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This story appears in the March 2009 issue of Cards&Payments.

Some commercial card issuers long have offered employers control over some functions on the cards they distribute to their employees. A supervisor can configure one employee's card to work only at office-supply stores, for example. That supervisor even can enable an employee's card to work only at Staples, not OfficeMax, or vice versa.

Issuers could benefit from tying similar functionality to their consumer cards, some sources say. They could let a parent enable a son or daughter's card to work only at bookstores, for example, and only for a set time period and for a limited amount. Or a consumer cardholder could use a Web site to activate cash-advance or foreign-transaction capabilities only before traveling abroad.

The question is, would offering consumers such advanced controls create enough excitement, loyalty and fraud prevention to make up for the networks' and issuers' extra costs to offer them?

Some observers believe they will.

Over the next few years, issuers will offer consumers an increasingly sophisticated collection of controls and alerts on their cards, says James Van Dyke, founder and president of U.S.-based consultancy Javelin Strategy & Research. That includes tools he calls user-defined limits and prohibitions, which enable cardholders to configure their own cards around such parameters as setting maximum transaction sizes and enabling or blocking cash advances, foreign transactions and card-not-present transactions (see table).

"This is the next big thing," Van Dyke says. "It's more here-and-now than mobile banking."

MasterCard's 16-month partnership and subsequent acquisition in January of Ireland-based software developer Orbiscom Ltd. will help spark issuer competition to offer cardholders the best controls, he believes. A portion of MasterCard's $100 million deal hinges on Orbiscom's future performance, and Orbiscom specializes in providing card controls.

Issuers have had the ability to offer more-sophisticated cardholder controls and alerts for some time, either through Orbiscom or their own technology platforms, Van Dyke notes. "What we have not seen is deployment on a mass scale," he says.
"Orbiscom users have deployed it to some small-business customers only."

Orbiscom, founded in 1999, made a name for itself by offering issuers the ability to give their cardholders single-use, virtual account numbers, pitched as a security feature for online shopping. The company counts Discover Financial Services, Citibank, Bank of America Corp. and JPMorgan Chase & Co. among its customers.

MasterCard began working with Orbiscom in September 2007, when it unveiled MasterCard inControl, a technology platform that enables companies to control and monitor business-to-business card transactions.

Royal Bank of Scotland last year became the first financial institution to offer MasterCard inControl to its commercial card customers. InControl helps companies prevent internal commercial card fraud by directing how, when and where payment cards may be used–including for one-time purchases–and by sending alerts to company supervisors for preapproval before transactions.

Michael Fiore, MasterCard vice president of emerging solutions development, says RBS has used inControl to create a payment system in which employees at a corporation must submit requests for purchases made with company commercial cards. Employees' requests must state why they are buying an item and exactly how much it will cost with tax, shipping and any extra fees. "If approved, they get back a single-use number to use with the merchant for that amount for a set period of time," Fiore says.

MasterCard would like to see issuers make greater use of its inControl tool to offer a variety of self-control functions to consumer cardholders, small businesses and corporations. The platform "allows you to use all of the criteria that come across in a credit card authorization request," Fiore says. "We can see who the merchant is, what category of spend it's in, the time of day and day of the week."

Such tools could enable parents to manage their families' credit card spending or an individual to limit spending per day or per transaction, for example. "You can set guidelines for yourself for the month," Fiore continues.

Cardholders whose issuers offer the service also could enable text alerts to their mobile phones that display the amount of a transaction, when it occurred and whether it was denied or accepted.

RBS would not offer specifics about whether it plans to offer its consumer cardholders controls and alerts similar to those it offers its commercial cardholders. But the issuer seems to like the idea.

Consumer 'Value'
"This could revolutionize the way consumers feel about their cards, giving them more peace of mind and a stronger sense of control on their spending," an RBS spokesperson wrote in an e-mail message to Cards&Payments. "That is something all consumers will value, especially in the current economic climate."

RBS is "constantly considering innovative products and services, as we've done for commercial cards, and will no doubt be considering the myriad consumer opportunities this opens up," the spokesperson wrote.

Discover representatives would not discuss whether, or for how long, the issuer and network will continue to use Orbiscom's services now that competitor MasterCard owns the company. But Ryan Scully, Discover director of business cards, says the brand will continue to offer customizable controls and alerts useful to its small-business cardholders.

"Let's say a lawyer hires a summer intern and needs that intern to purchase a bunch of office supplies," Scully says. "The lawyer wants to give the intern enough flexibility to make the purchase but not enough to be dangerous."

The lawyer can configure transaction limits on the firm's cards, enabling higher transactions on one card and lower transaction amounts on another. "It's something they can go online and change every day, every hour, every minute," Scully says.

Discover business cardholders also can sign up to receive e-mail alerts for transactions on their cards over a certain amount, Scully says. They cannot enable and disable cash advances on their own, but they can contact customer service to ask Discover to set the cash-advance limit on a particular card to zero, he says.

Consumers will come to demand more of the types of controls issuers now offer business cardholders, Scully says. "Based on the current economic outlook over the next couple of years, it wouldn't surprise me that consumers would want to have more controls around their spending," he says, noting Discover is working to develop such services on its consumer cards.

