Money Clips, Jewelry May Act
As Substitutes for Credit Cards

By DAVID ENRICH

As competition heats up among credit-card issuers, banks are quickly expanding alternatives to the traditional credit card in order to appeal to individual tastes and distinguish themselves from competitors.

Citibank plans next year to offer customers a money clip that substitutes for a credit card. Customers use the device by waving it in front of a sensor at a checkout counter. The bank, which is a unit of Citigroup Inc., and American Express Co. already have introduced key-chain attachments that work in a similar fashion and which they will give to many customers. MasterCard Inc. has developed prototypes of jewelry and watches that double as credit cards. KeyCorp's banking unit is also exploring noncard devices.

The strategy these companies are pursuing parallels the credit-card industry's overall move toward greater customization. That is reflected in rewards programs that are increasingly tailored to individuals' shopping habits.

Banks are desperate for ways to stand out from their rivals. Citibank is betting that its money clips and other unconventional payment products will be a hit with consumers whose wallets already are stuffed with multiple cards.

"We don't want to put more card products in people's hands, because everybody's been concerned with consolidating the wallet," said Wayne Malone, Citibank's senior vice president for transaction innovation.

Such credit-card alternatives contain radio-frequency technology that links the devices to customers' bank or credit-card accounts. But there are near-term hurdles, like higher costs associated with manufacturing the money clips, key-chain "fobs" and other devices. And not many stores have the equipment needed to scan the so-called contactless devices.

But the list of merchants that accept contactless payments is getting longer. John Gould, a credit-card industry consultant, reckons that banks and others eventually will mail out "kits" that offer a variety of contactless devices. "Instead of having one-size-fits-all, you have different styles for different people," he said.

While the trend toward contactless payments is a recent phenomenon -- banks started rolling out devices early this summer -- the development of a new generation of products is well under way.

"The technology is flexible enough that you're really limited only by your imagination," said David Bonalle, general manager of American Express's advanced-payments division. "Our whole goal is to make as many [products] available as possible, because it's clearly a personal choice." He declined to describe the new products American Express is planning.

KeyCorp's banking unit, which recently became the first U.S. issuer of contactless debit cards, is also exploring noncard devices. Carl Stauffeneger, KeyBank's senior vice president of product management, noted that radio-frequency chips that enable contactless payments can fit into wristwatches and rings.

Citibank will aim its new products at people in New York and other big cities who, it claims, increasingly leave their wallets at home, instead grabbing their keys, mobile phones and perhaps money clips. Mr. Malone said the bank's research showed that customers liked the idea of the key-chain fobs and souped-up money clips.

But other banks are skeptical.

Before unveiling its contactless "Blink" cards this spring, J.P. Morgan Chase & Co. toyed with the idea of issuing fobs or other noncard devices. But the company's Chase retail division found that when shopping, consumers prefer a wallet to a key chain, said Tom O'Donnell, senior vice president for Chase card services. Market research by Visa USA led Visa to a similar conclusion, a spokeswoman said.

By sticking with the familiar credit card, Mr. O'Donnell said, Chase hopes to avoid an "adoption curve" associated with people slowly learning to use a new type of product. And unlike the key chains and money clips, which can be used only at a limited group of merchants, the Blink cards work anywhere that normal credit cards are accepted.

Write to David Enrich at david.enrich@dowjones.com