At great risk of personal embarrassment, I looked back to our January 2002 issue to see what I forecast for the upcoming year. Whew! I was off about a couple of things but right about some others, so at least I didn't look like a complete fool.
I'll pick up where I left off and look into the crystal ball for 2003, beginning with that most difficult of subjects, smart cards. I predicted last year that a business case for them as general-purpose payment instruments in the U.S. finally would emerge in 2002.
That didn't happen, for a variety of reasons. Some of the early leaders were distracted by more urgent problems. For example, Providian Financial Corp., one of a handful of Visa issuers that pumped out a load of smart cards, spent all of last year trying to right itself after chargeoffs from its subprime portfolio blew a massive hole in its income statement.
Meanwhile, the word is that Target Corp.'s highly anticipated conversion of its checkout counters to read the chips on its company-issued Visa cards is going slowly. Target is the only major retailer to make such a commitment in the U.S. Minneapolis-based Target has said that electronic coupons will be the first application for the smart cards and is lining up some high-profile corporate partners for that effort. But when it comes to credit cards, Target executives seem to be much more concerned about keeping credit quality under control as their new Visa program undergoes massive growth. The last thing they want is to have Wall Street turn thumbs down on Target the way it did with Sears and its loss-wracked card program.
Having been singed in 2002, I'll punt on the smart card issue. Lots of exciting things are happening in niches, such as transit. But regarding general-purpose payment cards, all I'm going to say right now is that tests and limited development will continue in '03. (MasterCard and some issuers plan an interesting test of contactless cards in Orlando, Fla.) There is little doubt, however, that the long-term belongs to the chip.
Some other predictions:
* Visa and MasterCard will settle the retailer class-action debit card antitrust lawsuit against them led by Wal-Mart Stores Inc. The stakes seem to be getting higher as the April trial approaches. Do the associations, and ultimately their members, especially the big ones, really want to be on the hook for potentially tens of billions of dollars in damages? I'll predict that the associations will settle for no damages but agree to substantially lower interchange for signature-based debit cards. That's the main thing the retailers want. (For more on the debit controversy, see Debit Card Report on page 13 and Afterthoughts on page 56.)
* Easy ones-No matter which way the debit lawsuit goes, debit cards will continue to grow faster than credit. Visa last year reported that debit transactions in the U.S. exceeded credit card transactions for the first time, though credit dollar volume still remains far higher. Speaking of credit, we probably saw the worst of chargeoffs last year, though losses will still remain relatively high in 2003.
Any predictions you want to share with your fellow CCM readers? Send me an e-mail at james.daly
Authoritative analysis and perspective for every segment of the payments industry
Authoritative analysis and perspective for every segment of the industry
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