Nicole Turner
For a generation of children opening their first savings accounts, the smell and feel of money will probably be obsolete by the time they take out their first housing loan. The term ”flipping a coin” will be a quaint reference to an era when people actually carried paper and metal currency in their pockets.
The introduction of smart cards is the first step in a heady digital dosh revolution, which aims to link households, offices and individuals on a vast information network that is user-friendly, fast and convenient, and will put notes and coins in museum displays along with vinyl LPs.
Pay phones and transport networks around the world are being revamped to accept smart cards, while banks are rushing to develop an electronic money system that will store digital cash credits to be used for making purchases.
The advantages of the technology are numerous. Smart cards, with their own computer chip, offer greater capacity than magnetic stripe cards and also provide greater security and higher reliability.
According to Daniel le Gal, co-founder and head of the Gemplus Group, the world’s biggest smart-card manufacturer, use of the cards is increasing in leaps and bounds: ”In 1989 the average rate of smart card per inhabitant [of the world] was one for 100 people. Seven years later, in 1996, it was one for 10 people. And within seven years, in 2003, it will be one to one.”
For security-conscious South Africa, smart cards can only be good news.
As the recent spate of highway robberies has shown, handling cash costs time, money and effort. Smart cards will make the sight of armed security guards lugging coins around a rare one. The hijackers and armed robbers of the future will be computer hackers, not armed thugs.
But smart cards are not yet immune to tampering. Ask Coca-Cola, who were red- faced after boy scouts in Australia found a way to get free drinks at the launch of new vending machines last month.
Andre Mansvelt, the director Net1, the South African agents for Gemplus, says fraud is more difficult with smart cards, and even if the card is lost, your money remains protected. ”There is very little incentive to hack a smart card, and even if a card is broken by a hacker, the system remains intact. That is the beauty of it.”
Nedcor offers companies a smart card service called Nedsmart, a commercial debit card used by South African Breweries and Gilbey’s, among others, which allows payment of commercial transactions for fast-moving consumer goods in a fast and secure way. More than R2-billion is moved this way each year. The cards, linked to current or savings accounts, allow users to negotiate price differences and can be used in the same way as COD, without the cash.
A major benefactor of smart-card technology is the banking sector. New-generation credit cards being deployed in several projects around the world are all smart card-based. South African banks are more conservative when it comes to embracing the technology, says Bruce Barty of Internet Solutions.
”At the moment they are all watching each other to see what happens, and because we have a population that is not educated about using smart cards, it may be a while before they are widely used,” he said.
The Nedcor group is the most advanced in electronic banking. More than three million transactions at point of sale have been made via smart cards since their inception three years ago. The bank currently offers two smart-card applications: one a card aimed at the middle market and accepted by 40 retailers, a forerunner to a debit card that will allow transactions in shops to be automatically debited from users accounts.
As more retail banking applications are developed by local banks, the technology will allow them to service clients traditionally left out of the credit market. But with the cost of implementing systems, and suspicions about their security, this may take a while.
In health care, the smart card reduces paper work, streamlines insurance payments and with programmable levels of access, it can act as a portable electronic file, with vital information available in emergencies, and the rest stored securely to protect confidentiality.
Aplitech, a local company listed in December, is at work to develop a smart- card system for use on minibus taxis, buses and trains.
The possibilities are endless: one card can be everything from an electronic pass to a purse for snacks. In the United States, 200 contractors to the Department of Defence will receive payment via e-cheques thanks to a breed of smart cards backed by sophisticated Web applications.