Once placed inside of payment cards, computer chips can catalyze uses well beyond merchant security, argues MasterCard's Carlos Cornejo, who adds the card network plans to expand card utility through the mix of chips and tablets.
"We are working on several use cases for the chips, where we can see benefits of combining the chip with a tablet and an app," said Cornejo, the senior vice president and group head of new consumers at MasterCard.
Disaster relief and financial inclusion are the most immediate examples, where the card network hopes programmable chips can replace paper vouchers to increase speed, controls and efficiency for aid delivery.
This mindset led to the creation of the MasterCard Aid Network, which is designed to distribute aid without a traditional brick and mortar network or an operable telecommunications infrastructure.
Under MasterCard's program, chip cards are distributed to a local population and are pre-loaded with a list of eligible goods—such as food, medicine or shelter. Merchants that participate in a relief program receive a tablet. The beneficiaries dip their card, select desired items from the tablet's screen by tapping, and enter a PIN to confirm the transactions and receive their goods or supplies.
The program, which MasterCard announced Sept. 24, is designed to partner with "non-government organizations" (NGOs), or nonprofits that often respond to disasters or provide services to developing markets. These areas often lack traditional infrastructure, or have suffered a natural or human-made disaster that knocks out telecom service at least temporarily, making pre-loaded card technology the best way to digitize and secure commerce, Cornejo said.
"One of the most important things is to be able to deploy a solution in all types of environments, particularly where you may not have connectivity for a time," he said.
MasterCard has deployed the technology with Save the Children in Yemen, where about 41% of the population is unable to meet basic food needs because of a civil war. World Vision, a humanitarian aid organization, has also used the service in the Philippines following a recent typhoon.
"We met with a large group of NGOs to find out what the pain points are for recovery," Cornejo said, adding the big problems are getting micro-merchants back in business, dispersing funds and providing security for field officers.
The concept is similar to how prepaid cards have been used to distribute relief funds after incidents such as Hurricane Katrina. However, the Federal Emergency Management Agency stopped this program just a few days after it started, due in part to the risk concerns raised with offering plastic cards to individuals that may not have proper identification or even a permanent address.
The addition of a computer chip can address some of those risk concerns, while also addressing the other pain points that are common to relief efforts.
MasterCard's procedure involves field officers from the NGO distributing the chip cards, which most closely resemble limited use prepaid cards. The cards and tablets can be updated to accommodate different stages of a recovery. The chips also collect transaction, distribution and inventory data, which can help the NGOs manage resources.
"We can work with the NGOs to update the scripts on the chips to load different programs," Cornejo said. "We can have different types of food, or rice, or water. Or perhaps there's a medical supply or some other service that's needed."
The NGO partnership/recovery program is not a direct financial service, though MasterCard can gain an intangible benefit by introducing chip cards and tablet technology to regions where those devices are likely new.
"This falls under the financial inclusion umbrella," Cornejo said. "We're trying to bring services to a variety of different economies."
By using chip technology, which has mostly been seen as the delivery method for EMV security, MasterCard can add dynamic data to the mix.
"Adding a chip to a card adds a variety of different capabilities that were previously unavailable with mag-stripe cards. A chip card can add additional security as well as provide a link to a specific individual which could reduce fraud," said Thad Peterson, a senior analyst at Aite Group.
But there are still challenges in taking the next step to deliver full-fledged financial services in developing markets, where telco-driven mobile money programs such as M-Pesa normally enable transactions, Peterson said. Though MasterCard's program provides hardware for chip-card acceptance, simpler systems have generally fared better in emerging markets.
"A chip card requires a chip reader of some sort," he said. "One of the strengths of M-Pesa and other mobile money offerings is that they are not dependent upon any hardware beyond a simple feature phone, not even a smartphone."