Is the time for smart cards here?
Smart cards to invade U.S. in next few months
Anne D'Innocenzio
Associated Press
Posted December 24, 2000
Imagine a single card that lets you purchase and download an airline ticket using your PC. That same piece of plastic could also pay for a restaurant lunch, open secure doors at the office, check out books at the library. It could even become your car keys.
Sound like a script from the Jetsons? Not really.
Such is the promise of smart cards, wallet-sized plastic cards with embedded microchips that major U.S. credit-card issuers are rolling out in a big way in the next few months.
Smart cards, albeit with limited uses, have been popular for years in Europe and parts of Asia and Latin America. The industry says it has shipped more than a billion a year since 1998.
In lieu of change, the cards are widely used for pay phones. In some types of cell phones, they're used for security, billing and storing frequently used numbers. The financial sector also likes them: In France, every Visa debit card has an embedded chip.
Locally, the cards are in use at the University of Central Florida. But overall, smart cards have never been a commercial hit in the United States. For U.S. card issuers, there's been inadequate financial incentive while retailers have shown little interest in acquiring new card readers.
Some financial powerhouses are betting they can change that now. They're banking as first adopters on the estimated 35 million online shoppers -- almost double that of last year -- who are looking for secure ways to shop and add value with exclusive discounts and other promotions.
In September, Visa U.S.A. teamed up with three of its top 10credit-card issuers -- First USA, Providian Financial Corp., and Fleet Boston Financial Corp. -- to offer a suite of services led by secure online purchasing. To entice consumers, they are throwing in free PC card readers and touting super-low introductory rates.
Meanwhile, MasterCard, for whom big markets include Brazil and Japan, announced recently that it would be introducing its own smart card in the United States beginning next month -- offering secure identification as well as credit and debit functions to begin with.
Microsoft is also in the game. Software for smart-card readers is included in its Windows 2000 operating systems.
The incentives for the credit-card industry are great.
First, chip-card use could considerably reduce the $1.09 billion that credit-card companies lose annually to fraud, according to the Nilson Report, an industry newsletter. And with the per-unit cost now down to $3, compared with $12 a year ago, the cards are now much more economical to deploy widely.
Though smart cards are expected to initially be used commercially in the United States as little more than secure electronic purses and ID cards, experts predict myriad uses starting next year.
Thanks to the improving power and versatility of microprocessors embedded in the cards, consumers will be able to better protect themselves against online fraud as they bank or trade stocks.
They will also be able to store digital cash, personal information, Web site passwords and addresses, and such things as loyalty coupons from merchants or frequent-flier points.
And as circuits on the cards are upgraded to hold more memory, cardholders may eventually be able to store everything from drivers license information to medical insurance data -- all on a single card.
"We're seeing some enormous steps forward," said Donna Farmer, president and chief executive officer of the Smart Card Forum, a not-for-profit association largely financed by membership dues from 200 corporations and universities. |
