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Smart card promoters are unlikely to be content with simply replacing cash, or extending current credit card and EFTPOS applications to smaller transactions. The functionality and flexibility of smart cards is set to provide further opportunities, especially for the competitive retail industry.
In the United States, direct marketing is a much more advanced industry than in Australia. Here, a person might receive 10-15 items of personalised junk mail each year. In the US, it is more likely to be 10-15 items a week. Typically then, the stored value card systems being developed in the US have been developed with little regard for privacy:
"Another smart card retail scheme was introduced in a Chicago supermarket. At the check-out, the smart card was not only used to pay for the purchase, but also to record the customer's favourite foods, brands, and details like birthdays and anniversaries. When the customer next visited the store, he/she inserted the smart card into a terminal, which listed sales on favourite items and even reminded the customer that it was time to buy a gift for tomorrow's anniversary". 29
The potential for stored value cards to lead to fundamental changes in the way people do business has also been recognised. For example:
"Card readers could be built into television sets, and card-holders would be able to load advertiser's specials or discounts onto their card, automatically qualifying for the deals when goods or services were purchased."30
Another stored value card application which is likely to have a significant impact in the future is the use of the cards for payments on the global information infrastructure - the information superhighway.
"There is also an emerging expectation of anonymity of transactions in the new information infrastructures. In much the same way as people sometimes prefer to use cash so there is no record of the transaction, so people are looking for an untraceable means of carrying out transactions in the information superhighway". 31
The use of electronic money in this field is developing rapidly, and a number of smart card based systems have emerged. One such instrument is E-money, which can be traded on the internet without reliance on credit card numbers.
"E-money might also undercut national institutions such as the US Federal Reserve, which are jealous of their power to issue money. That threat to national power is likely to encourage governments to attempt to severely regulate e-money. Any time there is a new financial instrument, people are afraid. But technology moves faster than governments can." 32
Electronic money, sometimes known as E-money, cybercash or digicash, is a new medium of exchange designed for the global information infrastructure. Trade on the Internet, for example, currently relies on credit card transactions, but these are vulnerable to computer security breaches. 33 In their place, a new system of electronic payments is developing based on a company (not necessarily a bank) issuing money in the form of an electronic series of encoded digits. This can be sent to other users on the internet in a secure format and down-loaded on to a stored value card. It currently comes in many guises, and can be backed by, and traded for, any product which is currently in demand. The system presently operates entirely free of regulation.
These and other future applications of stored value cards are likely to be more closely linked to computer and telecommunications companies, than to banks and traditional financial institutions. Microsoft has declared its interest in taking on the banks at their own game, and issuing its own electronic currency for use on the Internet.
However, before this brave new world emerges, individuals are likely to be subjected to a plethora of unregulated and untested products, ranging from simple stored value cards to advanced multi-function cards, all of which will have a substantial social impact.
Before society can experience the glamorous and progressive "smart card age" described by Zoreda (see Figure 1 in Chapter 2), it is likely that Australian consumers will have to pass through a far less glamorous era. An era when the technology is unregulated and where smart cards will not seem so "smart", as described in figure 3 below.
A DAY IN THE LIFE OF A SMART CARD HOLDER, 1996
Iona B. Ming is woken at 5 am. by her young son Thomas who has a sore throat. His tonsils appear red and swollen. After searching for several minutes, she finds Thomas's Medicare smart card. Using her Smart-One stored value card she calls the doctor and makes an appointment. After breakfast she tries to call Thomas's school to tell them he is ill, and her work to tell them she will not be able to come in today. However, her smart phone now tells her that there is not enough money on the card. She is sure that there was more than $10 on it yesterday.
On the way to the bus stop she stops at an ATM and checks her card history on the screen. It shows that overnight the card company withdrew $10 for an annual renewal fee which was due and the balance is now zero. She loads $20 on to the card from her bank account. On boarding the bus, Thomas inserts his school bus pass smart card, but the machine beeps loudly and a red light begins to flash. The bus driver explains that the smart card is only valid for use on a particular bus-route (to and from Thomas's school). Iona pays for both fares with her Smart-One card.
At the doctor's, Iona decides to have a check up herself. However, she has forgotten her own Medicare smart card. The doctor refuses to examine her because she cannot prescribe any treatment for Iona without seeing her previous records, which can only be accessed with her smart card. Thomas is examined, and the Doctor adds an electronic prescription to Thomas's Medicare smart card. At the chemist, Iona hands over Thomas's Medicare smart card and her SuperCredit smart card to pay for the prescription from a credit account.
Her credit authorisation is refused. She tries her Smart-One card but after the bus fares, the value is now too low. She has another smart card in her jacket pocket - a TotalCard, but the chemist does not accept payments on TotalCard. This has been a common problem for Iona - she has over $150 on TotalCard but there are only a handful of outlets which accept it. She has tried to get the value on the card redeemed for cash, but the company has refused, saying she should have read the terms and conditions.
She can't remember seeing any terms and conditions, she only recalls that TotalCard offered $5 extra for every $50 put on the card when it was first introduced. From a phone booth, Iona uses her Smart-One card to ring home to collect the messages on her answering machine. The school wants to know where Thomas is. They have received a report from the NorthBus Truancy Response Centre saying that someone tried to use Thomas's bus pass earlier today. Her office has also called. She calls them both to explain, and then calls her bank to transfer money from her account to her SuperCredit account. She returns to the chemist and finally purchases the anti-biotics.
Back home, she reads her mail. There is a personalised letter from a pest control company she has never heard of. She can only think it must be linked to a can of rat poison she bought last week at the supermarket on her Smart-One card. There are also some brochures from hotels in Brisbane. She realises that this is because she is close to having enough points for a flight to Brisbane through her SuperCredit loyalty program. Unfortunately, she does not have enough money to pay for accommodation yet, and a letter from SuperCredit reminds her that she has only two more weeks to use her points before they are "wiped" and her balance returns to zero.
There is also a letter from Thomas's absent father, sent through solicitors. He is refusing to continue maintenance payments, saying that he is not in a financial position to support her or Thomas at the moment. The last time he made this claim she subpoenaed his smart card records to show that all his money was actually spent on drinking and gambling.
That afternoon, Thomas becomes bored and grumpy. To play on the Internet or to watch TV both require the insertion of a smart card. Iona chooses to let Thomas play on the Internet and gives him the SuperCredit card. She searches the house for another smart card so that she can watch TV or ring some friends, but every card she finds has only a few cents left on it or is not accepted by the TV and phone company.
Figure 3.