Many vendors have tried to sell banks on the concept of a payment card that has an embedded screen and buttons but adds no perceivable bulk to the card itself. In most cases these have been suggested as a security tool, such as a card that can present a dynamic password for online banking authentication.
Though these cards have interested some banks, they are far from becoming a common element of consumer cards. Dynamics Inc., which pairs the screen with a rewritable magnetic stripe, may move the technology forward, but observers say the company still has some hurdles to overcome.
Analysts were primarily concerned about the technology's expense. Dynamics would not disclose the cost of each card, or explain its business model, but Gwenn Bezard, co-founder and research director at Aite Group in Boston, said the cards cost about $10 each to make.
"The cost is going to be a barrier, at least in the near term, to making it a mass-market product," Bezard said.
Brian Riley, research director for bank cards at TowerGroup, said issuers could address the cost by offering interactive cards only for accounts that are likely to provide enough revenue to make up the expense.
Dynamics should "focus on getting issuers to issue the cards with that technology for very specific customer segments," Riley said. "You can price that into a card arrangement with the customer even if you spread that out over a year; it becomes a nominal expense."
Dynamics, which is based in Pittsburgh, pitches its product for multiple use cases. In the instance of Citigroup Inc., which has agreed to test Dynamics' product, the technology is used to rewrite the card's stripe at the point of sale to let consumers spend from their rewards balance.
Zilvinas Bareisis, a senior analyst for Celent, said Citi's example may prove confusing for end users.
"Besides the costs, I would have thought that the additional complication would be to manage the acceptance of rewards as a currency," Bareisis said by e-mail.
Typically, loyalty points can be redeemed only at specific merchants, while the card itself will be accepted wherever the its brand — Visa Inc. or MasterCard Inc. — is accepted.
Also, differing redemption rates for each merchant might add to the confusion and be "potentially complex to manage behind the scenes," Bareisis said.
But Citi is bullish on its newest pilot program. The banking company is calling it a first of its kind.
"I personally believe from what we have heard from our customers that there is a significant loyalty component to this," said Terry O'Neil, Citi's executive vice president for its cards business. "We see this as incredibly innovative."
Dynamics said other banks are also testing its technology, but it would not name them.
Another use Dynamics suggests for its technology is to prevent fraud. The card's stripe can be wiped clear until a user enters the proper PIN, so a lost or stolen card could not be used by anyone who found it.
The numbers on the card's face can overlap the embedded screen, allowing some of the numbers to be erased until the consumer needs to see them, such as when making a purchase online.
James Van Dyke, the president of Javelin Strategy and Research in Pleasanton, Calif., said interactive cards may not be enough to solve issuers' fraud problems.
