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Target to Phase Out 'Smart' Visa Cards

MINNEAPOLIS - Target Corp. is phasing out computer chips on its Target Visa smart cards, due to limited shopper use. Target announced the move on Tuesday, less than three years after it unveiled the cards.

The technology allowed cardholders to download discount "coupons" from the Internet or in-store kiosks onto the cards, then use the coupons on purchases in Target stores. When first introduced, many proponents believed the technology, which involved the collection of various data from consumers, would eventually change how consumers shopped and how retailers met their needs.

Target's announcement in 2001 to issue Visa cards with the chip technology had been viewed as a major step in increasing usage of smart cards in the United States. The cards have an embedded computer chip that can store data, such as the paperless coupons Target offered. While the cards have been popular in Europe, they've been slow to catch on in the United States.

Interestingly, though, Target's announcement came just days after German-based Metro AG announced it was discontinuing RFID chip-embedded loyalty cards at its Future Store in Rhineborg. Metro's decision followed pressure and protests from civil liberties groups that said its cards violated consumer privacy. Target has not publicly alluded to any privacy issues.

But despite all the hoopla regarding chip-embedded cards, only 3.5 percent of Americans 18 years or older said they had used a smart payment card like Target's, according to a survey conducted by research firm Financial Insights in March 2003.

Target's Visa program, which began in 2001, now has more than 9 million accounts, and has become a large profit generator for the company, according to Reuters. Target will keep its Visa program, but the Minneapolis-based retailer said it would phase out the smart chip starting this summer. Target did not say how many shoppers had used the smart coupons.

Target declined to comment on how many shoppers used the smart coupons. One analyst estimated that Target spent about $50 million to develop and roll out the smart card initiative, which included providing consumers with special in-home readers.
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