SPS Shrinks

SPS Transaction Services said its active private label accounts declined 11% last year from 3.5 million to 3.1 million accounts. Total card loans also dropped from $2.2 billion to $1.9 billion. SPS continues to be plagued by high charge-offs and delinquency. For last year average chargeoffs hit 9.2% compared to 7.7% for 1996. Delinquency (30-89 days) also grew from 4.9% in 1996 to 5.4% last year. Long term delinquency (90-179 days) also edged up from 3.9% to 4.2% last year. However SPS did report a 9% increase in electronic transactions processed during the fourth quarter with the total number hitting 122 million versus 112 million for the fourth quarter 1996. Active commercial accounts at year’s end were also up 9% to log in at 979,000.

Details

MoneyGram up Slightly

MoneyGram Payment Systems, Inc. reported Wednesday that its net income for the three months ended December 31, 1997 was $2.4 million, or 14 cents per common share, compared with $1.9 million, or 12 cents per share, in the fourth quarter of 1996.  For the full year, net income was $11.7 million, or 70 cents per share, compared with $14.6 million, or 88 cents per share, in 1996.

The fourth-quarter results include charges for impairment reserves on certain underperforming agent contracts with guaranteed minimum commission payments.  These contracts were entered into prior to 1996.  Charges were also recorded for non-recurring expenses of converting MoneyGram operations, which have been conducted under licenses held by First Data Corporation (FDC) in the various state jurisdictions, to licenses issued directly to MoneyGram Payment Systems, Inc.  Finally, reserves were taken for miscellaneous asset write-downs and other items.  The after-tax effect of these charges on net income was 6.7 million.

Separately, the company also reversed the valuation reserve against the deferred tax asset that had been recorded on the company’s balance sheet at the time of MoneyGram’s divestiture by FDC.  The reversed valuation reserve was in an amount of $6.9 million.  The deferred tax asset will be amortized over future years and results in reduced tax payments in those years.

Total revenue for the fourth quarter was $33.7 million, an increase of 10 percent over the $30.7 million recorded in the fourth quarter of 1996. Revenues for 1997 were $140.9 million, an increase of two percent from the 1996 level of $137.7 million.

Transactions handled by MoneyGram totaled 1.46 million in the fourth quarter and 5.87 million for the full year.  This compares with year-earlier levels of 1.40 million and 5.78 million, respectively.

James F. Calvano, Chairman and Chief Executive Officer, said  “In 1997 we had to confront a number of significant challenges, including the organizational task of structuring MoneyGram as a public company and securing the required money-transmitter state licenses.  Much of this transitional work has now been completed, and we have begun the new year with the successful move earlier this month of our transaction processing from FDC’s data processing center to computer facilities provided by IBM Global Network Services.  With this transfer of our transaction processing, and with the state licensing process now complete, the final separation of MoneyGram from First Data is at hand, and we have laid the foundation for the accelerated growth of our company in 1998.”

MoneyGram Payment Systems, Inc. is a leading non-bank provider of consumer money transfer and other financial services.  Through the MoneyGram network of more than 22,000 convenient agent locations, customers can wire cash in minutes to more than 100 countries throughout the world.  MoneyGram ExpressPayment(SM) service enables credit card issuers, mortgage servicers, finance companies, collections companies and others to collect good-funds payments from delinquent debtors within hours.  The company was organized in January 1996 and completed the initial public offering of its common shares on December 11, 1996.

