*Consumers Want Smart Cards, Study Says

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Results from a study by the Smart Card Forum, McLean, VA, indicate that 76 percent of consumers are interested in smart cards that store information, cash or both. The study surveyed more than 2,400 consumers in the United States and Canada.


Consumers were asked questions about smart cards, specifically how interested they were in a "card-sized unit with a memory that can hold any kind of information but requires a reader to input or output data." The survey found:


* Of the 76 percent interested in smart cards, 31 percent were very or extremely interested.


* Of the 31 percent very interested, 74 percent would like to use them for medical information, 62 percent for health insurance information, 59 percent for ATMs and other related bank access, 56 percent for driver's licenses and 53 percent for credit cards. Other popular uses were discount shopping cards to be used in conjunction with loyalty programs (39 percent), frequent flier information (34 percent) and other membership cards (26 percent).


* The most interested groups were willing to pay up to $50 to obtain a smart card and a $25 annual fee to maintain the card.


* The most interested groups also are more likely to have personal computers, cell phones or other high-end devices than those not interested; are younger (38 years old vs. 48) and have higher incomes ($54,000 vs. $45,000).


* Of those very interested, 35 percent would want just one smart card.


* Of those very interested, convenience and security were seen as key motivating factors to use them.


"Using a very precise and narrow definition of a smart card, we have discovered useful new information that we can apply as the full spectrum of smart card applications emerges into the mainstream commercial environment," said William J. Barr, president and chairman of the board at the Smart Card Forum, a nonprofit organization with nearly 200 corporate members, including banking, financial services, telecommunications, computer, technology, health care, retail and entertainment companies.


Direct marketers who are interested in expanding their smart-card initiatives should be encouraged by this information, Barr said.


"These numbers give us two pieces of information to take away about smart cards," Barr said. "One, consumers get it. This is not a mysterious technology to people. They understand how it can be used to simplify their lives. Two, there are many people out there who are ready to do something with this technology as soon as somebody presents the value proposition to them."


One company that has done this is Visa U.S.A., San Francisco. The credit card company is testing 12 active smart card programs in the United States. Bruce McElhinney, senior vice president of market development and acceptance for the company, said other direct marketers and merchants should pay attention to smart cards as well.


"Direct marketers that are smart about how they target and reward their customers are going to be able to leverage this kind of technology very well in the future," he said. "Eventually, smart cards will remove the need for centralized databases -- which can be expensive propositions for merchants -- and instead allow data to reside on each customer's chip or smart card."


For example, all of the data on a customer would be on his card. When that card interacts with a store's terminal, the store gets information from it through a chip reader without having to manage all of that data in a central location. This, McElhinney said, ultimately will let companies gather information about their customers' shopping habits more efficiently and less expensively.


One noteworthy pilot program is with Bank of America, where customers can purchase products over the Internet with their smart cards by putting them into diskettes that they put into their computers, so they can make purchases using a stored value card instead of a credit card.


"Initially, what we have in place right now is a combination of things like credit, debit and stored value -- the financial portions -- followed by proprietary loyalty programs that are card-based," he said.


Barr and McElhinney said smart cards will really pick up in the corporate world in the next two to four years. The initiatives would be accelerated, "if there was one service provider that would allow consumers to restore their card very quickly if they lost it, similar to [how] credit card registration works," Barr said. Issuing banks, telephone companies and credit card companies could be among the logical choices for this type of service provider.


But, "at this point, school's out as to whether or not there will be one entity that coordinates what goes on that chip," McElhinney said. "Maybe the consumer will own the chip and contract out the different services that they want."


In the meantime, Visa has tested the technology, has worked with other card companies on standards for chips and "our position is we are going to have a platform ready when our members want to utilize it," McElhinney said. "We are not out in the marketplace and the merchant community driving the applications -- but when they emerge, we are gong to be armed and ready."
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