Payment Cards Gaining Flexibility
SAN FRANCISCO-Payment cards are becoming more versatile.
Instead of charging purchases to a single account, cards that can access multiple sources of funding, or even do more than simply initiate transactions, are starting to catch on.
Though many of the current activity is taking place abroad, executives expect to see it migrate to the U.S., driven in part by the growing use of contactless cards here (featuring a chip that can facilitate additional functions) and the promise of payment-enabled mobile phones. Payments executives say the goal is to create cards that combine several capabilities so that they become nearly indispensable to consumers. "You are seeing a lot more sophistication and combination, not just card products, but mobile products and everything else," said Brian Triplett, Visa Inc.'s global head of prepaid accounts.
In card that Visa rolled out in August in Singapore with DBS Group Ltd.'s DBS Bank features a prepaid account that can be used for general-purpose spending or to pay fares using the city transit agency's EZ-Link closed-loop payment system. The card also served as a ticket to some events at the Singapore 2010 Youth Olympic Games.
MasterCard Inc. also is working on cards that combine various applications, rolling out last month the Multi-tude card, also in Singapore, and issued by POSB, another banking unit of DBS Group. It can function as both a credit or debit card, accessing either a credit line or the cardholders' bank accounts. "You are seeing all these applications move to one card because we're leaving paper, like checks, behind," said Visa spokeswoman Jennifer Doidge. "They are really replacing inefficient payment processes."
There are two types of multicards. Multipurse cards, like the new MasterCard product, can access more than one account, while multifunction cards such as the prepaid Visa card for the Youth Olympic Games, have payments capabilities and other, nonfinancial features. There are even multifunction, multipurse cards.
Some of the more common features for multifunction cards are identification, building access, event ticketing and campus cards for students.
Multipurse cards often access credit, debit or transit accounts, and there's a growing market in the U.S. for multipurse cards linked to health payment accounts. All these functions have traditionally been linked to a single piece of plastic. "If you open up a wallet, you'll find 10, 15 cards," said Gwenn Bezard, a research director at Aite Group LLC in Boston. "And most cards have a single application-most cards only do one thing."
One reason multicards have not had mass-market success in the U.S. is that they often require chips. Unlike a magnetic strip, which can only hold about 100 to 150 characters of information, chip cards can store plenty of data, a capability that is often needed to handle different functions.
The EMV Integrated Circuit Card Specifications, which require payments cards with chips, are gaining traction in much of the world, but not the United States, although United Nations FCU in New York has become the first issuer in the U.S. to offer members chip-based cards. However, contactless cards, which also feature chips, are becoming more common in the United States, and many financial companies are developing mobile payments systems that will let people use their phones for a variety of transactions.
'More Conversation' Happening Is A Sign Of Things To Come
"There has been a heck of a lot more conversation, relative to all of this new payment technology and the requirements, and what does the road map look like, in the last 12 months," said Oliver Manahan, MasterCard's vice president for emerging products or technologies. "I think that's all good. The more conversation that's happening, it gets people thinking about what it takes to get to that end-state."
And, as multicards become more common abroad, they will become cheaper to issue, he said. There already are some multifunction and multipurse cards in the United States. Most college students already use a single card to access various campus facilities and services, such as libraries, gyms and cafeterias, and many of these programs also let people make purchases at school bookstores. "There are separate systems behind the scenes, but your one ID card gets you in to all of those [our] systems with the data that's held on it," said John Farley, the assistant vice president for administrative affairs at the University of Maryland, College Park.
U.S. Bancorp is developing multipurse cards for health care. The Minneapolis company said in July that it could tie a single card to many different types of accounts-medical, dental and vision.
Typically, in a high-deductible plan, funds for the three accounts are segregated. Medical would be covered by the plan itself, while dental and vision would be separate, said Ralph Bernstein, the senior vice president of health care payment solutions at U.S. Bank.
U.S. Bank will start delivering the service to its first clients at the beginning of next year, Bernstein said.
Precision is crucial in differentiating all those purchases. U.S. Bank can block certain purchases by using bar codes or block certain stores by using merchant class numbers.
"What an employer might say to us," Bernstein said, "is: 'I'm going to put money in my employees' spending accounts for health care, but I really don't want them buying beer and smokes with it. Can you set up a purse that can't be used at places other than [pharmacies]?'"