To Visa executives, there are only two kinds of people in the world: the "banked" and the "unbanked" - those with money stashed away in financial institutions and those sitting on mattresses stuffed with bills. To convert the latter, many of whom live in developing countries, Visa is waging a "battle against cash" and employing an unlikely weapon: the smartcard.
In fact, if Visa gets its way, South America, Russia, and Asia will get a taste of smartcard technology and digital cash even before the United States does. In a conference Thursday, a team of six regional Visa vice presidents unveiled a bare-bones smartcard system called COPAC (chip offline pre-authorized card), designed specifically for emerging economies where fluctuating currencies, unstable infrastructures, and bank insolvency have made the Western way of money - credit cards and ATMs - an unrealistic option.
COPAC, to debut in St. Petersburg, Russia, this fall, is a simple cash debit card, onto which users dump funds for the plastic "Visa Pockapt" to make purchases from merchants outfitted with the COPAC terminal. Unlike the omnipresent ATM systems or credit-card readers in the United States, which demand secure network connections, the COPAC merchant's unit has no need to authorize transactions by telephone. Essentially, the system echoes the DigiCash and CyberCoin models for Net transactions: pre-load a certain amount of money and spend as you like. But in the case of COPAC, the store owner must take the card to a bank to turn the data back into money.
Countries that depend on cash are ripe for a smartcard explosion, said Dennis Goggin, president of Visa International for the Asia-Pacific region. Because industrial planning and security are not as strong as they could be, he said, Asia "is a cash-dominated society. ... Cash is infrastructurally necessary." Consumers fearful about carrying lots of cash are eager to try the system, he said.
The trial, funded in part by Inkombank, one of Russia's largest banks, is just the first step toward preparing these countries for credit card systems, Visa's core business, said Francois Dutray, group executive vice president for Visa International.
But in countries and communities where even a telephone call is a rarity, it may take work just to teach people what smartcards are, admitted Anne Cobb, the head of Visa operations in Central Europe, the Middle East, and Africa. "When people ask about my job, 'What do you do in [those countries]?' I say, "Three things: education, education, education," she said.
American consumers have had a tepid response to digicash technology. A system similar to COPAC was introduced at the Atlanta Olympics last year with disappointing results. Mildred Wolf, an analyst at Jupiter Communications, explaining that there was - and still is - no consumer demand for pre-paid debit cards. With robust telecommunications lines for credit cards and ATMs, US consumers already have a variety of payment options.
"We have to figure out what is the value proposition for consumers and banks," said Janet Otsuki, a spokeswoman for Mondex USA, the US counterpart to Europe's original smartcard-maker. Already ideas for frequent-use systems, like mileage awards on airlines, are being bandied about. Otsuki pointed out: "What does the merchant gain? You've got to have more than debit card. You have to have people be rewarded [for using it]."
From the Wired News New York Bureau at FEED magazine.
