Three big credit card
issuers give smart cards a new push
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
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
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.
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
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
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.
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
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
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
"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