Asia-Pacific users call for enhanced smart cards

Smart cards could be set for a consumer-driven course, including functions that stretch beyond basic payments, according to a recent survey of smart-card usage in Asia-Pacific.

Over three-quarters of the payment cardholders surveyed indicated that they would favor smart credit cards that consolidate payment functions, personal data, and other applications on the same card, according to a survey by Research International. The survey, conducted on behalf of Visa International in May this year, tapped the opinions of more than 1,000 payment cardholders in Hong Kong, Japan, South Korea, Taiwan and Australia.

In addition to standard payments, popular applications for smart cards include medical insurance data, personal identity information and driving licenses.

In Hong Kong, some 79 percent of users wanted smart card-integrated transportation tickets, similar to Dah Sing Bank's incorporation of the Octopus smart card with its own chip-based credit card.

In fact, Hong Kong users showed a tendency to accept smart cards for everyday use, from travelling on public transportation to buying coffee, the report noted.

Convenient package

Regionally, most users believe smart cards can offer greater security and convenience, especially if the number of cards they need to carry can be reduced, the report noted.

"Consumers' demand for smart cards will be increasingly driven by cultural and lifestyle profiles. The challenge is to create the right combinations of applications to suit consumer demand," said Rajiv Kapoor, executive vice president and general manager, marketing and product sales at Visa International Asia-Pacific, in explaining the implications of the survey findings.

To test which applications are most enticing to users, different service combinations were proposed to gauge users' preferences, Kapoor said.

The results showed that on average, a smart credit card that caters to the needs of vacationers is most preferred throughout the region. The card could act as a wallet for cash, transportation tickets, phone cards and hotel room keys, as well as a rental car key, the report noted.

Specific to Hong Kong was an interest in using a combination card related to stock trading; more than 60 percent of users surveyed said this would be a preferred feature. The smart card would enable users to securely track their stock portfolios, conduct online trading and make payments from any location.

However, it's unlikely that users will see these expectations fulfilled in the immediate future. Currently only one-sixth of the total six million Visa cards issued in Hong Kong are embedded with smart-card memory chips - the majority are single-function cards with a magnetic stripe, according to Visa.

Though details of individual country breakdowns are not available, Visa estimates that it won't be until 2008 that the worldwide migration to smart cards will be finished. The first market in Asia to complete the migration is expected to be Japan, which should finish the process within five years, followed by Taiwan and Korea, according to Kapoor.

The reason for the lengthy process is probably a "chicken-and-egg" problem, said industry players.

According to David Tsui, group chief information officer of the IT division at Dao Heng Bank, smart-card applications are still limited and as a result there are few merchants that have the necessary infrastructure - such as smart-card readers - in place.

Due to a lack of supporting infrastructure, banks are then hesitant about developing new applications for the smart credit cards they issued, Tsui added.

In fact, the costs related to building the support infrastructure for smart-card usage have been a deterrent for many merchants, according to an industry player.

These expenses, including smart-card readers and the related development costs for back-end software that connects the merchants and banks, generally amount to thousands of dollars, which can be a burden to merchants when budgets are tight, he added.

"The technology is already in existence and we're ready, implementation (of smart-card usage) would ultimately be driven by banks and government agencies," said Visa's Kapoor.

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