It’s way too early to write the definitive history of credit cards on the Net,
but here are the leaders in the online movement (so far).

First USA launched an answer to NextCard, e.card, “E-Commerce Services from First USA.”

First USA

While E-Loan and NextCard have pioneered Web-based sales and marketing tools and techniques, First USA (Wilmington, DE; $65.2 billion; 60.5 million customers), a division of Bank One (Columbus, OH), through massive marketing expenditures, has captured the lion’s share of business online. The Brittain study found that First USA’s share of online buyers was three times higher than its nearest competitor, MBNA, which is advertising on 500 of the 4,500 Web sites hosted by its affinity partners. MBNA has experienced a 20% approval rate online.

First USA’s online reach is remarkable. One analyst estimates First USA will have more than 1.5 billion online advertising impressions next year. Besides co-branded efforts with Yahoo! launched in Feb. (OBR 2/98 ) and AOL (launched in June 1996; OBR 7/96 ), the card giant has a $90-million, five-year exclusive pact with Microsoft, and will likely be part of parent Bank One’s $125-million deal with Excite.

While the company has primarily relied on co-branded offerings to build its Web-based portfolio, the company has just released its own Net-branded product, the e.card (screenshot above). The card has a great name, although the ecard.com domain is currently owned by Internet Outfitters in Santa Monica (310) 664-4800. The card features a 5% cashback feature from Amazon.com and several other merchants including eToys. Initial rate is 3.9% and normal “go to” rate is 9.9%.

The First USA e.card site www.getecard.com is obviously a work in progress as it only includes three pages: home page (left), online application, and regulatory-required terms and conditions.

NextCard

NextCard (San Francisco, CA) continues to lead the race to become the first Amazon.com of financial services. Through November, the company has received more than 750,000 applications. According to the company, approval percentages are, “consistent with industry averages.” The company’s animated “2.9%/Apply Now” banners are seemingly everywhere on the Net, not surprising considering the company is now a top-20 banner advertiser and has some 2,000 affiliates pitching its product for a $10 per approved application.

Bottom line, less than 9 months from start-up, NextCard
is pulling in more than 10% of total online credit card applications—a phenomenal performance considering its deep-pocketed competition. As a result, NextCard bagged an immense $38 million round of financing in Nov. from three blue chip Silicon Valley VC firms. The money will be used to continue the company’s aggressive online marketing efforts and capitalize an Internet banking operation. We wouldn’t be surprised if they simplified the process by purchasing an existing bank or thrift.

American Express

American Express (New York; 42.7 million cardholders) has clearly been the leader in online card services, first offering online account access in February 1995 via America Online (OBR 5/95 ) and the Web in April 1997. The company’s early 1995 AOL offering also included online card member and merchant account applications. The company was also the first to integrate value-added non-financial info, primarily travel-related, into its online presence (on AOL) in 1995 and on the Web in 1996 and 1997. Finally, and most significantly, industry sources unofficially peg AmEx’s registered online base at one million. 8

Honorable Mention
Company	Date	Milestone	OBR Ref
Block Financial	1992	first card with online statement data (via CompuServe)	2/96
Capital One	March 1995	first interactive credit card Web site including online application and financial calculator	5/95
Wells Fargo	July 1995	first MasterCard/Visa issuer with Web-based statement data	8/95

Source: Online Banking Report, 11/98

 

Portal Banner Advertising: 1998 vs. 1997

Source: Online Banking Report, 11/98 and 10/22/97; only financial service advertising is listed; search terms were put in parenthesis (except Yahoo) so only Web sites containing the exact phrase are counted; each term was searched on 10 times at each portal site (130 searches per portal); access was from a Seattle POP; no attempt was made to alter the normal cookie file on OBR’s Netscape 4.0 browser; percentages indicate how many times out of 10 searches the banner appeared, if no percentage is listed then the banner appeared 100% of the time, percentages may not add to 100% if non-financial banners were present. Notes: 1.) GetSmart has a paid link; 2.) HomeShark has a paid link

Abbreviations: AmCent = American Century; AmDebt = AmeriDebt www.mercuryseven.com CCC = Consolidated Credit Counseling Services www.debtfree.com CityLend = City Lending, a division of City National Bank of West Virginia www.citylending.com ConsInfo = ConsumerInfo.com; DataTransAssoc = Data Transfer Association www.evsistore.com MM Int’l = Money Management International www.mmintl.com Mtg Net = MortgageNetwork.com; Mtg Qte = MortgageQuote.com; Nations CC = NationsBank credit cards; Wells = Wells Fargo

Portals, previously referred to as search engines, are used by the majority of Web users (87% in one survey). Financial services companies have been advertising on these sites since they first accepted advertising in 1995. But even as recently as 12 months ago (see table right), less then half of the lending “inventory” was used. The times have changed. This month, we found 95% usage. Of thirteen loan-related search terms across the five largest portals, only three weren’t at least partially sponsored by financial companies (“auto loan on InfoSeek, “credit card” and “personal loan” on HotBot). If you factor in partial sponsorships, financial company share of the loan terms was 86%.

The most interesting result of this research: portal advertising is dominated by non-banks including mortgage brokers, Web-based loan marketplaces, and other specialty lenders. The day we tested, only two traditional financial institutions were advertising: NationsBank was pitching its card under “credit card” on Yahoo and Infoseek; while Wells Fargo was a partial sponsor of various “loan” phrases on HotBot (see table below).

*Number of loan terms with a financial services banner ad appearing
in at least one out of 10 searches of 13 loan terms at five portals
(65 total sponsorship opportunities)

**Taking into account partial (rotating) sponsorships of certain words, the actual financial services share of loan terms is 56.1 of a maximum 65 sponsorship opportunities, or 86%.

If this trend continues, it will have profound implications on Web-based lending. In this new world, it will be necessary to partner with one or more of the new loan marketplaces: The Lending Tree, Get Smart, Quicken Mortgage, iQualify, MortgageAuction.com , eStudentLoan.com , and others.