ANZ to introduce 'smart' credit cards

Smart cards make their way finally to the New Zealand market

The ANZ Bank plans to release what it claims is New Zealand’s first chip-enabled bank credit card -- or "smartcard" -- within a few months.

The card’s embedded chip will allow it to be used for a variety of other customer functions beyond credit -- including, applications using a card reader attached to the customer’s office or home PC.

Applications will include point-of-sale participation in loyalty schemes, discount coupon redemption and secure internet shopping in a virtual "mall" administered by ANZ, says general manager of cards, Ian Colley.

The scheme, to be rolled out throughout Australia and New Zealand, is in co-operation with Visa, and will use the 3D secure protocol.

Bundling of several applications onto a single card can offer advantages both to the merchant and the customer, Colley says. In the late 90s when Mondex was the brand on bankers' lips, the electronic purse was seen as the killer application; the card would be filled with electronic cash which could be spent through various merchants' terminals. The user would then buy another full card or, in some versions, reload the card from their bank or credit account at an ATM.

But there was no sound business case for the electronic purse, Colley says, as it offfered the merchant no benefit other than having to hold less cash.

With coupon redemption and in-store loyalty schemes, the smartcard will allow the customer to make savings at the store and gain cash rewards, which can then immediately be spent in the same store, a cycle Colley describes as "earn and burn".

With a non-store affiliated scheme like FlyBuys, the points just disappear out of the shop door, he says, though merchants will be able to use the ANZ card to belong to those schemes too.

The smartcard will make it less easy to commit fraud on the internet, Colley claims, and it will be much harder for a customer to claim they did not make a purchase when they did.

"Card-not-present" transactions, in which the buyer just quotes a card number on a mail order form, over the phone or through the internet, will drop away, he forecasts. With the smartcard, the card will have to be effectively present, even by insertion in a remote reader. It may, of course, be stolen, but PIN protection will make it difficult to get value from a stolen card, he says.

The cost to the merchant of fraudulent "card-not-present" transactions has been lamented by large merchant representatives like Woolworths' e-commerce manager, Richard Harrison (see Computerworld, March 5, Page 6).

Meanwhile, however, chief of advanced payment solutions for Advantage Group, John Tait, expresses doubts over the likely success of smartcards.

"From a point-of-sale perspective, the existing EFT-POS system in New Zealand is so good that smarcards will struggle to find a niche in the market," he says. Certainly, several functions will have to be combined on the one card to provide sufficient value to the customer.

The smartcard has been viewed as a "near future" prospect for about eight or nine years now, he says. Viewing its incursion into ever more countries, he likens it to "a tidal wave approaching us", but it will not necessarily have much impact on New Zealand’s shores.

Card manufacturer Datacard suggested earlier this month that smartcards might be used at PCs for users to join and unsubscribe from merchant loyalty schemes online, and for the authentication needs of e-government.

But Tait casts doubt on this, pointing out that a CD-ROM can contain far more information, is scarcely less portable and the information on it can be far greater in detail and just as securely encrypted. The reading device for the CD-ROM is already incorporated in most PCs, and an increasing proportion carry writeable CD drives.

Colley says the use of smartcards to carry keys to government-related information like health records would clearly have to be the subject of much more public discusssion.

Asked about the timetable for card rollout, Colley is unwilling to give an exact date for competitive reasons. "There will be an announcement within weeks; for cards into the market, we're talking months. But it will be sooner than you might think."

The BNZ bank declines to discuss any plans it may have in the pipeline for smartcards.

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