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'Virtual loyalty cards' coming to the internet

Online authentication uses Vista's Cardspace

Customer loyalty cards could be coming to the web, if technology demonstrated by a German company at Cebit takes off.

Fun Communications' idea is to offer a portal for retailers to create virtual loyalty cards to supplement plastic ones using Microsoft's CardSpace, an authentication feature that ships with Windows Vista, said general manager Stefan Bamberg.

CardSpace lets a person store identity information on a computer in virtual cards, which the user clicks to submit information to CardSpace-enabled websites. 'Self-issued' cards store identity information on a user's PC, while 'managed' cards are stored by an identity provider. When logging in to other websites, the user can ask the identity provider to vouch for them, which saves having to remember a slew of different passwords, a concept known as single sign-on.

Loyalty card programmes offer customers incentives based on repeat purchases in a network of merchants. For example, a customer may earn bonus points for purchases and those points can be used at other retailers participating in the loyalty card programme. This drives business to non-competing retailers within the network.

Fun Communications hopes to sell the portal to identity providers, which in turn would sell the system to retailers with a loyalty card network. The company will initially offer use of the portal free starting on April 22, Bamberg said at Cebit.

The virtual loyalty card system would be used together with plastic loyalty cards, Bamberg said. Purchases will be tracked, and then customers can be offered incentives redeemable online or in stores, Bamberg said. What customer data will be shared will be up to the businesses in the network and subject to consumers' consent.

Data on the virtual cards is valuable for retailers. Businesses can run email marketing campaigns based on metrics such as age or type of purchases, Bamberg said. The information can also be tightly integrated with businesses' customer relationship management (CRM) systems and generate other valuable behavioural data, Bamberg said.

But a large barrier remains. CardSpace ships with Windows Vista, Microsoft's newest OS, but isn't on Windows XP, which is still more widely used. CardSpace can be added to XP, but consumers have to download additional software.

Also, no company has stepped forward to be an identity provider for CardSpace. Microsoft has decided not to be one since consumers do not trust the company to hold their information, said Christian Klasen, senior business development manager in the Developer Platform and Strategy Group for Microsoft Germany. However, Microsoft is in discussions with companies to fill that role and increase the use of CardSpace, Klasen said.

Fun Communications hopes a large telecommunications operator or free email provider that has the confidence of consumers will become the identity provider. That would also make it more attractive to businesses to use the system on their websites, he said.

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