A coalition of 14 financial institutions, including MasterCard International and Bank of America, announced Wednesday that it will form a company to develop the first debit card for use nationwide to make purchases as small as a cup of coffee.
The new company, to be called SmartCash, will help speed implementation of a so-called smart card that aims to link the benefits of credit cards, automated teller machine cards and prepaid debit cards in one piece of plastic--thus taking the nation a step closer to the long-heralded cashless society.
Consumers will be able to “load” the card with cash for later use. Instead of carrying around bills and change, consumers will simply swipe the card through a machine to make purchases, including those under $20.
The card could also be used at automated teller machines to get cash or at retail locations to buy everything from food to clothing. When consumers run out of buying power on the card, they could simply recharge it by deducting money from their checking or credit card accounts.
However, the card may be a few years away from realization, and it will need the cooperation of retailers to work. The first pilot programs are expected to start sometime next year, said Nancy Elder, a spokeswoman for MasterCard. A nationwide rollout will come sometime after that--probably between 1997 and 2000.
The main holdup may be retailers, who must install upgraded computer systems to accept the cards.
Additionally, it’s too early to say how much banks are going to charge customers for the service, Elder said. The cost could have a significant impact on whether consumers use the cards as freely as they do cash--as promoters hope they will--or not at all.
Elder said there is the potential for the card to be expanded for use by those without bank accounts; they could “load” the card in person at various sites.
The demand for such a versatile card was the driving force behind the broad alliance of companies already signed on to the SmartCash plan, Elder said.
“Sixty percent of consumers surveyed in the United States said they would be willing to switch banks” to get the smart cards, Elder said.
“SmartCash represents a shared vision and a shared commitment to deliver the increased convenience, flexibility and efficiency of electronic cash to U.S. consumers, merchants and banks,” said Hatim Tyabji, chairman of VeriFone Inc.
Besides MasterCard, BofA and VeriFone, other founding members of the group include Banc One Corp., Chemical Bank Corp., Core-States Financial Corp., NationsBank Corp. and Wachovia Corp. However, participation in SmartCash will be open to all U.S. financial institutions and card providers, the companies said.
SmartCash will be standardized with similar efforts already under way for smart cards developed by credit card companies Europay, MasterCard and Visa.
Amy Brinkley, executive vice president at NationsBank, said the venture shows “unprecedented industry cooperation to develop an innovative financial product.”
Reuters contributed to this report.