Target move casts doubt over smart chips

The utility of smart chip technology appears to be waning following an announcement by US loyalty software provider, Catuity, that the product will be "phased out" by its chief customer.The Target Corporation has elected to dissolve the smart chip technology from its customer loyalty program over the next 12 months, ending the maiden voyage of the technology as a major retailer's tool on a US nationwide scale.

The utility of smart chip technology appears to be waning following an announcement by US loyalty software provider, Catuity, that the product will be "phased out" by its chief customer.

The Target Corporation has elected to dissolve the smart chip technology from its customer loyalty program over the next 12 months, ending the maiden voyage of the technology as a major retailer's tool on a US nationwide scale.

The president and chief executive officer of Catuity, Michael V. Howe, says the company is disappointed by the news but is hopeful that it will continue to work with the Target Corporation in the future.

"Catuity is fortunate that our loyalty software supports a variety of consumer identification devices. While in this instance it was smart chip technology, the system works equally well for mag stripe, contactless, RFID or bar codes," said Howe.

The technology was employed in July 2003 as a feature of the Target Visa card, giving customers the opportunity to access exclusive retail offers and savings through "Smart Coupons" redeemable via an in-home smart card reader or in-store kiosk.

Forrester Research, a US based independent technology research company, says that smart cards have not reached their "critical mass" in the US due to the costs of upgrading the infrastructure for the chip cards.

The company predicts that contactless payments will reduce cash based transactions in retail environments over the next five years. However, they anticipate that radio-frequency chips instead of the smart chip technology will support the system.

IDC make similar claims to the future of smart chip technology, it will need to evolve to keep up with the future card payment innovations.

"In its current form it could die because we are seeing more intelligent solutions like RFID [radio frequency identification]," said Warren Chaisatien, senior analyst for IDC Australia.