Target to Halt Smart Card Implementation

UPDATED: Loyalty software vendor Catuity on Monday said Target stores will discontinue its smart card-based loyalty system over the next 12 months.

Target Corp. will phase out its smart-chip program, according to one of the retailers suppliers. Catuity Inc., a provider of loyalty software, on Monday said that Target will phase out its smart card system over the next 12 months. Unlike standard credit cards that use a magnetic strip, smart-card technology stores data on a small chip in an encrypted format. The smart chip was originally touted as a key part of Targets loyalty program, giving customers access to special offers and discounts.

According to reports, however, retailers are just as likely to use existing modem-based services to check the status of a credit card.

According to Detroit-based Catutity, its loyalty software can be used with other credit-card technologies, such as magnetic-stripe, RFID, and other technologies.

"We are disappointed this specific program will not be going forward," Michael Howe, Catuitys president and chief executive, said in a statement.

"Catuity is fortunate that our loyalty software supports a variety of consumer identification devices. While in this instance it was smart chip technology, the system works equally well for mag stripe, contactless, RFID or bar codes and we are hopeful that we can continue to work with Target in the future."

Reached at his office, Howe declined further comment.

In a statement released on Tuesday, Target said that customers were not taking advantage of certain loyalty programs tied to the smart chip built into its Target Visa card.

"Target Visa is one of the most successful financial products ever introduced at Target, with more than nine million accounts opened since the card launched in fall 2001," Target said in the statement. "Programs such as Target Rewards and Take Charge of Education have been very well-received by our guests, and we remain committed to those programs. However, Smart Coupons—the only loyalty program requiring use of the smart chip—experienced limited use by our guests. Therefore, Target will phase out the smart chip on its Target Visa beginning this summer. "

"Target will continue to support Smart Coupons as we build a transition plan to a new loyalty program that will better meet our guests needs, Target added. "We are continually exploring ways to further enhance the Target Visa and build upon its already strong success. Our guests will continue to enjoy all the other functions and benefits of their Target Visa. We look forward to continuing the positive relationship we have with Visa and other business partners as we explore new ways to deliver the greatest value and convenience to our guests," the company said.

Catutity said it would provide more information in its Form 10K filing with the Securities and Exchange Commission in mid-March.

Meanwhile, according to Targets fourth quarter results ended Jan. 31, the retailer reported $388 million in revenue from its credit-card operations, which includes Target-branded Visa and guest cards. Target, based in Minneapolis, reported $832 million on revenue of $15.2 billion.

Editors Note: This story was updated to include comments from a Target statement.

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