Discover Redoubles Its Commitment to Single-Use Card Numbers

Although some issuers and processors have soured on so-called single-use or proxy numbers for secure Internet transactions, Discover Financial Services Inc. has just rolled out an advanced version of its own single-use system and plans very soon to begin a major marketing campaign for it. The most significant feature of Discover's latest version of its online Deskshop product is that it offers a so-called thin client, which allows cardholders to generate proxy numbers on a pop-up window on Discover's Web site, eliminating the need for cardholders to download software. “We're streamlining the whole technology,” says Steve Furman, director of marketing and e-commerce at the Riverwoods, Ill.-based card company. The new version is in a “soft launch” phase now, he says, adding “that's about to change.” Within a few weeks Discover will unleash a campaign, which will include e-mail messages and paper-statement inserts, to announce the new version. Discover, which introduced a single-use system in January 2000 and was one of the first card issuers to do so, says some 12 million out of its 50 million cardholders have registered at its online account center, a prerequisite for using Deskshop. The company refuses to say how many accounts are actually using the system, but Furman says enrollments increased 35% last year over 2002. “We're happy with our year-to-year growth,” he says. Orbiscom Inc., the New York-based company that makes single-use systems in the U.S. for MBNA Corp. and Citigroup Inc. as well as Discover , says on average 10% of accounts are users, a number it says has almost doubled in the past year. Furman says the system has wiped out online card fraud entirely for those who use it. “It's a bulletproof solution,” he says. Beyond that, concerns about identity theft have also helped spur interest and usage among cardholders, he says. “That's a selling point we make with this product,” he says. With single-use card numbers, cardholders shopping online who don't want to use their actual card-account numbers can use randomly generated numbers that are linked by the issuer to the actual number to allow authorization and settlement. Once used, the proxy numbers are permanently retired. No involvement by the merchant is required, since transactions flow as they normally would. Critics contend that issuers are abandoning the technology in favor of Internet security systems from the bank card associations. Visa's Verified by Visa and MasterCard's SecureCode, which are based on a so-called 3D Secure system invented by Visa, prompt online shoppers to enter secret codes on pop-up windows at checkout much as they would enter personal identification numbers for debit cards at the point of sale. Both offer incentives to merchants and acquirers, including a shift of chargeback liability to the issuer, though this shift is more limited in MasterCard's case. Visa also offers a 5-basis-point discount on interchange. Such incentives, some observers say, have combined with backing from the bank card networks to move issuers away from single-use technology. First Data Corp., which said in 2001 it would offer Orbiscom's product on a third-party basis to its issuer clients, never launched the service, blaming lack of interest. Non-bank issuers have also backed away. American Express Co. earlier this year shut down a single-use product called Private Payments that it had introduced four years ago. Still, Discover remains firmly committed to single-use technology. “We think this is a better solution [than 3D Secure],” says Furman. “We think it's the best one out there.”