                       MONEYGRAM PAYMENT SYSTEMS, INC.
                           Statement of Operations
                        Three months ended December 31
                   (in millions, except per-share amounts)

                                           1997              1996
    Revenue

      Fee and Other                      $ 28.0             $ 24.4
      Foreign Exchange                      5.7                6.3
        Total Revenue                    $ 33.7             $ 30.7

    Expenses

      Agent Commissions                  $ 17.1             $ 10.4
      Processing                            7.9                6.1
      Advertising & Promotion               7.4                6.7
      Selling & Service                     2.6                2.9
      General & Administrative              6.2                1.5
        Total Expenses                   $ 41.2             $ 27.6

    Income (Loss) before Income Taxes    ($ 7.5)            $  3.1
    Income Tax Expense/(Benefit)           (9.9)               1.2

    Net Income                            $ 2.4             $  1.9

    Basic Earnings per Share              $ .14              $ .12
    Diluted Earnings per Share            $ .14              $ .12

    Weighted Average Shares and
      Equivalents Outstanding            16,686             16,625

                       MONEYGRAM PAYMENT SYSTEMS, INC.
                           Statement of Operations
                       Twelve months ended December 31
                   (in millions, except per-share amounts)

                                           1997              1996
    Revenue

      Fee and Other                      $113.6             $108.6
      Foreign Exchange                     27.3               29.1
        Total Revenue                    $140.9             $137.7

    Expenses

      Agent Commissions                  $ 52.8             $ 44.3
      Processing                           26.7               23.9
      Advertising & Promotion              28.0               29.1
      Selling & Service                    11.2               10.6
      General & Administrative             14.4                6.2
      Total Expenses                     $133.1             $114.1

    Income before Income Taxes           $  7.8             $ 23.6
    Income Tax Expense/(Benefit)           (3.9)               9.0

    Net Income                           $ 11.7             $ 14.6

    Basic Earnings per Share             $  .70             $  .88
    Diluted Earnings per Share           $  .70             $  .88

    Weighted Average Shares and
      Equivalents Outstanding            16,701             16,625

Details

ECHO Up 24%

Electronic Clearing House Inc. reported fiscal 1998 first-quarter net earnings of $62,000, compared with net earnings of $50,000 for the same period last year, a 24 percent increase, resulting in net earnings per share of $0.004 for both periods.

Overall revenue increased 3 percent over the same period in the prior fiscal year. The increase reflected revenue growth of 6 percent in bank-card processing and transactions revenue and a 53 percent decrease in terminal sales and lease revenue over the same period in the prior fiscal year.

Fiscal 1998 first-quarter revenues and income from operations were $4,212,000 and $69,000, respectively, as compared with $4,087,000 and $115,000 for the same period last year.     “In addition to our profitable operations during the first quarter of our fiscal year, ECHO received an order for 3,100 terminals from U-Haul and ECHO made a smooth transition in the presidency of the company from Mr. Don Anderson to Mr. Larry Thomas,” stated Joel M. Barry, chief executive officer of ECHO. “We believe that both of these events will have positive and long-term effects on the company.”

Electronic Clearing House provides credit-card processing, check guarantee and various Internet services to more than 8,000 retail merchants, as well as providing inventory-tracking services to thousands of U-Haul dealers across the nation.

Through a subsidiary, Computer Based Controls, ECHO designs, develops and manufactures software and point-of-sale hardware that is utilized as credit-card-processing terminals, automated money-order dispensers, utility-bill payment systems and inventory-tracking devices.

Details

InfiStar is Born

It’s a credit card issuer’s dream the capability of originating new accounts without regard to the marketing cost or risk exposure. Yesterday Atlanta-based InfiStar and Mellon Bank announced the signing of a novel, multi-year agreement whereby InfiStar will develop VISA and MasterCard accounts on Mellon’s behalf, and then sell the productive accounts to Mellon. Mellon will continue to internally generate credit card accounts while InfiStar will tap into its own marketing database. InfiStar will also provide Mellon with marketing and portfolio management expertise. InfiStar is a wholly owned subsidiary of InfiCorp Holdings Inc. and was formerly known as Card Issuer Program Management. InfiCorp, headed by industry veteran Jerry Craft, recently received approval for a credit card bank.

Details

Best Travel Card Awards

The suspense is over, InsideFlyer finally announced the winners of the 10th Annual Freddie Awards in association with MCI and American Express SkyGuide at the Westin New York Hotel.

