All that glitters is not gold
The jangle of coins falling into the tray signals it`s time for another drink. Hit a button, and the waiter arrives smartly with a Kraaifontein Cocktail. Double Klipdrift and Coke, in a beer glass, lots of ice. Just the way a gambling man likes it.But there`s something odd about the setting. No, it`s gaudy enough. It`s full of flashing lights. The colour scheme is apparently based on some Chinese tradition that maintains bright, rainbow-colours on a building are associated with wealth and money. One must be a bit of a cultural connoisseur to appreciate it.One notices, or rather, doesn`t notice, two things. There are no uniformed porters with conspicuous firearms hauling trolleys loaded with buckets full of coins. And nobody`s feeding the bandits.It`s a real casino, with real winnings, and real people chancing their luck (or, down on their luck, chancing their livelihood). But when a one-arm bandit pays out, the jangle is just a recording, to keep the atmosphere real.The exchange of money occurs electronically, using a smart card. Casino changeThe casino is on Johannesburg`s east rand, and belongs to Sun International, which has been working on replacing the coin slots in its thousands of gambling machines with card slots.Somehow, it`s not the same, loading some money onto a card, and then plugging it in and just hitting the buttons. There is something about breaking a roll of coins, and relentlessly feeding the machine from a large paper cup that defines the experience of the glitzy casino floor.Nostalgia aside, however, the system works – particularly for the casino owners, but also for gamblers.Casinos have always been on the leading edge of coin handling. Their machines process huge volumes, and need to do so accurately, and more importantly, reliably.The days where one might gyppo a machine using simple tricks like a washer on a string or a strong magnet are long gone. But each of the couple of thousand slot machines on a typical gambling floor still needs a heavy-duty electro-mechanical device. They break down. They are expensive to acquire, and much more expensive to maintain.Charles Laxton, MD for new and emerging business at Nampak`s secure technology solutions subsidiary, NamITech, points out that the systems being implemented at Sun International`s casinos are not accurately described by the term “cashless”. Rather, they are “coinless” systems, he says, removing the handling of metal coins or tokens from the system.The principles are very similar, however, though the benefits likewise go significantly beyond just doing away with real money in heavy metal.“The cost of handling coins is huge,” says Laxton, looking for and finding confirmation of the fact from the casino`s IT manager and slots manager, having lunch with other Sun International executives at the table next to ours. “We used to need one service attendant for every two banks of slots. Now each attendant can handle a dozen or so banks,” comments one of the managers.For a casino, there are other benefits in a smart card system, however. Being able to track and learn about customer behaviour is a promising prospect, especially when frequent customers obtain personalised “VIP” cards.This card can perform nifty tricks, like tracking customers` drinks preferences, paying for items at merchants on the casino property, rewarding high-value customers with loyalty points or prizes, or paying consolation prizes to an entire bank of players when one wins a jackpot. It can act as a loyalty mechanism by encouraging people to visit only casinos in the same stable, when they gamble away from home. Random my footSmart card systems offer opportunities for improving casino management as well. Legislation stipulates minimum rates at which casinos must pay out their intake in prizes, for example. Obviously no truly random system would allow casinos to do this (and in the last 20 years, only the naïve have remained convinced that slot machines were random).Now, the system can become more sophisticated, and monitor not just which machines, but which customers are winners or losers. Detailed behavioural analysis – the urgency and speed with which buttons are hit, for example – can add to the mix, to produce an amazingly sophisticated model of a gambler on the job.Such systems could go further, and tie directly to bank accounts, although current legislation is vague on this issue, and Sun International claims it has not implemented any such links. The government will probably lean towards prohibiting any stratagem that exploits “gambling fever”, in favour of giving such customers time to reconsider their actions by having to visit an ATM well away from the tables or machines. While this might not stop people gambling away their child-support money, it at least more convincingly shifts the blame onto the individual that chooses to do so.Laxton is reticent to disclose too many details about the capabilities that have actually been implemented, or are in the pipeline at Sun International. Yes, the casino does know what its VIPs drink. It does pay out prizes to the entire bank when one player strikes gold. Beyond that, he is non-committal – partly because many of the details are still in development, and also because the casino prefers to play its cards predictably close to its chest.However, the potential benefits to merchants – the casino, in this case – of a smart card