Chip-based cards as wallets of the future

Hailed as one of the biggest inventions of the 20th century, the microchip, measuring no larger than a fingernail, continues to evolve by becoming more powerful, more pervasive and, at the same time, more personal in its application in people’s lives.

Powering PCs, mobile phones, palmtops and the most sophisticated gadgetry around, the microchip is about to make its way into our pockets, embedding itself in the form of a plastic card the size of most ATM and credit cards.

Once it does, it will carry with it a convergence of functions and technologies that will access every aspect of our lifestyle. It will act as passport, bank account card, Internet security key – in short, virtually a wallet of the future, all in one chip.

For starters, this digital chip-based card will be ideal for those who do not wish to carry actual cash around. Initially, it will be distributed in loading stations complete with a cash value depending on consumers’ needs. Eventually, these cards can be used to download money straight from their bank accounts and store it right in the chip’s secure electronic environment.

Once this value has been stored, the card can then be used to shop, dine, and do practically every transaction imaginable – even pay for one’s bus or taxi fare. As usage grows, it will even be possible to download money by visiting a bank’s website and inserting the card into a special reader attached to the PC, enhancing the convenience of home banking.

This set-up will be particularly attractive to the pre-paid card market, whose users will just download value into the reloadable chip-based card without the need to constantly buy disposable cards. Internet shoppers will also be able to purchase items just by inserting these chip-based cards into a card reader and transfer value directly into the Web merchant.

Equalizer

The chip-based card is seen as a great equalizer in both the "old and new" economies. Individuals without credit cards or debit cards, which requires a bank account, can now carry a convenient card that can facilitate e-commerce transactions over the Internet. With its higher level of security, a chip-based card will also deter the prevalence of card fraud in online transactions.

Since this chip-based card is electronic, it can also be configured to support various and complex business-to-business and business-to-consumer arrangements, such as electronic contracts and receipts, loyalty programs, club memberships, digital certificates and their corresponding payment schemes.

One card, for example, can be used in a members’ only video store. Upon presentation, the card reader will obtain the user’s membership profile and, at the same time, deduct the appropriate rental fee – without credit authorization, without waiting, and without any need for change.

These chip-based cards can also support an establishment’s rewards scheme, storing the number of a cardholder’s transactions to let him obtain the discount when making purchases, without manual input of data. Able to store large amounts of information in its memory, these cards can be used in fastfood chains, entertainment places, members’ only websites, and other establishments and services with exclusive privileges.

Loading devices

What’s more, the chip-based cards will not have to be online to function. The loading devices that will accept them will just be composed of another microchip that will "read" the card upon contact, validate the user’s profile if needed, establish the purchase price and transfer the appropriate amount. Independent of any system, these devices can easily be installed in commercial establishments and even in vehicles like buses, taxis and trains.

By transferring data from one chip to another, these cards will eliminate the need for a third-party validation that currently exists among magnetic strip-based cards. Businesses will immediately receive cash value at the time of transaction, quickly, efficiently and securely since, in effect, only two chips will be involved during data transfer.

Designed for mass usage, these chip-based cards will support whatever amount you have, making it ideal for micro-payment transactions. They will also carry a special security number that you can lock and declare void from use to protect your identity and value in case of loss.

A technological trend toward total cashless transaction, these chip-based cards are already gaining momentum in the United States, Canada, United Kingdom, Hongkong, Taiwan, Korea and Japan. Techno-guru Bill Gates even lauded the concept as one of the most exciting developments in the electronic information age.

The Philippines will be the next country to catch this trend as Mondex Phils. Inc., the exclusive franchise holder of this innovative payment system from Mondex International, is set to launch the microchip currency this year. Mondex is an affiliate of MasterCard International, one of the most globally recognized brands in the card industry.