ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, April 11, 1996 TAG: 9604110042
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: NEW YORK
SOURCE: Associated Press
The Susan B. Anthony dollar didn't catch on. Neither did the $2 bill. But the nation's two largest banks and two biggest credit card issuers hope to persuade even hardened New Yorkers to change the way they pay for cab rides, candy bars and greeting cards.
MasterCard, Visa, Citibank and Chase Manhattan said Wednesday that they have teamed up to produce ``Smart Cards'' that can be used for small purchases. A pilot program will be launched in Manhattan this fall, but the scope of the new venture could set an industry standard.
``One of the beauties of this is that we think it will be really easy for people to get the newspaper, to get on the subway and to get their lunch,'' said Visa spokesman David Melancon.
The electronic cash cards are intended for payments under $20, but the computer chip embedded in it will be able to store larger amounts. The limit will be regulated by the banks, but cards with a value of less than $100 would be exempt from regulation under proposed Federal Reserve Board guidelines.
Cash card systems have been tried in other countries with mixed results.
They have been in use in Denmark since 1992. But in Swindon, England, a cash card by Mondex, a venture of two British banks, has attracted only 10,000 of 190,000 residents to participate since its launch last July.
In Atlanta, NationsBank, Wachovia Bank and First Union Corp. have begun issuing disposable Visa cash smart cards - also known as stored-value cards - in anticipation of the Olympics.
``I like 'em,'' said Morris Graham, manager of the Chick-fil-A fast-food restaurant at the Colony Square Hotel complex in Atlanta. ``When you don't have to deal with change, it probably cuts off 15 to 20 seconds for a customer.''
But businessman Alex Granot said machines at his sundry shop and his dry cleaning store in Atlanta's First Union Plaza have sat unused since the bank gave them to him four months ago.
``Nobody has asked me about it,'' he said.
The New York project will differ from Atlanta in that the person's own debit or credit card will be used, instead of having to carry around a separate cash card.
With the cards introduced Wednesday, money is added to a card from an individual's bank account, using automated teller machines or special telephone lines. The service may become available over the Internet.
To make a purchase, a person places the card into a terminal. A display shows the amount due, and the customer pushes a button to confirm the sale. The money then is deducted from the card's balance and transferred to the merchant.
The new venture will allow stores to accept either a Visa or MasterCard cash card on a single merchant terminal - just as they do with traditional credit cards. The transaction is faster than with a credit card because there's no need to obtain approval over a telephone line.
Tests elsewhere have been disappointing because not enough businesses were involved or because consumers didn't understand the card.
``We think that New York will work because we will be able to achieve the critical mass'' with the partners involved, Melancon said.
The banks hope to recruit 50,000 customers and 500 merchants on Manhattan's Upper West Side as participants in the six-month test program to be launched this fall. New York was chosen because cash is widely used there. Six percent of all cash transactions in the United States take place in New York, said Jana Weatherbee, a MasterCard spokeswoman.
In all, U.S. consumers spend more that $580 billion annually on transactions under $20, she said.
The scope of the new venture should introduce a standard to the cash card industry, which explains why fierce rivals are making a rare show of cooperation.
``We're trying to roll this out in a way that makes sense,'' Melancon said.
The companies haven't signed up any merchants or consumers in New York yet, and the banks haven't determined whether the cards or card readers will be issued to consumers and merchants for free during the trial.
``Almost all of that is undecided at this point,'' said Susan Weeks, a Citibank spokeswoman.
Eventually, merchants could be charged a fee, just as they are on credit and debit card purchases. Customers also may end up paying a transaction fee to load money onto the cash card.
LENGTH: Medium: 85 lines ILLUSTRATION: PHOTO: AP. With an electronic cash card, you don't have toby CNBremember to visit the ATM before you hit the cafeteria for lunch.
color. Graphic: Chart by AP.