By Sean Condon
Having your money and personal information condensed and stored onto one card is supposed to make your life easier.
But the cashless society that banks are promoting may bring more trouble than convenience.
Last week, smart cards were introduced in Ottawa as part of a pilot project. For now, they work only as cash cards that can be used with selected parking meters.
Smart cards have already been introduced in a number of cities across North America to less than enthusiastic consumers.
A smart card is a plastic card with a built-in computer chip or microprocessor. That intelligence gives the card the potential to perform a wide variety of functions from storing and transferring money to holding credit and personal information. A user is able to put credit on their smart card at an Automatic Teller Machine (ATM) from a participating bank. Smart cards will eventually be used as a driver’s license, to store medical information, to buy junk food, ride the bus or make a telephone call.
This may seem like a good idea to some.
Consumers have already begun to move away from the ‘annoyance’ of hard cash as credit and debit cards have become the preferred choice for most shoppers.
Both banks and merchants love smart cards. Banks stand to make some big gains off of interest-free loans.
Once a customer transfers credit to a cash card, the bank can stop paying interest but gets to hold on to the cash until it’s billed by a merchant. If 100 million people use a smart card with an average of 10 unspent dollars on it, the banks would collect $1 billion a day of interest-free money to invest.
Merchants benefit from not having the expense of running card-verifier systems.
However, consumers have not shown any real interest in the cards and for good reason.
Test projects launched in Guelph, Kingston and Manhattan, N.Y. have ended with poor results.
In spite of millions of dollars in advertising, equipment and promotional offers, there has been very little evidence of anyone actually using the cards.
The unsuccessful project was pulled from Guelph after 18 months. For the test runs, the cards operate simply as cash cards.
However, consumers already have over-stuffed wallets and no need for an additional card to serve similar functions.
With the cards also come a series of security problems. These problems have not been examined closely enough by smart card manufacturers.
Much like pre-paid phone cards, if you lose the smart card then you lose all of the money on it. Too bad for the consumer.
Privacy is also a key issue. Unlike good old fashioned cash, transactions are not necessarily anonymous.
For smart card maker Mondex, each card is given a transaction number that is linked to the individual user.
Companies can take advantage of this feature to monitor user’s purchasing trends.
And unlike a phone card, you can’t buy a Mondex card without revealing your identity.
What’s more dangerous is that the smart card can be hacked into.
A team of San Francisco-based computer scientists have proven that the card’s coding system can be broken by monitoring the card’s power consumption.
The chip in the card uses electrons to do its calculations. This process can be easily monitored through a personal computer with a $500 attachment.
With people’s personal information at stake, more testing — and not at the consumer’s expense — must be done before these cards are pushed onto the public.
As it stands, it will be the consumer who faces the risks, under the guise of making life more convenient.