NRI Papers
No.93 August 1, 2005
  IC Cards Spur Innovative Changes in Financial Institutions  
Akira YASUOKA and Tomoyuki HIRATSUKA
      In recent years, rapid moves have taken place to shift from the use of magnetic stripe cash cards to IC (integrated circuit) cards as accelerated by an increasing number of forgeries and thefts involving bank cash cards. While a number of IC card types are available, how to make the best use of two principal features, i.e., "high security" and "multiple applications (usage purposes)," in the financial fields will be a decisive factor.
      IC cards first started to be used as credit cards and electronic money in Japan. However, because the use of bank cash cards is estimated to exceed that of credit cards, a substantial economic impact will be caused by the shift to IC cash cards. The biggest bottleneck is the cost of making the switch. Estimates indicate a cost of approximately 5 to 9 billion yen for each of the major city banks and several billion yen for each of the regional banks.
      The introduction of IC cards will revolutionize the management of financial institutions. One means of cutting costs will be to reduce the amount of cash stored in ATMs (automatic teller machines), which is estimated at about 4 trillion yen. Efforts will begin to advance retail sales by strengthening activities to collect and analyze customer information. In particular, a strengthened approach will be taken toward the integration of cash card and credit card functions, the identification of customer needs through scientific analyses of customer information and product cross selling.
      It is also likely that financial institutions might share loyalty programs with different types of businesses and might strengthen activities to sell consumer loans with the accumulation of credit information. As venues to provide financial services using IC cards, POS (point of sales) registers installed at retail stores will become effective candidates in addition to ATMs.
I Introduction of IC Cards in the Financial Field
  1 Transition in the Use of IC Cards
  2 Structure and Functions of IC Cards
  3 Features and Applications of IC Cards
II IC Card Applications in Japan
  1 Credit Cards
  2 Electronic Money Cards
  3 Cash Cards
  4 Applications in Other Fields
III Banks' Responses to Shift to IC Cards
  1 Background behind the Shift to IC Cards
  2 Economic Costs Required for Shifting to IC Cards
  3 Lack of Unity in Responses
IV Changes in Retail Banking Strategy with the Use of IC Cards
  1 Strengthening Measures for Cost Reduction
  2 Retail Banking Innovation by Enhancing Customer Information
  3 Strengthening Sales by Offering New Services
  4 New Issues Facing Banks
  5 Emergence of Dissonance in ATM Network Connections
  6 Use of IC Cards in Local Financial Institutions with the Community


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