Abstract: Chances are you've heard of smart cards even if you haven't yet seen or tried one at a technology conference. They resemble credit cards, but are embedded with microchips or some other means of storing far more information than cards with magnetic stripes on them can. Although some banks are actively testing smart-card applications, the industry as a whole may be moving too slowly in taking advantage of the technology. Such is the thinking of Jerome Svigals, a respected card industry consultant in Redwood City, Calif., and publisher of Smart and Comments, a newsletter. Cards are the most vital strategic planning element in a financial institution, says Svigals. If you look at the last ten major changes in retail branch strategies, almost every one of them has been card related. Off-premise banking, for instance, is largely possible due to card technology. But besides interchange fees and the minor transaction fees some banks charge, today's ATM cards are not significant money makers for banks. Future developments in electronic banking, therefore, will likely be tied to generating revenue. price per transaction for a smart card is lower than that of a mag-stripe notes Svigals. Also, a bank can make more money from a multiple-application smart card than it can from the bank card. Multiple-application cards would combine, say, ATM services with stored-value features that could be used to pay for public transportation, telephone calls, or cafeteria meals. The stored-value, or prepaid, feature replaces the need to carry cash for making small purchases. The amount of the purchase is automatically deducted from the card by the cashier. Banks could charge nonbank service providers for card access to their services. Smart initiatives Florida State University is issuing a private-label, prepaid debit card, called the FSUCard, to 38,000 students, faculty, and staff. The card can be used at Honor network ATMs and at over 300 merchants in the Tallahassee area. Columbus Bank & Trust Co. and Tallahassee State Bank, the bank subsidiaries of Synovus Financial Corp., Columbus, Ga., are issuing the cards. Another Synovus subsidiary, Total System Services, Inc., handles the card transaction processing. MAC's moves Electronic Payment Services (EPS), Inc., the joint venture of four regional banks that operates the MAC ATM network, introduced a multipurpose smart-card version of the MAC ATM card in October 1992. The bank-issued debit card, which carries a traditional magnetic stripe, is embedded with a microprocessor chip capable of storing monetary value in electronic credits as well as other information. Purchases are deducted from the chip at the point of sale without a personal identification number or an on-line authorization. The card is meant to replace cash payments for low-ticket items, those of $20 or less. We did a pilot at the MAC headquarters in Philadelphia that showed strong [94%] consumer acceptance, says Donald Gleason, president of Money Access Service, which issues the MAC card, and president of Smart Card Enterprise, another EPS unit. Gleason outlined EPS's smart-card strategy to attendees of ABA's National Operations & Automation Conference in May. Initial applications of the card include vending machines, mass transit, pay telephones, and some store purchases. The vast majority of smart-card applications involve purchases of under $20-or under $1 in the case of most vending machines. We believe that traditional debit and credit cards do not meet the market needs of low-value said Gleason. He does not believe smart-card transactions would stunt the growth of on-line debit- and credit-card products, because the average value of their transactions is around $40 for debit and over $50 for credit. MAC's 26 Million card holders will still use their cards for ATM transactions, but those with the smart-card version will be able to load monetary value onto the cards at the ATMs, as well. …
Publication Year: 1993
Publication Date: 1993-07-01
Language: en
Type: article
Access and Citation
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot