Forbes Magazine
Monday, July 20, 1998

Chip cards plus

Cities are adopting smart card systems

by Sam Sternberg

While 35 percent of the global smart card market will be anchored by phone cards, the remaining lion's share will show more innovation, according to Insight Research of Parsippany, N.J. The telecommunications market research company predicts that global spending on smart cards will grow from $1.1 billion in 1998 to nearly $2.8 billion in 2002.

Many of these innovative systems are aimed at communities, the perfect testing grounds for multifunctional card systems. Since they offer consumers new and attractive features, there is a good chance they will not suffer the acceptance problems Mondex and other bank card systems have had.

The most ambitious scheme comes from the city state of Singapore. By the end of the century, it plans to have one million smart card users. The government has already launched plans to use smart cards for shopping, as a roadway toll payment system and for access control to Ministry of Defense facilities. Singapore is also looking at hundreds of other uses, all to be held on a single card, including a voter identification scheme.

Closer to home, the city of Twinsburg, Ohio, is also testing an ambitious smart card model. Its Twinsburg 2000 smart card program is being developed by two small Ohio companies, NewMarket Solutions and ECO Computers. City residents will use the card for identification, access to city facilities, and admission to a wide variety of city-run fee-based programs. Residents' vital statistics and emergency health care needs may also be on the card. Local merchants are involved in developing a senior citizen discount program for the cards.

Twinsburg city employees and officials will use the cards for time accounting and payroll systems. The cards will also let them access secure areas, fuel city vehicles, order supplies, and query city information systems.

A more limited program for cities is being tested in Berlin, Germany. Two thousand refugees have received smart cards containing their benefit entitlement records and credit data. They can purchase a controlled set of items in approximately 70 retail outlets in the city.

What distinguishes all of these systems from the bank controlled systems is the more open mix of cash functions, and data storage services. Henry Dreifus of Dreifus Associates, thinks the banks are fighting an uphill battle in their efforts to maintain proprietary control. It's a battle they may not win.

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Copyright © 1998 by Forbes Magazine. All Rights Reserved. Reprinted with permission.