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In the next decade, "smart" cards equipped with microprocessor chips will likely replace the magnetic-strip cards currently used as debit, credit and ID cards.
Smart cards have been available in Europe since the early 1980s; the cards' versatility and resistance to illegal use have finally caught the eye of U.S. credit card companies.
What features do smart cards have that magnetic-strip cards don't? For one thing, you can download and store large amounts of information on smart cards, making them perfect for programs like frequent flier clubs. Also, the information on the chip is encrypted, and the chip itself is embedded into the plastic card, making fraud difficult.
A program to test consumer acceptance of smart cards, sponsored by Visa USA, MasterCard, Citibank and Chase Manhattan Bank, is underway in New York City. Customers can download "cybercash" into their smart cards from ATMs and spend it at stores equipped with smart card readers.
So far, even with more than 500 stores in Manhattan equipped with smart-card technology, consumer response has been lackluster. Greg Jones, director of corporate relations at Visa, believes getting people used to the idea of smart cards may be a gradual process. "Smart cards are not a mainstay in people's wallets right now," says Jones, "but we expect that in five to 10 years' time, the cards will become far more prevalent [in the United States]."
Merchants who currently use magnetic-strip card readers will eventually have to replace them with those that can handle smart cards. On the upside, the new readers don't require a dedicated phone line--smart card readers can verify available funds, subtract the sales total, and inform the customer of the remaining balance from data stored on the card's microchip.
According to Schlumberger Electronic Transactions, a division of Schlumberger Ltd., a manufacturer of credit and smart cards, there were 13 million smart cards in use in North America in 1996. The firm projects that by 2005, more than 500 million smart cards will be circulating in North America.
Fast Track
Name and age: Jens Molbak, 35
Company name and description: Coinstar Inc. manufactures,markets and operates 3,900 automated coin-counting machines locatedin grocery stores nationwide. The distinctive green machines, whichare connected to a central computer network that monitorsoperation, automatically counts coins deposited in the hoppers andthen prints out vouchers redeemable for goods or cash (less a 7.5percent "convenience charge") at the stores' checkoutcounters.
Based: Bellevue, Washington
Founded: 1991
Start-up costs: $30 million (venture capital)
1997 sales: $25 million
A penny for your thoughts: "I moved around thecountry a lot, and every time I moved, the last thing to go intothe U-Haul was my growing jar of coins," says Molbak. "Acouple of times, I actually sat down and wrapped some of the coins.It took an hour or so, so I was looking for another way to convertthem. A friend and I interviewed about 1,500 people outsidesupermarkets, and we found that there is about $7 billion in coinsout of circulation in this country, which comes out to about $30per person."
Count on it: Using a patented mechanism, the Coinstarmachine can count as many as 600 coins per minute and processesmore than 180,000 coins before automatically calling for servicevia the central computer network. The Coinstar's screen showsconsumers a running total of the coin count; it also displaysadvertisements and messages on behalf of the host store.
Coins of the realm: Coinstar has been contacted by 20foreign countries about exporting modified versions of the machinesoverseas, says Molbak. A plan is now in development to use Coinstarmachines to convert a variety of European countries' coins(which would otherwise be worthless after the changeover) into newEurodollars.
Contact Source
Coinstar Inc., (800) 928-CASH, http://www.coinstar.com
