Of all the credit card issuers jockeying for position on the Internet, three stand head and shoulders above the rest: First USA, Providian Financial Corp., and NextCard Inc.

Though it is common to find product applications on card Web sites-and though some let on-line customers view their statements or pay bills-these three standouts go further.

Comprehensive Web strategies such as these do not automatically yield profits. None of the credit card companies making the most noise about the Internet does much talking about customer numbers or business volumes.

But they are aggressively staking out positions for the future, introducing Internet-tailored products, and making high-profile cobranding and marketing deals with other prominent on-line companies.

First USA, the card-issuing specialist that Bank One Corp. bought in 1997, has asserted its newfound leadership in the credit card industry at large-as measured by total loans-by becoming the biggest on-line advertiser and deal-maker.

NextCard, a three-year-old San Francisco boutique that offers cards aimed at avid on-line shoppers, has also been playing the partnership game.

Providian, a mid-tier issuer just now closing in on the bank card industry's top 10, has eschewed such deals. It has bought two on-line businesses-GetSmart Inc. and WebCard Visa-and launched an on-line brand, Aria, that has its own Web site.

Other card companies are certainly active on the Internet but in a less dramatic way. Fleet Financial Group and American Express Co. have developed Web-related products and services, and MasterCard International and Visa U.S.A. are making promotional deals to boost their brands.

Notably absent are some major card companies that otherwise pride themselves on technology and customer segmentation, including Capital One Financial Corp., MBNA Corp., and Citigroup Inc. Industry experts said they are waiting for these firms-or other less-predictable candidates-to come forward with bold initiatives.

Because First USA is one of the largest direct mailers, its status as an Internet heavyweight does not surprise people. The company has stuck its neck out with pricey deals: In February, it announced a $500 million marketing pact with America Online, for example.

But First USA chairman and chief executive officer Richard W. Vague says the company's $1 billion marketing budget has not been growing.

"We are simply substituting payment to an Internet partner for a direct- mail campaign," Mr. Vague said in a speech last week to a Forrester Research Inc. conference in New York. Internet marketing is just a different form of "an expense we were already incurring," Mr. Vague said.

Providian, by contrast, says it is allocating $75 million to $100 million this year for electronic commerce.

Internet experts say the emergence of Providian and NextCard as companies to watch is evidence of the Internet's ability to "level the playing field."

Lee Spirer, principal at Booz-Allen & Hamilton, said the race is on "not just to originate accounts but to become the card of usage, to get locked in on a consumer's on-line wallet."

Companies striving for this have "a belief in the long-term viability of the Internet as a vehicle," he said.

These three active issuers are "ratcheting up the bar for how you have to do business," said Jonathan B. Spira, e-commerce trend analyst and senior managing director at Basex Group in New York.

"Building up alliances-by paying for referrals or banner ads-gives additional credibility to a card company," Mr. Spira said. "Consumers don't necessarily know which of the 10,000 Visa cards they should get."

Though NextCard has done a lot with banner ads and promotional alliances, First USA has gone well beyond that, working with 50 Internet marketing partners such as Yahoo, Excite, Microsoft Network, Lycos, Dell, and E-Trade.

In most of these deals, First USA pays fees based on how many customers or prospects the partner refers. The deals have lives of up to 10 years.

First USA has also created e.card, a platinum Visa that gives 5% cash rebates at participating Internet merchants such as Amazon.com and eToys. Like NextCard Visa, e.card is meant for Internet shopping but can also be used in the physical world. Both offer instant on-line credit decisions to applicants.

Even without the Internet, "we don't have a face-to-face relationship with any of our customers," Mr. Vague said. He described this as an advantage over companies more accustomed to or dependent on personal contact.

He said the millions of dollars First USA has committed to Internet marketing make sense in light of that channel's lower acquisition costs. Customers obtained on-line cost about $50 apiece, he said, versus $75 to $100 otherwise. Some on-line partners produce more and better accounts than others, Mr. Vague said, but the same can be said of telemarketing and direct-mail lists.

"A lot of people think of the Internet as an experiment in technology, but we think of it as an experiment in marketing and strategy," Mr. Vague said. One initiative just under way at First USA is using e-mail as a marketing tool, he said.

The technology seems ideal for testing products with different terms and features. "On the Internet, you can have an idea for a new product in the morning, have it on-line in the early afternoon, and know whether it beat your empirical observations by the end of the day," Mr. Vague said.

First USA wants to sign as many deals as possible with Internet portals. Mr. Vague said these will ideally give the company some form of "category exclusivity," meaning no other payment cards can get similar prominence.

Certain relationships-like the one with the Excite search engine-have been expanded to include Bank One products other than credit cards.

"We think lending products are easier to do (on the Net) than deposit accounts," Mr. Vague said. "The bank is giving you money, versus you giving the bank money.

"Over the next few months," he said, "we hope to find out which types of products sell most easily," then use them as the basis for more challenging cross-sales.

Mr. Vague said First USA's size and scale have been a boon on-line. "There are a lot of deals we think we couldn't have done if we didn't have 56 million customers-certainly not on an exclusive basis."

Mr. Spirer of Booz-Allen said First USA is "trying to own the Internet space, to become the brand most closely associated with the Internet."

The company's advertising and cobranding campaigns are a "bold stroke" but expensive, Mr. Spirer said. One danger for First USA would be if people start bypassing popular portals in favor of "customized ways to get onto the Web."

First USA's approach has been apparent for about a year, long enough to be studied by potential copycats. But Providian Financial of San Francisco has taken an opposite tack.

Providian started revealing its e-commerce strategy in February and is pursuing both acquisitions and internal initiatives.

