Why New Smart Card Technology May Make Cash Obsolete

There is a growing new trend worldwide, and it may soon make cash and currency obsolete in the twenty-first century!  Smart cards have been in use for years around the world and are now coming to the United States.

You have probably already heard of smart cards, even if you have never personally utilized one.  Similar in appearance to a traditional credit card, the difference is inside; the smart card carries a very small microchip that is programmable and readable with newer credit card terminals.  The card can also be called a “stored-value” card because the value it carries has been pre-loaded onto the card prior to use.  This is done at a bank or other financial institution issuing the card, usually by debiting your bank account and moving the funds over to your smart card.  When you need to re-load the card, the process is repeated.  As you make purchases with the card, the merchant’s terminal deducts the transaction amount from the stored-value balance on your card.  The cards are actually discardable when zeroed out.

These smart cards have been used quite a bit in Europe in recent years and are growing in popularity in Latin America as well.  In 1996, at the Summer Olympics in the United States, the smart card was introduced as an efficient means of visitekaartje met NFC chip handling small purchases without need for many foreign currencies being exchanged to purchase public transportation fares, newspapers, vendor food and drinks, etc.  Use in the United States is growing more slowly but the benefits are starting to attract merchants now.

For the consumer, benefits include:

  • Quicker transactions because no time is necessary for making change.
  • The consumer does not need to carry cash and coins, which is convenient and reduces loss or theft risks.
  • More secure, a photo ID may be asked for at checkout or even a fingerprint.
  • Use at different merchants, not just one like with a gift card.
  • Maintain personal anonymity because no records are kept of what was purchased, just like a cash transaction.
  • The smart card chip can also hold medical or other personal information.
  • Online transactions possible with a card reader attached to computer.

For the merchant, the benefits include:

  • Faster processing of transactions means more customers in less time.
  • No need to handle and store large quantities of cash and coins, armored car use, etc.
  • Access to customer information such as medical records or account numbers if programmed into card chip, again translating into quicker customer turnaround.
  • A smaller initial pool of merchants able to accept smart cards will keep customers coming back to those merchants who can process these cards.
  • No need or expense of “clearing” transactions through the merchant’s credit card processor system.  As soon as the card is inserted into a special slot on the merchant’s terminal the transaction is processed instantly.

Government backing of smart cards is growing because of the potential to combat crime, decrease the untaxable “underground economy”, etc.  This in turn has privacy advocates raising the alarm about the risk of abuse, especially when we are all seen as being electronic blips in huge multinational databases.  They warn that “the next step” after smart cards will be direct

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