Microsoft Corp. has dipped another toe a little one into the financial services swimming pool, striking an agreement with Household International to issue a private-label credit card for the software companys business customers.
The initiative, Microsofts first venture into the world of plastic, was revealed Monday in an announcement by Household. But the arrangement has been operational for the past two months, according to Dick Klesse, national director of Households retail services.
Household is the second-largest issuer of private-label credit cards in the United States, and is active in other forms of sales financing as well.
The purpose of the Microsoft card is to enable developers of Microsoft-based business computer systems to purchase on credit Microsofts software and hardware, as well as other related non-Microsoft products products that the developers would then resell to their own customers on a value-added basis.
Household said the current program extends a $25,000 revolving credit line at a 9.5% annual percentage rate to participants in its Microsoft System Builder Program.
According to Mr. Klesse, Household has similar private-label contracts with retailers such as Comp USA. Under the Microsoft deal, Household receives any interest accrued on the account. But Mr. Klesse said there is a financial arrangement with Microsoft involving finance charges, though he would not give details.
Mr. Klesse downplayed Microsofts financial incentive in the program. What it looks like is that they want to sell more software and hardware, he said.
News of the private-label card deal comes as Microsoft has reignited the vigilance of some players in the financial services industry after a period of relative placidity.
Among other things, earlier this summer, the vendor showed an interest in electronic payments, signing cross-licensing agreements with two software companies that provide one-time-use credit card numbers for Internet shoppers. At the time, Microsoft said it would probably include the payments mechanism in an upcoming version of its Internet Explorer Web browser.
After that announcement, the company reassured traditional financial services companies that it was more interested in cooperating to facilitate secure online transactions than in competing. Bankers should not be worried, said Brian Arbogast, vice president of Microsofts personal services group, in June.
But James Van Dyke, research director with New York research firm Jupiter Media Metrix Inc., said Monday that theres no question Microsoft wants to get into the transaction business.
Mr. Van Dyke added: Whether or not that means being out in front or being behind the scenes processing, Microsoft probably doesnt care. What they want to be is an essential provider to the business.
According to the announcement from Household, Microsoft set up the credit card program in response to requests from its business customers. It could not be determined at press time whether Microsoft intended to issue credit lines to any other segment of its vast customer base.