By agreeing to use a collection of Web services from Microsoft Corp., Citigroup Inc. says it is gaining access to a high-profile advertising vehicle to promote its credit cards for online purchases.
Citi said Wednesday that its credit card division would use two Web applications from Microsofts .NET MyServices platform a multibillion-dollar project the software giant has been working on for years.
The price of the deal was not disclosed, and Citi executives said some of its other businesses were negotiating with Microsoft about using other pieces of the .NET platform.
In return for using .NET, Citigroup is being designated a preferred payment provider on other sites that use the Microsoft technology. This lets Citi plug its credit cards to about 200 million users Microsoft says are equipped to use .NET authentication services.
Citigroup is hoping the extra eyeballs will help it do more online credit card transactions. Only $400 million of the $15 billion to $20 billion of card transactions Citi processes each month are from Web sales, said Stephen J. Freiberg, the president and chief executive officer of Citi Cards. But online sales growth is quickly outpacing that of offline, he said.
We're looking to increase the number of card members and to increase our share of online transactions, he said.
Of Citis 15 million online accounts the largest share seven million is in credit cards, against four million banking accounts, two million brokerage accounts, and 500,000 account aggregation customers.
Citis decision is a tremendous boon to Microsoft, which has staked its future on .NET but has had problems convincing users of its reliability and security. Citigroup has agreed to use the Passport user authentication service, one of the .NET technologies that has come under fire. Citi also will use .NET Alerts, an application that will let it send customers e-mail and instant messages containing personalized information.
Gartner Inc. said in a survey report it issued last month that 52% of consumers it polled said they were aware of recent hacking incidents into Microsoft Passport and the latest version of Windows. Twenty-three percent said they would avoid using Passport, and another 22% said they would avoid upgrading their home computers to Microsofts Windows XP platform.
Perhaps partly as a result, Microsoft has had a hard time getting companies to use Passport. Last month only slightly more than 100 sites were Passport-enabled, according to Gartner and Microsoft owned 12 of them.
Avivah Litan, the vice president of payment services at Gartner, a consulting firm in Stamford, Conn., said Microsoft and Citi would both benefit from the deal. Really, what Citibanks getting is a promotional deal for Citicard on MSN, she said. What Microsoft gets in return is announcing that the one of the biggest banks in the world is one of their .NET customers.
What is less clear is how consumers will benefit. The goal of Passport is to allow consumers to use a single ID and password once to access a broad range of sites. But Citigroup, in an attempt to ensure that security is not compromised, will require users to input their usual Citi passwords as well as their Passport ones at its sites.
Security and privacy is a paramount part of our business and we wouldnt delegate that to anyone, not Microsoft or anyone else, said Katherine Sullivan, the president and chief executive officer of Citis electronic commerce unit. We have spent a lot of time on security.
Microsoft spokesman Sean Sundwell said: We realize that security really is a journey, not necessarily a destination, and we are doing everything possible in our power to make added efforts to ensure that our products are secure. Are they 100% secure right now? No. We dont believe any technology really is.
Paul Jamieson, the president of FiSite Research in Littleton, Mass., said that the dual sign-on process at Microsoft-Citi sites will be burdensome to customers. I fail to see that its providing a Citibank cardholder with any larger degree of convenience that they have otherwise, he said. It doesnt seem like its providing any added value for Citi customers.
But Ms. Sullivan noted that this authentication process is not repeated. The convenience that this .NET deal brings to our customers is if they are moving around the Internet to various sites, they dont have to keep putting in their user ID and can easily move among those sites.
James Van Dyke, a research director at Jupiter Media Metrix, said consumers would probably appreciate the convenience of e-mail and instant message alerts, as well as the ability to access online accounts and shop at Passport-enabled sites without having to enter information multiple times. And financial institutions, he said, can take advantage of the range of authentication technology used by Microsoft rather than invest in it themselves.
Chicagos Bank One Corp. signed on to use Microsofts .NET services last December, and Mr. Van Dyke said other financial institutions are in talks with the company. But the possibility of one software company playing such a large role in the transmission of consumer information is at once quite enticing and scary for financial services executives, he said.
Now you have all the valuables sitting in one safe, Mr. Van Dyke said, and should someone hack in, the concern is even more severe.
Are they able to solve some of the authentication issues while being able to deliver more convenience to consumers? he asked. Or, as Microsoft gets more information and users flowing through .NET, do everyones worst fears become realized?
