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Three big credit card issuers give smart cards a new push

Smart cards gain new pushIn America's love affair with credit cards, the ones with the brains haven't been very popular.

So-called smart cards -- credit cards with embedded microchips -- have been all the rage in Europe and Japan, but have not been embraced in the U.S. market. Their use hasn't expanded much beyond trial uses and college campuses.

But now, a new alliance between Visa USA and three of the Top 10 credit card issuers aims to make smart cards chic.

First USA, Providian and Fleet Boston -- which are the second-, fifth- and eighth-largest credit card issuers, respectively, with a combined $101 billion in billings -- have all begun to market new smart cards.

Their new programs come on the heels of a similar venture by American Express, which launched its Blue smart card in 1999.

Now, their features are limited. But they boast that soon you will be able to use the cards to buy a jacket at the mall, tally your frequent flier miles, let you on the subway and unlock your door when you get home.

"We know customers want products more customized to their tastes and needs," says Al Banisch, vice-president of consumer credit products at Visa USA. "Ultimately, the card will be built with the features you want rather than the ones I want."

A smart card looks like an ordinary credit card. It has a magnetic stripe so it can be used as a traditional credit card, but it also has a computer chip.

The chip allows smart cards to carry 100 times more information than traditional cards.

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Want to buy something online? Skip that tedious typing of your address and credit card number -- the card will supply the information. The card can also keep track of bonus points or rewards that an airline gives when you buy a ticket.

The new cards
The new cards going on the market are:

What is a smart card?

It's a credit card with a fingernail-sized microchip embedded in it.

Today's chips have the same computing power as a full-sized computer from the '80s. And like a computer, you can send information and programs to the chip and have them stored there.

• Fleet Boston's Fusion card: The 32K smart card will come with some applications built in, but customers will eventually be able to add to functions and customize it. The card has no annual fee and an interest rate of 11.99 percent, with a six-month 0 percent introductory period.

"Ultimately, the way consumers will manage the card is through the Web site," says Michael Abbott, Fleet's senior vice president. "They'll see what's on their card and upload or download information. It'll be like a Palm Pilot. This should happen by early next year."

In the near future, consumers will be able to load e-coupons on their Fusion card and redeem them when making purchases. Going to a movie? Buy the tickets online, download them and skip waiting in line that night.

• First USA's Smart Visa: When you use the card online to buy from participating merchants, including Amazon.com and eToys.com, you get a 5 percent rebate.
First USA also offers a software utility it calls SmartView, which loads your personal information onto your card to allow speedy and secure online ordering. The card has no annual fee and an unspecified low introductory APR.

• Providian's Clear card: Providian has its own version of e-wallet software, which it calls the My Toolkit service. It also plans to offer an optional rewards program with miles and other benefits at an additional cost.

Home computer card readers
American Express and Visa's partners have also begun to offer their customers card readers that connect to their home computers.

The gadgets are now external card-swiping devices that hook up to a computer's USB or serial port. But eventually, the card issuers predict, computers will come equipped with built-in card-reader slots -- much as they now come with CD-ROM drives.

Some banks are providing free readers to the first 50,000 customers, others are charging about $20. Until computer cash registers in department stores, restaurants and the like are outfitted with readers, the chip aspects of the smart cards will only be available for online purchases.

The exception is if you travel abroad. Smart cards have been available in the UK, France, Germany and Japan for several years, so the chip elements of the card can be used in over-the-counter transactions.

Down the road
Future uses of the device are being dreamed up all the time.

For example, smart cards could eventually be used to unlock doors.

"When you go to a hotel they give you a plastic key card," says Visa's Banisch. "Instead of that, they could load the information onto your smart Visa. When you leave, they unload it.

Security is a big selling point of the smart card. Like an ATM card, it takes both something you have and something you know to activate the card.

If you're shopping online, you stick the card in the reader, the site you're buying from sees the card is valid and asks for your personal identification number (PIN).

Security-wise, that beats a credit card, which has the card number, expiration date and the owner's name right on the card.

"Smart Visa delivers tremendous benefits to cardholders, providing greater security in tandem with financial information, more efficient online commerce and highly personalized benefits and services to simplify their lives," says Al Banisch.

If your card is lost or stolen, the account is deactivated and you receive a new card with key account information restored on the chip.

Fleet's Mike Abbott says it will take a combination of general awareness and adoption by storeowners to make smart cards catch on.

"People will see the value and ease of it. You don't have to use the chip function all the time. It's an evolution, not a revolution."

 

--Posted: Oct. 9, 2000

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