Electronic cash cards planned for Olympics - Brief Article

Nation's Business, March, 1996 by Peter Weaver

When Olympic athletes face off in the Summer Games beginning in July in Atlanta, merchants and three major banks will also be "going for the gold."

Working in alliance with Visa International, the banks-First Union, NationsBank, and Wachovia--will issue 4 million to 6 million stored-value cash cards to be used in lieu of coins and bills by an estimated 4 million consumers in the Atlanta area.

Each card contains a memory chip programmed with "electronic cash." Consumers will buy cards at face-value amounts of $10, $20, $50, or $100 and will pay no additional fee.

Cards will be accepted at more than 5,000 outlets in the Atlanta area, including fast-food restaurants, coin-operated laundries, convenience stores, cinemas, and vending machines.

"We've already started using [the cards]," says Kevin Williams, owner-operator of a Chic-fil-A franchise restaurant. "The faster transaction time is speeding up customer lines so we can handle more volume and at the same time reduce our cash-management costs and pilferage risks."

For the merchant, there's no risk of being stuck with a fraudulent transaction because chip cards (as opposed to magnetic-stripe credit cards) are virtually impossible to counterfeit, according to the banks issuing them. But for the consumer, cash cards are just that--cash. If they're lost or stolen, you're out the amount that hasn't been spent.

Williams' restaurant has installed small electronic-transaction boxes by each cash register. To pay for an order, a customer inserts a cash card into the box, which reads the cards balance and displays the figure--along with the price of the meal--on a screen. When the customer pushes a button to approve the transaction, the "money" electronically leaves the card and is stored as a record in the electronic box for eventual transfer to the restaurants bank account.

The participating banks are competing to sign up merchant locations by offering discount deals on leasing or purchasing the equipment needed to handle the cash cards. Madeline Leonard, owner of Henri's Bakery, a breakfast and lunch spot, says her bank "made us a very good offer so we could try it out."

Banks charge merchants a processing fee on cash-card transactions, ranging from 2.5 to 4 percent of each transaction--roughly the same as processing fees for credit-card transactions.

Merchants have been willing to pay transaction fees, participating bankers say, because the system reduces businesses' cash-management costs and risks while attracting customers.

In April, First Union will introduce another card that bank customers can use in automated-teller machines to transfer money from their checking accounts in order to reload the cash-value memory chip. "Later in the year," says Edgar Brown, a senior vice president with First Union, "we will be rolling out a card that can be used three ways: for cash expenditures, ATM operations, and credit-card transactions."

Brown and other bankers predict that the money cards will be in use nationwide within three to four years. After Atlanta, the cards will appear in metropolitan areas including Washington, New York, Philadelphia, and San Francisco.