By contrast, stored-value cards in Asia are fizzing. More than 20 million smart cards are already in circulation throughout the region, and that number is growing daily. The runaway success of Hong Kong's Octopus card, which accounts for US$5 million worth of transactions a day, has spurred smart-card programs around the region. The Malaysian government will roll out its multipurpose smart card this month. It combines stored value with a national ID, a first. Korea has no fewer than four smart-card programs. Singapore is currently considering the expansion of the smart-card program now used for its road system.

Pick a Card
The technology and variety of these cards is changing almost daily. Companies and financial institutions offer single-function cards for pay and mobile phones, such as subscriber identity module (SIM) cards, as well as for retail loyalty programs, credit and debit functions of banks, mass-transit ticketing, and many others. Multi-application cards have now been developed that are capable of several functions, including storing monetary value, keeping personal information about the cardholder, and updating his or her accounting relationship with the card and the application issuer. In Hong Kong, for example, youngsters are buying colorful Octopus watches, a stored-value gadget that lets them buy drinks at 7-11 stores, jump on the MTR and, of course, tell the time with a flick of the wrist. They use it to buy at McDonald's and to enter local stadiums. Hong Kong salarymen use Octopus to buy a grande at Starbuck's.

The sharpest corporate eye on the smart-card phenomenon is Sony. The Japanese electronics giant, with its vast R&D budget, has a tradition of experimenting and pushing the limits of existing technology to understand its implications. It developed a multi-application smart-card high-speed processing chip called FeliCa, which became the basis of the Hong Kong Octopus transport card and Sony's own Edy card, which it piloted through a spin-off company in Japan between March and August of this year.

Like the Octopus card, FeliCa is a 'contactless' smart card, meaning that you tap the card onto a reader surface without even removing it from your wallet. The pilot took place in a Tokyo shopping mall, where all the merchants were fitted with readers and consumers were handed the card. The pilot was so successful that Sony set up bitWallet, a separate company, to administer the card. It now plans, starting this month, to issue 30 million cards over the next five years, mostly throughout Asia. "The target market is anything to do with micropayment," says Kazumasa Miyazawa, vice president of business planning of bitWallet.

Sony's ambitions for the card can be gleaned in Edy's name, which stands for euro-dollar-yen. "We want to see the card become a global currency," says Miyazawa. Sounds farfetched, but the means of delivery is already here. Smart-card portals can be purchased for computer keyboards that allow users to refill via the Internet. Sony is researching ways to put smart cards in mobile phones, allowing automatic refill through WAP technology. This could add millions of users in mobile-phone-crazy Japan.

Experts have long recognized the ability of ordinary businesses to create currencies that 'compete' with national money as deposited and lent through financial institutions. They're watching Sony closely. Sony Bank has applied to Japanese regulators for banking powers that would allow it to use prepaid float for banking. That means when Sony and bitWallet get enough cards rolling, with millions of customers paying money in stored value, it will have made the sea-change from industrial company to bank. "I foresee new private currency markets in the 21st century," said Alan Greenspan recently. If so, it will be a first shot fired across the bow of Asia's protected banks.

"If the banks act like lemmings, other sectors will muscle in on the payment and financial services field," warns Bernard Lietaer, an expert on e-money and author of The Ecology of Money, published last year by Resurgence Books. "This will include, perhaps, telecoms, supermarkets, even Net marketers."

The Power of Octopus
Miyazawa notes that Sony was very deliberate in testing its technology in Hong Kong, where it first approached the MTR to use its FeliCa chip in the city's upgrade of its stored-value turnstile card in 1997.

The rapid expansion of the Octopus card confirmed Sony's view that if smart- card technology were flexible enough, it had vast potential. Rob Noble, the MTR executive in charge of Octopus's deployment, became convinced that the use of the card based on the FeliCa technology would soon encompass other retail uses as well. He suggested to the MTR's board that a service and settlement company be created as a separate entity, funded by the MTR, but which would eventually be spun off and made independent.

Creative Star began by getting local transportation companies, including the Kowloon-Canton Railway Corporation (KCRC), Hong Kong's three major bus lines, its tram line, and eventually, its minibuses. It also began offering the card for nontransit applications. Seeing the potential, Creative Star applied for a license from the Hong Kong Monetary Authority (HKMA) to offer it at stores. The HKMA decided that the wider application turned it into a deposit-taking institution, and required it to sever its connection with the MTR. This year, according to Noble, nontransit applications, from grocery stores to restaurants, should reach 20 percent of turnover, or more than US$1 million.

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