American Express’ Blue is setting the pace in U.S. smart card market
Last year, American Express became the first major credit card company to begin wide-scale distribution of smart cards in the traditionally resistant U.S. market. The name of its card is simply “Blue.” Assuming that the future of plastics will be smart cards, other major card companies have also launched smart card initiatives-but none are as aggressive as the one initiated by American Express.
“With Blue, we wanted to introduce a card that was entirely different from any other American Express card,” says Molly Faust, American Express’ public relations director.
And so they did. The new card is opaque with a hologram and a smart chip in the center. Developing a new look was central to American Express’ marketing strategy, because it wanted to go after a different market than the market served by its traditional credit and charge cards.
“We determined early on that our objective was to target a new audience for our product,” says Faust. “We identified a consumer who typically wasn’t with American Express. We carved out technologically savvy people who use computers, palm pilots, and cell phones. We believed the new card would offer this group a lot of benefits, like Internet access, online capabilities, and access to entertainment offerings.”
The U.S. market has been a tough one for smart card issuers to penetrate. “One of the obstacles in the United States for the smart card is that there’s no infrastructure yet,” says Faust. “Retailers and restaurants don’t have smart card readers. To overcome this obstacle, we placed the traditional magnetic stripe on the back of Blue, with the smart chip on the front. The magnetic stripe lets customers conduct business as usual with retailers and restaurants using traditional technology.
“The smart chip currently has functionality that’s applied to online shopping on a personal computer [PC],” she continues. “To use it, all a customer needs is a smart card reader, which we’re currently giving away with the card. The smart card reader plugs into a serial port on the computer. This application makes Blue the nation’s first widespread rollout of smart card technology.”
Using the American Express Online Wallet, which records customers’ buying information, consumers can use Blue or another credit card in a secure environment when they buy online. The transaction is processed just as if the consumer presented a traditional credit card to a merchant. Within this environment, American Express also provides 24/7 customer service.
Despite the ease of processing American Express has created for consumers in the online environment, consumers continue to have security concerns about using smart cards-or any cards-online.
“The smart chip on the card stores a digital certificate, which is the customer’s unique identifier,” says Faust. “When customers shop online and are ready to purchase, they insert Blue into the smart card reader on their PCs. The digital certificate that’s stored on the smart chip is read, and customers are prompted for their personal identification numbers [PINS]. The combination of PIN and digital certificate provides secure access to the customer’s online wallet.”
When American Express launched Blue in September 1999, it presented consumers with a card that had no annual fee, a low introductory rate on purchases, cardmember protection services, and online personal financial planning tools. American Express also initiated the BlueLoot Rewards program. It’s designed to encourage new customers to use the card by giving them one free reward point for every dollar they charge both online and offline with the card.
Cardholders can go to www.american express.com to register for the program, check on point balances, browse the rewards catalog, and redeem rewards. In its target market study, American Express determined most cardholders were interested in health, fitness, and entertainment. The 40 brand-name reward offerings reflect those interests and include gift certificates for books, music, electronic equipment, and recreation gear.
American Express is pleased with Blue’s reception. “We set aggressive goals and the number of applications has far exceeded those goals,” Faust notes. “We’ll continue to target customers and to add new features to the card to meet evolving consumer needs.”
“We’re always working on new smart chip applications,” says-Faust. “With- Oberthur Card Systems and Sun Microsystems, we’ve just sponsored a Code Blue contest for the 2.5 million Java developers around the world, and we’re looking for applications that align well with our brand. Some of the areas we’re concentrating on are security, privacy, and convenience.”
The contest has a first prize of $50,000 for software developers who create new Java Card technology applications for Blue. Adds Glen Salow, American Express’ executive vice president and chief information officer, “We’re delighted to work with Oberthur and Sun to launch `Code Blue: By incenting the best technology developers to create imaginative Java Card applications for Blue, Code Blue will spur innovation within the smart card industry. Through our use of Java technology, we’re demonstrating our commitment to making Blue an `evolving’ credit card by adding new features and services that meet open and interoperable standards.”
Copyright Credit Union National Association, Inc. Sep 2000
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