The History Of Smart-Cards and Their Place In Modern Russia

Exploring new sales markets.

Lukoil fuel cards are used in several regions (Volgograd, Chelyabinsk, Perm and others) for years. In every separate region cards functionate well. But the problem of unite system was not solved yet. The card holder cannot use his card in another region but only where he has bought his card. That’s why the question of unification of the system of electronic payments appeared where cards could be acceptable at every filling station.

The main criterion while choosing the technology for organizing cashless payments was the low level of telecommunication systems in Russia, which makes on-line transaction almost impossible. Thus, it was decided to use smart-cards to operate the special processing center instead of on-line transactions (off-line). The second argument for smart-cards was high security level of recorded on smart-card information. Besides, smart-cards are available for many kinds of application which was also important for this project.It was decided to use smart-cards produced by GemPlus company in SmartCity technology for creating corporate electronic payment system for Lukoil filling station. Every person or company can become a card owner.

Before going somewhere a car driver put his money on his smart-card or money can be transferred by an organization. And now our driver travels with a plastic card instead or a huge wallet full of money for his trip. When filling at Lukoil gas station corresponding sum of money is written off from his smart-card. If using smart-card driver gets 3-7% discount.

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:

Low level. Regional agencies and service offices, and filling stations Lukoil;

Middle level. Regional processing centers and regional representative offices of LICard;

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.