Credit cards get creative to lure consistent chargers
Ready for a little money magic? Wave your wristwatch and presto,
your car is all gassed up. Flip your key chain and voilà,
that bag of burgers is heading home with you. Flash that doodad
on your gym bag and kazam, next month's club fee is paid faster
than a TaeBo kick.
No sleight of hand here. Credit card issuers are exploring these
and even more exotic payment innovations in an effort to make their
cards more appealing in today's go-go world.
Sheer numbers are forcing card companies to redouble their efforts
to build customer loyalty. Virtually every American (70 percent,
according to the Federal Reserve Board) has at least one credit
card. Statistically at least, most of us hold several, if not a
whole deck of plastic, in our wallets.
Card issuers are hoping the new gadgetry will convince us to use
their plastic, and only theirs, consistently. And while that gizmo
may not look like a credit card or act like a credit card, you can
be certain it will spend like a credit card.
Teardrops on my gym bag
Card hopes to leave its competitors stuck in your wallet by
putting its redesigned card at your fingertips.
The recently unveiled Discover 2GO is a teardrop-shape, pocket-size
card housed in its own protective case that easily attaches to a
key chain, belt or money clip. It works on all magnetic stripe "swipe"
terminals, with the exception of full-card insert models.
Discover spokeswoman Jennifer Kwak says the card company surveyed
more than 1,000 consumers nationwide during the past year to develop
"They wanted something that was cool, fun and practical,"
she says. "They also liked the overall design and appearance.
For people who are card members, their response was, 'Oh yeah, I
would get it. It's so convenient. I could latch it on to my gym
bag.' They don't have to carry their wallet or sift through the
wallet every time they have to purchase something."
Brain on a chain
a leading payment terminal manufacturer, is bullish on the prospects
for radio frequency ID, or (RFID), the new wireless "magic
wand" technology behind the Speedpass
that Exxon and Mobil customers use to gas and go. The tiny "brain
on a chain" fob acts as an electronic key to authorize purchases
against your credit card of choice.
VeriFone has teamed with McDonald's in a Chicago pilot study to
see if the Speedpass key fob will conjure similar magical results
in the quick-service restaurant (QSR) market.
"In an environment like a QSR, a supermarket, a video store
or a convenience store, speed and throughput are really important,"
says VeriFone spokeswoman Michelle Graff. "Once somebody proves
that it works, the competition among retailers is so strong that
that will drive rapid adoption."
Case in point: debit cards at the grocery store. They were first
introduced by Lucky stores on the West Coast in the mid- to late
'80s and spread like wildfire throughout the supermarket industry.
Today's RFID fobs are essentially identification devices. Also
in development are loadable "smart" fobs whose computer
chip can store large amounts of information, including numerous
credit cards, rewards programs and customer loyalty applications.
Does your card keep on ticking?
Even the venerable watchmaker Timex has climbed aboard the
radio frequency bandwagon.
Timex recently introduced a watch that includes a tiny built-in
transponder to trigger the charge mechanism.
The watchmaker is betting the timepiece will prove even handier
than a key fob, especially for use at drive-through windows.
Use the beeping card
With all this wireless wand waving and key chain dangling,
how's a traditional plastic card to compete?
Three inventors at Walker
Digital in Stamford, Conn., think they've found a way.
Jay Walker, Bruce Schneier and Magdalena Mik have patented a sensor
that, when attached to a credit card, flashes lights or beeps for
your attention when you open your wallet.
The product, not yet affiliated with any particular card company,
could lend new dimension to the term "flash some cash"
in the very near future.
More hype than help
Industry analyst Marc Abbey of First
Annapolis Consulting says that while the gizmos may have some
marketing value, most new payment concepts prove to be more hype
"The American Express Blue card proved that having a novelty
to market can have real uplift in direct mail solicitation uses,"
he says. "The chip on the Blue Card was completely without
substance, and yet it had really some nice results for the Visa
and MasterCard issuers that followed.
"I evaluate this contactless card issue along the same lines.
Having something different to market from the other guy may have
some short-term advantages for issuers."
In general, merchants remain largely skeptical of payment innovations,
especially those requiring expensive software or terminal upgrades.
Nor are consumers beating down the doors demanding more payment
"Our industry is relatively unique in that it's not demand
driven, it's supply driven," says Abbey. "I think that's
why you see so much hype, because a supply-push strategy depends
upon generating primary demand."
Blinded by the light
Ironically, payment technology has blossomed at the very moment
that the credit card industry has reached maturity. Is it possible
that the attack of the killer credit card applications could create
a traffic jam of fobs, bobs and bleeping, flashing gadgets to frustrate
both merchants and consumers?
"I think there is real potential for that," Abbey says.
"In the payment industry, there has been more innovation in
the last 24 months than ever before. It's like in the consumer products
world, if you're a packaged-goods company and you released 100 products,
maybe one or two of them will be successful. The same is going to
be true in the payments business.
"All of these technologies that are hyped, that we read about
all the time, most of them will be commercial failures. The question
for issuers is where do you place your bets?"
Jay MacDonald is a contributing
editor based in Florida.