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Conversion to smartcards is an industry challenge

The migration to smart and chip cards will transform the way we conduct business by empowering the customer, transforming financial enterprises and arming merchants with even more sophisticated marketing tactics, said Clive Handley, in charge of the security and transactions divisions of VELOCIT-e, the Internet security, systems integration, gaming and entertainment, smartcard and cashless systems specialist.

Handley said that what consumers want from the electronics payment industry is to be able to make their product purchases and financial dealings that much easier, faster, more convenient - and far more secure.

In the future, consumers will demand that a single consumer point-of-sale device contains software applications for a number of card-based and virtual capabilities, including credit and debit, stored value, loyalty programmes, as well as e-commerce and other nonfinancial applications such as health benefits information or travel programmes.

Multi-application cards a possibility

A number of different applications on a single card will be required. Handley believes chip card or smartcard technology can make the multi-application card a possibility. "If the industry is to maintain and build revenues - and meet consumer demands - it is a fundamental imperative to put in place new infrastructures, easy-to-operate terminals, faster telecommunications and a more flexible transaction-processing environment.

"Converting to chip cards and implementing practical smartcard solutions is critical. Chip cards may be the paradigm shift that these competitors can leverage to become full payment service providers."

Capitalising on opportunities

Factoring in a five-year projection that banks around the world will issue 375 million of the estimated four billion smartcards, it is clear that the banking industry must respond fast and expediently. The focus must be on practical chip solutions and using them to offset the competition, improve business efficiency and profits - and create new revenue streams. Credit and debit are widely accepted consumer payment products and the first logical choice for accelerating the use of smartcards.

Handley also said electronic couponing is dramatically increasing coupon redemption rates and is expected to increase coupon redemption tenfold.

"Smartcards are a business tool that, with multiple applications, can make a compelling case for changing the payment card infrastructure to accept chip-based smartcards. Acting now will slow the competition, build profitability and save money. The benefits of chip cards translate into recovered income. They can assist in numerous ways, such as helping to eliminate skimming and account disruption caused by cancelled cards."

In order to capitalise on opportunities, banks and processor manufacturers need to shape their chip card operating procedures and interface standards to allow the easy addition of chip card support to existing terminals, or terminal bases.

Hypercom's ICE family of terminals - for which VELOCIT-e is the local distributor - incorporates most or all chip-capable applications.

"It is, however, imperative that the industry begins today," Handley stressed. "When distributed over the next seven years, the global cost of terminal replacement would be about $1 billion. But if the industry waits, replacement costs after the same number of years - with no concerted effort or commitment - will be as high as $11 billion. The migration to smart and chip cards will transform the industry. It will also greatly empower the customer, transform financial enterprises and arm merchants with even more sophisticated marketing tactics."

For details contact VELOCIT-e on tel: (011) 258 6900.

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