Credit card designed for internet shopping

It seems like it would be possible to make a great deal of money by creating a payment system better than credit cards. Paypal has come closest to doing this, but has a lot of problems.

How could one make credit cards better? It would be very difficult to get your payment system into as many retailers as Visa and Mastercard, so perhaps aiming for a niche would be a good idea. One such niche might be internet purchases. Develop a payment system/credit card designed specifically for internet purchases and it could be very popular.

One major difference between a payment system designed for the internet and one predating it is that one could authenticate the transaction, not the identity. Whenever you buy something online, you put in your card number as usual but then (unlike with normal credit cards) there is an extra step - you log into the payment system's website and approve the requested transaction. Until you have done that, the merchant doesn't get any money (and won't deliver the goods). This cuts out all "stolen card" type fraud, since the thief would also need to steal your payment system password (which never goes anywhere near the merchant). This would allow this payment system to undercut the existing credit card issuers and become competitive. Fraud caused by loss of the payment system password would be treated the same as fraud caused by the loss of any other online banking password (which I think varies from place to place).

This system would still need a "chargeback" mechanism to combat fraud from merchants (and mechanisms to combat fraudulent chargebacks) but my impression is that the costs of these are small compared to the "stolen card" costs.

With suitable cellphone applications for authorization, the system could even be used for brick-and-mortar stores as well.

Unlike Paypal, this system would actually be able to lend money like a credit card, it wouldn't need to be linked to a bank account or credit card.

2 Responses to “Credit card designed for internet shopping”

  1. Tom Martin says:

    Unless I am misinterpreting what you are suggesting, I believe a similar system exists in the U.K. - see

  2. Andrew says:

    Tom, that looks like a bit like Verified by Visa. They're similar but not identical to what I'm suggesting - for one thing Verified by Visa (and, I think, MasterCard SecureCode) redirects you temporarily from the merchant's page to a payment-system-specific page to verify. In my system, you would go to your bank's site yourself to approve the transaction, which is slightly less user friendly but more secure. Also, the idea is that all transactions on this new payment system would use this per-transaction-authorization system, not just those with participating merchants.

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