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July 28, 2007

GE locks up eBay card issuance

GE Money has teamed with eBay to launch the eBay MasterCard, a credit card that combines the payments service features of PayPal with a revolving credit platform, capping an astonishing run of private-label deals for GE Tightening its grip on the online payments market, GE Money, the consumer lending unit of General Electric, has teamed with online auction giant eBay to launch the eBay MasterCard.

By Verdict Staff

GE Money has teamed with eBay to launch the eBay MasterCard, a credit card that combines the payments service features of PayPal with a revolving credit platform, capping an astonishing run of private-label deals for GE. Charles Davis reports.

Tightening its grip on the online payments market, GE Money, the consumer lending unit of General Electric, has teamed with online auction giant eBay to launch the eBay MasterCard.

eBay MasterCard customers will earn one reward point per dollar spent with the card, and can use those points to obtain shipping discounts and vouchers that can be used to shop on eBay or to pay eBay seller fees. The card will charge annual interest rates ranging from 7.99 percent to 14.99 percent, depending on the cardholder’s credit history and other factors.

Cardholders can choose from one of three card designs and can add their eBay User ID to the card, making it far easier to initiate payments using the card on the site. The card features Safe Shipping, a guarantee that protects cardholders if their item never arrives.

In a powerful enhancement that differentiates the eBay MasterCard from all other online payment options, the card allows synchronisation with payments service PayPal – eBay MasterCard customers can view their account activity within their existing PayPal account. eBay owns PayPal, and has been working to combine the features of PayPal with a revolving credit platform.

Additional benefits include 0 percent liability for unauthorised purchases, 24/7 customer service online and through a call centre, and no annual fee.

eBay will provide promotional and branding support for the eBay MasterCard. GE Money Bank will be responsible for issuing the card, and providing customer service, billing and credit management.

The card represents a major expansion of a relationship originally created in June 2004 for GE to offer PayPal Buyer Credit, a private-label revolving credit line available to registered PayPal customers. The PayPal Plus MasterCard was introduced in May 2006.

To date, GE Money has issued about 1 million PayPal Plus cards, many to regular buyers on eBay.

“The eBay MasterCard is another great extension of the partnership we’ve built with eBay and PayPal over the past few years to offer rewards, security and convenience for their customers,” said Margaret Keane, president and CEO of GE Money’s Retail Consumer Finance unit, in a release. “With the eBay MasterCard, shoppers can apply and buy with an instant online credit process. As with PayPal Plus, there’s no waiting for a card to arrive in the mail before making your eBay purchases.”

eBay and PayPal also announced the availability of the PayPal Security Key. The key, a small, handheld device that users can obtain for $5, supports two-factor authentication by creating a unique code every 30 seconds. PayPal members can use the code, along with their user name and password, to sign into their PayPal or eBay accounts to help prevent unauthorised users from accessing them, the companies said.

GE Money Bank recently replaced Washington Mutual (WaMu) Card Services as the issuer of PayPal’s credit cards.

The PayPal Plus card also has a MasterCard logo and some features the WaMu card lacked, including a rewards programme and the ability to check the card’s balance on PayPal.com. PayPal, which is based in San José, California, also recently began offering a different GE-issued credit card to customers in the UK.

The switch comes shortly after the cancellation of an eBay affinity card issued by MBNA since 2003. That relationship ended soon after Bank of America bought MBNA in January.

Offering both an eBay and a PayPal credit product, as well as a PayPal debit card, allows GE Consumer Finance to essentially lock up card issuance for one of the world’s largest and fastest-growing web sites, and caps what has been an astonishing run of private-label deals for GE.

Private-label card issuance by GE Consumer Finance, which has $163 billion in assets, has grown dramatically. The Financial Times newspaper reported in June that retail giant Wal-Mart would partner with GE Consumer Finance and Visa USA to offer a reloadable debit card for the country’s estimated 80 million under-banked consumers.

In July, GE Money announced that the unit will offer a Visa credit card to customers of retailers Gap, and its brands Banana Republic and Old Navy. The Visa card will be issued by GE Money Bank and marketed to existing Gap customers. The Visa card will be offered at more than 2,600 of these retailers’ outlets across the US and will allow cardholders to earn rewards at all of these stores’ locations and everywhere Visa is accepted worldwide. In addition to earning rewards, customers can receive additional benefits such as special cardholder offers, advance notice of sale events and exclusive online shipping.

The deals are even more remarkable considering the shrinking number of private-label deals left to be made. According to SourceMedia’s 2006 Card Industry Directory, GE Consumer Finance, Citi and HSBC Retail Services own just over 80 percent of private-label retail card receivables, up from 68 percent in 2003.

The cards business is particularly appealing to eBay, which is looking for ways to increase revenue. Auctions still account for 69 percent of eBay’s revenue, and its auction business grew 23 percent on sales of $1.25 billion last year. Only a few years ago, though, those numbers were closer to 40 percent. More than 81 million people use eBay, but the total number of listings on the site is flattening, and as competitors such as Google have introduced new features into the market such as Google Checkout, some analysts wonder if eBay’s auction model may eventually be replaced in large part by search engines.

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