![][1]     An unprecedented 44,000 frequent travelers voted, rating airline and hotel programs in eight categories  Program of the Year, Best Award, Best Bonus, Best Program Newsletter, Best Web Site, Best International Program, Best Elite-Level Program and Best Customer Service.  A Freddie was also awarded for the Best Frequent Traveler Affinity Credit Card Program, and Petersen singled out four programs for Special Recognition awards.

![][2]     “Frequent travelers around the world know what the best programs are. They travel with them daily.  We’re honored that for the last ten years they’ve chosen to allow the Freddie Awards to represent their votes,” said Petersen. “Only a handful of programs embody the sort of excellence it takes to earn the honor of a Freddie Award.”

![][3]     The Continental OnePass and Marriott Rewards frequent travel programs snapped up the first etched crystal trophies for the coveted Program of the Year awards.  Continental went on to win additional Freddies in four more categories  Best Program Newsletter, Best Web Site, Best Elite-Level Program and Best Customer Service.  Buoyed by the revamping of their program, Marriott Rewards also won four more Freddies  Best Award for its 200,000 point Choice Award, Best Program Newsletter, Best International Program and Best Customer Service.

![][4]     Hilton HHonors made a respectable showing with three Freddies  Best Bonus for its “Double Dip,” Best Web Site and Best Elite-Level Frequent Guest Program.  Diners Club topped the list for Best Frequent Traveler Affinity Credit Card and Virgin Freeway took the Freddie for Best International Frequent Flyer Program.  A surprise showing in this year’s Freddie’s came from Southwest Rapid Rewards, which garnered second place wins in two categories Best Frequent Flyer Program and Best Customer Service.  Petersen believes this reflects changes in the voting process.  For the first time, Freddie ballots ![][5] included a value vote which allowed voters not only to choose the best program, but also to rate their choice with 10 equating the highest score possible.  This was a change from the popular vote which was used in the first nine years.  It was not a matter of how many votes a program received but the overall merits of what each program has to offer which determined the winners. The addition of the value vote and a record number of voters made the Freddie Awards for 1997 the most comprehensive and accurate ever.

![][6]     This year Petersen gave special recognition to several programs and individuals he believes demonstrated exceptional management and commitment to frequent travelers.  He commended Reno Air QQuick Miles for a program debut promotion akin to Hilton’s “Double Dip;” Northwest WorldPerks showed commitment to frequent flyers by allowing members to access award seat availability online; Sheraton Club International created Instant Rewards, a program which allows points to be used as currency in its hotels; Continental OnePass used Internet email to alert members to weekend award specials; and finally, Petersen lauded the efforts of Senators John McCain, Bob Graham and Kent Conrad for their efforts to fight new tax on miles.

The Freddie Awards are named after Sir Freddie Laker who attracted fame for his pioneering marketing ideas within the travel industry in the 1970s. The “Freddies” were introduced to members of frequent traveler programs in 1988.  Petersen, then the editor of FREQUENT, decided to poll members of various frequent traveler programs.  The Freddies have since grown in stature and importance and are the oldest and most prestigious awards solely voted on by frequent flyers themselves.

Sponsors of this year’s Freddie Awards include the following

InsideFlyer, a monthly magazine dedicated to the coverage of frequent travel programs around the world, helps more than 80,000 readers optimize their mileage and point earning potential through in-depth news coverage of programs, their partners and special bonuses and promotions.

MCI, headquartered in Washington D.C., offers the industry’s most comprehensive portfolio of communication services.  With 1996 revenues of $18.5 billion, MCI ranks as one of the world’s largest telecommunications companies. MCI is also the world’s third largest carrier of international voice traffic and operates one of the world’s most advanced Internet networks. Since its founding in 1968 MCI has been a leader in bringing the benefits of long distance competition to businesses and consumers and is now leading the charge to open U.S. local calling markets to competition.

