From...

by Lisa Shuchman

(IDG) -- The world's largest credit card issuer has unveiled yet another way to spend money online.

Seeking to grab a bigger share of the online shopping business, Citibank today launched a virtual credit card, called ClickCredit, that can be used only for transactions performed over the Internet.

"It's a totally new kind of payment tool, designed for the virtual world," said Antony Jenkins, director of online initiatives for Citibank's credit card business.

In fact, Citibank is calling its ClickCredit service "credit without a card," and provides customers with just a thin piece of plastic that lacks the magnetic strip, signature panel and embossed numbers found on conventional credit cards.

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Citibank hopes to entice customers to use ClickCredit by offering incentives such as cash back and airline mileage rewards, as well as a money-back guarantee to dissatisfied customers. ClickCredit customers will get a line of credit distinct from other Citibank credit cards and will receive a separate bill. Cardholders have indicated that they want to keep their online transactions apart from purchases made in the physical world, Jenkins said.

The virtual card is being offered at a time when credit card issuers are struggling to find ways to grab a larger share of the e-commerce business. Although today the Web accounts for only 2 percent of retail sales, banks are positioning themselves for a time when online shopping becomes more than a niche market.

"We believe use of the Internet is ubiquitous and will increase dramatically over time," Jenkins said.

Competitors are also trying to seize a chunk of online business. American Express (AXP) recently unveiled its Blue smart card, which has an embedded computer chip, intended to ensure greater security. But unlike Citibank's ClickCredit card, Blue requires a home card-swipe machine.

Citibank is hoping the new service will enhance its relationship with customers, increase loyalty to the bank and stimulate online banking, Jenkins said. The credit card division currently has 40 million U.S. customers, and the bank is now signing up 8,000 people a day for its online account services, he said.

To further stimulate use of its services, Citibank also introduced CitiPlaza, an online shopping mall, which links to Internet retailers offering discounts to Citibank customers. The merchants include Barnes & Noble, Dell (DELL) Computers, the Disney Store, Eddie Bauer and Sharper Image.

The bank has begun a big direct-mail campaign promoting ClickCredit and plans to run print, radio and television ads in coming weeks.