Retailing giant Target Corp. is phasing out computer chips on its Target Visa cards due to limited shopper use, dealing a setback to proponents of "smart card" technology.
Target announced the move Tuesday, less than three years after it introduced the cards. The technology allowed cardholders to download discount "coupons" from the Internet or in-store kiosks onto the cards, then use the coupons in Target stores.
"I think a lot of eyes were watching Target," said John Gould, director of consumer lending and bank cards at research firm TowerGroup. Target's decision to abandon the technology will put a "short-term damper" on any plans to roll out similar programs, he said.
Target's announcement in 2001 to issue Visa cards with the chip technology was seen as a major step in increasing usage of smart cards in the U.S. The cards have an embedded computer chip that can store data, such as the paperless coupons Target offered. The cards have been popular in Europe but have been slow to catch on in the U.S.
Only 3.5% 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 retailer. Target will keep its Visa program, but the Minneapolis-based retailer said it would phase out the smart chip starting this summer because it "experienced limited use."
Target spokeswoman Lena Klofstad declined to comment on how many shoppers used the smart coupons.
Visa said in a statement that it "will continue to work closely" with Target and that Target Visa cardholders could still use their cards at Target or anywhere else Visa credit cards are accepted.
TowerGroup's Gould said Target was on the right track with the program. "I don't think they gave it time to mature," he said.
Klofstad declined to comment on the cost of the program. She said Target would offer a new loyalty program.
Target rose 1 cent to $45.59 on the New York Stock Exchange.