SkyGuide, published by American Express, is a monthly pocket sized airline schedule guide used by frequent business travelers.

                            Freddie Award Winners
                     Numbers Represent Value Vote Rating

    Program of the Year

     Airline
      Continental OnePass                9.30
      Southwest Rapid Rewards            9.12
      United Mileage Plus                8.98

    Hotel
      Marriott Rewards                   8.58
      Hilton HHonors Worldwide           8.44
      Westin Premier                     8.37

    Best Award

     Airline
      Delta SkyMiles – Hawaii coach award for 30,000 miles
      American AAdvantage – Reno Air/Midway Airlines
      partner awards for 15,000 miles
      United Mileage Plus – shuttle awards for 6,000 miles

     Hotel
      Marriott Rewards – 200,000 point Choice Award
      Hilton HHonors Worldwide – Point Stretchers
      Hyatt Gold Passport – Equal reward redemption levels
      for regular and resort hotels

    Best Bonus

     Airline
      American AAdvantage – “Drive and Dream” promotion
      United Mileage Plus – “United Connection” online bonus
      Continental OnePass – BusinessFirst double miles promotion

     Hotel
      Hilton HHonors Worldwide – “Double Dip”
      Marriott Rewards – “Double Take” promotion
      Hyatt Gold Passport – “Nights after Nights” promotion

    Best Program Newsletter

     Airline
      Continental OnePass Update         8.63
      United Mileage Plus Mileage Plus   8.40
      TWA Frequent Flight Bonus Update   8.34

     Hotel
      Marriott Rewards Marriott Rewards  8.24
      Hilton HHonors Worldwide Update    8.09
      Westin Premier Preview             8.06

    Best Web Site

     Airline
      Continental OnePass                8.88
      Northwest WorldPerks               8.73
      TWA Frequent Flight Bonus          8.65

     Hotel
      Hilton HHonors Worldwide           8.34
      Marriott Rewards                   8.21
      Sheraton Club International        8.19

    Best International Program

     Airline
      Virgin Freeway                     8.49
      Qantas Frequent Flyer              8.12
      Thai Royal Orchid Plus             8.08

     Hotel
      Marriott Rewards                   8.64
      Hyatt Gold Passport                8.46
      Hilton HHonors Worldwide           8.40

    Best Elite-Level Program

     Airline
      Continental OnePass                9.28
      United Mileage Plus                9.02
      TWA Frequent Flight Bonus          8.91

     Hotel
      Hilton HHonors Worldwide           8.62
      Westin Premier                     8.51
      Marriott Rewards                   8.47

    Best Customer Service

     Airline
      Continental OnePass                9.19
      Southwest Rapid Rewards            9.18
      United Mileage Plus                9.01

     Hotel
      Marriott Rewards                   8.72
      Hyatt Gold Passport                8.59
      Westin Premier                     8.58

    Best Frequent Traveler Affinity Charge or Credit Card

     Diners Club Club Rewards            9.45
     Marriott Rewards Visa Gold          8.77
     American Express Membership
      Rewards                            8.74

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Details

IVI Ingenico Gets Argentina Contract

International Verifact Inc. announced that its Latin American joint venture, IVI Ingenico Inc., has received an order commitment totaling over US $1.0 million to supply ITRON with Ingenico’s Elite 500 electronic payment terminals. These terminals will be deployed throughout Argentina to authorize and process healthcare transactions.

IVI Ingenico, Inc., based in Coral Gables, Florida, is a joint venture between IVI and its strategic alliance partner, Groupe Ingenico, of Paris, France.

Jorge Fernandez, Executive Vice President and General Manager, IVI Ingenico stated, “The decision to use our products is a strong endorsement of our next generation technology in EFT-POS. Furthermore, it demonstrates our company’s continued worldwide leadership in smart card base POS products.”

