GratisCard offers a credit card for the anonymous

No name, no number and no physical data stored on the card itself

Concerned that losing your credit or debit card could result in fraudulent card use and the potential loss of personal data?

GratisCard Inc. thinks so, too. That's why, when the company launches on April 1, it plans to introduce the nation's first completely anonymous credit card with no name or number and no physical data stored on the card itself. It will also be the first credit card in the U.S. to support authentication based on personal identification numbers (PIN) for all credit transactions. Such authentication is already widely supported in Europe via so-called Chip and PIN technology and is supposed to be far more secure than signature-based transactions.

GratisCard is a new payment card company being launched by AOL LLC founder Steve Case and his investment company, Revolution Inc.

It is targeted largely at merchants that process low-value payments, such as fast food restaurants, sports clubs and game arenas, said Avivah Litan, an analyst at Stamford, Conn.-based Gartner Inc. As such, it does not necessarily compete with big-brand cards such as Visa U.S.A. Inc. and MasterCard International Inc., she said.

The card is being aimed at people with medium to poor credit and offers security that, in concept at least, is similar to what Gartner has been advocating, Litan said. It is designed to plug into the existing payment-card infrastructure without requiring major upgrades.

"The GratisCard uses simple technology to make the cards anonymous and render the card data useless even if it is stolen," she said. "It is a living proof of concept that Visa and MasterCard could do the same thing if their member banks were willing to spend some money upgrading their card technology for the sake of tighter security."

So far, though, the major card brands have found that it is easier to pass on fraud and breach costs to retailers rather than revamp the entire payment card system, she said. "The big brands have hundreds of millions of cards in circulation, and thousands of processors set up to process payments using the old scheme," she said. Therefore, it is easier for a new player such as GratisCard to introduce "more evolved and intelligent" technology for securing payment transactions, she said.

What's likely to make the card appealing for merchants is the fact that GratisCard will charge substantially lower interchange fees than the big brands, she said.

Card companies such as MasterCard and Visa charge merchants an average of about 2% in fees for each card transaction. The fees vary by merchant and by transaction. Such fees netted MasterCard and Visa an estimated $30.7 billion in 2005 and an estimated $40 billion in 2006, according to the National Retail Federation. Merchants have for some time now been bridling at the fees and have sought legislative help in keeping the rates down.

By combining low interchange rates with better security, "Steve Case certainly is hitting all the sweet spots when it comes to making a new payment card a success," Litan said. But it's unlikely that GratisCard will be much more than a niche player nibbling away at cash and check payments in much the same way as PayPal Inc. has done, she said.

"Visa, MasterCard and other brand cardholders are simply too fond of their loyalty programs to give them up that quickly," she said.

A spokesman for Revolution declined to comment for this story.

Copyright © 2007 IDG Communications, Inc.

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