Characteristics of Stored Value Cards

The principal function of stored-value or smart cards is the portable storage and retrieval of data. These applications have evolved from existing electronic funds transfer mechanisms using debit cards, such as prepaid cards and copy machine cards. The embedded integrated circuit on the card defines the capabilities of the product, and possible components may include a microprocessor, nonstatic random access memory (RAM), read only memory (ROM), erasable programmable read only memory (EPROM), other nonvolatile memory, and special purpose coprocessors.

These characteristics make smart cards a viable medium for a digital currency payment system. In making a payment through stored-value cards, the following points can be noted:

• There are no backend settlements involved.

• There is no audit trail for transactions.

• If a card is lost, the same result is achieved when actual cash is lost—it’s gone.

• Developers are working on ways to deliver card-to-card funds transfers

Stored-value cards have met with high approval ratings among consumers in Europe, and are gaining increasing popularity in the United States. Stored-value smart cards are capable of more than facilitating payments. They can offer added-value information, including digital certificates for identification purposes, and may authenticate a secure transaction.

It is worth noting that computer hardware manufacturers have started to include smart card readers with their PCs and PC keyboards. The ubiquity of this digital currency system in on the rise.