Citi workers try out stored-value card.

Citicorp is testing a stored-value payment card that can be used for small-ticket purchases such as pay telephone calls and vending machine purchases.

Citicorp employees in the bank's 50-story office building in Long Island City, New York, are using the cards in the company cafeteria and vending machines. About 3,500 employees work in the building.

The machines can accept a card made of heavy paper, or a standard plastic Citibank automated teller machine card.

Citicorp is the second big bank to experiment with the stored-value cards, which are more commonly used on college campuses and in corporate headquarters. CoreStates Financial Corp. began a similar test with its employees a year ago.

Commonplace in Europe

The prepaid application, which can be used on cards equipped with a magnetic stripe or an embedded computer chip - a design known as a smart card - is widely viewed as the first big U.S. opportunity for the stored-value concept, which is already widely used in Europe.

Although the magnetic stripe technology Citicorp is using is very different from smart-card technology, the trial can yield data about market acceptance of smart cards.

A recent study by PSI, of Tampa Fla., showed that 21% of consumers were interested in stored-value cards, typical of the ones used in public telephones in the United Kingdom. France, and Japan.

The cards can lower operating expenses for vending machine operators, who can eliminate the costs of processing cash, and reduce vandalism.

Citicorp has installed six machines, called Value Stations, where employees can add value to magnetic-stripe cards. Three of the machines, developed by Verifone, accept cash and credit cards to issue value up to $99.99. Citi is accepting Visa, MasterCard, and Diners Club cards at the Value Stations.

In addition, Citicorp worked with Verifone for a year to develop a kiosk that accepts a Citibank ATM card, transferring funds from an employee's bank account. Unlike the cash and credit card machines, the ATM kiosk gives customers a receipt.

Since working with Citicorp to set up the trial, Verifone announced it will stop making stored-value terminals using magnetic-stripe technology in favor of smart-card-compatible devices.

Smart-Card Conversion Mulled

As a result, Citicorp will not extend the magnetic-stripe pilot to other locations and is now talking with Verifone about converting the Long lsland City facility to smart-card technolbgy. Citicorp is also considering expanding the smart-card pilot to other large facilities in South Dakota and Nevada.

For its customers, Citicorp is also looking at smart cards, but not for stored-value applications, according to Barbara Garrett vice president of new product development in the U.S. card products group at Citicorp.

"In a closed facility, the prepaid card is fine, but in the open market, you need to move to smart-card technology to avoid fraud," Ms. Garrett said.

The Verifone machine the current amount stored on the card, add value to the magnetic stripe, and return the card to the cardholder. Verifone's trade mark is the Value Card, and the bank is calling its card a CitiCash card.

The pilot is a joint effort between the Visa and MasterCard division at Citicorp and the bank's corporate dining and vending services.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER