By the end of 1997 LICard system has been in action in greater part of Russia. Noticeable growth of personal LICard owners was hit upon for the recent year.
LICard has three levels the scale of ranks as to its organization:
1. Low level. Regional agencies and service offices, and filling stations Lukoil;
2. Middle level. Regional processing centers and regional representative offices of LICard;
3. High level. Application center and interregional processing center LICard.
Transfers between regional centers are carried out through the interregional processing center. This action allows any filling station to receive money even if no money was put on the card.
This project can real working example of applying smart-cards for corporate needs. But I would like to notice that not all features were used in this project. Using some additional wallets project owner could have more effective and profitable system.
The place of smart-cards in modern Russia
In this chapter I mean smart-cards under "plastic cards" term. Because magnetic line cards and memory cards have little chance for success in Russia.
Our plastic cards market is rather a collage picture. Before 90's plastic cards was so badly known that they even were not shown in Soviet films that showed disadvantages of Western style of living. Meanwhile, plastic cards are so deeply integrated in American and Western style of living that person who has rather big sum of money is cash almost immediately gains the reputation of a criminal.
Plastic cards are not so wide spread in Russia as in Europe and of course in the United States. Obviously, the reason is in the lack of necessity of everyday cashless payments We also have to take average income in our country into consideration which, unfortunately does not let many citizens to have enough free money to place then on a card. There are still many obstacles in operating plastic cards in Russia: from simple tradition to call pieces of paper in a pocket money to elementary distrust, fear to become a victim of another "MMM" speculation project.
Hence placing plastic card into operation in further 3-5 year would not bring a satisfactory result to any bank, no matter how reliable it is. The success can be reached only by uniting all existing systems into one national payment system. But this perspective is now very attractive to the majority of banks as they are afraid to depend on bigger and stronger banking groups. Beside that the present level of telecommunication systems and banking equipment will not let such project to be realized. And great investments are needed for many banks to proceed the convertion from magnetic line cards to smart-cards. That's why I consider putting smart-cards into operation in Russia rather disappointing in the nearest years.
I think the solution of this problem is in replacing existing systems of cashless payments with smart-cards technology. Lets take transport fuel coupons as an example. Obviously, introducing plastic cards in this sphere will meet the lowest resistance of citizens who got accustomed to other kinds of cashless payment for fuel. Such systems are good for both: people and oil companies. People are glad to carry one small card instead of a bunch of coupons and to be sure that nobody else would use their fuel credit even if their card is stolen. Oil companies gets valuable assets with such systems as they ensure themselves from serious losses connected with coupon falsification. And if we mention speeding up money return, it becomes absolutely clear that such systems will soon appear in our life. After fuel smart cards are introduced, additional wallets can be added to the same cards. For example, on one and the same card fuel credits can be recorded (in litres), some technical service for cliens car (in working hours), dinners in filling station cafe (in number of dinners). It that situation our driver can travel with a little sum in cash and his smart-card.
Besides, using plastic cards instead of coupons territory depending problem can be easily solved, as direct and strong "coupon" connections already exists through oil companies.
Thus, in my opinion, the process of introduction plastic cards should start not from banking but from trading sphere. The ideal case could be the combination of corporate, banking and international cards into one.
Plastic card payments in Internet
Another stimulus for developing smart-cards is active growth of selling trough international computer network Internet. Unfortunately it has not received enough development in Russia. Although there are companies selling goods through Internet (music CD, books, computer) payments are still processed after an old manner: client pays the money after he gets the good at the post office. Hence there are some noticeable losses because of payment delays.
The situation in Europe and the United States is quite different. Companies sell almost everything from pens to cars and cottages through Internet and such activities give real profit. For example, on 10 May 1999 Apple virtual computer store sold equipment on more than 1.9 million dollars - a record during short history on Internet selling.
In trading part of the Internet the decision toconverse from magnetic line cards to smart-cards has been discussed for more then 3 years. As e-companies incur constant losses because of low security level of magnetic line cards If such decision is made we will have the right to say that it will be a final victory of smart-cards over their out of date congeners.
The above analysis of operating smart-cards as modern international payment tools allows me to make the following conclusions:
1. Impressing results are reached in realization of smart-technology and applying different kinds of plastic cards payment systems in international markets.
2. The process of developing plastic cards as universal payment systems is in a phase of rapid growth in Russia
3. There is a clear tendency of intellectualization of plastic cards, based on modern technology chip equipment and electronic communications.
4. Year 2000 will define tendencies of plastic cards developing once and for all.
5. The most promising way of introducing smart-cards in big Russian cities is in creating local systems of small sum cashless payments with their further unification into one national cashless payment system.
Sources and literature
1. Mike Hendry. Smart Card Security and Applications (Artech House Telecommunications Library). Artech House. September 1997
2. Catherine A. Allen. Smart Cards : Seizing Strategic Business Opportunities : The Smart Card Forum. Irwin Professional Pub. November 1996
3. Jose Luis Zoreda. Smart Cards. Artech House. December 1994
4. Ron E. Gielgun. 1 Business, 2 Approaches : How to Succeed in Internet Business by Employing Real-World Strategies. Actium Publishing. September 1998
5. Bruce J. McLaren, Constance H. McLaren. E- Commerce : Business on the Internet (Computer Applications Series). South-Western Pub. June 1999
1. WWW-server of Visa Internetional http://www.visa.com
2. WWW-server of MasterCard International. http://www.mastercard.com
3. WWW-server of BGS Smartcard Systems AG. http://www.bgs.ru
4. WWW-server of company "I.T." http://www.it.ru
Erik Przekof. Consumer Credit Counseling Services. Farmington Hills, MI, USA
Tyra Turnquest. CCCS of the Gulf Coast & Money Management International. Houston, TX, USA