Last month Providian unveiled the Aria brand with a distinctive Web design that the company describes as "hip." Some of Providian's basic cards have been rebranded as Aria and are being sold through the site. The company views Aria as an eventual "umbrella" brand for other loan and deposit products.

James Rowe, senior vice president in charge of the e-commerce division, said Aria was selected from among 200 names suggested by Providian employees and an outside firm.

"We made a decision early on to build a separate brand (for the Internet) and support it aggressively," Mr. Rowe said.

Internet-specific brands seem to be proving their worth, he said. Amazon.com, for example, has become synonymous with books. Its struggle to expand into auctions and other activities suggest that brands should be "product-specific" to create "top-of-mind awareness," Mr. Rowe said.

The Aria Web site is linked to Providian's main site, but neither connects to GetSmart, which Providian bought in February for $33 million. GetSmart, a loan marketplace featuring 70 lenders, is operated autonomously to maintain the integrity of competing lenders.

A national television advertising campaign for GetSmart has just begun, and on-line applications have been trimmed from seven pages to two.

"This has a huge impact on the economics because customers don't have the patience for a lengthy application," Mr. Rowe said. GetSmart's "back- end execution has been improved dramatically, and our next phase is to modify the look and feel of the site."

Providian is not now actively marketing the WebCard Visa portfolio, which it bought in January from H&R Block.

Providian has run into a legal problem. It confirmed it is cooperating with the San Francisco District Attorney's Office, which is investigating complaints from consumers who say they were charged for unwanted features on credit cards, such as credit insurance.

To assuage concerns, Providian announced last week the "Providian Guarantee," an enhanced customer satisfaction program. Among other measures, the company will cancel any product add-on at the customer's request and will refund the fee. (See related article on page 31.)

Like Providian with Aria, NextCard aims to build a brand that consumers associate with the Internet. NextCard-founded in 1996 by a former Providian executive-calls its product "the first true Internet Visa."

NextCard, which started offering cards in December 1997, raised $130 million in an initial public offering last month. It said it plans to use the proceeds to open its own bank, NextBank, which would issue cards that are now the responsibility of a Silicon Valley community bank, Heritage Bank of Commerce.

Like many Internet companies, NextCard is operating at a loss and expects to do so for a while. According to its S-1 registration with the Securities and Exchange Commission, NextCard had a $17.5 million deficit for 1998, roughly 39,000 card accounts, and $66 million of receivables. NextCard says many customers were wooed by a generous balance-transfer offer, which the company plans to cancel.

By the end of February, NextCard said, it had received more than a million applications-most of them, obviously, rejected-and had made $125 million of loans.

Jeremy R. Lent, founder and chief executive officer, said NextCard is "creating a truly differentiated credit card product for someone who is not just an Internet user but an Internet transactor."

NextCard has marketing deals with E-loan, the USA Today Web site, and BabyCenter.com. The last, an on-line information and shopping site for parents, offers the My Baby Visa card, which parents can adorn with a photo of their child. The card gives discounts on baby merchandise.

Mr. Lent said NextCard customers do a high percentage of transactions that fall into the mail order/telephone order category, which includes the Internet. But people are still using NextCard "more in the physical world than in the Internet realm, which obviously I'm glad about because people still aren't doing enough Internet purchasing to make that a business proposition."

To spur on-line buying, Mr. Lent said, he puts great hope on a partnership his company formed with eWallet, a San Diego digital wallet developer. The NextCard eWallet is downloaded to a cardholder's personal computer, where it stores card account numbers, mailing addresses, and other information for completing on-line transactions.

"When you go shopping on the Web, the merchant gives you a form to fill out," Mr. Lent said. "Instead of having to fill it out, you simply drag the icon over the form and it inputs the right data in all the fields."

In contrast to wallets that are site-specific, Mr. Lent said, NextCard's "works on every one of the top 100 merchant sites and hundreds of others."

Mr. Lent described the Internet as a rare place where a little-known brand like NextCard can surpass some household names.

"Just as Yahoo is a more powerful brand for an Internet user than CBS or Time Warner and Amazon is a more powerful brand on-line than Barnes & Noble, there is a historical opportunity to create an Internet financial services brand that can actually have more power than some of the more established brands off-line," Mr. Lent said.

He cited proprietary market research that found NextCard and First USA each getting 25% of credit card applications filled out on-line, with the rest fragmented among other brands.

"Whereas First USA's strategy is more mass-marketing-oriented, ours is more target-marketing-oriented," Mr. Lent said. "We monitor click paths and the approval rates and balance transfers from different banner ads, and we can use that to determine where to place our banners and where to strike the relationships."

Mr. Spirer of Booz-Allen said NextCard wants to establish itself as "the virtual card company" and to capitalize on "the coolness factor of being the Internet brand."

Providian, he said, seems to be in a middle ground between mass and niche marketing. "It's hard to discern exactly what they're driving at by creating a separate brand for the Web," Mr. Spirer said.

But the Internet is "an interesting world in which it's really unclear who is going to win," Mr. Spirer said. "Maybe being the card company isn't it-maybe being the e-wallet is."

Mr. Vague of First USA predicted that the Net's credit card landscape will shake out into "a handful of very large players and a bunch of niche players."

Mr. Vague acknowledges how difficult it can be for a seasoned card executive to embrace the Internet. He looked back to 1995, when First USA was considering whether to introduce a cobranded card with America Online.

"I remember being the one guy in the room who thought it wasn't such a great idea," Mr. Vague said. "I thought we'd get a lot of teenagers applying for credit cards."

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