The terminals will be used in doctor’s offices, pharmacies, clinics and hospitals to verify a patient’s eligibility to receive healthcare benefits. While these transactions will initially be processed using magnetic stripe cards, they can be easily switched to smart cards in the future, which would further reduce telecommunications and other data processing costs. The software will be developed as a partnership between ITRON and IVI Ingenico.

“We chose IVI Ingenico for several reasons. The first one is their technology, which will allow us to purchase products that meet our current requirements, but still provide us with a built-in smart card platform to migrate to in the future. No additional investment in hardware will be required to do this. Secondly, their UNICAPT(R) operating environment will allow us to write and maintain our own applications, while providing us with the security and flexibility that we will need in managing different applications in the future. And finally, we chose their solutions because we had already worked with their products in the past and have experienced first hand their quality and flexibility,” Gabriel Simsic, Vice President, ITRON.

Group Ingenico is engaged in the design, development and sales of secured terminals and complete systems dedicated to electronic payments, loyalty and electronic benefits transfer and is the recognized leader in smart card technology in Europe, Africa and the Asia-Pacific areas.

IVI is engaged in the design, development and sale of electronic payment solutions for retailers, financial institutions, governments and other businesses. The company’s hardware and software products include solutions for point-of-sale debit/credit/EFT/EBT terminals, check readers, smart card readers, POS printers and secure PIN entry devices. Additional company information is available on IVI’s website at .

Details

Cyberflex Multi 8K Card

Schlumberger has released for sale the latest in its family of Java-based smart cards, the Cyberflex Multi 8K card, offering enhanced support for secure multiple applications. Cyberflex Multi 8K is immediately available, and is now being shipped in the current version of the Cyberflex Development Kit.

Cyberflex Multi 8K is built on the Cyberflex 2.0 Core technology introduced last year by Schlumberger, and with 8K bytes of EEPROM, the new card has three times the memory space available for Cardlets(TM), or applications. In addition it has internal facilities that reduce the amount of code required for individual applications. The result is that an increased number of bigger Cardlets can be loaded onto the card.

“We are pleased about Schlumberger’s announcement today,” said Patrice Peyret, director of consumer transactions at JavaSoft, a business unit of Sun Microsystems, Inc. “With their new Cyberflex card, Schlumberger continues to make significant headway in Java Card innovation and development and in bringing new products based on Java technology to the market.”

“Cyberflex Multi 8K incorporates a real advance in technology that brings our customers what they have been asking for – more space for applications,” said Paul Beverly, vice president of marketing for Schlumberger Smart Cards division. “With the hundreds of Cyberflex Development Kits we’ve sold, we expect 1998 to be the year in which interoperable multi-application cards will hit the streets in volume applications.”

Schlumberger continues to lead the smart card industry in the development of this exciting new technology for smart cards, and in the availability and shipment of Java-based smart cards. With Cyberflex Multi 8K, a new level of technical capability has been established that will enable developers to introduce practical applications for all markets.

Until now smart cards, which incorporate a computer chip and memory instead of the traditional magnetic stripe, have been very successful in single roles – as bank cards, phone cards, electronic tickets and so on. But like early computer software, the programs they run are specific to a particular manufacturer’s card, and to all intents and purposes ‘carved in stone’.

Java card and Cyberflex have changed all of this. Now issuers can put more than one application on a card, securely, and modify the applications after the cards have been issued.

This means that consumers will for the first time have cards that can perform a range of functions – such as debit, credit, e-purse, e-commerce and loyalty – and which can also have these applications changed and updated. This reprogrammable quality is expected to have an enormous impact as consumers will be able to individualize cards to reflect their own needs and priorities.

About Schlumberger

Schlumberger Electronic Transactions offers a flexible portfolio of smart card-based solutions for businesses and communities of all kinds. The company provides cards, terminals, development tools and support in open configurations for operators, developers, integrators and distributors worldwide. Under The Smart Village brand, the Schlumberger offer includes the milestone Cyberflex card, the industry’s first Java-based smart card.

