Opportunities:
The marketplace is very bullish regarding smart cards. Analysts are projecting a market of 3 billion (integrated circuit) cards in use by the year 2001. As described, most of the current usage is in large manufacturers like Motorola are avidly targeting the smart card arena. Many believe that the Internet will further increase the use of smart cards as a platform for secure electronic commerce. With copiers and duplication technology improving, the fear of paper counterfeiting could be reduced with the increased use of smart cards and "digital" cash.
Smart cards could be a huge time and cost savings for merchants and banks. Analysts estimate that it costs $60 billion dollars each year to handle and process paper money and coins. With PC readers, users could turn their home PCs into "ATMs" and download funds from their bank accounts directly to their smart cards. Lastly, smart cards can allow users to make fractional payments or "micropayments" (less than a penny) for article reprints and site access. These payments are currently not cost effective for banks and card companies to process.
As economic development continues in second and third world countries, smart cards could be used to expedite payments without the need for building extensive telecommunications networks. Because the cards can track where payments occur, with whom and for what, the cards could also reduce fraud in government payments. Despite these advantages, there are also several barriers to the proliferation of smart cards.
Challenges:
Lack of standardization/Vendor alliances: There are at least three major smart card standards currently on the market. Two of these standards being Mondex and Visa Cash. The trial that is to occur in Upper Manhattan later this year will be the first to use dual standards.
Security: Many users are afraid of having all of their information kept on one card. The idea of all of one's health, tax and legal information kept in one place is of high concern. There is a significant fear of the information being surreptitiously accessed or altered while in use.
Cost of upgrading merchant equipment: Especially in the use of smart cards as a substitute for cash is the need for every merchant to obtain new card readers. Many credit authorization institutions may also feel threatened by the possibility of disintermediation. Merchants may also be concerned regarding the increased costs (economic and physical) of supporting current credit and new smart card systems.
Widespread usage/availability: During the Atlanta trial of Visa Cash during the Olympics, smart card users complained that they were not able to use their cards as much as they would have liked. This lack of widespread availability caused many to question the practicality of smart cards. The next trial in New York is striving for a higher level of vendor penetration and larger number of card readers.