In the Cards

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Last March, Porpora launched the Lee Auto Parts Smart Card, which rewards purchases with points redeemable for gifts and discounts. Porpora got the idea from the bar-coded frequent-shopper cards used at local supermarkets. Those cards, however, require a connection between the cashier's scanner and a remote database to add or redeem points. To avoid the expense of setting up local area networks at his 12 stores, he teamed up with Smart Card Solutions (888-225-6442) to build a loyalty program around a smart card. "Since it has a microchip," he says, "it can actually hold the points in the card."

Customers pay $5 for the card, which arrives in the mail along with a $5 gift certificate. After that, cashiers load one point onto the card for every dollar spent. A thousand points earns a $25 gift certificate.

Now that Lee Auto Parts has experience using smart cards to compete with the big guys, Porpora wants to help the little guys, specifically, the mom-and-pop garages that buy from him wholesale. His plan: print cards branded with the logos of those garages, which would then issue them to their customers as part of their own points programs. "There would be a tie-in where we would make their business better," Porpora says.

Merchants in Cache County, Utah, meanwhile, use smart cards to promote their businesses to families. "I don't know about the rest of the world," says Tracy Hoth, co-owner of the Juniper Restaurant, in Hyde Park, "but here in the valley, parents want to support their kids' education."

In June, Hoth's family restaurant began accepting the Kids Card, a smart card issued by IC One (801-355-0066). The card program lets patrons designate up to three schools to receive a portion of every purchase. "We always get people coming in asking for money for every school function: the choir, the football team. That's $25 here, $50 there," says Hoth. "We'll still help with some of that, but now we can say we're doing the Kids Card, and it's up to the schools to distribute the money."

Every time a Juniper diner presents the Kids Card, Hoth slides it into a reader and types the amount of the bill on an attached numeric keypad. The reader, which contains both memory and an internal modem, records the transaction, notes which schools the patron has selected, and earmarks 6% of the tab as a donation. (Each merchant sets the amount he or she wishes to give.) Then once a day, Hoth modems the donation information to IC One, which moves cash from Juniper's bank account to the schools' accounts.

IC One gives 50% of each donation directly to the schools. In addition, the reader loads 20% back onto the Kids Card in the form of "EduCents," which the card holder can spend on things like lunches and books at the schools themselves. (Most schools participating in the program have at least one reader.) Card users without school-age children can pass their EduCents on to friends or relatives, or donate them to specific groups, such as the band or the debate team. IC One keeps 9% to cover the cost of the program. Two percent goes to foundations and school-board associations, and the remainder goes to independent reps who sign up schools and businesses.

The cost to Juniper is so low--just a $25 monthly rental fee for the reader--that the restaurant can't lose. "We're expecting big things out of it," Hoth says. "But even if it only brings in another two or three customers a month, it would pay for itself."

Applications like the Oklahoma City Medicard and the Kids Card don't cost businesses much, because infrastructure costs are shared among merchants, consumers, and public institutions. But that raises a question: If smart-card programs are so cheap and easy, won't everyone eventually use them, causing their competitive advantage to evaporate over time? That's all the more reason to become an early adopter, according to some experts. John Frank, editor-in-chief of Card Technology magazine, predicts that smart-card pioneers will enjoy the same long-term benefits reaped by companies that were quick to set up shop on the Web. "Smart cards are relationship builders that can lock in customers," says Frank.

And customers aren't the only targets for smart cards. Chemco Electrical Contractors, a $20-million company in Alberta, Canada, plans to give them to its employees. Chemco sends skilled electricians to jobs at industrial sites in Alberta, such as Syncrude Canada's oil-sand mines. Before workers head out on assignment, Chemco has to make sure they've taken the required safety-training courses. "We had a paper-based system, but it wasn't always accurate," says Dave Hagen, Chemco's safety coordinator.

With courses run by numerous unions and training companies, networking everybody to a central database was simply too expensive. So starting early next year, all of Chemco's contract workers will begin carrying the Construction Safety Training Passport, a smart card that holds their training records. When Hagen gets a request for someone with, say, hoisting and rigging training, he will be able to verify instantly that a candidate has the appropriate courses under his or her belt. "I just take their card, I throw it into the computer, and I get a record of everything they have," says Hagen.

The other beneficiaries are Chemco's customers, who lose time and money every time a contract employee is mistakenly turned away from a work site. "If you're carrying a paper card to prove you've got H ₂S"--that's hydrogen sulfide awareness training--"and the guard can't read it because it's got a smudge, he's going to tell you to get a new one," says Art Riendeau, computer-based training marketing manager at the Alberta Construction Safety Association. "And in a place as isolated as northern Alberta, that's not so easy."

Andrew Raskin is a freelance journalist based in New York City.

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