Visa International is partnering with four South African banks to roll out a national smart card system.
It is Visa's first crack at supporting multifunctional cards that are linked to bank accounts. Visa Cash, the association's leading smart card product, has only a stored-value feature.
South Africa, which has been experimenting with smart cards for the past six years, has developed national standards for a sophisticated product that reduces vulnerability to fraud, violent crime, and makes up for a lack of communications infrastructure.
The present project, proprietary work of Nedcor Bank Ltd. and First National Bank of South Africa Ltd., has been in progress in the country since 1995, when South Africa developed national smart card standards. The two banks have issued 200,000 bank-branded smart cards and have deployed 60,000 point of sale terminals and 2,700 automated teller machines that accept the cards.
The banks, with additional participants Boland Bank and NBS Bank, plan to issue more than a million cards by the end of 1997. The program will be converted from private-label bank cards to Visa-branded cards but will have no connection to Visa Cash now being tested in the United States, Australia, and other countries.
Visa, in fact, has licensed this smart card technology from South African developer Net One and will enhance it with heightened security; with the international standards Europay, MasterCard, Visa, or EMV; and with interoperability with other programs. The technology, called Copac for chip off-line preauthorized card, will be adapted for a smart card launch in Russia in 1997.
Visa International vice president Debbie Arnold said the South African smart card has many unique features. She said the system provides the "basis to build a banking system, open accounts, and sign up merchants in outlying areas" in developing nations. She called it "an inexpensive system that is easy to start and very secure."
The card contains three purse applications. One stores value on the chip and is used for small dollar transactions; another is used for larger cash transactions and requires a personal identification number for access, and a third accesses a bank credit or debit account and also requires a PIN.
The transactions are fully auditable, but are preauthorized and conducted off-line. A merchant terminal containing a smart card authenticates the consumer card and transaction information is transferred.
At the end of the business day, the merchant can download the transactions by telephone, through an ATM, or at the bank. Unlike Mondex, another smart card system that transfers actual value, monetary value on this product is cleared and settled through the Visa system.
Ms. Arnold said the off-line product is ideal for developing nations without the sophisticated communications infrastructure of the United States.
She said Visa will market the product in Eastern Europe, Asia, and other African nations. It can even be used for more developed countries for payments in rural communities that haven't gotten on-line terminals.
The Russian project will begin next summer with partners Inkombank and Sperbank, said Ms. Arnold. The banks are testing a complete system from Visa, which she said would be similar to the South African product though "not as robust."
She said Visa would work with the Russian and South African banks to merge the two systems to test interoperability at a later date.
Jerome Svigals, a Redwood City, Calif. consultant, said smart cards supply a "good deal of additional function and control."
In a country like South Africa, where less than 3% of the population is eligible for a credit card, the new technology makes "revolving credit (available) to anyone," he said.
"The controls are within the card as to spending limit and PIN validation," he said. The smart card, with its improved controls is "better than an on-line system," like the one in the United States, which is more vulnerable to fraud.
