Enter the "Supersmart Card"

Is the much maligned chip card headed for a growth spurt? By now, any smart card expert worth his weight in silicon will tell you that stored value alone never has, and never will, drive extensive chip card use in the U.S. We like our coins, currency, and magnetic stripe cards too much to part with. Even internationally, where uses of stored value cards have thrived, multi-application cards are being introduced that may have very little to due with payments in the traditional sense. Until recently, smart cards have largely been a technology in search of a problem to solve. Now, though, empowered by relatively new architecture such as Java API or other advanced operating system and chip designs, "supersmart" cards will solve many problems in one easy to carry combo card--or at least, that's the vision. The reality is that, today, although many business issues (and, some tech standards) need to be worked out, these cards are technologically up to the task of supporting safer e-commerce, loyalty programs attached to payments, and, ultimately, improved customer relationships. (This happens when cards let consumers, essentially, "tap into" data warehouses.) Mum on early initiatives That these new cards are ultra safe is the latest mantra. Multiapplication cards are new "killer applications" on every vendor's lips. True, vendors quibble about costs and entrance strategies even as they agree with probable market outcomes. Some wonder, for example, if the cost of a Java card (quoted as costing about $20 versus $2 or $3 for other types of chip cards) will justify its use in most but high security access applications. Vendors also wonder when banks will feel comfortable enough with the technology to adopt it more widely. In this country, many early initiatives and pilots have been led by the military and retailers (ABA BJ, Nov. 1998). They have occurred mostly in controlled, campus environments where it is required, or makes sense, to supplant the standard payment infrastructure. Still, banks have done their part to promote newer, multi application cards. Since our last report, for example, U.K.-based Barclays, as well as Citibank, Bank of America, and Bank One/First USA, have all started, or laid the groundwork for, projects that explore various, multi-application chip cards. Though pilot details are scarce at best, vendors have discussed general areas of focus to come out of early discussions in these Projects. De La Rue, for example, has worked with Barclays in the United Kingdom to initiate a project begun last June that enables its small business customers to use chip cards to complete government paperwork. Stored-value boost Many believe that supersmart cards (whether Java, Microsoft or some other type) will boost that tired stored-value model' a bit by enabling vendors to add value to the Standard, chip-based payment scheme. This is, by many accounts, a notoriously difficult task because consumers based here don't, in most situations, inherently care about one payment technology over another. If it's safe and convenient, they're in. So, there's no reason to replace magnetic stripe technology, until you start, perhaps, to think of payments in a new way, such as payments plus loyalty. Again, whether or not the business issues can be easily overcome in the short-run, it's far more probable that such smart card-empowered 'payment plans will become more prominent now that card design can more safely protect what's known as "card real estate" (see diagram on previous page). This is what vendors call the space on the card that can be and allocated to hold the operating system, many applications, and security features. Any card designed to handle multiple applications, and more importantly, multiple retailer participation without card corruption can make the difference, vendors say. Imagine a supersmart card that can facilitate a loyalty program jointly issued by banks and merchants. …