Visa International pulled a wild card from its deck recently when it announced the development of a prepaid card, which can substitute for travelers checks.
With that move, Visa took a step toward what many believe is the ultimate consumer payment system.
In such a system, a single card would perform the functions of both credit and debit cards. The card might also contain a computer chip that stores value that the customer has previously purchased, or prepaid, for use in vending machines and other locations where cash is the norm.
But the future will not arrive overnight. So Visa is easing into the prepaid world -- without the chip technology, and in a way that initially will be more likely to displace travelers checks than coins and currency.
The card, to be tested in three of Visa's five international regions next year in preparation for full-scale marketing in 1995, will allow purchasers to withdraw money from automated teller machines.
Visa anticipates that customers will use these cards the same way they use travelers checks -- transferring funds they have set aside for travel, which they can draw down as needed.
MasterCard International said it is developing a prepaid travelers card that can be used at the point of sale -- an advance that Visa also has on the drawing board.
Amex Staying Put
For the time being, American Express Travel Related Services Co. says it is sticking with its time-tested travelers checks.
"You've got to go forward with cards and electronics," argued Anne Morgan Moore, president of Synergistics Research Corp. in Atlanta. "Paper is status quo."
Will consumers move away from travelers checks, which are also available in Visa and MasterCard brands, toward the higher-tech alternative?
Visa expects people between 18 and 34, particularly women and those earning under $50,000, to go for it.
"It's not a bad idea," said Aaron Sugarman, deputy news editor of Conde Nast Traveler, a monthly consumer travel magazine. "But it's not going to revolutionize the travel industry."
Mr. Sugarman and others wonder about the prepaid card's overlap with other products. Consumers could use their automated teller machine cards or credit cards for travel expenses, he pointed out. And many ATMs dispense American Express, MasterCard, or Visa travelers checks.
Visa claims a travelers card will complement its other products and build business for institutions that sell the card.
"We see this as appealing to a niche currently served by cash," said Michael Nash, senior vice president of market development at Visa International. And because the product is not tied directly to an account, Visa banks will have the opportunity to serve new customers.
North American banks could sell as many as two million prepaid cards, adding $1.3 billion to their volume in the first year on the market, Visa projected. The financial institutions will set fees for the card, as they do with travelers checks.
"We have found a product that complements our existing products -- that can coexist and really cover the market," Mr. Nash said.
Visa will provide point of sale advertisements as well as statement stuffers, and may also advertise to market the cards.
Travelers using the card will receive a personal identification number that enables them to draw cash from the 160,000 automated teller machines in Visa's global network. Besides the 24-hour convenience, international travelers would get better exchange rates than they could with travelers checks at currency or retail outlets.
Ms. Moore sees this as an attractive feature.
"The one problem I've had is getting travelers checks cashed at a decent exchange rate," she said. "If I had one of those prepaid cards, I could go to an ATM and I could get a good rate. That's a big factor."
When a prepaid card is used at an ATM in the United States, the screen will apprise the cardholder of the current balance. Elsewhere, customers will be able to call a toll-free number to learn their balances. Visa is working on a system to automate the balance inquiries internationally.
It could get confusing to keep track, especially if several people in one family use the card, as Visa is suggesting they do.
But Mr. Nash said prepaid cards are less risky than ATM cards and more easily replaced if lost. Visa promises to replace a lost or stolen card within 24 hours anywhere in the world, and will shut down the card immediately.
Once money is withdrawn, however, the traveler is responsible for the cash if it's lost or stolen.
"We suspect people will [limit themselves] to convenient sums they're comfortable with, which happens with travelers checks," Mr. Nash said. That way the loss of a portion of the funds will not disrupt an entire vacation.
Eventually, Visa expects the travelers card will be accepted in stores.
Point of Sale Capability
MasterCard says consumer research shows the point of sale capability is what travelers really want. "We see it has the potential to generate a large demand from consumers, particularly if it was accepted at the point of sale," said a MasterCard spokeswoman.
But Jerome Svigals, an electronic banking consultant in Redwood City, Calif. warns about the possibility of fraud in point of sale systems.
He presented one scenario in which thieves with point of sale equipment capture a customer's personal identification number and magnetic stripe information, deny the transaction, and then go to an ATM where they can sweep the money in the traveler's card account.
"I would be very concerned about that," Mr. Svigals said. He cited the obvious parallels with the ATM scam at a Connecticut mall earlier this year, in which personal identification numbers and magnetic stripe data were collected and used later to steal money from cardholders' accounts.
Visa contends that the prepaid card in its current form is safe from fraud because of the PINs and the lack of an account number on the card.
Denise Jeffreys, president of Xtec Inc. in Miami, said using a PIN "is still a perfectly adequate way to secure that card."