In an effort to help banks and financial institutions pull smart-card technology from the slow-to-adopt quagmire of the U.S. market, Visa USA launched its "smart Visa" card platform this week.
The payment card platform offers Visa Issuers pre-packaged applications and personalized services that can be adapted to work with individual Issuer components for smart cards, said Heather Gray, vice president of Foster City, Calif.-based Visa Consumer Products.
"The competition for customers in the credit card category is extremely intense and issuers are looking for new value to their customers," Gray said. "When you can add multifunctionality to a card, you can acquire new customers with new applications, target specific or niche areas of interest, or retain existing customers because you can add a greater sense of security and loyalty."
The new modules are designed to be used in conjunction with a smart-card reader connected to a PC, allowing smart Visa card customers to download new applications and upgrades to their cards without having to be issued a new card, according to Gray. Future services and development work with Visa member banks will bring wireless and PDA (personal digital assistant) connectivity to the smart cards, according to company officials.
Smart-card implementation has been stunted in the United States, but flourishes in Europe due to two primary factors: the higher price of telecommunications overseas, which makes online authorization by banks costly, and rampant European credit card fraud, Gray added.
However, the Visa release coincided with a pair of high-profile security breaches that added to consumer wariness about online transactions. The Web site hacks launched last week against Western Union and furniture seller IKEA also reinforced the need for credit card companies and other online businesses to protect customer information, said John Pescatore, research director for Internet security at technology at Stamford, Conn.-based Gartner Group.
"The more and more we see these 'self-inflicted' wounds like Western Union, it's going to be a major problem [for customers to trust that online transactions are secure]," Pescatore said. "The investment in protecting against even self-inflicted wounds like this is not that high, but a lot of companies are basically self insuring, saying 'I don't think it's going to happen to us,' and so they take a chance."
With added responsibility squarely on their shoulders, major credit card companies face a daunting task of not only assisting Issuers with time-to-market costs and enhanced card functionality, but also convincing vendors to re-vamp their payment systems to accept new cards before customers even feel comfortable using them.
"It's the whole 'chicken and the egg scenario," Gray said. "Vendors aren't going to re-terminalize until customers use [smart cards], and customers won't use them until they can be accepted."
This fall, Visa member financial institutions First USA, FleetBoston Financial, and Providian Financial will implement smart Visa card programs with new chip technology.