<B> Are They Really Smart?</B>
By Rolfe Shellenberger
<i>Rolfe Shellenberger is a senior consultant for Rochester, Wis.-based Runzheimer International.</i><hr>
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The "smart card" in its simplest form is an information repository. It provides portability of what may be complicated, temporary or permanent information, and can take data from one computer or electronic storage medium to another.
Probably its best use for a consumer might be in transferring a name, address and phone number to countless requests for that information when someone must prepare an electronic record for a customer. A charge card performs the same role: When swiped through a reader it transfers your name and account number, but not the balance.
A unique feature of smart cards is their ability to interact with readers and to "unload" either a portion or all of their stored information. Thus, if a smart card were loaded with, say, $1,000, and someone wanted to buy something that cost $200, the smart card could reduce its store of value by $200 and change its balance to $800. Or, if used to transfer itinerary information from a computer record to a supplier, it could, in turn, qualify a traveler's reservation to an airline, a car rental company and a hotel.
Many businesses are excited about the concept of smart cards as a kind of electronic wallet. That's just a fancy kind of debit card with a slight difference: When you fill your electronic wallet, your bank won't have to pay interest from that point on if you have an interest-bearing account. With a debit card, you only lose interest on costs of purchases as of purchase date.
Siemens sees an application for smart cards that combines identification, qualification and balance reduction on other types of accounts. If a traveler--or an employer--establishes a contract with an airline for 2,000 trips at $600 each, and with a hotel for 1,000 room nights at $88 each, the smart card bearer can carry a portion of inventory behind that contract. A traveler's reservation will generate data transfer from a computer reservation system (or other system) via an intermediary device to a card that also will be personalized to one traveler's profile, including probably indisputable personal identification.
That kind of smart card is good for a traveler's corporate employer because the traveler cannot convert this adjustable plastic purchase order to get a seat on another airline or a room at another hotel. It also is good for a supplier who wants an easy way of counting how many seats or rooms in a corporate contract are being used. Travelers may like it because it is a simple way to claim a reservation. Ideally, it should be designed so that it can issue a remote boarding pass at an airline departure gate or even act as a room key for a hotel. Taking a page from car rental companies' express service packages, the hotel could have an electronically accessible system to reveal room assignment, then issue a plastic key.
What could be better than the electronification of processes? Well, I may be a dinosaur but I think paper is a better medium until a traveler has universal private access to electronic readers.
Paper, or even stone tablets, can provide a traveler with direction. If an itinerary's content is buried in plastic, a traveler will need a piece of paper to know where he or she is supposed to be. That makes a smart card a needless redundancy. Storing information on a card can be a great convenience to a traveler, but "permanent" passive data--identification number, name, address, vital statistics like date of birth, medical requirements, etc.--not "temporary" value data, are what should be stored. All of these items could be imbedded on a corporate charge card.
A recent report on a smart card experiment undertaken by Lufthansa indicated that traveler response was less than overwhelmingly positive. The biggest complaint was: "I don't want or need another piece of plastic to stuff into my crowded leather wallet." Travelers also feared the loss of resources.
One clear advantage of any ticketless scheme is that the replication of information is possible wherever there's a fax or printer, and no financial security issues are involved. If a traveler needs a smart card to enable travel, responsibility for security is transferred from a less portable "information vault" to that piece of plastic residing in his or her blue jeans. This makes a traveler much too involved in the transfer of information.
So why is "everyone" excited about smart cards? Who is everyone?<ul>
<li>Smart card chip manufacturers--yes, they want to sell technology, but who doesn't these days?
<li>Banks want smart cards to reduce distribution costs and competition in their sale of money. A smart card will reduce the number of cash suppliers; it also will reduce the need for ATMs; it will keep bank customers out of reach of other banks; and reduce bank risks while raising customer risks.
<li>Corporate controllers want them as a device to enforce per diems. A company can give a vice president a smart card stash of $3,500 for a day in New York. For lower-ranking employees, plastic purchasing power might be limited to flophouses and street-corner hot dogs.
<li>Charge card companies want them to diminish competition. </ul>
Any individual who starts using a smart card will have to consider its "lose-ability." Having more than one only increases risk. When an employee leaves a smart card on the restaurant dining room table it could be the same as leaving behind $3,500 or a piece of the company's airline contract.
The smart card also creates opportunities from non-redemption. In 1965, American Express had $4 billion in unredeemed traveler's checks squirreled away in desk and dresser drawers, waiting for that next trip abroad. How much can you earn a day with $4 billion of somebody else's money?
Smart cards may be a possibility for more secure information transfer, but I would rather it be accomplished through a satellite than through somebody's purse or wallet.