Controls Can Vary
American Express Co. clients can restrict spending on individual employee corporate cards by daily or monthly limits and by industry, such as T&E merchants.

Company-spending managers can restrict employee purchasing cards to a specific merchant category code, such as office supplies only, or restrict cards even more specifically, such as only at Staples or only at OfficeMax.

Holders of AmEx Open small-business cards can set specific spending limits or restrict cash access on individual employee cards.

AmEx representatives declined to comment about whether AmEx might begin to offer consumers similar card controls. The card brand, however, already enables its consumer cardholders to opt to receive alerts via e-mail, mobile phone or both. Alert options include payment-due reminders, payment-received confirmations, balance updates, spend tracking (for its charge card members), membership rewards point balances and updates on how close cardholders are to exceeding credit limits.

Opt-in, one-way alerts about basic card-transaction activity will be standard within a few years, Van Dyke believes. And issuers will compete with each other to offer ever-more-sophisticated alerts that consumers can configure themselves and change from day to day if they wish–through Web sites or mobile phones. Issuers will expand the types of alerts, levels of customization and channels for delivering alerts, he adds.

Alerts from card issuers already are starting to gain popularity among consumers. In a recent survey of 1,367 adults residing in the United States conducted for mobile-banking and mobile-payments services provider Monitise Americas LLC, 77% of respondents said they believe it is important to have real-time information regarding their bank and credit card accounts.

Visa is talking up its commercial launch of a service through which issuers of its credit and debit cards can send to cardholders' mobile phones  real-time alerts, reward offers and store-locator services.

"On the consumer side, that's a path we're going down ... personalizing messages to cardholders," says Elvira Swanson, a Visa spokesperson.

Cardholders configure the types of alerts and offers they want to receive through their issuers' Web sites to arrive via e-mail, mobile short messaging service (SMS) texting or both. Alert choices include cash withdrawals from ATMs, cross-border transactions, Internet- or telephone-initiated transactions, and transactions that exceed amounts chosen by the cardholder.

Visa uses its VisaNet processing switch to deliver the information to cardholders within seconds of when they or a fraudster initiates a transaction. Based on the information, cardholders can see suspicious activity and immediately ask the issuing bank to block further transactions on the account, or they can be assured the transaction just initiated is for the correct amount.

Cardholders also can opt in or out of receiving special offers and coupons from participating merchants directly to their mobile phones. Visa has signed up some 17 merchants so far to participate in the service, including Jos. A. Bank, Overstock.com, Bonefish Grill and Planet Hollywood.

A Visa issuer also can integrate the service into Google Maps. That means cardholders whose mobile devices are powered by the Android operating platform can download an application from Visa that enables their phones to find nearby merchant locations to redeem coupons and special offers. The applications also will provide driving directions to those locations and locate ATMs that accept Visa.

The card network began piloting the service in August with 2,000 participating cardholders and several issuers in the U.S. and Canada, including US Bancorp, Wells Fargo & Co., TD Bank Financial Group and Royal Bank of Canada.

Swanson is one of the cardholders testing the service. "We generate the alert and send the alert as close as possible to the transaction," Swanson says. "I've had experiences where I'm actually signing for the transaction and I receive an alert."

Chase began offering the service commercially to its cardholders in December. The issuer, which did not respond to requests for comment, will have exclusive access to full use of service for the first quarter of this year, after which Visa will offer it to any U.S. issuer.

Visa's next task is to enable cardholders to act on alerts through their mobile phones, Swanson says. That way, cardholders receiving alerts could respond to their issuer with instructions via reply messages on what to do about the transactions in question.

Two-way communication through mobile text responses, for example, would enable a cardholder to flag a transaction that just occurred as fraudulent, without having to call an issuer customer-service representative first, Swanson says.

Giving cardholders new tools in the fight against fraud is one way issuers can help justify the expense of offering enhanced controls and alerts to cardholders, says Van Dyke, who expects more issuers to rely on card networks for such services instead of building their own, internal tools.

Neither MasterCard nor Visa would reveal pricing models for their cardholder control and alert services, but Van Dyke expects issuers to pay initial network-licensing fees, up-front costs of integrating the services into their own networks, and annual maintenance and use fees for software updates and support from the networks.

Even if an issuer pays $200,000 upfront for initial licensing fees, then 18% of that for annual fees and $100,000 for their own integration costs, "I think that's cheap," Van Dyke says. "If you look at the fraud problem, it's definitely not getting any better."

Participants in the payments industry bear the brunt of the $45 billion annual cost of card-fraud losses worldwide, Van Dyke says. So tools that enable cardholders to block or at least flag suspicious transactions as soon as possible can help pay for themselves in savings from fraud reduction, he says.

Indeed, offering such services will create loyalty and excitement among cardholders who appreciate the option of adding extra controls, alerts and fraud-prevention tools at their fingertips, Van Dyke says.

"We're starting to see networks move forward," he says. "It's still early, so for a bank or technology vendor that wants to invest in this area and not have a 'me-too' solution, there's still time."

As new pilots and commercial rollouts proliferate, perhaps this could be the year consumer cardholder-configured alerts and controls gain momentum.  CP

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