SAN FRANCISCO - A senior Visa U.S.A. executive tipped his hat to American Express Co. at the eCard 2001 conference here last week, giving the rival card firm credit for bringing smart cards to the U.S. public.
Though Visa has been playing catch-up to American Express, which introduced the Blue card nearly a year before Visa banks had a chip product to offer, the executive, Patrick Remi Gauthier, said he was thankful to "our friends at American Express who kindly spent $100 to $150 million" to put smart cards "on the map." Five million cards in one and a half years is a pretty good track record, he said.
But the lavish marketing campaign for Blue has failed to make consumers aware of the chip in the card or what it can do, Mr. Gauthier said. That leaves much work ahead for Visa and the other companies that are trying to promulgate the technology. In his speech to the conference, which was sponsored by American Banker's parent company, Thomson Financial Media, Mr. Gauthier noted that Blue's success was built on features other than the microchip.
"Was it the pricing?" he said. "Was it the advertising? Was it the cool looks of the card? It was all those things." The pricing in particular - a 9.9% annual percentage rate - made people want it, since all consumers scrutinize interest rates these days. "We've trained them to do that," said Mr. Gauthier, the senior vice president of smart card applications and market development at Visa.
Marketing Blue as a status symbol also worked, he said. American Express got its cardholders to experience emotional gratification from what is essentially an attractive-looking card with no annual fee and a favorable rate.
"The Amex Blue cardholder has no idea what chip does," Mr. Gauthier said. "Four out of five have no idea that they even need a chip reader. That's because the ads only mention the cards."
The three Visa banks that are issuing smart cards have not released customer numbers or other results, but do not seem to have captured the popular imagination quite the same way Amex has with Blue. Mr. Gauthier acknowledged that American Express had hit a home run, but said Visa's chip product could do things like track cardholders' loyalty points. "Unlike Blue, the chip does something here," he said.
Mr. Gauthier, who previously worked for the smart card division of the French company Schlumberger Ltd., said U.S. banks have been reluctant to spend the money needed to upgrade to smart cards, and that the infrastructure required to support chip costs about 25% more than magnetic stripe technology.
But he said issuers could make up the loss by garnering a decent card-activation rate from a consumer base that is likely to have a higher-than-average income and a lower-than-average defection rate.
Further international adoption might break down America's resistance, Mr. Gauthier said. "The rest of the world is going chip. Whether we like it or not, there are other people who do."
On a more pessimistic note, he said smart cards will have to establish themselves soon. "If chip does not make its proof over the next five years, it probably will not happen," he said.
