Manhattan Smart Card Trial Ends, Lessons To Be Learned

Computergram International, Nov 5, 1998

The much-maligned smart card trial on Manhattan's Upper West Side is to finish at the end of this year after a muted response from consumers and retailers. About 96,000 cards were issued to consumers and 600 merchants signed to accept a terminal in their shop and process the payments. In the first year about $1m was spent using the card, which amounts to just over $10 for each consumer, but many were known to have never tried using the card, so some spent more than that.

The trial, a four-way joint venture between Citibank, Chase Manhattan, Visa and MasterCard, was originally supposed to end in the spring, but was extended by six months. It used MasterCard's Mondex and Visa's VisaCash smart card systems. The banks have both pledged to continue with other stored-cash smart card trials. About a third of the merchants have left the scheme, disgruntled at technical problems with the terminals and the fact that the banks originally asked them to pay fees to use the system. Eventually the banks had to offer rebates to consumers and incentives to retailers. Some retailers had dumped the terminal at the back of the store, making it effectively unusable, and there were other problems. It would have been far more useful if people could have done additional things with the cards, such as use payphones or taxis - other traditionally cash-only services. As it was, the introduction came just as America was waking up to debit cards - already commonplace in Europe - and thus people saw no need to use a smart card, onto which they had to load the 'cash' at an ATM, over their debit card, which requires no such effort. Mondex is also terminating its trial in Guelph, Ontario, which included converting some of the town's parking meters and public buses, but reports suggests the town's officials were not impressed with the results. Another pilot will start in mid-1999 in Sherbrooke, Quebec. Last month the Department of Justice sued MasterCard and Visa for engaging in anti-competitive practices in the credit card market and also alleged that the two companies "have slowed down the development of new card products and technologies such as smart cards, commercial cards, and systems to permit secured card transactions over the internet," according to a DoJ statement at the time.