For the past decade, Europe has been the world’s number one maker of smart cards, the pocket plastic with an embedded chip that stores reams of financial and other information. In the meantime, American markets are trying to switch over to chip based cards but the consumers and merchants are not as enthusiastic. In this analysis, I will compare two different articles that have separate views about smart cards coming to the United States.
In August 2000, Business Week published an article about the future of smart cards coming to the U.S. The article contained nothing but positive aspects of the new technology and its perks for consumers. It seemed the article was written simply to boost the idea of the smart card to holders of the cards. The article did not mention the business owners views or card issuers views. The article was also very statistical in the prospects of the smart card in the years to come. For example, the article says that companies and government agencies will have an annual sales growth of 100% if the smart cards take off in the U.S. Since smart cards have a chip it can verify the users passwords and even fingerprints thus bringing a whole new network security feature.
The Business Week article also looks at how smart cards will bring annual sales growth of 24% for Pay TV users. Couch potatoes can now enter their credit card numbers directly from their comfort of their homes and order anything on television that interests the person. The problem with this estimate is that Pay TV has not been introduced in the United States yet so this option will not be available for a few years to come.
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The most prominent feature that smart cards can help consumers right now is the on-line shopping features. “Consider what happens when you buy online with your credit cards.
A secure server will probably encrypt your account number, but the merchant might store it on a vulnerable computer network” (Business Week). This is a definite problem that consumers worry about. Last winter, a hacker stole 300,000 credit card numbers from online music retailer CDUniverse who stored their credit card information on a private computer network. If, however, you slid a smart card into a reader on your PC and entered your password, the merchant would never get to your account number—only a code authorizing the sale. This feature is the only current item that would benefit getting a smart card as a consumer.
The assumptions this article makes is just that, assumptions. Everything written makes smart cards seem like there is nothing that could stop the roll out of the smart card production but it does not look at the merchant side of the equation. This article would make anyone excited about getting a smart card in their wallet but the businesses are not prepared to deal with the technology advancement.
Transaction Trends is a monthly magazine sent to credit card processing companies and related fields. In the October 2001 edition, Lauri Giesen wrote an article that is more realistic for businesses and smart card preparation. Ms. Giesen has recorded early tests of smart card transactions at the Olympics in Atlanta and in the upper West side of New York. The trial period “failed to excite merchants on the prospect of accepting smart cards. And Internet-based smart card applications are progressing slower than many had expected”(Giesen).
The article that Lauri Giesen wrote spoke to the business owners and card issuers side of processing the smart card transactions. It was not all negative aspects of the future of smart cards. She noted that merchant loyalty programs may have breathed new air into the smart card applications. It will give something to everyone. Consumers will like the ability to get free purchases and discounts through such programs. Smart card chips store the activity of the consumer at certain businesses and if they ensue the loyalty program then business can expect an annual growth rate. It is expected to be more effective than clipping coupons or direct mailings.
Card issuers have long been interested in the ability to reduce card fraud. The chip embedded in the card gives that feature, Laurie points out. The issuers will be able to differentiate their cards while at the same time use the chip to cut down on fraud and misuse.
One fact that Ms. Giesen notes is that all the U.S. merchants that have credit card equipment in their business would have to upgrade to a higher technology that would accept smart cards. Smart cards do not get “swiped” as regular cards do. You insert the card into the machine like a disk into a computer and wait for the credit card terminal to read it. “There just hasn’t been a good reason for merchant to invest in the extra equipment needed for smart card acceptance”(Giensen).
The two articles both raised the question of the future of smart cards in the United States. The article from Business Week you might think was written by a smart card company or
by a person that stood something to gain from the issuance of smart cards. But the it her article written by Lauri Giesen was by far more realistic. It gave pros and cons from the business perspective and introduce another feature, the loyalty programs that reward you by shopping at the same place over and over.
Either way, smart cards are a definite for the United States. American Express has already rolled out their smart card program with over a million consumers already smart card capable. The company that introduced smart card technology, Gemplus, is now developing chips that enable watches and even eyeglasses to receive and process data.
With technology moving at the rate it is there is no reason why not to accept it and enjoy the new features available to us today, tomorrow or in the future.
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