Broad view from Visa International chief.
(a few months old-- sorry if previously posted)
One-time computer programmer at London's Barclays Bank, Malcolm Williamson became the first non-American president and CEO of Visa International when he assumed those posts Oct. 1, 1998. Williamson came to Visa from Standard Chartered Bank, which under his watch became one of the world's smart card pioneers, introducing the first bank-issued multiapplication Java Card in Singapore. Since coming to Visa, Williamson has used his high-profile post to encourage banks to move faster in migrating their credit and debit cards to chip. For instance, in his keynote address at Faulkner & Gray's Credit Card Forum in April, Williamson argued that there are attractive revenue streams open to banks that move quickly to take advantage of chip technology-and aggressive competitors waiting to steal customers from banks that drag their feet.
After a year at the helm of Visa, Williamson talked about how banks view smart cards and the likely pace of the migration to chip with Card Technology's editor, Don Davis. Joining the conversation was Stephen Schapp, Visa's executive vice president of product platforms.
Card Technology: Malcolm, you came to Visa with a reputation as a smart card advocate, but made clear early on that you would only push smart cards if they make sense for Visa members and for consumers. After a year on the job, what is your sense of how Visa members think about smart cards? And what about how consumers view smart cards?
Williamson: Among the members around the world there are varying degrees of enthusiasm for this depending on how far they feel they can make a business case for chip. If you take a country like Britain, in the time I've been here there has been a commitment to go totally chip in the next five years, so the British banks clearly believe that they have a business case.
I think that this business case is based on three things. The first is, what is the impact of going to chip as opposed to mag stripe on fraud? In most of the world, fraud is quite a problem. I mean, it's small in terms of our turnover, but it's big in absolute amounts, and there is concern that magnetic stripe is being attacked. We put in place many safeguards for magnetic stripe and, nevertheless, it is a problem. And I think our British members believe that fraud, on its own, makes quite a significant part of the business case for moving toward chip.
The second part of the business case, and I think this is terribly important, is the issue of, if we don't do it are other people going to do it? The disintermediation argument. Clearly the chip manufacturers are manufacturing a hell of a lot of chips at the moment, and they're going somewhere, and only a relatively small percent of the chips are going to banks. The rest are going to supermarkets, telecommunications companies, airlines and so on. Now the difficulty is that if those people are using chip technology for things like loyalty points, it won't be long before they start thinking about diversifying into financial services. So the banks have to think very carefully about that.
The other thing is, they certainly stand a chance of dealing with multiapplication chip cards. We found that we actually got more business out of the chip card. It actually increased the level of business that we did. So you've got your three different layers, if you like: fraud; disintermediation, which is really protecting yourself against the loss of business; and the other thing is the actual increase in business that you get by using the technology.
And it's quite clear that people in the UK feel it's a strong business case and will probably migrate over the next five years totally to chip. But, you know, we convinced ourselves at Standard Chartered in the Far East that going this way is probably the future, and we were prepared to invest money in a place like Singapore to prove the point.
I think where the differences are is in that different countries are in different stages of development. They've got different infrastructures, and I think in the U.S., where people generally feel the chip has been slower to catch on, the problem is that you have an extremely good and cheap telecommunications service. Most merchants are online.
So, I think the reason the U.S. seems to have been behind the rest of the world in going for chip in a big way is they don't see the business case being built out of fraud because they don't have the fraud problem that other countries have. That's why they have to be convinced through these other factors-the disintermediation argument and the value-added argument-that there is a business case. I think there are signs that some of the American banks are coming around to that, but it has taken a bit longer than it has in some other parts of the world.
So, on the member side, there is enthusiasm, there is commitment through the international board to Visa Smart Path, which is something that has set down some key milestones to encourage the move to smart cards. But the commitment to that is stronger in some parts of the world than others, and I think that is just a by-product of history.
Now, if you turn to the population and what they feel about it, I have strong views about it because, after all, I'm a consumer when I'm outside this place. And the thing that annoys me is carting around an enormous wallet in my suit, which has within it driving licenses, social security numbers both for Britain and the U.S. I've got credit cards, debit cards for the UK, credit cards, debit cards for the U.S. I've got cash. I've got airline cards; I've got telephone cards. I mean, my wallet is a mess, and I sort of have an overspill of it that I put in my briefcase where my other junk is.
What would I like? I'd love to have it all on one smart card, or it could be my key ring or signet ring, anything. I'd just love to get rid of that wallet. So, I've always been very much a believer in the multiapplication chip, the little computer that does what you want it to.
My idea of the world is a chip where I have credit card facility, debit card facility. I have some stored value. I have some air miles. I have a telephone card capability, and I probably have my passport in there, and I may have my thumbprint in there so people can be absolutely sure that I'm who I'm purporting to be. That would be my ideal world.
Now, obviously, it's going to take a decade or two to get to that happy state. But I think if you see that as an end objective, it's working out sensibly how you can migrate. And really part of this thing that we call Visa Smart Path is trying to see how we can, over time, migrate that, and how it can be done in the most efficient and economical way so that we have interoperability, so that we have security standards, so that we don't feel that people are falling over each other in different parts of the world coming to different conclusions about these things.
The public, therefore, is a bit confused, because they see all kinds of different experiments. But I think the general conclusion you're getting is that the interest in stored value is only to a point. The banks have to go beyond that and find something that is more exciting and tantalizing to get the consumer excited. And because I know what's possible, I'm very excited about this. |