system are self-evident. Crisp cards, R50!Just a short jaunt down the N17 lies yet another establishment – this one not glitzy at all.Potatoes and onions fill one hall. Fruit is in another. Fresh vegetables can be bought by the sack or box in a third. Meat, fish and general groceries are on sale to exporters, distributors, retailers and even the public. A staggering 30 percent of all South Africa`s fresh produce is handled daily by the Johannesburg Fresh Produce Market – the largest wholesale market in Africa.The market system of the 17 fresh produce markets in South Africa, according to Agritel`s Agricultural Information Services, is unique in the world. Most of these markets are, like the Johannesburg market, municipally owned. They use a system governed by a market authority, in which the market agents act as intermediaries between producers on the one hand, and buyers on the other.It`s huge. Yet, in the hands of the buyers, there`s not a banknote in sight.The Johannesburg market was the first to replace its old barcode-based system – which got defrauded using the sophistication of photocopiers and felt-tipped pens – with a smart card system, in January 2000.According to Madelein van Duuren, IS manager at the market, the system was primarily required for the security it offers, but also because of the rich additional functionality that can be employed.“We have agents on the floor, who are not allowed to use cash,” she explains. On a crowded market floor, where agents fix prices and sell produce on behalf of others, untraceable sales and payments are an obvious hotbed for error, abuse and fraud. And since the market acts as a price-maker for South African fresh produce, and operates on the basis that the market itself earns a fixed five percent commission, and market agents another 7.5 percent of each sale, the ability to accurately account for prices and sales is paramount.Van Duuren says that the smart card system was obviously the best solution, and is also used for access control and transaction authorisation.In principle, the system is simple. Registered buyers, who often attend the market, are issued with a personal card, while occasional buyers can obtain one against a deposit with the cashier. This card is the sole method of payment on the floor, where each agent has a card terminal.In practice, however, things are a little more complicated. Cards break and terminals get dirty.“Acceptance was good, but some buyers complain about technical problems, such as chips falling out, or card readers malfunctioning because of dirty contacts. But, on the whole, the system is more reliable, and they don`t have to walk around with much cash,” says Van Duuren.The system itself isn`t particularly expensive, at only about R1 000 per card terminal, but since the cards are imported, replacement costs can exceed R50 per card.While a contactless system (where the card does not physically touch the reader) would solve many of the remaining reliability issues, Van Duuren says this isn`t under consideration at the moment. “With 15 000 cards issued, implementation would be a major hurdle,” she observes.Several other markets are interested in following the lead of their big brother in Johannesburg. They`ll have the luxury of being able to avoid the contact based system altogether, and going with a contactless system from day one. Closed communitiesToday`s efforts at abolishing cash are typically closed systems, such as university campuses, public transport networks, shopping centres, casinos or loyalty schemes.“Most closed-loop implementations will work, because you have a captive market,” says Ian Povey, an EDS consultant that has advised governments, banks and other organisations worldwide on smart card deployment issues – earning himself a small slice of the $23 billion smart card consulting spend predicted for 1999 to 2003.“Good examples of such workable systems are mandatory models, such as military or employee identification and payments.”Security is one of the important drivers. Besides removing physical cash from the system, smart cards are also less prone to fraud.Smart cards can be tied to more than the usual criteria for verification. A card can verify not only what you have and what you know, but also who you are – as measured by a biometric such as a fingerprint or retina scan.A working paper written in 1996 for the FBI by police captain Andrew J Harvey acknowledges the crime-prevention possibilities of a cashless society. “Cash-only criminal enterprises would disappear.”Nanoteq`s divisional manager for business solutions, Pieter Pretorius, who has been involved in smart-card and secure payment-related fields for over a decade, agrees – particularly in the South African case – that the prospect of merchants being able to dispense with the requirement for keeping cash on the premises is a big plus.Another useful function is the ability to limit a smart card`s use. In a school or university environment, for example, multiple “purses” on the card could include limits on what a student is permitted to spend on certain items such as sweets or sporting goods. And while all school-related fees and canteen bills can easily and safely be settled, the card will refuse to pay the bottle store across the road, or the friendly candy man down the block.But security aside, asks Povey, why use a card when it`s only useful in one environment? “In the open market, for