Canadian bank invests in smart cards
A new trial for "cashless" automatic teller machines may help popularize smart cards in North America.
Intellect Electronics, the U.S. subsidiary of Intellect Holdings Ltd. of Australia, has set up a pilot program for its ULD 2000i with Scotiabank, a major Canadian bank, and Visa.
The ULD 2000i is an "unattended loading device" otherwise known as a cashless ATM, said Thomas Ream, Intellect's president. With a ULD, customers can transfer funds from bank or credit accounts to smart cards, or vice versa. The smart card can then be used to make purchases without any cash money being involved.
The ULD looks like a regular ATM with two card slots, one for debit/credit cards and one for the smart card, which is about the same size as a credit card.
Although widely used outside North America, smart cards have failed to excite U.S. consumers. "Every card in France is a smart card. Every card in the Netherlands is a smart card. Some places in Asia have them. China has them," said Ream. "We're a little behind in the U.S."
Smart cards are only slightly more popular in Canada, Ream added, but he expects the cards to be increasingly used everywhere on the continent.
"Banks in the U.S. are much less centralized. We've also had a very efficient on-line transaction systems," Ream said. "But as costs come down, you have more people saying they will look at smart cards. Every bank has a smart card division now."
One reason the banks have hesitated until now is that installing the equipment to handle smart card transactions is expected to cost the banking industry $2 to 3 billion, according to Scott Wu, a vice president at Montgomery Securities. "It's a chicken and egg problem. Merchants don't want to pay for upgrades until there are customers and customers don't want them until there are places to use them," Wu said.
In the meantime, it's up to the smart card manufacturers to seed the market. Wu and Ream both think the Intellect-Scotiabank trial, for example, will boost awareness of smart cards in North America.
Visa will also conduct a large-scale trial with Chase Manhattan this fall that will be similar to the Scotiabank trial.