Ray Van Eng (10/20/97)
This motto always carries a lot of weight and it is certainly the hope of many technology firms and service providers taking part in the electronic money trial which commenced on October 06, 1997 in Manhattan's Upper West Side, an area west of Central Park between West 60th and West 96th Streets. New York, New York. The city that makes you say it twice has the cooperation of Mondex USA and Visa USA, offering two of the most dominant stored value card platforms in the world today: the Mondex and the Visa Cash cards. The NYC pilot is a follow-up to the Visa Cash only smart card roll-out for the 1996 Olympic summer games in Atlanta, Ga. The Olympic smart card project is the largest to date in the United States, no doubt about that. A total of a million and a half fixed value, non-reloadable Visa Cash cards were issued and accepted throughout the city of Atlanta, whereas the NYC trial involves the use of an initial 50,000 cards (25,000 Visa Cash cards from Citibank and another 25,000 Mondex cards from Chase Manhattan Bank). However, the NYC trial is more advanced in many ways.
First off, the Mondex and Visa Cash cards used in the Big Apple are the reloadable variety, meaning that cash can be downloaded to the smart card from a bank account via a special ATM or kiosk terminal installed throughout the test area. In the future, the Internet or an online banking hook-up will also enable such fund transfer activities. For those unfamiliar with how stored value smart cards work, here is a primer. When you first obtain a smart card (which has a computer chip embedded) from a bank, it will usually come with a certain amount of money pre-installed so that it is ready to use. Upon purchasing a merchanize from a vendor, a magazine, for example, you would place your card inside the smart card reader (which also holds a merchant smart card), the clerk will punch in the amount, you approve it by pushing a button on the reader and the exact amount will be deducted from your card and credited to the merchant card thereby completing the transaction. When you are running low on cash on your card, you could get it reloaded at an ATM or kiosk as mentioned above. And for the merchant, he or she could make a deposit of the accumulated sales by bringing the merchant card to the bank or download the amount to his/her bank account via an ATM, or a secure online banking link. Here, an interesting thing about the Mondex card must be point out. It enables person-to-person cash transfer without going through a bank computer. This unique feature will allow you to settle expenses between friends, among family members or even with a total stranger e.g. paying the taxi cab or door-to-door sales. Verifone Inc. is in fact supplying the Personal-ATM device to accomplish these tasks in the trial. More on that later. Visa Cash is reported to have something similar in the works. The NYC Trial is the first time that the Mondex and Visa Cash cards are being publicly tested in a real life merchant/consumer environment for inter-operability -- the ability to work with one another in a single card reader terminal as it is done today with credit and debit card purchases. This aspect is extremely critical if the stored value card market were to take off, as not many merchants would welcome the option of having to install two different types of card terminals on their sales counters to handle the two different cards systems. It is not only expensive but cumbersome as well. The smart card market will likely go through a Catch 22 period in which the merchants would say there are not enough consumers using it and consumers complain that there aren't many merchant outlets equipped with the reader terminals. That is one major reason why most of the successful smart card trials are done in confined settings such as inside a college campus, a corporate compound or a military facility or in small city states such as Singapore and Monaco. It is much easier for closed venues to mandate smart card usage by making it the only way possible to do business with one another. Not so with an open city trial like the one in New York which also explains why the NYC smart card sponsors have gone a long way to ensure the success of the trial by giving much of the items needed for the pilot away for free to participants. Cards were issued at no cost to Chase and Citibank customers living in that area. These are actually special ATM cards with a computer chip that can handle not only stored value but also able to incorporate loyalty programs, air mileage schemes and the like. These 'Feature Loadable' cards pave the way for the card issuers to provide innovative multiple application services for cardholders at some future date even after the trial is over. For those who are not customers of the two banks, they can still obtain a 'Stand Alone' version of the smart card for handling simple cash transactions only. Smart "electronic cash register" card readers are no charge loaners to merchants to handle retail transactions. Most, if not all of the 600 merchants taking part in the pilot simply won't pay for the readers at this point as the trial will only last for six months. A variety of "Personal Value Checker" compact smart card readers from Oki Advance Products are being provided to consumers so that they could check balances on their cards, look up the last ten purchases they have made or even examine the money downloads they have performed. Another note-worthy gadget being used is the "Personal-ATM" which allows the consumer to download cash right from the comfort of her/his home or office by hooking the unit up with a phone line and dialing into the banking network. As mentioned above, this device can also facilitates person-to personal money transfer. All of the consumer card readers are portable enough that they can be easily carried in anyone's pocket, wallet or purse. There are certainly many benefits for everyone in using smart cards as a medium to transact petty cash expenses especially those under five dollars. Consumers won't have to search for exact changes. Merchants won't have to deal with the headache of counting the cash, worry about counterfeit money, robbery, employee theft etc. not to mention a faster throughput at the point-of-sale. Banks would like it because it reduces the demand for hard cash and they would make money on "floats" -- portions of unused cash on the cards that are interest free to the bank, and for lost cards, banks will keep that money forever as they never have to reimburse the merchants. There are also opportunities for banks to build customer loyalty and enhancing relationships by issuing branded smart card products and services. Government will like it because smart cards reduce under-reporting by merchants which is a chronic problem in cash only businesses. However, the other side of the equation may also be true. Consumers may balk at card cost ($10 to $20 per card, Mondex being the more expensive variety as it requires a more powerful microprocessor for offline operations), about bank transaction fees (some suggest that it may cost 25 cents per cash download), the expense of card readers and being not protected with lost cards etc. Merchants may not be very enthusiastic about purchasing merchant card readers that can cost upwards of $500. Banks may worry that they won't be able to recoup the expenses in pushing smart card products and services when cash is working just fine for them and so on and so forth. However, the dice is cast and the tide can no longer be turned back. With the increasing popularity of the Internet as a major communication and transaction medium for the 21st century, the whole world is going virtual, so will the future of money. Will smart cards make it? That is the untold million dollar question that everyone is waiting for. All eyes will be on New York, New York, the city that makes you say it twice.
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