example a mall smart card, people start to question its utility.”Says Pretorius: “If I have to carry money around with me for small transactions or because not everyone accepts the card, it defeats the purpose of a smart card system.”Equally important is that transaction fees, particularly for low-value transactions, are minimal. Consumer complications“One of the biggest stumbling blocks in the fragmentation of smart cards is, ironically, loyalty and branding,” says Pretorius. He notes first that plain vanilla loyalty programmes don`t really need smart cards, since security and sophistication aren`t key criteria, while cost is.But, more importantly, he explains: “I can today take a white card, and turn it into a multipurpose card, with multiple purses, multiple applications, and multiple loyalty schemes on it. The problem is everyone wants their logo on its face. So everyone wants their own card.”Another barrier in this scenario, he says, is who “owns” or “carries” the pool of cash loaded onto the cards before it is spent. In the case of a single vendor, the question of who repays a customer if the card breaks or goes astray is simple – assuming suitable security measures are in place. But if multiple merchants in a shopping centre collaborate, the answer is not that simple, and becomes a political battle over cash flows.Other resistance barriers exist, though. One of the reasons for the difficulty of introducing smart cards to our own taxi industry can perhaps be found in an experience Povey relates, this time in Indonesia. There, taxi drivers proved reluctant to adopt smart cards, because they lost the ability to manipulate declared income.In high-inflation countries, consumers have a more valid objection, in that they are unwilling to stick their rapidly devaluing cash into a prepaid system of any sort.Oddly enough, according to Povey, cash also remains king in many conservative countries in the Middle East, because the unforgiving penalties under Islamic law for theft make cash quite secure. The hassle and initial cost of adopting a new, unfamiliar way of transacting far outweigh the perceived benefits. Consensus and confusionPovey doesn`t believe pure e-cash will ever be accepted, partially because of the lack of universally available readers and standards.“Cash is universally accepted, and cards are not,” he says.He says that standards for contact-based cards are fairly well developed, but for the newer generation of more robust contactless cards (that contain a small radio transmitter and receiver, instead of the copper contact plates we`re familiar with) at least five non-interoperable standards are in use.“This is a hindrance to deploying solutions,” he says, adding that the software is also still an issue. “While the banks and cellular companies have gone a long way in setting standards, other areas, like the electronic wallet, need work. There are also a lot of operating system problems. JavaCard, despite being the only open system, is by no means dominant.”Laxton says that in moving beyond closed communities, most of the criteria – simplicity, security and wide acceptance – have not yet been met. He holds out hope, however, that the EMV standard, jointly developed by EuroPay, MasterCard and Visa, will in due course nudge banks in the direction of migrating their credit and debit cards to a new smart card platform.Povey warns, however, that this scenario of turning closed loops into open systems will require an inordinate amount of retrofitting. Fragmentation makes it difficult, unless the government can manage the system very well, as is the case among the county public services in the UK.On the South African government`s introduction of the laminated, bar-coded driver`s licence, Povey is somewhat stumped, saying that the licences will again have to be replaced, because they`re still open to fraud.“They put the card before the horse,” he quips. “You want to avoid de facto standards arising that don`t address all national requirements. Moving too quickly is expensive and fragmentary.” He adds, however, that the proposed national ID card will alleviate the situation, because all that will be needed then is a software change. Cashless communitiesSince the mid-eighties, technologists and futurists have envisioned a single smart card to serve as both an ID and transaction card. The major South African banks tried to get together as long ago as 1992 to launch an inter-bank smart card agreement, but it`s been sputtering along for a decade without getting more than a few smart cards in consumers` hands.South Africa`s Home Affairs National Identification System (HANIS) aims to go some way towards delivering on the smart ID card in the future, and such a card may, in due course, be turned to other uses.As in almost every country, the ideal still seems a long way off, but closed cashless communities are proving to be a valuable testing ground.
30 July 2002
The jangle of coins falling into the tray signals it`s time for another drink. Hit a button, and the waiter arrives smartly with a Kraaifontein Cocktail. Double Klipdrift and Coke, in a beer glass, lots of ice. Just the way a gambling man likes it.
One notices, or rather, doesn`t notice, two things. There are no uniformed porters with conspicuous firearms hauling trolleys loaded with buckets full of coins. And nobody`s feeding the bandits.
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