USPS gains lots of knowledge, if not sales, as smart-card pilot concludes

Four post offices on Manhattan’s Upper West Side rang up only about $51,000 in
smart-card sales during a one-year bank-sponsored pilot [GCN, June 22, 1998, Page 40].


But the Postal Service did gain a wealth of information.


“We were not one of the merchants who were disappointed,” said Terry Carter,
USPS assistant treasurer for payment technologies. “We didn’t go into it because
we expected to get a significant amount of business, but more for the data. Based on what
we’ve learned, we would be able to implement the technology nationally” if
required.


But Carter does not expect a widespread smart-card rollout for retail payments anytime
soon.


“What needs to happen in the United States is a killer application, and just
paying a merchant is not it,” he said.


The Manhattan pilot, begun in October 1997, was one of the first large-scale commercial
tests of stored-value smart cards. Citibank and Chase Manhattan Bank issued the reloadable
VISAcash and MasterCard Mondex cards to 100,000 customers.


The banks tried to sign up more than 1,300 merchants to accept the cards. But only 650
merchants joined, and after a year, only about 400 remain.


Of the handful of cards activated, most were never reloaded. By October, the merchants
had settled just $1 million in total smart-card sales.


The banks extended the test through the end of last year.


The four post offices were among the busiest smart-card merchants, ranking fourth,
11th, 25th and 33rd. The average postal transaction was $31 for VISAcash cards and $17 for
Mondex cards.


Unlike many merchants, especially small businesses, the postal workers received
training in how to use smart-card readers, said Peter Myo Khin of USPS’ Office of
Payment Technologies.


The Postal Service also invested in an accounting system for the smart-card system, and
the trial helped further the goal of automating more than 60,000 retail windows at 30,000
post offices nationwide.


“In some form, we do believe smart cards will become a fairly common payment
medium,” Carter said. “We wanted to have an influence on the way the cards are
used.”


The agency is not participating in other bank-sponsored pilots, however. “It would
have become quite expensive, and we felt we had gotten the information we needed out of
the New York test,” Myo Khin said.


What USPS learned first and foremost is that it will be up to merchants to make a
smart-card system work, he said. 

About the Author

William Jackson is a Maryland-based freelance writer.

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