Security fix: Disposable credit cards?

American Express plans to offer disposable credit-card numbers for online shopping amid continued consumer concerns over online security.

American Express Co., amid continued consumer concerns over online security, is proposing an answer: disposable credit card numbers.

The New York travel and financial-services company announced a new technology allowing registered holders of any American Express card the ability to shop online with a random number, rather than their credit card number.

The card number would be good for one transaction only, and shoppers would no longer have to give their credit-card number to merchants over the Web. The service, to be called Private Payments, will be free for cardholders and will cost nothing extra for merchants who accept American Express. The service will be available to holders of any American Express card within a month.

"Consumers have a real fear of having their credit-card (number) stolen," said Alfred F. Kelly Jr., group president of U.S. consumer and small-business services at American Express. "This fear is the biggest obstacle for a real boom in e-commerce."

To the extent the fraud is eased, merchants might lower their costs from fraudulent transactions. But American Express and other card companies also charge merchants more for online transactions than those at store counters because they fall into a category called "card not present," supposedly because of a higher risk of fraud. The New York company has no plans to lower card-not-present rates charged to merchants -- even though it says this technology will lower fraud risk.

American Express is one of the first big card issuers to actually market this type of service, free, to consumers, and others are expected to follow with similar products. Consumers will be able to register for Private Payments within minutes. Once registered, a window pops up when a shopper clicks the American Express icon at the check-out page of any retailer's Web site. The window will automatically fill in a card number and expiration date with random numbers. The consumer need only type in a password, and the payment is sent.

The merchant receiving the number will process it like any credit-card transaction and verify it with American Express. That will complete the transaction, and the credit-card number, randomly generated for that one transaction, won't be used again. The purchase is billed to the shopper's account, but the account's actual credit-card number is kept off the Web.

The primary goal, American Express said, is to convert an untold number of potential shoppers who troll through Web sites but don't shop because they are reluctant to send their private credit-card data. American Express hopes to tap into the mounting pressure on online ventures to turn Web traffic into actual sales and profits.