My wallet bulges, but it isn’t because of money. No, it is a hefty critter because it’s stuffed with train passes, metro passes, telephone cards, bank cards, credit cards, ID cards, point cards for individual stores, video store cards, meishi from people and restaurants, and random scraps of paper littered with notes.
That’s absurd. There is no reason why anyone should have to carry around all those payment devices, nor why a single ID card doesn’t do the trick. It’s always me and it’s the same (shrinking) pile of money.
One card ought to be able to prove that I am me, and therefore that the cash being proffered is my money. In short, the card should get smarter.
Some are. Card manufacturers and semiconductor makers worldwide are working on ways to make “smart cards.” The most common solution involves embedding an integrated circuit in the card so that each one has a unique identifying number.
Every major credit card company has or had some project in the works. The cards are fairly popular in Europe, but pilot projects — from New York’s Upper West Side to Shibuya — have uniformly failed to live up to expectations.
The problem tends to be scale. People don’t want to buy the card because it isn’t widely accepted, and merchants don’t want to invest in hardware to join the network because it isn’t economical. This chicken-or-the egg paradox plagues all such pilot projects.
Governments can jumpstart the process. The Posts and Telecommunications Ministry last week announced that it and nine commercial banks had agreed to adopt a common standard for IC smart cards. They, together with some 30 huge companies, will set up a committee to decide on the specs for the cards. About 200 to 300 companies should sign up by May; if all goes according to plan, the smart cards will be in use by 2002.
In Finland, every citizen is required to have an ID card (it also functions as an EU passport). Since December, each citizen can apply for an electronic ID card that has a microchip with the user’s individual ID number. Plug in the card, dial in a PIN number and you’re ready to go.
Really smart cards will handle the two big issues of 21st-century commerce: e-commerce and everyday micro-commerce, such as buying train tickets, making phone calls and the like.
The two are linked: Rest assured that as soon as the technology for the latter is workable, lots of things that are free on the Net today will get price tags. An article will cost 5 yen a download, or access to a Web site may cost a nickel. It may not sound like much — that is part of the idea; why not pay? — but quality will attract eyes and eyeballs will add up to a nice revenue stream. That stream can finance better contents, and so the wheel spins. Money does make the world go round.
There are a host of issues that have to be addressed. The key ones are adaptability and security. The first means that the same card has to be usable in just about every setting, from phone booths to PCs. It has to be as reliable in face-to-face transactions as in distant ones, when you don’t mind if you are identified and when you want to be anonymous.
That involves security. The parties to the transaction have to be assured that the person they are dealing with is who he or she claims to be. Both merchant and customer have to have 100 percent confidence in the transaction itself.
My guess is we’ll move to some kind of biometric to confirm identity on the user side. Merchants will probably be automatically verified in a databank like that kept by the Better Business Bureau.
Last week, there were several moves in the digital world toward this new payment model. First come reports that eBay and Wells Fargo had joined forces so users of eBay’s auction site could accept credit-card payments. Currently, if you want to buy an eBay item, you have to pay by check or money order. The existing system does seem strange: Bid on the Net and pay by snail mail. But the new setup, called Billpoint, will let anyone accept credit-card payments: The charge is transferred to the payee’s charge account. This is a key first step. Until now, accepting card payments was the privilege of merchants who were willing to pay for it. Now, anyone can.
The day after the unveiling of Billpoint, X.com, a financial-products company that offers person-to-person payments, announced that it was merging with PayPal, its chief competitor. PayPal is, thus far, about the only successful digital cash program around. A user opens a PayPal account by transferring funds from a bank, writing a check or registering a credit card. When you want to pay (for a transaction as little as 1 yen), you contact PayPal, it debits your account and credits the recipient. If you’re short of funds, PayPal takes them from your credit card. Account holders can even beam money from one PDA to another (settling when the PDAs sync with the PC).
That’s the way we should be doing business: by bit. The trick is setting the standards and getting everyone on board. (Earlier this week, 617 Japanese financial institutions rolled out a new debit-card service that tries to do just that.) If companies resort to proprietary systems, we’ll be back to carrying around different cards.
Elimination of proprietary systems doesn’t mean there won’t be card companies. They will offer different services to distinguish their brands.
In particular, there will still be a difference between credit and debit services. Sometimes we will want to use e-cash, other times e-credit. My guess is that there will be default settings: All purchases up to X amount will be cash; everything above will get a query to see if you want to use credit. (You, of course, set the defaults.)
That’s something to look forward to: a time when not having cash doesn’t mean that you’re broke.