Target to Issue Smart Visa Cards

Target Corporation has announced that it will issue millions of smart Visa cards to Target customers. By the end of 2002, it will have installed smart-card terminals in 990 Target stores in 46 states. The company also plans to install terminals in its 266 Mervyn's stores and 64 Marshall Field's stores. The move may break a chicken-and-egg impasse, which has long stymied the widespread adoption of smart cards in the U.S. Merchants have been reluctant to invest in the point-of-sale technology to accept smart cards until enough consumers carried the cards. Target's willingness to make the initial investment as well as put smart cards in the hands of many of its 18 million private-label cardholders may encourage other merchants to install the hardware to accept them. The terminals will accept any Visa smart card, regardless of whether it is issued by Target's Retailers National Bank credit card subsidiary. "This will be heralded as a significant moment in the U.S. movement to chip," Diana P. Knox, senior vice president of smart card applications and market development for Visa told the American Banker.

At the end of 2000 Target's Retailers National Bank subsidiary had 36 million accounts with $3.2 billion in receivables. Jerry Storch, vice chairman of Target, told the American Banker that the company has three primary goals for the chip: online purchase security, online couponing, and loyalty. As always, the battle for card-issuing institutions is over wallet space, which means that any new entrant must provide enough value to the customer to make it one of the few cards to be carried. George Rosenbaum, chairman of the marketing research firm Leo J. Shapiro and Associates, said that Target's main interest is in finding ways to boost customer retention. The chip card gives them a range of loyalty program possibilities, as well as database marketing possibilities. However, the value-added for the customer at this point is vague. Rosenbaum told the American Banker that while Target is "way out in front of most other retailers," with this chip card plan, "I have no idea what the card will do for the customer that will make a difference to her."