The embedded microprocessor Smart Card was invented in France in 1974 – and is now quite widely used there, mainly for financial applications. But that is primarily because successive governments have wanted to see a French invention exploited. If the technology is to have a long-term future, it has to become an entrenched part of […]
The embedded microprocessor Smart Card was invented in France in 1974 – and is now quite widely used there, mainly for financial applications. But that is primarily because successive governments have wanted to see a French invention exploited. If the technology is to have a long-term future, it has to become an entrenched part of US culture and commerce, and, not surprisingly, few financial institu-tions there see a pressing need for the cards. However there is an unquestioning faith in the in-evitable march of technology in the US, so there is a consensus that the technology will make its mark, and that a business case for implementing the technology will begin to emerge until 1995, according to a survey by Payment Systems Inc on behalf of Visa USA. The survey was intended to measure members’ and merchants’ perceptions of chip card development and telephone interviews were conducted with 23 of the 25 largest issuers and the same number of acquirers, and 126 retailers and service providers, including the clothing, petrol, restaurants, hotel and airline trades. The major finding of the survey, released at the ABA National Bank Card Conference in Orlando, Florida was that almost 90% of respondents said that chip cards would not be a viable option within the next three years, and overall perceptions of the viability of chip cards suggested that the market was to be seven or more years away. Nevertheless half of the issuers and 75% of acquirers polled felt that chip cards would be cost justified in the future, primarily because of increased telecommunications cost that will make off-line authorisations imperative, but also because of other costs of card transactions, including discount rates and fraud. A gradual approach to chip card development and implementation was preferred by 80% of issuers and 75% of acquirers, primarily because it would be easier on the banks to adapt, and would allow time for education of the public, whereas an immediate conversion was regarded as too costly and risky: the banks are not willing to spend a lot of money on a card the public may not accept, according to respondents. Aware of developmentsAll issuers and almost 95% of acquirers are aware of chip card developments, and about half perceive the differences between the Visa and MasterCard chip card strategies. Visa’s approach is evolutionary, letting the market set the pace, whereas MasterCard has proposed mandating a conversion to take place over five years, according to Roger Peirce, executive vice president of Visa USA. Visa is convinced that chip cards must generate new revenue, whereas MasterCard sees chip cards primarily as a means of minimising fraud loss and communications costs, Peirce declared. Most mer-chants interviewed observed that the current magnetic-stripe technology was satisfactory for their current needs, but did see advantages with chip cards, including the potential for reduced discount rates, reduced authorisation costs and fraud, more payment options for consumers, reduction of the processing burden and better customer service; per-eived disadvantages were the cost of implementation, speed of the transactions procedure, consumer resistance, changes in procedures, use of personal identification numbers at the point of sale, employee training, and greater possibility of error.