To put it mildly, the first week of November 1998 seemed to bring grim news for anyone who thinks that smart cards are likely to be important in the near future. A trial of smart cards in New York's Upper West Side ends in December 1998 with disappointing results. Two headlines on November 4 are "Banks, Credit Card Companies Withdraw Support for Money Cards" and "Firms to End Smart-Card Test As America Shuns Plastic Cash", by Amy Feldman of the New York Daily News and Paul Beckett in the Wall Street Journal Europe respectively. These are not exactly encouraging thoughts. A day later, Digicash announced that it is filing for bankruptcy and reorganization under Chapter 11, which does not suggest that electronic cash in the Internet is just around the corner. The smart-card trial in New York is the event with the deeper significance. I will discuss the future of digital cash on the Internet in a later article.
The publicly-available results of the trial of smart cards in New York generally are consistent with the headlines even if the headlines are overdrawn. The trial was a substantial one with Citibank, Chase Manhattan Bank, MasterCard and Visa participating. About 96,000 people acquired the cards, 600 merchants signed up, but consumers used the cards to spend only about one or two million dollars from October 1997 through October 1998. Average spending was about $5 or $10 per card, and the cards provided by Citibank gave consumers $5 to sign up for the Citibank card. Most people loaded no funds onto their card after they tried them. Evidently merchants also were paid to participate. These are not auspicious results by any standard.
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