Toward a cashless society: smart cards offer an alternative to paper money.

Cold, hard cash. It's something that most of us couldn't do without. Or could we? If many financial and government institutions have their way, our currency will soon be colder and harder than ever: it will be plastic. That's the vision behind NationsBank's introduction of the Visa Cash Card at the 1996 Olympic Games in Atlanta.

The Visa Cash Card is a "smart card." Made of plastic and reminiscent of a bank card, the Visa Cash Card keeps track of how much money you've spent, plus has a built-in microprocessor to store and process data and records. The version available at the Olympics is a disposable stored-value card that can be used in lieu of cash. It will come preloaded in $20, $50 or $100 denominations.

In addition to NationsBank, Wachovia and First Union banks are also participating in this launch in the greater Atlanta area during the summer Olympics. Visa expects that there will be 3,000 to 5,000 individual terminals where these cards will be accepted.

"Most banks in the industry, as well as Visa and Mastercard, believe smart cards will eventually replace current magnetic strip technology," says Dick Shaffner, vice president of NationsBank card services.

The Atlanta pilot program is part of Visa's international development of smart cards. They've already launched pilot programs in Australia and Canada based on a system that's been up and running in Europe for years. "Nearly 70% of the Central European countries use smart cards, and many of their government programs make use of them," notes Robert Gilson, executive director of the Smart Card Forum, a consortium of companies joined to accelerate the widespread acceptance of smart card technology.

Maryland, Texas and South Carolina have already switched to debit card systems for their welfare recipients. Massachusetts and Florida plan to adopt this system as well. While these programs still use cards with magnetic strip technology, it's not far-fetched to conclude that they will be replaced by the versatile smart cards.

"What you're seeing is how technology is affecting efficiency and convenience for the consumer and cost for both consumer and financial institutions. That's why it's so important to people on both sides of the teller line," says Kenneth Robinson, president of the National Association of Federal Credit Unions.

For the consumer, the primary benefits are ease of payments and the greater accessibility of account information. Smart cards can store information on up to six different accounts at one time, including one or more credit cards, a debit account and health records. They can also act as a portfolio manager, of sorts, for investments.

"Merchants will benefit from faster and easier customer service, reduced slippage [when incorrect change is given or employee theft occurs at the register] and the elimination of costs associated with the handling and transferal of cash," predicts Shaffner. Financial and government institutions will be able to lower administrative costs associated with paper documentation, boost security and discourage fraud.

For banks and credit unions, though, smart cards are about more than streamlining payments and facilitating greater consumer access to accounts. Smart cards would allow banks to consolidate more financial services, thus increasing customer loyalty to a particular institution. "It gives us [financial institutions] another way to extend the relationship with our customers, and to move into payments that have so far been cash only--and integrate them with our other products and services," adds Shaffner.

The widespread use of smart cards is not without its hurdles. Aside from getting accustomed to the concept, consumers face privacy and security issues. Regulation and the creation of industry standards will have to be worked out before we can expect to see the cards used widely.

"In many foreign countries, the government is taking the lead role and mandating standards. In the U.S. the competitive pressures of different financial institutions will elongate the implementation process," says Gilson.

All agree that the pilot project at the Summer Olympics will be pivotal to smart card development in the U.S.--that and the American public's willingness to have plastic, rather than cash, in hand.