Net credit card companies charge overseas

NextCard, an Internet-only credit card company, is discussing deals with several major credit reporting agencies in the United Kingdom, while also looking to expand into South East Asia, according to the company's chief executive Jeremy Lent.

While the market for credit card customers in Europe and Asia remains largely untapped, card companies are expected to face several hurdles in their efforts overseas. They most likely will have to overcome cultural biases against credit card use and deal with infrastructure issues, such as building technology that can handle international credit checks over the Net.

But if they can build basic systems to handle international applications, the market is wide open, said Chris Musto, director of financial services at Gomez Advisors. "If [card companies] can pull it off, they will find that the local competition is just not that strong," he said.

"We really view [expansion in the United Kingdom] as an extra opportunity beyond our core business plans," said Lent, emphasizing that even the online credit card market in the United States remains largely untapped. "We want to grow our business in the United Kingdom where we have an opportunity to establish leading market share in the Internet channel."

NextCard's overseas move, not expected until next year, comes after credit card issuer Capital One's move toward overseas market. This week, Capital One partnered with the United Kingdom's third largest Internet service provider X-Stream Network as its preferred credit card product.

While the United Kingdom could be a good target, Capital One, NextCard, Bank One, and other major card companies are steering clear of other European countries where credit card use is insignificant. A recent study by Fletcher Research found that only 12 percent of Germans and 15 percent of Italians even had credit cards.

"In the United Kingdom, the credit card model is very similar to the United States, with people borrowing and paying back over time," said Capital One spokesman Patrick Nelson. "That doesn't apply to other countries in Europe where they are more likely to use debit cards."

Industry analysts and credit card companies said the United Kingdom is by far the most fertile ground to acquire clients safely because of its more credit-friendly consumers and advanced credit infrastructure. Experian and Equifax, two of the largest U.S. credit reporting agencies, are also the main agencies in the United Kingdom.

To expand beyond the United Kingdom, analysts said online credit card companies will have to change their marketing pitches to not only show Europeans the benefits of signing up, but also to allay mistrust of credit cards. Concerns are said to persist about privacy issues, interest rates, and theft.

Credit card advertisements in Europe now are accompanied by prominent warnings advising consumers to compare rates, said Nick Jones, a London-based e-commerce analyst for Jupiter Communications. "Companies are going to have to do things differently than how it is done in the United States," he said.

Regardless of the hurdles in entering the European market, analysts agreed that the use of the Internet to directly market credit card products overseas could work in the long term. Even Visa and MasterCard have been pushing debit card products on the continent.

"Europeans are showing that they will use the Internet to manage their financial lives," said Musto. "I think that getting credit cards over the Internet will pick up as people become more comfortable transacting over the Internet. I think the prognosis is pretty good."