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From the October 2002 Issue of CardTrak |
Does the future belong to smart cards or does it even belong to a physical
payment card? The future of payments may lie in wireless technologies such
as mobile phones, infrared beams from PDAs, or tiny transmitters imbedded
in key chain attachments or wrist bands. Meanwhile, credit card issuers are
beginning to dicker with the shape of physical credit cards.
This month, VISA International developed a new global payment specification
to facilitate contactless or wireless payments via smart cards or other
electronic devices. This is the first time that 'contactless' payment chip
technology has been applied to general-purpose payment cards. Based on an
international standard, "ISO 14443", the new specification uses a chip
embedded in a plastic card or an electronic device, such as a mobile phone
which is then held in front of a terminal and a wireless interface to
transmit the payment information. The first use of this new specification
is expected to be in South Korea with SK Telecom.
Infrared-based proximity payment solutions are set to become a reality on
the University of Southern California campus. The project, known as the
"ZOOP Universal Mobile Payments Service," is jointly sponsored by Harex
InfoTech and the USC Marshall School of Business. Under the program,
students and faculty at USC will use standard Handspring "Treo
Communicators" equipped with a ZOOP payment application, Cingular Wireless
service, and a virtual VISA card issued by the USC Federal Credit Union to
make payments at infrared-enabled POS sites. USC's Bookstore will be the
first merchant in the U.S. to go live with this wireless payment method.
Over time, the project will expand to permit payments at any location on
the campus equipped to handle cash, checks, credit cards and/or debit
cards. In its strategy to become a fully digital campus, USC plans to
extend the capabilities of the service to include access services and
coverage on and off campus.
San Fernando, CA-based Precision Dynamics announced that two theme parks in
Atlanta, Stone Mountain Park and Six Flags Over Georgia, have begun using
its "Smart Band" RFID wristbands. The wristbands enable visitors to pay for
merchandise and refreshments, as well as to gain access to parks,
individual rides, and lockers, with a "flick of the wrist." "Smart Band"
incorporates radio frequency identification technology from Texas
Instruments. Precision Dynamics has also implemented its "Smart Band"
technology at Six Flags Over Georgia in a "Floating Locker System"
developed by Compusafe Electronic Locker Systems of Wentworth Falls,
Australia. Guests purchase their "Locker Band" for the day and the new
RFID-based system lets them rent a locker on demand at any of the park's
lockers for just the time they need it. Each "Locker Band" is equipped with
TI's "Tag-it" smart label inlay, which individually identifies each patron
and allows data to be written to and read from the bands to control access
to the lockers. Precision Dynamics introduced the first patient bar code ID
wristband in 1984 and RFID wristbands in 2000.
This month Bank of America launched a mini VISA, about half the size of a
regular credit or debit card and can be attached to a key chain. The mini
card, which is being offered as a companion to full-sized credit and debit
cards (it will share the same account number), is initially being
distributed to select existing BofA consumer credit cardholders. By the end
of October, current and future credit card customers of BofA will be able
to request a mini card. Bank of America will initially make the mini card
only available to credit card customers, with an introduction of a debit
card version slated for the future.
In March Discover launched a new credit card that brings the card out of
the wallet onto a key chain. The "Discover 2GO Card" is oval shaped and
smaller than a traditional credit card but has a mag stripe containing the
same account information as the cardholder's existing Discover Card. The
unique and patent-pending design is housed in a protective case that
attaches to a key chain, belt, or money clip. Users simply rotate the card
out of its case and swipe.
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| AMEX CARDS |
American Express has rolled out the "Rewards Green," "Rewards
Gold," "Preferred Rewards Green," and "Preferred Rewards Gold," cards which
now have the "Membership Rewards" program as a core feature. The four new
"Rewards Cards" enable cardholders to earn two points for every dollar
charged to the card for purchases at stand-alone supermarkets, gas
stations, drugstores, home improvement stores, the U.S. Postal Service and
wireless phone bills. Cardholders will earn one point for every eligible
dollar charged for all other purchases.The "Rewards Green" and "Gold Cards"
will include traditional AmEx services such as: Purchase Protection;
Buyer's Assurance; Return Protection; Car Rental Loss and Damage Insurance
Global Assist Hotline; Travel Accident Insurance; and Year End Summary.