Schlumberger is unique in that it provides both smart cards and turnkey solutions along with a full range of tools and services for Telecom, Banking, Retail, Mass Transit & Parking, Healthcare and Networks. The company has design and manufacturing facilities in Europe, North America, Asia and Latin America.

The Electronic Transactions group employs over 5,000 people and operates 45 facilities. Among dedicated facilities in 34 countries, the group has 9 research and development centers strategically located in Europe, Asia and North America.

Schlumberger Electronic Transactions is a business segment of Schlumberger Ltd., a $10.65 billion global technology and service company providing oilfield services, natural resource management, smart card transactions-based technology and associated systems, and semiconductor test equipment.

Details

MSFDC Picks E-Bill Printer

Interface Systems, Inc. and MSFDC, the electronic bill presentation and payment joint venture between Microsoft  and First Data Corp. announced that the new MSFDC service plans to employ Interface’s enterprise printing and document formatting systems for mainframe computers.  This means that when the service is introduced later this year, customers of billers using mainframes will be able to see customized utility, banking and other bills in the format to which they are accustomed — whether displayed electronically or printed in hard copy.

“With the help of systems integrators like Interface Systems, MSFDC will take electronic bill presentment and payment beyond its infancy stage to large-scale acceptance and usage,” says Warren Dent, senior vice president at MSFDC.  “Interface provides a valuable service by helping billers prepare their data from various platforms and integrate it with MSFDC’s technology.”

Corporations that use mainframe computers to perform billing functions include the majority of banks, utilities, and retailers, as well as phone, cable, oil, gasoline, and credit card companies, according to Robert Nero, president and CEO of Interface.  “Virtually all major billers employ mainframe computers,” he says.  “Interface’s Oasis printing and document formatting systems will translate print data streams from legacy systems at these companies and make them useful for the Internet.  It means that Interface will be providing a key component to the success of electronic consumer billing and payment worldwide.”

Interface will modify its existing Advanced Function Printing (AFP) translator to make mainframe-based print data understandable to the MSFDC system.  Work with MSFDC and its beta site partners will begin immediately. Broadscale introduction of the full MSFDC service is due this summer.

MSFDC, based in Denver, is a joint venture company equally held by Microsoft and First Data Corporations.  The company was formed to offer a new Internet-based Electronic Bill Presentment and Payment (EBPP) service to billers, banks and consumers.  The service offers an easy and secure way for customers to receive bills and pay them, all online.

Interface Systems, Inc. provides customized mainframe information distribution and connectivity solutions to businesses around the globe.  With more than 30 years of experience, Interface works closely with companies to design solutions that enhance the utility and value of existing information systems by building on them, rather than replacing them.  Interface is headquartered in Ann Arbor, Mich., and markets its products worldwide.  The company’s current list of partners includes such industry leaders as Microsoft and Lucent Technologies.

All company, brand and product names are or may be trademarks of their respective holders.

Details

FDC Downshifts

First Data said yesterday its greatest disappointment last year was the slowing rate of growth in its merchant processing services revenues over the last half of 1997. As a result, FDC is re-examining every facet of the merchant processing business, making both organizational and operational changes. However FDC’s card issuer services and payment instruments businesses were among the company’s strongest performers. Total company revenues for last year were only up 6%, impacted negatively by several business divestures. Yesterday FDC announced it was selling off yet another unit, its imaging and documents management business, First Image. Domestic merchant card volume processed increased 20% to $259 billion with total domestic card accounts on file at 161 million at year’s end, a 20% annual gain.

Details

Upping the Ante

Membership services king Cendant Corporation is offering $2.7 billion to acquire credit insurance king American Bankers Insurance Group. In a letter to AIB’s Board last night Cendant made an offer of $58 per share in cash and stock, representing a 23% premium over AIB’s agreement to be acquired by American International Group. AIG announced December 22 its acquisition of AIB for $47 per share or $2.2 billion. Under terms of the December AIG agreement, AIB is prohibited from discussing offers from other interested bidders during a 120-day blackout period and if another bidders emerges AIG would be granted 19.9% of AIB’s common stock. Cendant said last night it will commence litigation this morning to eliminate the blackout period and the stock grant. Cendant was created through the merger of CUC and HFS on December 17.

