SAN FRANCISCO - Issuers that want to sell credit cards over the Internet should design them specifically for that channel, according John Hashman, president and chief executive officer of NextCard Inc.

Interest in Internet card sales has risen recently, largely because response rates to mail solicitations continue to fall. Mr. Hashman, whose firm is widely regarded as a leader in online marketing, offered some tips at the eCard 2001 marketing conference here.

He recommended keeping online applications short, delivering instant credit decisions, and offering products that have specific benefits when used online.

"This is not about putting your old product on the Internet - it's about making a new product," he said Monday in a keynote address to the conference, which was hosted by Thomson Financial Media, the parent company of American Banker.

Mr. Hashman is a big fan of using banner ads to promote cards on the Web. Many card issuers had soured on such ads, which seemed to get lost in the Web's visual clutter. But price cuts for the ads, along with the dot-com shakeout and advances in Internet marketing techniques, have helped bring them back into vogue.

In an interview after his speech, Mr. Hashman said that NextCard, which flashes three billion banner ads a month, spends about half as much to acquire cardholders as issuers who solicit by direct mail. He said he wondered why other companies have been as reluctant to use the ads.

The Internet era has brought about a new paradigm in card marketing, Mr. Hashman said: In the 1970s banks gave credit cards to customers as perks to go with their checking accounts. In the 1980s and 1990s issuers such as Capital One Financial Corp. and MBNA Corp. scoured data from credit bureaus to extend card offers, thereby inventing information-based lending. Today, he said, Internet technology has created a new lending model in which card companies must "focus obsessively on targeted marketing and data mining."

Mr. Hashman said NextCard's founder, Jeremy Lent, a veteran of Providian Financial Corp., conceived of a company that would exploit the Internet's marketing potential before he settled on the idea of a credit card issuer. Mr. Lent and his early collaborators "knew our product had to be different," Mr. Hashman said. Today, NextCard has $1.3 billion of loans under management and more than 700,000 cardholders, and anticipates revenues of $400 million in 2001.

In other advice, Mr. Hashman said that Internet card marketers must "make sure to grab" customers' balances. NextCard considers balance transfers more important to its bottom line than interchange fees, he said, and has made high balance transfers a prerequisite to high credit limits.

For companies with the right formula, "credit cards work on the Internet," Mr. Hashman said. "Other things might not work."

Mr. Hashman said instant credit, targeted marketing, and speedy product-testing cycles are important. On the flip side, he said, issuers should not focus too much on the public's online security concerns.

"There's only so much you can do on security," he said in the interview. "The industry tends to focus too much on tools and devices. Our customers just want to know who they're doing business with, what we say, and whether they can trust what we say. Brand has a lot more to do with it than digital certificates."

Patrick Remi Gauthier, senior vice president of smart card applications at MasterCard International, gave a different view in a later conference session. Though customers may not be interested in the details of a company's use of digital signatures, "if you explain to consumers that when they put a card through, it verifies who they are; that's something they understand quite well," he said.

But Mr. Hashman said that boasting about security was of little use, since most cardholders know that their liability for fraudulent card transactions is limited to $50.

"All customers want to know is if they're protected," Mr. Hashman said. "We were the first by far to say, 'If you use the card, don't worry.' You see Amex doing that all the time now."

In a session later in the day, Paul Jamieson, director of financial services at Gomez Advisors, said he gave NextCard credit for sticking with its strategy, but wondered why Mr. Hashman had gotten so explicit about it.

"NextCard has one of the best applications online, but I'm not sure that if I were John Hashman, I would have stood up here and given away all my competitive advantages," Mr. Jamieson said. "I hope all of you took very good notes."


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