motors, which Household also supports in the United States, and the Goldfish card, which gives discounts to customers of British Gas.
These cards appealed to consumers because "we were actually giving cardholders something of value, something meaningful, as opposed to some of the trinkets that had been in place before," Mr. Rutland said.
Freeserve, a division of Dixons Group PLC, opened for business in September 1998 with the first free Internet service for Britons, Household said.
William F. Aldinger, chairman and chief executive officer of Household, said in a statement: "The Internet represents the fastest-growing, most dynamic segment of credit card usage . With Freeserve's and HFC Bank's reputations for being innovative, we are ideally positioned to capture this market opportunity."