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A Thing The Green Sheet Issue 020101-
Issue 020101-
Table of Contents

Payment Innovation Evolving Within Well Defined Boundaries

Training Your Sales Force to Win the Profit Tug-of-War

Swipe, Sip, Chill: Pepsi Without Cash

An Acquirer with Heart

Suit Calls Visa Chargebacks Unfair

Putting POS First at PSC

New Bug Is Born

Concord Acquires Logix, Expands Services

A Call Back Can Mean Many Happy Returns

Got a Minute?


Lead Story:

Smart Solutions or Smart Marketing?

M ost smart cards continue to be a solution in search of a problem. In the United States, where dealing with multiple currencies is a problem that doesn't exist, smart card technology is overkill and unnecessary.

And when 12 European countries complete the transition process of switching to a single-currency system by mid-2002, we will see less and less need for the common solution smart cards provided.

Here in this country, the smart card "solution" is superfluous. Smart card technology has its applications, but plastic cards embedded with computer chips are, for the most part, an expensive gimmick. Rather than solving a complicated problem, smart card use in the U.S. will not add true value to most of our lives.

On Jan. 1, the much-anticipated euro made its official debut in 12 European Union Member States. The countries have adopted the single currency as a way of simplifying trade and commerce.

Smart cards were developed 25 years ago in Europe, and their widespread use and acceptance there did alleviate many of the problems associated with multi-currency business.

Part of the fun - or frustration, depending on your outlook - of traveling through Europe was trading dollars for drachmas, francs, lire or marks and bringing home the different coins and paper bills as souvenirs. For visitors and residents, making purchases across the various borders was occasionally inconvenient but was simplified somewhat by smart card technology.

The challenge of exchange rates between countries became simpler with the new year, and by mid-2002 Irish pounds, Italian lira, French francs and German marks will no longer be viable forms of payment. A common single currency used throughout Europe could make smart cards unnecessary. And if that's the case in Europe, what does that mean for the future of smart cards in the United States, where dealing with multi-currencies has never been a problem?

The switch-over from 12 separate currencies to one has been a monumental project, requiring years of planning to implement and affecting every citizen in the participating countries. The adoption of the euro has its roots in the rebuilding of Europe following World War II and is a major step toward the vision of a unified group of countries. The transition is expected to take up to six months to be complete.

In mid-December, people in the Netherlands, Ireland and France became the first to see and feel the new coins; these were the first three governments to distribute euro starter kits through banks and government offices. The paper bills were not available until New Year's Day, when ATMs were shut down to replace old money with new euros. Casino chips have been replaced to reflect the new denominations.

Until the old currencies are taken out of circulation, merchants will need to price items two ways and keep two tills. Large retailers will hand back euros as change for purchases made with the old currencies. Employees will deposit checks based on the euro and have been educated to ensure they are being paid correctly.

Smart cards definitely will ease the potential for chaos during the transition in Europe, smoothing bumps and glitches that are sure to appear, especially in the first days or weeks.

In the United States, though, smart card applications seem headed in other directions. Visa and MasterCard both have begun to issue cards with embedded smart chips. Rather than storing the cardholder's personal information to prevent fraud, the chips will be used mainly for marketing purposes. (Retailers and businesses need special readers to access the information on the chips.)

For example, a retail chain can issue smart Visa cards to its customers, who will be able to take advantage of online specials with the use of card readers attached to their home PCs. The personal chip readers are meant to offer greater comfort levels and more secure access, as well as savings and rewards, for online shoppers. The retailer can tailor special offers based on buying habits and possibly offer the same type of shopping opportunities as in the actual stores.

Because the chips are reprogrammable and can store a variety of information (depending on chip size, ranging from a simple eight-bit memory chip to a 32K open platform chip), smart card applications do have many potential applications and are being used more every day.

In 1999, there were 1.3 million smart cards in use worldwide. That number jumped to 2.8 billion in 2001 and is expected to be as high as at least 5.7 billion by 2004.

The U.S. Department of Defense, the largest employer in the country, is using smart cards for employee IDs and building access. Smart cards are used for information security, such as allowing employee access to computer networks in and out of the office.

At universities and colleges, student services utilize smart cards for campus ID, library cards, dorm meals, Internet access and registration. They help prevent fraud in the health care field. They can be used as "e-purses" for parking, mass transit and telephone calls.

Most smart cards and their applications are not worth the expense of making them. They just don't provide the equivalent additional advantages over cards that cost less to make.

If someone could figure out how to make a card that was just smart enough to meet the less complicated needs these cards can fill, that would be a solution worth something.

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