Retailers Get Smart

Visa and Target embark on a smart card adventure

The time has come for Americans to see just how smart smart cards really are. Target Corp. and Visa USA have teamed up to offer Target Visa smart cards to their customers as well as install special smart card readers in all Target stores by 2002. Industry observers believe that smart cards are the next step in business intelligence strategies for retailers, as they offer many opportunities for focused marketing and CRM.

Smart cards have been popular throughout Asia and Europe, but until now, have had trouble finding a home in the United States. The cards resemble credit cards, but instead of having only a magnetic strip, they also contain a 64K memory microchip that can store things such as loyalty programs and purchase history.

The Visa smart cards contain three prepackaged applications: payment; smart access, which lets the card act as a key to unlock online secure access sites and provides an extra layer of security; and loyalty, which lets the card hold up to 36 loyalty programs. Visa envisions smart cards storing information such as rewards programs, discounts, and special offers, for instance.

Although there is no prepackaged application for storing demographic or personal information, Diana P. Knox, Visa's senior vice president for smart card application and development, said that such an application could be written. However, Knox added that, if such information were to be stored and shared with the merchant, the cardholder's permission would be critical.

Raj Sundra, president of KeyCash.com, a retail marketing solutions consultancy firm, believes there are many benefits to the smart card.

"A smart card has the potential to not only store customer information, but also store key transaction history, and further function as a payment card," said Sundra. "[The card] would be more of a way to complement the information the store is already getting from the POS terminals. The key difference is that instead of knowing that the store sold X units of product Y, they could also be in a position to track that they sold X units of product Y to customer Z who meets certain demographics."

Although Target declined to comment on the marketing opportunities available with the information the company could gather from its smart cards, Target officials believe the cards will be very beneficial to their customers.

"This revolutionary new card offers our guests a credit vehicle with greater convenience, broader utility, increased value, and expanded reward programs," said Jerry Storch, vice chairman of Target.

Along with the smart cards, Target will also install new card readers throughout all its stores as well as offer a free card reader to customers, which they can hook up to their home computer. By using the reader at home, a customer can check if they've built up enough loyalty points to take advantage of a special offer at the store or at home. Visa and Target also boast that the smart cards will offer another layer of security for consumers buying online.

"Smart cards can tie online and offline shopping environments together," said Sundra. CRM experts believe integrating different sales channels is key to customer satisfaction. Just as e-tailers are able to track shopper preferences on the Internet, Target will now be able to track user preferences from their physical stores. It's one more way to get to know customers.

— Jeanette Perez

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