As part of the CGAP IT Innovations Series, this technical note looks at smart cards and assesses their contribution to a MicrofinanceInstitution’s (MFI) financial services provision. This note provides preliminary research for those MFIs that have begun investigating the possibility of adopting smart card technology. This note provides a short summary of all the important points to consider and features websites to suppliers, the organisations surveyed and additional resources.
A smart card is a wallet-sized plastic card with an imbedded computer chip that can process information or simply store data. Smart cards can be used to manage accounts, disburse loans or make transfers. The smart card functions as an electronic passbook on which transactions can be recorded once, speeding up the process and improving accuracy in managing client accounts. The author examines the requirements and the costs and benefits of adopting smart card technology. The author recommends smart card technology to MFIs that seek to automate transactions for clients or are trying to reduce the use of paper in operations by using smart card readers. However, if one wants to use smart cards as a component in a fully computerised information system, the purchase of additional technology such as Automated Teller Machines (ATMs) or Personal Digital Assistants (PDAs) and reliable electric and communications networks are generally required.
The use of smart cards by Prodem FFP in Bolivia and SKS Microfinance in India provide two case studies from which the author has drawn lessons for implementation. They are as follows:
- Define success up-front
- Conduct phased implementations