Details

Raising Confidence in Shopping Online

A new Internet survey of consumer attitudes and behavior concerning online shopping indicates that businesses can increase consumer confidence in shopping online by addressing two key concerns security of payments and the reliability of businesses. Greenfield Online, Inc. conducted the research on behalf of BBBOnLine, a wholly-owned subsidiary of the Council of Better Business Bureaus.

“This research has important implications for Sony and other businesses seeking to foster an ethical online marketplace.  We’re encouraged by the percentage of respondents purchasing products and services on the Net, the wide range of products likely to be purchased, and the many positive reasons consumers gave for shopping online,” said Patrick A. Flaherty, senior vice president, marketing services, Sony Electronics Inc. and chair of the BBBOnLine Board of Directors. (The BBBOnLine Board is composed of representatives from founding sponsor companies that provided the leadership and financial support to launch BBBOnLine  Ameritech, AT&T, Eastman Kodak Company, GTE, Hewlett-Packard, Netscape, Road Runner, Sony Electronics, USWEST Media Group, Visa U.S.A. and Xerox.)

“The data show that the business community can further increase consumer comfort in shopping online by addressing key security concerns.  Both online purchasers and non-purchasers said that they would shop more online if they could be assured that a company on the Web was reputable, and if they were confident in the security of paying online for orders and services,” the BBBOnLine chairman said.

In presenting the BBBOnLine survey findings, Council of Better Business Bureaus President James L. Bast said  “It’s the perception of half the respondents that there are many disreputable companies offering products for sale on the Web, and both purchasers and non-purchasers seek cues to indicate the reputability of a company on the Web.  Greenfield Online has concluded from these and other findings that recognition of companies on the Web by a reputable third party, such as the Better Business Bureau, would definitely have a positive effect on online purchasing, particularly with people who are already online purchasers.  This highlights the value of our BBBOnLine program in boosting consumer confidence and voluntary self-regulation of business in the electronic marketplace.”

KEY OBSERVATIONS

In its analysis of the Cybershoppers Survey data, Greenfield Online reported the following key observations

* The main concern of survey respondents is the security of online       shopping, and those who have never purchased anything online are       especially worried about this.

* The reliability of businesses on the Web is one of the key concerns to       online consumers, and more online purchasers, than non-purchasers,       reported that solving this problem would encourage them to buy online.

* The recognition of online companies by a reputable third party would       make online shoppers more confident about the purchases they make on the       Web.

* Most of the survey audience are active online shoppers and buyers.

ONLINE SHOPPING BEHAVIOR

When questioned about their online purchase behavior, respondents revealed

* Frequency of purchases online  More than two-thirds (69%) of those       participating in the survey reported having placed an order online in       the past.  A majority (63%) shop online at least once a month, and 27%       shop online at least once a week.

* Who has purchased online Nearly three-quarters (74%) of the male       respondents have ordered something online, with 59% of females reporting       the same.

* Average online spending  Online purchasers spent on average $446 on the       Net in the past 12 months, with 16% having purchased products and       services for over $1,000.  The average amount spent on the most recent       purchase is $157.

* Price range comfort level on the Net  The average price limit at which       respondents would be uncomfortable purchasing an item on the Web is       $1,500.

* Products and services considered suitable for online shopping  Computer       software was found to be the product people most likely would buy on the       Web (77%).  Other items likely to be purchased online include books       (67%), CDS (64%), computer hardware (63%), airline tickets (61%) and       magazine subscriptions (53%).

* What consumers are NOT likely to buy on the Net  More than half (60%)       reported that they are unlikely to buy insurance on the Net.  Other       items unlikely to be purchased online include food/drinks (55%) and       financial services (53%).

