Banks Pitch Cash Cards Pilot Program To Test Consumer Response

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 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 set 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 before with mixed results.

In the New York project, the person’s own debit or credit card will be used, instead of a separate cash card.

The money is added to a card from a person’s bank account, using automated teller machines or special telephone lines.

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 is then deducted from the card’s balance and transferred to the vendor.

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.

Graphic: Smart card