Six months after launching Blue - the first U.S. credit card with a microprocessor chip as well as a magnetic stripe - American Express Co. said it can hardly keep up with demand, and the product's early popularity is raising smart card proponents' hopes that the technology will take off in this country.
American Express would not say how many cards have been issued, but Oberthur Card Systems - Blue's supplier - said it received an initial ship order of one million. A survey by Brittain Associates Inc. found more than a million Blue cardholders already, and analysts said they expect two million by yearend.
Amex is now busy shipping PC-connected smart card readers - for $25 apiece - and said it will start offering a variety of applications for both online and offline use. Cardholders will be able to download the applications from American Express' Web site to their chips.
"Amex has sort of proven the ground here, which makes it easier for others to go forward," said Merzad Madavi, vice president of information security and e-commerce at Schlumberger, the French chip card maker. The Blue card "looks like it's going to be the wave of things to come."
But Allen Gilstrap, vice president of alliances and partnerships in American Express' smart card technologies division, said, "The objective of Blue was not to launch a smart card." Speaking at a Smart Card Forum meeting in New York last week, Mr. Gilstrap said the product was regarded in-house as "an opportunity for Amex to reintroduce our revolving credit card."
Amex's other revolving card, Optima, has not been as profitable as the company hoped. Because people think of American Express as a charge card company, too many Optima customers were paying off their balances in full each month, Mr. Gilstrap said.
American Express saw a smart card as an attention-grabber that could make it a leader in Internet payments. The security features associated with the chip were meant to allay the concerns of the 58% of Internet users, like those in a recent survey, who said they were wary about online shopping security, Mr. Gilstrap said.
Blue is also a boon to merchants, Mr. Gilstrap said, because it addresses fraud concerns and reduces their interchange rates, turning a "card not present transaction" into a "card present transaction." In a swipe at the Secure Electronic Transaction protocol developed by MasterCard and Visa, Mr. Gilstrap said Blue does not require online merchants to make major infrastructure changes.
American Express was besieged with calls from angry customers still waiting for their cards to arrive two months after signing up. Others have complained that the smart card readers malfunction and that it is still impossible to sign up for Blue Loot, Amex's new rewards program.
Mr. Gilstrap said distribution is now on schedule and that overwhelming demand caused the delays. Moreover, he said, introducing new technology is never trouble-free.
Some observers attribute Blue's strong start in enrollment chiefly to its futuristic look and attractive pricing - no annual fee and a 0% introductory rate on purchases, which jumps to 9.9% after six months.