* Reasons FOR placing orders online Of those who have ever placed an       order online, 88% cited convenience as their main reason for       cybershopping.  Other reasons for making an online       purchase include price (cited by 58%), access to items not available       elsewhere (48%), selection (42%) and no pressure from salespeople (38%).

* Reasons for NOT buying online The 31% who have never bought anything       online are mostly concerned about the security of payment (75% reported       such a concern).  Other main barriers to purchase cited by non-       purchasers include payment structure (46%), reliability of companies       (36%), returning items (36%) and lack of privacy policy (33%).

CONCERNS REGARDING ONLINE PURCHASES

* Security of payment concerns Of those surveyed, 83% cited security of       payment as a main concern about online shopping.  Nonetheless, while       security of payment is of chief concern, 59% of respondents have used       their credit card online to pay for their purchases.

* Other major concerns Besides the security of payments issue, other       issues of concern to a large number of online users include reliability       of businesses (cited by 73% of purchasers, 82% non-purchasers) privacy       (71% purchasers, 84% non-purchasers), the possibility of returning items       bought on the Web (65% purchasers, 77% non-purchasers) and resolving       differences with online merchants (45% purchasers, 69% non-purchasers).

* Disreputable companies on the Web About half of the respondents agreed       that there are many disreputable companies offering products for sale on       the Web.

* Cues to business reliability The key cue respondents look for to       indicate the reputability of a company is awareness of the business name       (75%).  Other cues mentioned by a majority of purchasers include brand       familiarity (68%) and the presence/stature of the business offline       (52%).  In addition to business name recognition, non-purchasers look to       brand familiarity (64%) or recommendations from friends/family (42%) as       reliability cues.

ENCOURAGING ONLINE PURCHASES

* Inspiring confidence in unknown companies on the Web A large majority       (84%) agreed that the recognition of companies on the Web by a reputable       third party (such as the Better Business Bureau) would make them more       confident about buying from companies they do not know.  More than       three-quarters (78%) report that they would shop more online if they       could be assured a company is reputable.

* Ways to encourage online purchases  Ways to encourage online purchases       that were most frequently cited by non-purchasers were more security       (36%), followed by price/payment (24%).

IN CONCLUSION

Greenfield Online issued the following conclusions regarding the survey findings

* The two key concerns about online shopping are the security of payments       and the reliability of businesses.

* Recognition of online companies by a reputable third party would       definitely have a positive effect on online purchasing; however, it       would have the strongest impact among those who are already online       purchasers.

* To convert non-purchasers, the barrier of security of payments has to be       overcome before other considerations can impact behavior.

About the Survey

During the 1997 holiday season, survey participants were routed to an online shopping survey at the Greenfield Online Web site through links from the sites of BBBOnLine founding sponsor companies. Participation was voluntary and a total of 500 respondents was selected randomly among those who participated in the survey.  The margin of error in the data is plus or minus 4.4 percentage points depending on the variance and the response rate of the particular question.  Greenfield Online, Inc. is a leading marketing research company that conducts research using the Internet.  Based in Westport, Conn., Greenfield has a worldwide base of 500,000 Internet households.

About BBBOnLine

BBBOnLine is the Web’s most prominent self-regulation program for online marketers.  More than 700 online businesses — ranging from large marketers like Procter & Gamble, J. C. Penney Company and Lands’ End, to medium and small retailers — have qualified to be a BBBOnLine participant. To qualify, businesses must be a member of the Better Business Bureau (BBB), meet high standards, which include a satisfactory record with the BBB, make significant commitments to their customers, and agree to resolve complaints quickly and fairly.  BBBOnLine participating businesses are permitted to demonstrate their customer commitment through the use of a BBBOnLine seal on their web site. Consumers are able to click on the BBBOnLine seal and instantly get a BBB company profile on the participating company.

For more information about the BBBOnLine consumer confidence program, visit on the Web.

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