"Gold Cards" will also offer free shipping and handling on select Internet
and catalog merchants and the "Best Value Guarantee" program. In addition
to these reward options, the upgraded "Preferred Rewards Green" and
"Preferred Rewards Gold Cards" are designed for the frequent travelers
interested in more air, hotel and vacation rewards. The annual fee for the
new cards ranges from $65 to $130.
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| DEBIT ENGINE |
VISA reported that its debit card transactions continue to outpace
credit card transactions this year. During 2001, VISA processed 6.9 billion
debit card transactions compared to 6.2 billion credit card transactions.
For the first six months of this year, VISA says it processed 3.04 billion
"VISA Check" card transactions compared to 2.96 billion VISA credit card
transactions. At the end of the second quarter, VISA had 122.6 million
debit cards versus 261.0 million credit cards, according to CardData
(www.carddata.com). VISA has a 77% share of the off-line debit card market
based on volume and a 74% share based on cards-in-force. "VISA Check" cards
now represent more than 35% of VISA's total U.S. card volume compared to
17% just five years ago. VISA also released a consumer survey yesterday
which shows the primary reason consumers use a "VISA Check" card is to
carry less cash. Other findings: 76% say using their "VISA Check" card has
saved them time and 70% say they have a better idea where they spend their
money since they started using their "VISA Check" card.
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| JAVA CARD |
Starbucks has added an automatic reload feature to its prepaid store card
and has launched a promotion with VISA. The automatic reload enables
customers to set a minimum balance threshold and when the account falls
below the threshold, it is automatically replenished through the customer's
designated credit or debit card. Reloads can be made in any amount between
$20 and $100 and can be setup online. In conjunction with the new feature,
Starbucks is also launching the "Get an Extra Shot from Visa" contest.
Between now and November 11th, VISA will randomly select five individuals
who have signed up for the automatic reload option using their Visa card.
The selected customers will receive a match of their first reload amount
loaded onto their Starbucks Card. The Starbucks stored value card was
introduced last November and to-date has activated nearly five million cards.
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| TITANIUM MARKET |
Discover has joined the "titanium" bandwagon with the release of
the new "Discover Titanium" card. Discover has been hitting mailboxes over
the past several weeks for the new card which features a 0% intro rate on
purchases and cash advances. The current promo rate ends with the May 2003
billing cycle and then increases to a fixed 9.9% rate, according to
CardWatch (www.cardwatch.com). Discover is offering credit limits up to
$50,000 with the new program. However, the "Discover Titanium" does not
include Discover's cash-back rewards program. First USA first launched a
"Titanium VISA" in early 1998. Since then MBNA, Fleet, First National Bank
of Omaha, and Direct Merchants Bank have launched "Titanium" cards. Direct
Merchants and MBNA offers "Titanium" cards under the MasterCard brand while
Fleet and First National Bank of Omaha offer "Titanium" VISA cards.
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| ARIA CARD |
Providian has resurrected its "Aria" credit card brand. In
solicitations flooding mail boxes over the past six weeks, Providian is
offering the "Aria VISA Platinum" with credit limits as low as $250. In May
1999, Providian launched its "Aria" Internet card brand in response to
NextCard. The "Aria" card was part of Providian's e-commerce intiative
which also included GetSmart.com. In February 1995, Providian acquired the
WebCard VISA portfolio from H&R Block and GetSmart.com from a group of
private investors. According to CardWatch (www.cardwatch.com), the new and
improved card is offering a 12 month 0% interest rate on purchases and a
fixed 9.9% APR on balance transfers. The go-to APR on purchases is a fixed
9.99%. Providian also charges a default rate up to 24.99% and a $35 fee for
late payments and over-limits.
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| MID-YEAR PULSE |
The bank credit card industry passed the 500 million account
milestone at mid-year and the percentage of active accounts versus gross
accounts remained solid at 58%. Overall the industry is growing at an
annual rate of 8%.
Bank Credit Card Pulse
Growth
Outstandings $611.4b +7.8%
Q Volume $359.9b +7.1%
Accounts: 500.5m +8.1%
Actives: 290.3m +8.1%
Cards: 607.6m +9.3%
Source: CardData (www.carddata.com)
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