In 1984 all French payphones were coin operated. In 1985, after having
rejected alternative technologies such as magnetic or optical cards on
the grounds of security and global cost, France Telecom decided to
start installing smart card payphones. In 1994 nearly all public
payphones use prepaid smart cards. 100 million phone cards were sold in
1993 and 115 million are expected to be sold in 1994. This is currently
the largest smart card project in the world.
Any person wishing to use a payphone can buy phone cards from tobacco
stores, post offices and some newspaper kiosks. The cards hold either
50 units (40 Francs = $6.7) or 120 units (96 Francs = $16). The
duration of one unit depends on the distance and the time of day. A
display on the telephone indicates how many units are left on the card.
When no units are left a new card must be used.
The use of smart cards for payphones has had dramatic effects on the
image of the payphone. In 1985, 44,000 payphones were broken into. As
these phones were systematically replaced by the new card payphones,
the motive was removed and the number of phones broken into fell to a
mere 900 in 1989 and about zero in 1994.
Freed from the obligation of having the right small change at hand,
people telephoned 50% longer from card phones. As card operated public
phones ceased to be a target for theft, they were less often out of
order. A survey of payphone users showed that the satisfaction index
for card phones is 20 points higher than for coin phones, despite
having to pay in advance for calls from a card operated public phone.
Now customers will also be given the possibility to store pre-recorded
phone numbers or abbreviated dialing numbers and use their card to pay
Phonecards are used in two additional ways: as a novel advertising
support and as a collectors item just like stamps.
At the beginning of 1994, 66 operators in 60 countries are already
using smart cards for payphones and, looking at the uptake trend, it is
expected that over 100 countries will have adopted the smart card for
payphones before the end of the century. The major smart card users
apart from France are Germany and the Latin American countries. All
systems are similar to the French system using a prepaid card. The
world market for smart payphone cards is expected to leap from an
estimated 250 million cards in 1993 to an estimated 1 billion cards in
the year 2000.
For payphones, smart cards have proved to be cost effective: they can
bring new services and are readily accepted by users. The same benefits
can be found in many other applications where coin operated machines
have suffered from the cost and loss of service through vandalism, coin
collection, and low reliability. Smart cards are already being used for
gas metering, car parking, car washing, arcade games, and vending
If you put a coin into a machine today, you will most probably use a
smart card for the same operation in five years time!
Why are smart cards replacing coins in the world payphone market?
There are several reasons:
In Singapore the CashCard, is starting to replace coins and bank notes
for everyday purchases. The CashCard is a smart card which acts as an
Electronic Purse, that is to say that it holds electronic money. As the
national electronic purse program unfolds, it is predicted that most
Singapore citizens will use the CashCard by 1997. They will then be
able to pay with electronic cash for most everyday services, such as
cinemas, car parks, tourist attractions, petrol, telephones, vending
machines, sports, retail outlets, fast food, in fact virtually
everywhere where cash is used today. The CashCard is available in
several different initial values, S$20, S$50 and S$100 (the
equivalent of $12, $31 or $62 in $US). The card is not linked to a
bank account, however the possibility of combining the electronic purse
card with an ATM cash withdrawal card or credit card is quite possible
and will most probably be used.
The main reasons for using electronic money are consumer convenience,
reducing the cost and work associated with handling cash, and avoiding
fraud. It becomes quite clear when examining these reasons that they
are in fact quite closely linked.
Using a smart card to pay with electronic cash is faster and easier
than using coins and bank notes; no more fumbling for that last little
coin that you are certain that you saw in the bottom of your pocket
(while 14 frustrated shoppers wait in a line behind you). Paying with
electronic cash in most systems simply means checking that the amount
on the till is the price you should be paying, and inserting the
electronic purse in the terminal. Some systems may also have a button
to push. Consumer research conducted in electronic purse pilot schemes
show that consumer acceptance is very high.
The cash that has been counted and recounted every time that it enters
or leaves the till for each sale during the day, is then counted and
recounted and recorded to be taken to the bank, where it is counted
again. With electronic money, there is no change to be given, the sales
terminal automatically counts the taking and wires it directly to the
The smart card, in association with a well designed security system,
has been demonstrated to be an effective weapon against payment fraud.
The electronic purse is also an effective protection against
counterfeit coins and bank notes.
Singapore is not alone in moving towards an electronic purse system. At the start of 1994 over 20 projects had been identified spread over the 5 continents, and to name a few, we can mention Mondex (which is still at an experimental stage in England and in the US, but which aims to become a worldwide electronic cash and payment systems standard), or Banksys -in Belgium- and Interpay -in Holland- Cash Cards (which claims to be the world's largest live electronic purse system). The technology is available, consumer acceptance has been demonstrated for card payment in the limited area of public payphones, and the benefits for consumers, merchants and banks are beginning to be well understood. By the year 2000, many working systems will be in place and perhaps in countries like Singapore, where an early adoption of the electronic purse has been made, electronic cash could well be more frequently used than today's coins and bank notes.