March 15, 2007

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  NEWS: New Credit Card Aims to Compete

  A startup company out of Saint Petersburg, Florida, is aiming to compete with Visa and MasterCard by offering its own branded card. GratisCard's rollout is being funded in a big way ($500 million) by Revolution, the investment company that Steve Case created with the money he got from starting America Online. The new card has an almost impossibly large task ahead of it – earning market share when two card companies control a huge majority of it.
  
  GratisCard, which is already being test-marketed with three Philadelphia sports teams: the NBA's 76ers, the NHL's Flyers and the minor league hockey Phantoms, is counting on one big selling point against its competition. Merchants are beginning to get fed up with the exorbitant interchange fees they are charged per transaction for accepting credit cards. There is talk of new legislation that would put a cap on the percentage and/or amount of these fees that can be charged, but the issue is divisive, and nothing is set in stone. Right now, merchants accepting Visa and MasterCard payments can expect to shell out about 2% per transaction, which added up to $25 billion last year alone. GratisCard is looking to buck the trend towards greediness by charging only a 0.5% fee, a move that will be offset by processing sales over the internet.
  
  Furthermore, GratisCard is aiming to court consumers weary of the risk of identity theft using traditional American credit cards, which offer relatively little protection against fraud. GratisCards will not have an account number or the user's name on them, nor will they encrypt information on a magnetic stripe. Rather, the cards will feature a barcode that does not contain an account number in any way, and will use a personal identification number to complete transactions – no signature required.
  
  GratisCard is only the most recent of the cluster of new cards that have popped up hoping to grab a piece of the credit card pie. Competitors include Tempo Payments, which issues branded debit cards, and National Payment Card LLC, which converts driver's licenses and loyalty cards into debit cards. Word is that the big dogs aren't concerned, however: experts are saying that, if Visa and MasterCard do ever face anti-monopoly proceedings, they may use the spate of competing cards cropping up recently as a defense.
  
  
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