"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."
This is according to Clive Handley of VELOCIT-e, purveyors of sophisticated smartcard-based business and security solutions. Here he outlines the challenges the industry faces in converting to smartcards.
"What do consumers want from the electronic payments industry?," poses Handley. "Ultimately, they want products that will make their personal financial dealings easier, faster, more convenient and secure," he says.
In the future, consumers will demand that a single consumer point-of-sale device contains software applications for all the following card-based and virtual capabilities:
* Credit and debit.
* Stored value.
* Loyalty programs.
* e-commerce and other nonfinancial applications such as health benefits information or travel programmes.
A number of different applications on a single card will be required. Chip card or smart- card technology can make the multi-application card a possibility. Suggests Handley, "If the industry is to maintain and build revenues, and meet consumer demands, it is now 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," he adds.
"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 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. Electronic couponing is dramatically increasing coupon redemption rates and expected to increase coupon redemption ten-fold," he says.
A business tool
"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 help eliminate skimming and account disruption caused by cancelled cards.
"For this opportunity, banks and processors 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," concludes Handley.
Hypercom's ICE family of terminals incorporate most or all chip-capable applications.
"It is imperative that the industry begin today. When distributed over the next seven years, the global cost of terminal replacement would be about $1 billion (R7b). But if the industry waits, replacement costs after the same number of years with no concerted effort or commitment would be as high as $11 billion (R77b).
For details contact Clive Handley
VELOCIT-e on (011) 258 6900
email: [email protected]
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