The result of collaboration with IBM and STMicroelectronics, the new smart card is part of a major Visa initiative to halt the growing cost of credit-card fraud by encouraging the use of smart cards that require a personal identification number for authentication. Visa International notes that fraud rates are less than a tenth of 1% of all sales--but still, with $2 trillion in annual charges, that means a total tab of $2 billion for Visa alone. And the figure is higher still for Internet sales, where there's no physical card with which to compare a customer's signature. Some studies have put the fraud rate for Internet sales at six or seven times the rate of card-present transactions.
Smart cards have been slow to catch on in the United States, and chip-based Visa cards are issued by only three banks: First USA, FleetBoston Financial, and Providian Financial. But Visa clearly is intent on driving the number up this year. It's partnering with retailer Target Corp. on a mammoth project revealed in June to launch a co-branded Visa chip card and a national rollout of cash registers to accept them.