More people will do their holiday shopping on-line this season than ever before, according to a recent survey, a trend that bodes well for banks and other credit card issuers because on-line shoppers have in the past overwhelmingly made their electronic purchases with a credit card.

A Visa-sponsored survey in October found that 55% of 1,037 people with Internet access intended to shop on the Internet this Christmas season, up from 46% in a survey last year. Significant to banks is the fact that two-thirds of the respondents said they had at sometime or another made an on-line purchase and 88% of these said they had used a credit card to complete the purchase. "This is really the year of on-line shopping, more so than last year," said Gerry Sweeney, vice president of marketing at Visa U.S.A.'s eVisa electronic commerce division. "We're seeing consumers really adopt this into their everyday lives."

He added that while the nine-percentage-point increase in likely shoppers may seem less than enormous, 98% of those shopping on-line were "more than satisfied" with the experience.

Depending on the research source, on-line sales volume for the last six weeks of the year is projected to total $4 billion to $15 billion - a likely interest- and fee-income bonanza for banks and others that issue credit cards and process the transactions for merchants. Volume last year was estimated at $3 billion.

"The hype is justified," said Shripriya Mahesh, director of e-commerce at NextCard Inc., a San Francisco card issuer that markets primarily on the Internet.

NextCard recently introduced an electronic wallet service, which it calls a "concierge," to help complete order forms when shopping on-line.

"Last year we were just getting started," Ms. Mahesh said. "This year it's a sea change. We're going to promote the concierge in a really big way. We're running sweepstakes where the size of the prize is determined by the amount spent. We're running merchant promotions and another sweepstakes where we're matching donations to charities made on-line. We think it will be a banner year."

Lest all this sound like too much holiday cheer, some lumps of coal are to be found in the Internet stocking.

Customer-service complaints are rife in Internet retailing; even some well-known sites do not measure up in market research. People who have good experiences are likely to stay loyal and return repeatedly, observers said, but those who have problems may never return. Internet research and consulting firms such as Forrester Research and Jupiter Communications warn of the strain on systems as transaction volumes skyrocket.

"Reliability and scalability are key, and that means you have to have a very responsive site that doesn't get bogged down with a lot of people on it," said William Donahoo, vice president of marketing at Cybersource Corp., an e-commerce transaction processor in San Jose, Calif. "On the Web, the perception is that there is no line to wait in and instant checkout. So if they click on the 'buy' button … every second they wait is a second they could bail."

Mr. Donahoo expressed a sentiment, shared by many e-commerce industry participants and observers, that this holiday season will prove a watershed in consumer use of the Internet and that the success or failure of on-line merchants will have a lot to do with how, and how fast, e-commerce moves forward.

"If you do a good job at it, they'll be customers for life, and if not, we'll see a falloff rate after the holidays," he said.

Elaine Rubin, chairman of Shop.org, a Silver Spring, Md., trade association for Internet retailers, said some stores with prominent brand names are "tiptoeing" around this year's shopfest to make sure their systems are ready. By contrast, "pure play" Web merchants are pulling out all stops with pricey, make-or-break television advertising.

"Traditional or multichannel retailers are pulling back," Ms. Rubin said, "and saying, 'We aren't ready for this Christmas on-line. We don't have the customer service and the fulfillment models, and rather than risking our reputations, let's pull back and wait until next year.' "

Credit card banks are weighing the risks and rewards of experimentation. Some are coming out with digital wallets that shoppers can use to store their payment and shipping information. Some are bidding for new customers through banner ad campaigns at popular Web sites.

"I think it's going to be an enormous e-Christmas, just phenomenal," said John McGuire, president and chief executive officer of Trintech Group, a payments software company in San Mateo, Calif. "Some banks are going to be prepared for it, and some are going to be hit disastrously on fraud and chargebacks.

"After Christmas there are going to be some very happy campers and some very disappointed people, who will be rushing out to deploy more secure technology and automation to protect themselves against fraud," Mr. McGuire added.

"The opportunity for fraudulent behavior becomes greater as more people go on-line," said Michael Ross, program manager at GTE Corp.'s Cybertrust unit in Needham, Mass., which sells digital certificate technology for on-line customer and merchant authentication. Cybertrust is working with Wells Fargo & Co., among others, to distribute certificates for transaction security and "nonrepudiation," which produces evidence to use if a customer tries to deny having made a legitimate transaction.

Amid the holiday hoopla, Visa, MasterCard International, the American Bar Association, and other groups are putting out tips for consumers on how to avoid Internet fraud. The lawyers group has set up a Web site for that purpose, safeshopping.org.

"To the extent that on-line transactions increase, you should assume increased fraud," said Thomas P. Vartanian, managing partner in the Washington office of Fried, Frank, Harris, Shriver & Jacobson, a New York law firm.

Like consumers, banks must educate themselves about the pitfalls of cyberspace, said Mr. Vartanian, who worked on the bar association project. "It is extremely clear what the regulators are saying: 'Don't underestimate or ignore that risk, and it's your responsibility to protect against it.' "

MasterCard is sponsoring a public education program, "Be E-Wise," with the National Consumers League. In a survey of 1,019 people done recently for the Washington-based league, 41% said they were concerned that their credit card numbers would be stolen if provided on-line, and 69% said - mistakenly, according to the sponsoring groups - that it is safer to pay for an Internet purchase by check or money order than by credit card.

Arthur Kranzley, senior vice president of electronic commerce and emerging technologies at MasterCard, said "merchants have addressed" most of the glitches and "we expect that there won't be any problems in terms of fraud or major consumer disputes."

Mr. Sweeney of Visa said banks "can do a lot to educate consumers when they go on-line." In the role of helpmate, banks "can take advantage of this mass adoption to build and deepen relationships with customers."

Les Dinkin, managing principal of NBW Consulting Group of Westport, Conn., said the anticipated surge in Internet transactions would have far-reaching ramifications, lifting acceptance of on-line banking and electronic bill presentment as well.

"This all represents a tremendous win for the banks in terms of increasing activity across the whole payment system," he said.

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